cl- 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 


A  TREATISE 


ON    THX 


LAW  OF   IXSl  I^\NCE 


IN     ALL    ITS    BKA.NTHRS.    ESPKCLXLLY     FIRE,    LIFE. 

ACriDENT.   MAKLNi:.  TITLE.  FIDELITY.  CREDIT, 

AND    EMPLOYERS'    LIABILITY 


AN  APPENDIX  OK  STATrTF>^  AFFECTING  THE  INSUR- 
ANCE CONTRACT  AND  A  COLLECTION   OF  FORMS 


■T 

GEORGi:  RICHARDS,  M.A. 

or  mm  xrv  turk  uxu,  roRMcnLv  lkcttrer  on  ivfli-R.vNCE 

LAW   Uf  TMB  •CMCWL  of  LAW   Of   COLUMBIA    UNIVER8ITT 
AXD  tmc  xcw   tork    Law  (KTHOOL 


Third  Edition,  Enlarged  and  Rewritten 


THE  BANES  LAW    PUBLISHING  CO. 

NEW  YORK 

191^ 


Copyright,  1892, 
By  GEORGE  RICHARDS 

Copyright,  1892, 
By  GEORGE  RICHARDS 

Copyright,  1909, 
By  GEORGE  RICHARDS 


<_.  -i- 


PREFACE  TO  THIRD  EDITION 


This  volume,  like  prior  editions,  is  designed  primarily  for  the 
class  room,  and  is  the  result  of  an  effort  to  unite  and  harmonize  the 
distinctive  advantages  of  the  ireneral  treatise  with  those  of  the  case- 
book. 

In   the   present    revision,  or   rather  rewriting  of  this   book,  the 
coarse  print  text  and  fine  print  footnotes  combined  cover  a  very 
wide  range.     Believing  that  the  safe  counsellor  in  insurance  law  is 
one  who  (1)  is  well  grounded  in  general  principles  and  (2)  is  imbued 
with  the  spirit  of  many  modern  tlccisions,  the  writer  has  endeavored 
to  treat  this  difficult  subject  with  a  large  measure  of  thoroughness; 
but  the  coarse  print  text,  to  which,  if  necessary,  study  may  be  limited, 
is  concise.     To  the  legal  proposition  in  the  text  there  has  usually 
been  added  explanation  in  the  text,  and,  where  deemed  desirable, 
copious  illustration  from  the  reports.     Some  of  these  illustrative 
cases  are  briefly  given,  but  in  numerous  instances  and  especially  in 
tlealing  with  abstruse  doctrines  and  with  important  clauses  of  modern 
policies  the  case  system  is  followed  to  this  extent  that,  instead  of 
cursorily  describing  the  cases  cited,  the  writer  has  extracted  the  facts 
from  the  original  reports  with  all  the  detail  considered  desirable, 
and  so  far  as  relevant  to  the  point  in  hand,  and  has  given  the  exact 
holding  of  the  court  in  juxtaposition  with  the  precise  statement  of 
facts  in   concrete  form.     The  opinions  of   the  courts  occasionally 
are  given  in  the  footnotes  and  often  are  reflected  in  the  general  ex- 
planations of  the  text.     This  compact  but  accurate  method  of  pre- 
senting the  whole  law  of  an  important  case,  while  quite  consistent, 
if  time  allows,  with  the  use  of  a  supplementary  case  volume,  is  for 
certain  purposes  thought  to  be  the  most  effective.     The  ruling  and 
principle  involved  are  thus  most  quickly  apprehended,  most  firmly 
impressed  upon  the  memor>',  and  from  time  to  time  most  easily  re- 
viewed.   The  student  having  before  him  the  exact  premises  and  the 
exact  conclusion  may  profitably  be  left  in  certain  instances  to  con- 
struct the  argument  for  himself  and  perhaps  may  be  encouraged  to 
subsequently  compare  his  own  course  of  reasoning  with   the  well- 

iii 


735883 


iv  PREFACE  TO   THIRD   EDITION 

rounded  and  more  logical  opinion  of  the  learned  court  to  be  found 
in  the  official  report.^  To  the  voluminous  footnotes  have  been  rele- 
gated incidental  and  subsidiary  points,  occasional  quotations  from 
the  opinions  of  the  courts,  together  with  very  numerous  citations. 
From  the  cases  cited  the  instructor  will  find  material  on  almost  any 
point,  from  which  he  can  cull  statements  of  fact  to  be  submitted  to 
his  pupils,  leaving  it  to  them,  if  he  choose,  to  discover  the  principle 
applicable  and  the  judgment  to  be  rendered.^ 

in  part  I,  general  principles  of  insurance  law  are  stated,  explained 
and  illustrated.  In  part  II,  the  provisions  of  the  policies  are  con- 
sidered clause  by  clause  in  the  phraseology  and  sequence  in  which 
they  occur  in  the  several  instruments,  only  scant  attention  being 
given  to  those  many  cases,  which  construe  forms  of  policies  no  longer 
used,  and  which  often  are  positively  misleading.  This  arrangement 
is  believed  to  be  the  most  convenient  for  student  and  practitioner. 
In  appendix  chapter  I  will  be  found  classified  lists  of  references  to 
the  statutes  of  the  state  legislatures  affecting  the  contract,  with  a 
specimen  statute  serving  to  show  the  general  character  of  each  group. 
These  were  made  up  from  the  original  statutes  of  all  the  states. 
Chapter  II  of  the  appendix  contains  all  the  standard  fire  policies,  a 
New  York  standard  life  policy,  the  ancient  Florentine  marine  policy, 
other  forms  of  modern  policies,  a  large  collection  of  special  clauses, 
and  binders,  applications,  proofs  of  loss,  etc. 

Grateful  acknow^ledgments  are  due  to  kind  friends  for  their  as- 
sistance voluntarily  and  unstintingly  rendered.  Prof.  Robert  D. 
Petty  of  the  New  York  Law  School  assumed  the  great  labor  of  read- 
ing over  all  the  book  in  galley  proof  and  drew  upon  his  long  experi- 
ence in  teaching  this  branch  of  the  law  to  offer  many  suggestions  of 
highest  value.  Pi'of.  Francis  M.  Burdick  of  the  School  of  Law  of 
Columbia  University  was  so  good  as  to  furnish  a  list  of  illustrative 
cases  which  he  had  found  specially  well  adapted  for  use  in  the  class 
room.  Harrington  Putnam,  Esq.,  of  the  New  York  bar,  reviewed  the 
proof  of  the  chapters  on  general  average  and  marine  insurance  and 
thus  courteously  brought  to  bear  his  learning  on  those  subjects,  much 
more  profound  than  the  writer's.  He  also  prepared  the  example  of 
an  adjustment  in  general  average  spread  out  with  explanations  in 
appendix  chapter  III.  Willis  O.  Robb,  Esq.,  secretary,  general  ad- 
juster and  expert  of  the  loss  committee  of  the  New  York  Board 

1  If  the  opinion  or  argument  of  the  eouit  is  always  furnished,  as  in  the  case- 
book, less  opportunity  is  afforded  for  independent  thought  on  the  part  of  the  pupil. 

2  This  is  a  mental  exercise  which  the  successful  lawyer  must  frequently  sum- 
mon to  his  aid. 


PREFACK    TO    THIHI)    KDITlON  V 

of  Fire  Underwriters,  kindly  wrote  for  this  book  a  summary  on  the 
perplexing  subject  of  non-concurrent  apportionments  given  in  the 
footnotes  at  pages  440-443.  He  also  tabulated  instances  of  the  op- 
eration of  the  eighty  and  one  hundred  per  cent  coinsurance  clauses 
as  set  forth  in  appendix  chapter  III. 

The  special  thanks  of  the  writer  are  likewise  due  to  Messrs.  Eli- 
jah R.  Kennedy,  chairman  of  the  committee  which  framed  the 
New  York  standard  fire  policy,  E.  H.  A.  Correa,  vice  president 
of  the  Home  Insurance  Company  of  New  York,  E.  J.  Richards,  resi- 
dent manager  of  the  Xortli  British  ct  Mercantile  Insurance  Company, 
Cecil  F.  Shallcross,  resident  manager  of  the  Royal  Insurance  Com- 
pany, Seelye  Benedict  of  the  brokerage  house  of  Benedict  &  Bene- 
dict, Hendon  Chubb,  marine  underwriter,  Clarence  H.  Kelsey,  presi- 
dent of  the  Title  Guarantee  &  Trust  Company  and  to  the  insurance 
departments  of  all  the  states.  Citations  were  verified  by  I\Ir.  James  J. 
Dillon,  assistant  librarian  of  the  Bar  Association.  The  index  was 
prepared  and  the  appendix  chapter  I  was  brought  down  by  the  au- 
thor of  a  well-known  text-book  on  insurance  law. 


II 

The  following  observations  are  offered,  especially  to  instructors, 
in  explanation  of  the  method  which  finds  embodiment  in  this  book. 

The  law  of  insurance  is  a  branch  of  the  wide  law  of  contracts,  but 
in  certain  of  its  underlying  principles  and  also  in  its  application  to 
modern  forms  of  policies  it  stands  in  marked  contrast  with  other 
branches  of  the  law.  In  its  first  stages,  many  of  its  peculiar  doc- 
trines were  founded  upon  trade  usages,  and  the  early  decisions  in 
controversies  relating  to  marine  insurance  were 'for  the  most  part  ren- 
dered by  arbitrators  or  by  commissioners,  acting  outside  the  jurisdic- 
tion of  the  common-law  courts  of  England,  decisions  which  doubt- 
less gave  shape  to  trade  usages  and  thus  through  the  medium  of 
custom  powerfully  influenced  the  action  of  the  Westminster  and 
American  courts  when  subsequently  they  came  to  apply  and  further 
develop  the  doctrines  of  insurance  law. 

The  custom  of  closing  insurance  contracts  by  preliminary  binding- 
slips,  the  doctrines  of  indemnity,  insurable  interest,  and  highest  good 
faith,  the  exacting  doctrine  of  warranties,  the  implied  condition  that 
facts  material  to  the  risk  must  be  disclosed,  the  implied  warranties 
of  seaworthiness  of  the  ship,  and  against  deviation  from  the  course, 
the  unexpressed  exception  of  deck  cargo,  the  obligation  inferentially 


Vi  PREFACE   TO   THIRD    EDITION 

resting  upon  marine  underwriters  to  make  payment  towards  gen- 
eral average  and  salvage,  the  obligation  inferentially  imposed  upon 
the  insured  to  become  coinsurer  for  the  amount  of  deficit,  if  his 
marine  insurance  is  short  of  value— all,  at  once  usages  and  legal 
dogmas,  justly  impress  us  as  unusual  when  compared  with  principles 
governing  in  other  departments  of  law. 

Certain  of  these  familiar  features  in  the  law  of  insurance,  though 
exceptional,  are  comparatively  clear  and  in  the  main  easily  applied, 
but  there  are  other  developments  in  this  branch  of  the  law,  now 
to  be  adverted  to,  which  are  more  confusing,  and  in  their  nature 
perhaps  quite  as  exceptional.  Partly  as  an  offset  to  this  rigorous 
doctrine  of  warranties  already  mentioned,  and  in  order  to  evade 
forfeitures  deemed  to  Ije  unconscionable,  the  courts  have  leaned 
towards  an  interpretation  of  the  clauses  of  all  policies,  which  shall 
be  favorable  to  the  insured.  And  naturally  some  of  the  judges  lean 
further  than  others.  In  this  regard,  we  may  as  well  confess,  the  aim 
has  been,  not  so  much  to  ascertain  and  give  effect  to  the  legal  in- 
tendment of  the  language  employed,  even  though  that  language  be 
prescribed  by  legislatures,  as  to  ascertain  what  the  assured  might 
fairly  suppose  it  to  mean,^  and  to  relieve  him  from  fatal  conse- 
quences of  any  innocent  breach  of  contract  regarded  by  the  court  as 
technical  rather  than  substantial.  Manifestly  such  methods  of  in- 
terpretation must  give  uncertain  results,  results  which  cannot  be 
predicted  with  confidence  in  advance  by  any  course  of  a  priori 
reasoning.^ 

This  purpose  of  the  courts  has  found  expression  in  various  rules 
or  doctrines,  the  application  of  which,  by  no  means  concordant  in 
the  many  jurisdictions  of  this  country,  has  also  exhibited  a  varying 
degree  of  departure  from  common-law  canons  as  applied  to  other 
branches  of  the  law,  and  which  together  with  the  doctrine  of  war- 
ranty embrace  perhaps  the  larger  part  of  what  may  be  called  the 
active  and  operative  law  of  insurance  to-day.  Among  these  doctrines 
four  may  be  mentioned:  (1)  the  general  rule  that  all  ambiguities  in 

1  See  Hermann  v.  Mechanics'  Ins.  Co.,  81  N.  Y.  188;  Donlev  v.  Glens  Falls  Ins. 
Co.,  184  N.  Y.  107;  Tisdell  v.  Neiv  Hampshire  Ins.  Co.,  155  N.  Y.  163. 

2  In  the  last  volume  of  the  Insurance  Digest  by  Deitch,  424  appeals  are  cited, 
a  large  minority  of  which  show  reversals.  The  comfortable  theory  that  famili- 
arity with  avol.nne  of  leading  cases  will  enable  one  safely  to  forecast  the  further 
rulings  of  the  coui  ts  in  matters  relating  to  insurance  is  a  delusion.  This  cannot 
be  done  either  by  the  tyro  or  by  the  experien--  ed  lawyer.  Doubtless  most  of  the 
defeated  parties  in  the  cases  mentioned  were  honestly  advised  by  counsel  that  they 
had  a  fair  prospect  of  success  on  appeal.  In  general  only  cases  appealed  reach 
the  reports.  A  few  of  these  cases  constitute  no  substitute  for  a  comprehensive 
digest  of  all. 


PREFACE   TO   THIRD    EDITION  vii 

the  policy  are  to  be  resolved  in  favor  of  the  insured;  (2)  the  subsid- 
iary rule  that  a  statement  in  the  policy  of  present  condition  is  not 
necessarily  to  be  construed  as  a  warranty  of  continuance;  (3)  the 
subsidiary  rule  that  to  prevent  forfeiture  of  the  whole  contract  and 
to  save  a  part,  the  fire  insurance  contract,  though  stated  to  be 
"entire,"  shall  be  held  divisible;  and  (4)  the  doctrine  known  briefly 
as  "parol  waivers  and  estoppels."  ^ 

Involving  the  application  either  of  the  stringent  doctrine  of  war- 
ranty or  of  some  one  of  the  four  countervailing  principles  just  men- 
tioned, hundreds  of  insurance  litigations  are  brought  to  trial  every 
year,  many  of  the  distinctions  drawn  by  the  courts  in  their  determina- 
tion are  exceedingly  fine,  many  of  the  conclusions  of  law  reached  are 
necessarily  more  or  less  arbitrary,  many  points  are  decided  one  way 
in  some  states  and  other  ways  in  other  states.  Moreover,  the  attitude 
of  the  courts  in  this  regard  has  found  much  more  than  an  echo  among 
the  legislatures  of  all  the  states,  and  numerous  enactments  affecting 
the  terms  of  the  contract  have  been  adopted  which,  while  bringing 
relief  to  the  insured  in  special  instances,  have  at  the  same  time 
further  complicated  this  branch  of  the  law.  It  becomes  obvious  at 
a  glance  that  a  few  isolated  instances,  a  few  reported  cases,  no  matter 
how  careful!}'  selected,  fail  hopelessly  to  stand  for  the  great  body  of 
insurance  law  as  developed  in  recent  times.  Each  decision  is  but  a 
pin  point  on  a  vast  surface.^  By  what  means,  then,  may  this  sub- 
ject of  insurance  law  best  be  presented  to  student  and  practitioner? 
by  text-book  or  case-book,  or  by  aid  of  a  book  which,  in  its  plan,  shall 
omit  the  inconveniences,  and  borrow  the  meritorious  features  of  each 
of  the  others? 

However  perfect  law  may  be  when  theoretically  considered,  we 
know  that  as  applied  by  human  tribunals  it  must  always  be  re- 
garded as  an  imperfect  and  inexact  science,  but  also  a  progressive 
science.  While  the  opinions  of  the  justices  must  always  be  tinged 
with  error,  time  will  bring  detection  and  amelioration  as  to  most  of 
these  errors.  Cases  once  called  leading  are  constantly  being  dis- 
tinguished or  modified,  if  not  overruled.  Nor  do  the  opinions  of 
the  courts,  which  occupy  the  major  part  of  the  official  reports,  con- 

1  So  far  as  it  allows  terms  of  the  policy  to  be  abrogated  by  parol  evidence  of 
what  was  said  and  done  prior  to  the  closing  of  the  contract,  this  may  be  called 
a  modern  American  doctrine. 

2  Many  years  ago,  when  engaged  for  a  season  in  lecturing  at  a  law  school,  the 
writer  was  asked  by  the  dean  to  make  a  selection  of  insurance  cases  to  use  with 
the  class.  A  painstaking  effort  was  made  to  meet  the  request,  but  it  was  found 
impossible  to  cover  the  subject  with  any  degree  of  success  by  that  method  alone 
The  task  would  be  much  more  difficult  now. 


viii  PKEFACK  To  rniui)  edition 

stitute,  strictly  speaking,  any  part  of  tlie  law;  As  the  late  James  C. 
Carter,  himself  an  advocate  of  the  case  system,  has  admitted,  the 
law  "is  alone  found  in  those  adjudications,  those  judgments,  which 
from  time  to  time  its  ministers  ami  its  magistrates  are  called  upon 
to  make."  ' 

Furthermore,  we  must  concede  that  a  judge,  in  deciding  the  pre- 
cise litigated  point  before  him,  often  has  no  right  and  little  oppor- 
tunity to  address  himself  to  the  broader  task  of  a  lecturer,  and  for 
this  reason  doubtless  in  part  it  is,  that  some  of  the  most  illustrious 
of  judges  feel  moved  to  write  commentaries  and  scientific  treatises 
on  subjects  with  which  they  are  specially  familiar,  to  the  great 
advantage  of  students  and  the  profession.  The  hypothesis  that  a 
jurist  can  produce  the  happiest  results  towards  furnishing  a  scien- 
tific exposition  of  a  subject  in  its  entirety,  when  his  aim  is  to  offer 
persuasive  arguments  for  the  determination  of  the  narrow  issues 
usually  involved  in  litigated  cases,  carries  no  compliment  to  the 
bench.  Court  opinions  when  severed  from  their  particular  environ- 
ment of  fact  are  proverbially  misleading.  A  few  instances  out  of 
many  that  might  be  gathered  from  insurance  case-books  must  here 
suffice.  Two  interesting  cases,  rightly  decided  by  prominent  state 
courts,^  are  given  at  length  to  describe  the  nature  of  representations 
and  warranties.  From  the  opinions  we  read:  "The  essential  difference 
between  a  warranty  and  a  representation  is  that  in  the  former  it 
must  be  literally  fulfilled  or  there  is  no  contract."  But  how  about 
all  those  many  warranties,  not  before  the  court,  which  are  condi- 
tions subsequent,  and  which,  if  broken,  avoid  the  contract  at  com- 
mon law,  only  from  the  time  of  breach?  Again,  we  read:  "  An  express 
warranty  in  a  policy  of  insurance  is  a  condition  precedent  the  bur- 
den of  proving  performance  of  which  rests  upon  the  assured."  But 
how  about  the  innumerable  decisions  establishing  the  rule  for  most 
jurisdictions  that  in  the  case  of  many  classes  of  warranties,  not  be- 
fore the  court,  the  burden  rests  upon  the  insurer  to  allege  and  prove 
a  breach?  Again,  we  read:  "A  representation  on  the  other  hand  is 
not  part  of  the  contract  but  is  collateral  to  it."  But  how  about  the 
many  statements  contained  in  policies  which  the  courts  have  con- 
strued to  be  representations  only  and  not  warranties?  And  how 
about  the  statutes  of  many  states  expressly  converting  warranties 
into  representations?    Again,  from  Lord  Mansfield's  famous  opinion 

1  1  Yale  Law  Jour.  147.  Under  the  French  system  of  jurisprudence  opinions 
at  large  are  not  reported,  but  only  the  decisions  of  the  courts. 

^McLoon  V.  Commercial  Ins.  Co.,  100  Mass.  472;  Aetna  Ins.  Co.  v.  Grube,  C 
Minn.  82. 


PREFACE   TO   THIRD   EDITION  ix 

on  concealments  in  marine  insurance/  we  read:  "The  governing  prin- 
ciple is  applicable  to  all  contracts  and  dealings.  Good  faith  forbids 
either  party  by  concealing  what  he  privately  knows  to  draw  the 
other  into  a  bargain  from  his  ignorance  of  that  fact  and  his  believ- 
ing the  contrary,"  a  statement  permissible  perhaps  as  argument,  but, 
in  giving  the  impression  that  the  effect  of  concealment  on  the  va- 
lidity of  the  marine  policy  is  the  same  as  its  effect  in  the  case  of  other 
dealings,  certainly  not  a  safe  guide.  Again,  from  a  leading  English 
case  given  on  subrogation,' we  read:  "The  very  foundation,  in  my 
opinion,  of  every  rule  which  has  been  applied  to  insurance  law  is 
this,  namel}^,  that  the  contract  of  insurance  contained  in  a  marine 
or  fire  policy  is  a  contract  of  indemnity,  and  of  indemnity  only,  and 
that  this  contract  means  that  the  assured,  in  case  of  a  loss  against 
which  the  policy  has  been  made,  shall  be  fully  indemnified,  but  shall 
never  be  more  than  fully  indemnified.  That  is  the  fundamental 
principle  of  insurance,  and  if  ever  a  proposition  is  brought  forward 
which  is  at  variance  with  it,  that  is  to  sa}-  which  either  will  prevent 
the  assured  from  obtaining  a  full  indemnity,  or  which  will  give  to 
the  assured  more  than  a  full  indemnity,  that  proposition  must  cer- 
tainly be  wrong."  But  how  about  the  well-established  rule  that  if 
marine  insurance  is  short,  the  insured  is  coinsurer  for  the  deficiency, 
and  therefore  in  case  of  loss,  though  less  than  the  face  of  his  policy, 
he  may  be  entitled  to  collect  only  a  minute  fraction  of  indemnity? 
It  was  not  within  the  plan  of  the  compilers  to  vouchsafe  explanations 
or  qualifications  as  a  part  of  these  case-books.  That  would  savor  of 
the  general  treatise;  and  so  the  first  impressions  of  the  student,  who 
relies  upon  them  without  other  helps,  are  likely  to  be  erroneous, 
touching  the  very  fundamentals  of  insurance  law. 

Not  only  then  is  it  obvious  that  the  expert  master  can  deduce 
general  principles  from  a  wilderness  of  reported  cases  more  suc- 
cessfully than  can  his  inexperienced  pupil,  but  it  seems  to  follow 
also  that  for  an  accurate  presentation  of  unchangeable  doctrines  and 
of  the  maturest  views  of  the  courts  on  mooted  points  as  well,  a  good 
text-book  furnishes  a  useful  adjunct  in  the  class  room.^  Only  thus 
can  the  results  of  past  labors  of  myriads  of  workers  in  the  judicial 
field  be  garnered  and  sorted  out  for  present  use.     Within  the  broad 

i  Carter  v.  Boehm,  3  Burr.  100.5. 

2 CasteUain  V.  Prei^ton,  n  Q.B.B.  381. 

3  For  the  view  that  the  text-book  must  play  its  part  and  that  a  discussion  of 
selected  cases  is  not  the  only  process  of  legal  culture,  see  articles  by  the  Hon.  Ed- 
ward J.  Phelps  and  Prof.  Christopher  G.  Tiedeman,  1  Yale  Law  J.  139,  150; 
Prof.  .Tohn  Wurts,  17  id.  8G;  the  Hon.  Simeon  E.  Baldwin,  14  Harvard  Law  Rev. 
258;  Dean  Chas.  F.  Carusi,  2  Am.  Law  School  Rev.  213. 


X  PREFACE   TO   THIRD   EDITION 

scope  of  a  general  treatise  principles  can  be  concisely  stated  and 
systematically  arranged,  not  only  for  purposes  of  study  in  the  first 
instance,  but  also  for  subsequent  reference  and  frequent  review; 
the  relations  of  different  cases  to  one  another  can  be  compared  and 
explained;  decisions  can  be  given  with  as  great  accuracy  as  in  the 
official  reports,  but  unincumbered  by  subsidiary  points  and  volu- 
minous opinions;  rulings  seemingly  inconsistent  can  be  harmonized; 
historical  developments  can  be  briefly  but  adequately  summed  up, 
and  many  particulars  and  distinctions  of  greater  or  less  importance 
which  could  not  possibly  be  touched  upon  within  the  bounds  of  any 
selection  of  isolated  cases,  can  be  enumerated  or  brought  within  the 
reach  of  general  rules.  Indeed,  many  legal  doctrines  are  never  more 
clear  than  when  crystallized  in  the  form  of  approved  definitions. 
To  this  class  in  a  measure  belong  the  doctrines  of  insurable  inter- 
est, seaworthiness  and  subrogation.  A  comprehensive  treatment  of 
these  subjects  with  a  few  illustrative  cases,  especially  border  line 
cases,  is  more  effective  than  a  treatment  by  illustrative  cases  alone. 
The  statement  of  the  important  rule  that  the  insurance  company,  to 
serve  an  operative  notice  of  cancellation  under  the  New  York  stand- 
ard fire  policy,  must  also  tender  the  unearned  portion  of  the  pre- 
mium, if  the  premium  has  been  collected,  carries  with  it  its  meaning, 
and  calls  for  little  space  in  a  book.  On  the  other  hand,  such  doctrines 
as  warranty,  proximate  cause,  waiver  and  estoppel,  and  others,  when 
stated  merely  as  abstractions,  produce  an  impression  of  vagueness 
and  haziness,  and  therefore  any  attempt  to  embody  them  in  general 
rules  must  be  accompanied  by  copious  illustration  and  abundant 
application.  Nevertheless,  after  all  this  is  well  done,  we  find  that 
the  application  of  such  doctrines  to  concrete  cases  is  not  enough. 
The  principles  involved  are  so  elusive  and  so  difficult  to  master,  that 
thorough  explanation  and  analysis,  in  printed  and  permanent  form, 
are  required  at  the  hands  of  someone  who  has  made  the  tenor  and 
trend  of  a  perfect  maze  of  decisions  the  subject  of  his  special  study 
and  practice  for  a  long  term  of  years. 

What,  then,  is  the  criticism  which  the  legal  instructor  may  justly 
put  upon  the  conventional  text-book?  Why  did  certain  successful 
professors  banish  all  general  treatises  from  their  class  rooms  some 
thirty-five  years  ago,  actually  discourage  their  pupils  from  consult- 
ing them  and  substitute  in  place  of  them  volumes  of  selected  cases 
transcribed  from  the  official  reports?  ^  Why  did  a  high  exponent  of 
their  views,  the  dean  of  a  law  school,  dispose  of  all  our  text-books 

1  See  articles  by  Dean  William  A.  Keener,  and  Prof.  John  C.  Gray,  1  Yale  Law 
J.  143,  159. 


PREFACE  TO  THIRD    EDITION  xi 

with  the  published  assertion,  "The  opinion  of  the  court,  giving  the 
reasons  for  the  conclusion  reached,  is  really  the  only  authoritative 
treatise  which  we  have  in  our  law  "  ?  ^  The  answer  is  not  far  to  seek. 
The  usual  text-book  does  not  limit  itself  to  a  statement  of  general 
principles  or  rules.  It  devotes  the  larger  part  of  its  space  to  a  de- 
scription of  a  multitude  of  actual  decisions  separately  noticed.  The 
law  of  insurance  is  composed  of  upwards  of  thirty  thousand  reported 
cases,  in  the  English  language,  to  which  must  be  added  a  great  body 
of  statutory  law  affecting  the  contract  and  the  relations  of  the  parties. 
Obviously  there  must  be  condensation  of  some  sort  for  the  use  of  both 
student  and  practitioner.  In  the  case-book  a  comparatively  small 
number  of  cases  are  spread  out  more  at  length. ^  In  the  text-book  the 
abridgment  is  rather  in  the  form  and  substance  of  every  case.  In  the 
latter,  the  author  endeavors  in  a  few  words  of  his  own  to  give  the 
pith  and  point  of  each  case.  This  description  in  many  instances 
owing  to  brevity  is  indefinite.  The  result  is  well-nigh  a  series  of 
abstractions  lacking  not  onl}'  perspective  and  color  but  also  pre- 
cision. Nobody  feels  full  confidence  in  such  a  meagre  description 
of  a  case,  convenient  though  it  is  for  ready  reference,  until  he  has 
looked  up  the  original  in  the  reports  to  ascertain  the  exact  scope  of 
the  decision.  Even  the  accomplished  barrister  is  never  content 
with  a  perusal  of  his  attorney's  brief,  but  must  resort  to  the  official 
reports  to  make  sure  of  the  cases  described. 

Accordingly,  the  conclusion  was  reached  by  a  few  teachers  that 
students  should  be  referred  exclusively  to  original  sources  of  au- 
thority supplemented  by  oral  explanations.  It  was  found  by  ex- 
periment, and  must  be  conceded,  that  the  official  statement  of  facts, 
together  with  the  precise  holding  of  the  court  based  upon  them,  makes 
a  much  more  interesting  and  instructive  subject  for  debate  in  the 
class  room  than  a  secondhand  epitome  of  a  case  which  amounts 
to  little  more  than  an  abstract  generalization.  This  revolt  from 
the  use  of  the  text-book,  however,  went  to  a  needless  extreme  in 
the  other  direction.  Many  conspicuous  advantages  of  the  general 
treatise  were  thus  altogether  lost.  Students  were  overwhelmed  with 
a  mass  of  material,  put  together  in  volumes,  which  they  under- 
stood fairly  well,  as  they  studied  it  from  day  to  day,  but  which 
they  could  not  carry  in  mind  and  which  they  were  discouraged,  by 
the  magnitude  of  the  task,  from  attempting  to  review.    Index,  table 

1 1  Yale  Law  J.  145. 

»  But  it  must  be  remembered  that  the  official  report  is  only  an  abridgment, 
made  from  the  record  at  the  discretion  of  the  reporter,  who  may  not  be  an  expert 
in  a  particular  branch  of  law. 


Xii  PREFACE  TO   THIRD    EDITION 

of  contents,  and  syllabus,  all  were  deliberately  eliminated  from  some 
of  the  case-books.  Definitions,  general  principles,  rules,  and  explana- 
tions, which  might  liave  been  concisely  and  admirably  stated  in  the 
lano-uage  of  the  learned  editor  were  also  omitted  out  of  deference  to 
the  main  object  sought  to  be  attained.^  In  spite  of  a  bewildering 
number  of  selected  reports,  only  a  part  of  the  required  ground  could 
ever  be  covered  by  the  new  method.  The  larger  portion  of  each 
compilation  was  occupied,  as  in  the  official  reports,  with  opinions 
voluminous,  though  often  curtailed,  separating  the  statements  of 
fact  from  the  decisions  rendered  by  a  long  course  of  reasoning,  only 
the  drift  of  which  could  be  remembered.  Even  points  of  counsel 
were  often  transcribed  from  the  reports.  In  consequence,  we  find 
that  in  the  insurance  case-books  little  space  is  left  for  treatment  of 
the  clauses  of  the  standard  and  other  modern  policies  which  con- 
stitute the  principal  subject  of  inquiry  by  our  clients.  Reasons  and 
explanations  can  be  provided  by  the  case  method  only  as  they 
chance  to  be  given  in  reported  cases.  Thus  in  these  insurance  collec- 
tions we  find  no  case  explaining  why  the  peculiar  doctrine  of  war- 
ranty was  adopted,  none  explaining  the  marked  difference  in  the 
attitude  of  the  courts  towards  marine  and  towards  fire  underwriters, 
none  contrasting  the  effects  of  a  transfer  by  subrogation  and  a  trans- 
fer by  abandonment.  Yet  one  of  these  volumes  of  cases  numbers 
over  eleven  hundred  and  sixty  pages. 

Take  any  practical  and  important  topic  you  may  choose — the  ap- 
praisal clause  of  the  New  York  standard  fire  policy,  the  pro  rata 
clause  as  applied  to  non-concurrent  apportionments,  the  application 
of  coinsurance  clauses,  the  legal  rights  and  relations  existing  between 
insured  owners  and  insured  first  and  second  mortgagees  and  their 
respective  insurers,  assessments  valid  and  invalid,  waiver  and  es- 
toppel,— study  only  the  necessarily  sparse  selection  of  cases  spread 
out  at  length  in  the  best  case  volume  of  practicable  dimensions  that 
human  skill  can  devise,  and  then  ask  yourself  whether  it  is  possible 
out  of  such  slender  resources  to  gain  anything  approaching  an  ac- 
curate conception  of  that  aggregation  of  decisions  known  as  "the 
law."  Will  it  be  as  sound  a  conception  as  one  based  upon  the  wealth 
of  good  material  close  at  hand,  properly  digested  and  presented? 
You  cannot  build  your  house,  if  you  are  content  to  stop  at  the  cellar 
foundation,  nor  can  you  make  a  single  brick  without  the  necessary 

iToo  much  disputation  and  friction  over  the  issues  of  isolated  cases,  it  is  sug- 
gested, has  a  narrowing  influence  upon  the  mind  of  the  novice.  Quietly  to 
ponder  over  the  meaning  of  well  worded  generalizations,  the  ripened  product  of 
many  adjudications,  also,  is  profitable. 


PREFACE  TO  THIRD  EDITION  Xlll 

ingredients.  Put  your  case-book  to  some  test.  Ascertain,  for  in- 
stance, whether  it  meets  the  needs  of  the  practicing  lawyer  at  any 
point  or  on  any  important  subject.  If  not,  the  inference  is  clear;  we 
must  omit  from  our  college  hand-book  much  that  the  courts  have 
said,  in  order  to  make  room  for  much  that  the  courts  have  done. 
And  such  is  the  very  general  consensus  of  opinion. 

By  the  adoption  of  this  plan,  involving  the  omission  from  indi- 
vidual cases  of  incidental  points  and  voluminous  opinions,  the  loss 
to  the  profession  would  be  irreparable  were  there  no  official  reports 
left  extant,  but  the  opportunity  for  gain  in  simplicity,  accuracy,  and 
thoroughness  is  very  great;  for  example,  not  to  speak  of  definitions, 
rules,  general  principles,  and  explanations,  room  is  found  for  a 
greater  number  of  illustrative  cases,  detailed  at  some  length,  on  the 
important  subjects  of  warranty,  proximate  cause,  waiver,  and  the 
clauses  of  modern  policies,  in  the  text  of  this  treatise,  covering  with- 
out notes  all  told  only  about  three  hundred  and  sixty  pages,  than  in 
all  the  insurance  case-books  combined,  including  among  them  part 
II  of  the  former  editions  of  this  book,  while  as  to  a  few  of  the  many 
topics  omitted  from  the  case-books  it  may  be  observed  that  more  than 
one  hundred  cases  are  here  cited  under  the  cancellation  clause  of  the 
standard  fire  policies,  more  than  fifty  on  the  divisibility  of  the  New 
York  standard  fire  policy,^  more  than  one  hundred  on  assessments 
valid  and  invalid,  more  than  one  hundred  on  the  employers'  liabilit}' 
policy,  more  than  forty  on  credit  insurance,  more  than  a  dozen  on 
title  insurance,  and  more  than  forty  on  the  sue  and  labor  clause  of 
the  marine  policy.^ 

1  One  of  the  recent  questions  for  admission  to  the  New  York  bar  was  based  on 
this  point. 

2  In  only  one  case-book  is  there  a  case  on  the  sue  and  labor  clause,  Atchison  v. 
Lohre,  4  App.  Cas.  755,  holding,  for  England,  that  salvage  charges  and  general 
average  are  not  recoverable  under  that  clause,  but  as  to  general  average  the  law 
in  this  country  is  otherwise. 


CONTENTS 

PART  I 

GENERAL  PRINCIPLES  OF  INSURANCE  LAW 

CHAPTER  I 

Introductory 

Nature,  Origin,  and  Description  of  Insurance  and  Insurance  Companies 


1. 

Nature  of  Insurance. 

§  11.  American  Lloyd's. 

2. 

Conditions  Necessary. 

12.  Fire  Insurance. 

3. 

Insurance  Companies. 

13.  Life  Insurance. 

4. 

What  Are  Insurance  Companies. 

14.  Accident  Insurance. 

5. 

Corporations  Classified. 

15.  Classification  of  Risks. 

6. 

Statutory  Safeguards. 

16.  Mortuary  Tables. 

7. 

Contracts  with  Unlicensed  Com- 

17. Reserve. 

panies. 

18.  Different  Kinds  of  Policies. 

8. 

License  to  Procure  from  Non- 

19.  Same  Subject — Marine. 

admitted  Companies. 

20.  Same  Subject — Fire. 

9. 

Origin  of  Insurance  and  Insur- 

21. Same  Subject — Life. 

ance  Law. 

22.  Mixed  Risks,  Sea  and  Land. 

10. 

Lloyd's  and  Lloyd's  Usages. 

23.  Reinsurance. 

Pages  1-25 

CHAPTER  II 

General  Principles  of  Insurance  Law 
Nature  and  Characteristics  of  the  Contract 


i  24.  Indemnity     the     Object — Pure      § 

Wagers  Void. 

25.  Insurable  Interest — Fire. 

26.  Same  Subject — Legal  Title. 

27.  Same  Subject— Equitable  Title. 

28.  Illegal  or  Defective  Title. 

29.  Same    Subject — Representative 

Capacity. 

30.  S&me  Subject—Liens. 

[XV] 


31.  Same  Subject— Possession. 

32.  Same  Subject — Contract  Rights. 

33.  Same  Subject— Liability. 

34.  Insurable  Interest — Life. 

35.  Ties  of  Affection,  Blood,  or  Mar- 

riage. 

36.  Creditor  in  Life  of  Debtor. 

37.  Same — To  What  Amount. 

38.  Other  Business  Relations. 


XVI 


CONTENTS 


5  39.  Insurable  Interest — Marine. 

40.  Payee  of  Life  Policy  Need  Have 

no  Insurable  Interest. 

41.  Same  Subject — Assignee. 

42.  Express  Restrictions. 

43.  Appointees — Assignees — United 

States  Supreme  Court. 

44.  When  Must  Insurable  Interest 

Exist — Marine  Insurance. 

45.  Same  Subject — Fire  Insurance. 

46.  Same  Subject — Life  Insurance. 

47.  Temporary  Suspension  Does  Not 

Avoid. 

48.  Insurance     Does     Not    Always 

Grant  Full  Indemnity. 

49.  Insurance  Grants  Indemnity  for 

Results  of  Negligence. 

50.  Rule  of  Indemnity  Qualified  in 

Marine — Insured  When  a  Co- 
insurer. 

51.  Double  Insurance  Contribution. 

52.  Subrogation,  Fire  and  Marine. 

53.  Subrogation — Mortgagee. 

54.  Subrogation — Other       Contract 

Rights. 

55.  Same    Subject — Stipulation    in 

Bill  of  Lading  for  Benefit  of 
Insurance. 

56.  Special  Clause  in  Policy  to  Pre- 

serve Subrogation. 


§  57.  Release  of  Party  Primarily  Lia- 
ble. 

58.  Right     of     Subrogation — How 

Prosecuted. 

59.  Insurable  Interest  as  Related  to 

Measure  of  Indemnity — Fire. 

60.  Personal  Contract. 

61.  Premium  When  Returnable. 

62.  Premium   When   Apportionable 

— Marine. 

63.  Assignment  of  Policies. 

64.  Vesting  of  Rights  in  Beneficiaries 

— Regular  Life  Policy. 

65.  If  All  the  Donee   Beneficiaries 

Die  Before  Insured. 

66.  If  Some  of  Donee  Beneficiaries 

Die  Before  Insured. 

67.  Beneficiaries'    Interests — Condi- 

tionally Vested  or  Contingent. 

68.  Right  to  Change  Beneficiary  Ex- 

pressly Reserved. 

69.  Mode  of  Changing  Beneficiary. 

70.  Relations  Between  Insurer  and 

Insured — Life. 

71.  The    Contract    Is    a    Property 

Right — Life. 

72.  Rights  of  Creditors  to  Life  In- 

surance Premiums  Paid  by  In- 
solvent Debtors. 

73.  Rights  of  Creditors  as  the  As- 

sured. 

Pages  27-92 


CHAPTER  III 


General  Principles — Continued 
Closing  of  Contract — General  Rules  of  Construction 


74.  Introductory. 

75.  Fire  Insurance  Contract — How 

Closed. 

76.  Marine — How  Closed. 

77.  Life  Insurance — How  Closed. 

78.  Requisites  of  Complete  Contract. 

79.  The  Particulars  Sometimes  Un- 

derstood. 

80.  Contract  Closed  by  Parol. 

81.  Contract  Closed  by  Binding  Slip. 


§  82.  Contract  Governed  by  Terms  of 
Usual  Policy. 

83.  Same  Subject — Form  of  Action. 

84.  Construction  of  Contract. 

85.  The    Same— Policy    Best    Evi- 

dence. 

86.  Court    Must    Not    Make    New 

Terms. 

87.  Special  Terms  Prevail  Ovei*  Gen- 

eral Form. 


CONTENTS 


xvu 


§  88.  Parol  to  Explain  Ambiguity. 

89.  Trade  Custom. 

90.  Construction  Liberal  to  Insured. 

91.  Forfeitures  Not  Favored. 


§  92.  What   Law   Governs   Construc- 
tion of  Contract. 
93.  Who    Construes    the    Contract, 
Court  or  Jury, 

Pages  93-116 


CHAPTER  IV 

General  Principles — Continued 

Representations  and  Concealments 


94.  Introductory. 

95.  Concealment:  Marine  Insurance. 

96.  Concealment:  Fire  and  Life. 

97.  Representations. 

98.  Mere  Opinion  or  Belief  Not  Gen- 

erally Fatal. 


99.  Test  of  Materiality. 

100.  Refers  to  What  Time. 

101.  Materiality   and   Substantial 

Truth:  Questions  of  Fact. 


Pages  117-133 


CHAPTER  V 

General  Principles — Continued 


Warranties 


§  102.  Warranties:  Introductory. 

103.  Definition  of  Warranty. 

104.  No  Special  Form  Necessary. 

105.  Warranty  Must  Be  Part  of  Con- 

tract. 

106.  What   Reference   Sufficient  to 

Incorporate  as  Warranty. 

107.  Nature  of  Warranties. 

108.  Inability  to  Fulfill  no  Excuse. 

109.  Warranties     Contrasted     with 

Representations. 

110.  In     Interpreting     Warranties, 

Courts  Lean  Towards  the  In- 
sured. 

111.  Statements  of  Opinion,  Expec- 

tation, or  Belief. 


112.  Statement  of  Present  Use. 

113.  Questions  Unanswered  or  Par- 

tially Answered. 

114.  Whether     Temporary     Breach 

Avoids    or    Only    Suspends 
Contract. 

115.  To  Avoid  Forfeiture,  Contract 

Made  Severable. 

116.  Void  Means  Voidable. 

117.  Burden  on  Insurer  in  Pleading 

and  Proof. 

118.  Statutes     Making     Warranties 

Representatiors. 

119.  Such    Enactments    Valid    and 

Controlling. 

Pages  134-157 


CHAPTER  VI 

General  Principles — Continued 

Waiver  and  Estoppel 


§  120,  Nature  of  Waiver  and  Estoppel 
in  General 


§   121.  Election    Once   Made    Is    Fi- 
nal. 


U 


XVIU 


CONTENTS 


§  122.  Whether    New    Consideration 
Required. 

123.  Action  Usually  upon  Contract: 

Not  for  Rescission  or  Refor- 
mation. 

124.  Disturbance    of    Contract    by 

Parol. 

125.  Effect  of  Doctrine  on  Common- 

Law  Rules  of  Evidence. 


§  126.  Considerations   Favoring   Doc- 
trine of  Parol  Waivers. 

127.  Considerations  Opposed  to  the 

Doctrine. 

128.  Practical    Operation    of    Doc- 

trine. 

129.  Difficulty    in    Applying    Doc- 

trine. 

Pages  158-167 


CHAPTER  VII 

General  Principles 

Waiver  and  Estoppel — Continued 


§  130.  What  Cannot  Be  Waived. 

131.  What  Can  Be  Waived— Stock 

Companies. 

132.  New  Subject  Not  to  Be  Intro- 

duced by  Waiver. 

133.  Waiver — Mutual  Companies. 

134.  What  Amounts  to  Waiver  or 

Estoppel — Doctrine     Ampli- 
fied. 

135.  The  Same — Acceptance  of  Pre- 

mium. 

136.  The  Same — Receipt  of  Overdue 

Premiums. 

137.  The  Same — Consent  to  Assign- 

ment of  Policy. 

138.  The  Same — Renewal  of  Policy. 

139.  Effect  of  Prior  Course  of  Deal- 

ing. 

140.  Subsequent  Parol  Permits. 

141.  Knowledge  of  Breach — When  a 

Waiver. 

142.  Rule  in  Federal  Courts — Massa- 

chusetts— New  Jersey, 


143.  Silence  Not  a  Waiver. 

144.  Proofs    of    Loss  —  Technicali- 

ties. 

145.  Denial  of  All  LiabiHty. 

146.  Demanding  Proofs  of  Loss. 

147.  Demanding  Additional   Proofs 

of  Loss. 

148.  Where    Policy    Provides    That 

Such  Acts   Shall   Not   Be  a 
Waiver. 

149.  Non-waiver  Agreement. 

150.  Taking  Part  in  Adjustment. 

151.  Company  May  Defend  on  Other 

Grounds   Than   Those    First 
Named. 

152.  Claimant    Not    Concluded    by 

Statements  in  Proofs  of  Loss. 

153.  Retention    of    Proofs    Waives 

Defects    That    Might    Have 
Been  Remedied. 

154.  Waiver  or  Estoppel  Must  Be 

Pleaded. 

Pages  168-188 


CHAPTER  VIII 

General  Principles — Continued 
Waiver  and  Estoppel  by  Agents 


§  155.  Introductory. 
156.  Ostensible  Authority. 


§  157.  Undisclosed    Instructions    Not 
Binding  upor\  the  Insured. 


CONTENTS 


XIX 


158.  Agency  Determined  by  Facts 

of  Each  Case. 

159.  Effect   of   Stipulations   in   the 

Contract  Itself  as  to  Who 
Are,  or  Are  Not,  Agents  of 
the  Company. 

160.  Effect  of  Stipulations  as  to  the 

Manner  of  Waiving. 

161.  The    Same  —  Restrictions     on 

Agents'  Authority  in  Stand- 
ard Fire  Policy  and  Other 
Policies. 

162.  Policy  Restrictions,  When  Op- 

erative. 

163.  Authority    of    Officers    of   the 

Company. 

164.  Authority  of  Managers. 

165.  Limited  Authority  of  Solicitors 

—Life. 

166.  The    Same — Exception    as    to 

First  Premium. 

167.  Erroneous     Answers     Written 

into  Application  by  Agent. 

168.  Agent's  Interpretation  of  the 

Contract. 


169.  Mere    Knowledge    of   Solicitor 

Works  no  Estoppel. 

170.  Notice     of     Restriction     upon 

Solicitor's  Authority. 

171.  Illiterate  Applicants. 

172.  Authority     of     Commissioned 

Agent — Fire. 

173.  The   Same — Restrictions  upon 

Authority  Coupled  with 
Knowledge  of  Forfeiture 
When  Policy  Issues. 

174.  Conclusion. 

175.  Present  Knowledge  of  Existing 

Facts  Which  Will  Shortly 
Constitute  Breach. 

176.  The   Same — Subsequent   Parol 

Waivers. 

177.  Overt  Act  with  Authority  to 

Perform  the  Act. 

178.  As   to   Provisions  Relating  to 

Proceedings  After  Loss. 

179.  Special  Soliciting  Agents — Fire. 

180.  Adjusters     —     Other     Special 

Agents. 

Pages  189-220 


CHAPTER  IX 

General  Principles — Continued 
Marine  Insurance 


S  181.  What  Is  Marine  Insurance. 

182.  Implied  Warranties. 

183.  Warranty  of  Seaworthiness. 

184.  Warranty    of    Seaworthiness — 

Time  Policies. 

185.  Seaworthiness  Is  What. 

186.  Implied  Warranty — Deviation. 

187.  Deviation  by  Delay. 

188.  Deviation,  When  Proper 

189.  Illegality. 

190.  Actual  Total  Loss. 

191.  Constructive  Total  Loss — What 

Constitutes. 

192.  Constructive  Total  Loss — Eng- 

land. 


§  193.  Constructive  Total  Loss — Uni- 
ted States. 

194.  Notice  of  Abandonment. 

195.  Form  of  Notice  of  Abandon- 

ment. 

196.  Effect  of  Abandonment. 

197.  Particular  Average. 

198.  Salvage   Charges   Recoverable. 

199.  Insurer  Liable  for  General  Av  - 

erage  Loss. 

200.  Insurer  Also   Liable   for  Gen 

eral  Average  Contribution. 

201.  Measure  of  Indemnity. 

202.  Total  Loss. 

208.  Partial  Loss  of  Ship. 


XX 


CONTENTS 


§  204.  Partial  Loss  of  Freight.  §  208, 

205.  Partiul  Loss  of  Goods. 

206.  Apportionment  of  Valuation. 

207.  General  Average  Contribution  209. 

and  Salvage  Charges. 


Liability  for  Successive  Losses 
May  Exceed  Amount  of 
Policy. 

One-third  Off  New  for  Old. 

Pages  221-259 


CHAPTER  X 


General  Average — Marine 


§  210.  General    Average — Related    to 
Insurance. 

211.  General  Average — Its  Basis. 

212.  General  Average  Loss  and  Con- 

tribution Defined. 

213.  Distinction     between     General 

and  Particular  Average. 

214.  Obligation    Rests    upon    Law 

Rather  Than  Contract. 

215.  Origin  of  General  Average. 

216.  Requisites  of  General  Average 

Act. 


§  217.  Negligence  Cause  of  Sacrifice. 

218.  General  Average  Losses. 

219.  Deck  Load. 

220.  Voluntary  Stranding. 

221.  Port  of  Refuge  and  Other  Ex- 

penses. 

222.  Illustrations. 

223.  The  Lien  for  Contribution. 

224.  The  Adjustment. 

225.  York-Antwerp  Rules. 

226.  Contributory  Value  of  Freight. 

Pages  260-273 


PART  II 

MEANING  AND  LEGAL  EFFECT  OF  THE  CLAUSES  OF 
THE  POLICIES 

CHAFrER  XI 

The  Standard  Fire  Policy 


227.  Introductory. 

228.  In  Consideration  of  the  Stipu- 

lations and  Premium. 

229.  Premium— To  Whom  Payable. 

230.  The  Term— Duration  of. 

231.  Insures  Against  All  Direct  Loss 

by  Fire,  Except  as  Provided; 

232.  The  Following  Described  Prop- 

erty. 

233.  Additions,  Alterations,  etc. 

234.  Fluctuating  Stock,  etc. 

235.  Location. 


§  236.  Held  in  Trust, 

237.  As  Interest  May  Appear. 

238.  For  Whom  It  May  Concern. 
Measure  of  Damages. 
The  Same— Total  Loss  of  Build- 
ing. 

Measure  of  Damage — As  Af- 
fected by  Provision  as  to  Re- 
pairing. 

Coinsurance  and  Other  Special 
Clauses  Modifying  Measure 
of  Liability. 


239. 
240. 

241. 


242. 


CONTENTS 


XXI 


9  243.  Insurance  Payable  Sixty  Days 
After  Satisfactory  Proofs. 

244.  Reinstatement  Clause. 

245.  There  Can  Be  no  Abandonment 

to  Insurer. 

246.  This   Entire    Policy   Shall   Be 

Void. 


247.  Temporary  Breach. 

248.  Concealment  —  Misrepresenta- 

tion. 

249.  Interest    of    the    Insured    Not 

Truly  Stated  in  the  Policy. 

250.  Fraud  or  False  Swearing. 

Pages  277-316 


CHAPTER  XII 


The  Standard  Fire  Policy — Continued 


§  251.  Waivers  Must  Be  by  Written 
Agreements. 

252.  Other  Insurance  Prohibited. 

253.  Effect  of  Words— Valid  or  In- 

valid. 

254.  Effect   of   Coinsurance   Clause 

and  Other  Limited  Consent. 

255.  Factories — Operation  and  Stop- 

ping Work. 


256.  Watchman. 

257.  Increase  of  Risk. 

258.  Mechanics — Repairs. 

259.  Interest    of    Insured — Uncon- 

ditional and  Sole  Ownership. 

260.  Leased  Ground. 

261.  Chattel  Mortgage. 

262.  Foreclosure. 

Pages  317-342 


CHAPTER  XIII 


The  Standard  Fire  Policy — Continued 


263.  Alienation  Clause. 

264.  The  Same— Incumbrances. 

265.  The     Same — Executory     Con- 

tracts of  Sale. 

266.  The     Same — Joint     Owners — 

— Partners — Joint     Insured. 

267.  The    Same — Legal    Process    or 

Judgment. 

268.  Assignment    of    Policy — Or    if 

This     Policy    Be     Assigned 
Before  Loss. 

269.  Memorandum     Clause — Gener- 

ating Gas,  Keeping  Benzine, 
etc..  Prohibited. 

270.  The  Same — As  Affected  by  the 

Subject  and  the  Written  De- 
scription. 

271.  Vacancy  Clause. 


§  272.  Vacancy   Clause — Dwellings. 

273.  Vacancy       Clause — Buildings 

Other  Than  Dwellings. 

274.  Certain    Causes    of    Loss    Ex- 

cepted. 

275.  Loss  by  Order  of  Civil  Author- 

ity Excepted. 

276.  Loss  by  Theft  Excepted. 

277.  Neglect  of  Insured  After  Fire. 

278.  Loss    by   Explosion    Excepted 

Unless,  etc. 

279.  Falling     Building  —  Insurance 

Ceases. 

280.  Earthquake       and       Volcano 

Clause. 

281.  Memorandum      Articles  — Ac- 

counts, Bills,  Currency,  etc., 
Excepted. 

Pages  343-376 


xxu 


CONTENTS 


CHAPTER  XrV 


The  Standard  Fire  Policy — Continued 


282.  Survey,    etc.,    AVhen    a    War-      § 

ranty. 

283.  Who  Are  Agents  of  the  Com- 

pany. 

284.  Renewals. 

285.  Cancellation. 

286.  Notice   Must   Be   Peremptory, 

Explicit,  Unconditional. 

287.  Cancellation  by  the  Insured. 

288.  Cancellation  by  the  Company. 


289.  Return  Premium  When  Policy 

Becomes  Void. 

290.  Mortgagee  Clause. 

291.  The   Same— Standard  Mortga- 

gee Clause. 

292.  Subrogation  by  Contract. 

293.  Mortgagee  Party  to  Appraisal. 

294.  Proofs  of  Loss — Form  of  Ac- 

tion. 

Pages  377-400 


CHAPTER  XV 


The  Standard  Fire  Policy — Concluded 


295. 

Removal      of      Property      for 

§  306. 

Safety. 

307. 

296. 

Notice  and  Proofs  of  Loss. 

297. 

The  Same — Immediate  Written 
Notice  of  Loss. 

308. 

298. 

The    Same— Duty    to    Protect 
from  Further  Damage. 

309. 

299. 

Forthwith   Separate    Damaged 

310. 

and     Undamaged  —  Put    in 

311. 

Best   Possible   Order — Make 

312. 

Complete    Inventory,    Stat- 

313. 

ing    Quantity    and    Cost    of 

314. 

Each    Article    and    Amount 

Claimed    Thereon  —  Exhibit 

315. 

Remains. 

300. 

Same    Subject — Statement    or 
Proof  of  Loss. 

316. 

301. 

Excusable     Failure    in    Strict 
Compliance. 

.317. 

302. 

Where  Served. 

318. 

303. 

Same    Subject — Plans — Magis- 

trate's Certificate. 

319. 

304. 

Exhibit    Remains — Submit    to 

320. 

Examination. 

321. 

305. 

When  Required,  Production  of 

Books  of  Accounts,  Vouch- 

322. 

ers,  etc. 

323. 

Appraisal. 

Standard  Clause  a  Valid  Con- 
dition. 

Appraisers  Competent,  Disin- 
terested. 

Scope  of  Appraisal,  Entire 
Loss. 

Conduct  of  Appraisal. 

Unfinished  Appraisals. 

Scope  of  Award. 

Setting  Aside  Award. 

Enforcing  Contract  Is  no 
Waiver. 

Pro  Rata  Clause — Other  In- 
surance. 

What  Is  Other  Contributing 
Insurance. 

Policies  with  Nonconcurrent 
Terms. 

Partially  Concurrent  Appor- 
tionments. 

Reinsurance. 

The  Usual  Reinsurance  Rider, 

Special  Contracts  of  Reinsur* 
ance. 

Subrogation. 

Subrogation — Tortious  Fires. 


CONTENTS 


XXlll 


324.  Subrogation  —  Negligence      of 

Water  Company. 

325.  Subrogation — Order     of     Civil 

Authority. 

326.  Limitation  of  Time  to  Sue. 

327.  When   the    Period    Begins    to 

Run. 

328.  Commencement  of  Action. 

329.  Construction      of      Limitation 

Clause. 


330.  Waiver  of  Limitation. 

331.  Insured  Includes  Legal  Repre- 

sentative. 

332.  Mutual  Companies. 

333.  Authority  of  Agents  to  Waive 

Limited  to  Writing. 

334.  Policy  Not  Valid  Until  Coun- 

tersigned. 


Pages  401-460 


CHAPTER  XVI 


Life  Insurance  Policy 


335.  Life  Insurance  Policy — Intro-      §  348. 

ductory. 

336.  Designation  of  Beneficiary.  349. 

337.  Other  Beneficiaries. 

338.  Insurance  Payable  to  Heirs  or  350. 

Legal  Representatives. 

339.  Insurance  Payable  to  Wife.  351. 

340.  Insurance  Payable  to  Children. 

341.  Insurance  Payable  to  Family,  352. 

Dependents,   Survivors,   etc. 

342.  Beneficiaries  May  Sue.  353. 

343.  Anticipatory  Breach.  354. 

344.  Anticipatory    Breach  —  Reme- 

dies Available.  355. 

345.  Application   Incorporated   and  356. 

Warranted.  357. 

346.  Statutory  Provisions. 

347.  Statements    as    to    Health    or  358. 

Freedom  from  Disease. 


Statements  as  to  Medical  At- 
tendance. 

What  Constitutes  Medical  At- 
tendance or  Consultation. 

Family     Physician     or    Usual 
Medical  Attendant. 

History  of  Family  and  Rela- 
tives. 

Statements  as  to  Other  Insur- 
ance. 

Statements  as  to  Age. 

Statements  as  to  Family  Rela- 
tionship. 

Statements  as  to  Habits. 

Statements  as  to  Occupation. 

Statements  or  Requirements  as 
to  Residence  and  Travel. 

Statements  About  Bodily  In- 
juries or  Infirmities. 

Pages  461-494 


CHAPTER  XVII 


Life  Policy — Concluded 


I  359.  Payment  of  Premiums. 

360.  Statutory  Notice  of  Premiums 

Due. 

361.  Extended    or    Paid-up    Insur- 

ance. 


§  362.  When  Premium  Is  a  Debt  Col- 
lectible by  Company. 

363.  Assessments. 

364.  Assessments  Must  Be  Lawfully 

and  Properly  Levied. 


XXIV 


CONTENTS 


5  M\5. 

367. 
368. 

369. 

370. 

371. 


372. 
373. 


Power  to  Change  Rate  of  As- 
sessments. 

Notice  of  Assessment  to  In- 
sured. 

Suicide  Excepted. 

Degree  of  Insanity  Required  to 
Save  the  Insurance. 

Suicide  and  Self-destruction, 
Sane  or  Insane,  Excepted. 

13urden  of  Proof — Suicide,  In- 
sanity. 

Exception  of  Death  by  the 
Hands  of  Justice  or  in  Vio- 
lation of  Law. 

In  Violation  of  Law. 

Suicide  Not  a  Crime. 


§  374.  Death  Must  Be  Caused  by  Un- 
lawful Act. 
37.5.  Authority  of  Agents. 

376.  Ericrs  in  Age  to  Be  Adjusted. 

377.  Assignments. 

378.  Incontestable  Clause. 

379.  Same     Subject  —  Policy     Puo- 

cured  by  Fraud. 

380.  Incontestable     from      Date  — 

Policy  Procured  by  Fraud. 

381.  Same    Subject^ — Insurable    In- 

terest. 

382.  Same  Subject — Suicide. 

383.  Same  Subject — Death  at  Hands 

of  Justice. 

Pages  495-536 


CHAPTER  XVIII 


The  Accident  Policy 


Introductory.  §  397. 

Accident  Defined— What  Con-  398. 

stitutes.  399. 

Injuries  Effected  Through  Ex-  400. 

ternal,    Violent,    and    Acci-  401. 

dental  Means.  402. 

Sole  and  Proximate  Cause.  403. 

Same    Subject— "Immediately  404. 

and  Wholly  Disable." 
Same  Subject — Loss  of  Bodily  405. 

Member. 

390.  Exception  of  Hazardous  Em-  406. 

ployment. 

391.  Notice  and  Proof  of  Accident 

and  Injury. 

392.  Right  to  Examination  or  Au-  407. 

topsy. 

393.  Disappearances.  408, 

394.  Suicide — Sane  or  Insane. 

395.  Visible    Mark    of    Injury    Re-  409 

quired. 

396.  Accidents  Caused  by  Disease, 

etc.,  Excepted. 


384. 
385. 

386. 


387. 
388. 

389. 


Intoxication  or  Narcotics. 

Poison,  etc. 

Inhaling  of  Gas  or  Vapor. 

Duelling  or  Fighting. 

Intentional  Injuries. 

Voluntary  Overexertion. 

In  Violation  of  Law. 

Voluntary  Exposure  to  Unnec- 
essary Danger. 

Boarding  or  Leaving  Cars  in 
Motion. 

Riding  in  or  on  Any  Such  Con- 
veyance Not  Provided  for 
Transportation  of  Passen- 
gers. 

Walking  or  Being  on  Railway 
Bridge  or  Roadbed. 

Due  Diligence  for  Personal 
Safety  and  Protection 

Insurance  Against  Injuries  Re- 
ceived While  Traveling. 


Pages  537-581 


CONTENTS 


XXV 


CHAPTER  XIX 


The  Marine  Policy 


§  410.  Introductory. 

411.  Name  of  the  Assured. 

412.  Lost  or  Not  Lost. 

413.  Master's  Name — Ship's  Name. 

414.  The  Subject  of  Insurance. 

415.  Same  Subject — Ship. 

416.  Same  Subject — Cargo. 

417.  Same  Subject — Freight. 

418.  Commencement  of  Risk — Ship 

— Freight. 


419.  Commencement  of  the  Risk — 

Cargo. 

420.  Same  Subject — Indorsements — 

Declarations. 

421.  The  Voyage. 

422.  Duration   and  Termination  of 

Risk. 

423.  Touch  and  Stay. 

424.  Prohibited  Waters. 

Pages  582-599 


CHAPTER  XX 


Marine  Policy — Concluded 


§  444 
445 
446 
447, 


448 
449 


425.  Perils  of  the  Sea. 

426.  Foundering  at  Sea. 

427.  Grounding. 

428.  CoUision. 

429.  Stress  of  Weather. 

430.  Fire. 

431.  Perils  of  War,  etc. 

432.  Arrests,    Restraints    of   Kings, 

Princes,  or  People,  etc. 

433.  Thieves. 

434.  Barratry. 

435.  Jettison. 

436.  All    Other    Perils,    Losses,    or  453 

Misfortunes. 

437.  Proximate  Cause. 

438.  When       Nearest      Antecedent 

Cause  Held  Responsible. 

439.  Proximate    Cause,     How    Far 

Followed  in  Its  Results. 

440.  An    Independent    Intervening 

Cause. 

441.  Joint  Action  of  Peril  Insured 

Against  and  Peril  Excepted. 

442.  Independent  Cause,  Producing 

Distinguishable  Damages. 

443.  Proximate   Cause   as   Limiting 

Insurers'  Liability. 


Wear  and  Tear. 

Original  Defect. 

Inherent  Vice. 

Application    of    Principles    to 

Particular  Average. 
The  Sue  and  Labor  Clause. 
Exemption  of  Loss  under  Five 

Per  Cent. 

450.  Other  Assurance  Clause. 

451.  Warranted  Uninsured. 

452.  Warranted   Uninsured   beyond 
a  Specified  Amount. 

Warranted  Free  of  Capture, 
etc. 

Want  of  Ordinary  Care  and 
Skill. 

Other  Perils  Sometimes  Ex- 
cepted. 

Memorandum  Clause  —  War- 
ranted Free  from  Average 
Unless  General. 

Whether  Constructive  or  Only 
Actual  Total  Loss  Will  Sat- 
isfy the  Warranty. 

Total  Loss  of  Part. 

Unless  Ship  Be  Stranded. 


454. 


455. 


456. 


4.57. 


458 
459 


460.  What  Constitutes  Stranding. 


xxn 


CONTENTS 


S  461.  Cargo  on  Deck— Cargo  on  Deck 
Not  Covered. 
462.  Blockade— Warranted   Not  to 
Abandon. 


463.  Warranty  of  Neutrality. 

464.  Ridera. 

465.  Adjustment. 


Pages  600-651 


CHAPTER  XXI 


Title,  Guarantee,  and  Liability  Insurance 


466.  Introductory. 

467.  Title  Insurance. 

468.  Fidelity  and  Guarantee  Insur- 

ance. 

469.  Contract     One     of     Insurance 

Rather  Than  Suretyship. 

470.  A   Contract   of   Highest  Good 

Faith. 

471.  Period  of  Risk. 

472.  Stipulation  to  Give  Immediate 

Notice  of  Misconduct. 

473.  Knowledge  of  What  Agents  Is 

Imputed  to  the  Employer. 

474.  Credit  Insurance. 

475.  Employers'     Liability     Insur- 

ance. 

476.  The  Employer,  Not  the  Injured 

Person,  Is  Insured. 

477.  Period  of  Risk. 

478.  Whether  the  Policy  Is  Indem- 


nity Against  Liability  or  Sat- 
isfied Liability. 
§  479.  Immediate    Notice    of    Injury 
with    Full    Particulars    Re- 
quired. 

480.  The  Employer  Must  Not  Settle 

Claims,     Without     Insurer's 
Consent. 

481.  The   Employer   Must   Show   a 

Liability  Insured  Against. 

482.  The  Insurer  Conducts  Compro- 

mise or  Defense  in  Accident 
Suit. 

483.  Judgment     in     Accident     Suit 

Conclusive. 

484.  Effect  of  Insurer's  Breach  of 

Agreement  to  Defend. 

485.  Costs   and   Expenses   of   Acci- 

dent Suit. 

486.  Carriers'  Liability  Policy. 

Pages  652-678 


CONTENTS  XXVli 


APPENDIX 

CHAPTER  I 

Statutes 

Statutes  of  American  Legislatvres  Affecting  the  Insurance  Contract  Arranged 
in  Groups  with  a  Specimen  Statute  of  Each  Group 

Pages  681-717 

CHAPTER  II 

Forms 

Blank  Forms  of  Applications,  Binding  Slips,  Ancient  Florentine  Policy,  the 
Standard  and  Other  Policies,  a  Collection  of  Special  Clauses  and  Riders, 
Proofs  of  Loss,  etc. 

Pages  718-776 

CHAPTER  III 

Relating  to  Adjustment 

Examples  of  the  Operation  of  Coinsurance  Clauses.  York- Antwerp  Rules. 
Customary  Deductions  in  Adjusting  Partial  Loss  on  Ship.  An  Example  of 
an  Adjustment  in  General  Average. 

Pages  777-789 


PART  I 

GENERAL  PRINCIPLES  OF  INSURANCE  LAW 


THE  LAW  OF  INSURANCE 


PART  I 
GENERAL  PRINCIPLES  OF  INSURANCE  LAW 


CHAPTER  I 

Introductory 
NaturCj  Origin^  and  Description  of  Insurance  and  Insurance  Companies 

§  1.  Nature  of  Insurance. — There  are  certain  serious  casualties 
or  accidents,  such  as  shipwreck,  fire,  and  premature  death  or  dis- 
abiHty,  to  which  exposure  is  very  common  among  mankind,  but 
which  actuall}'  occur  in  comparatively  few  instances.  It  is  difficult 
or  impossible  to  predict  or  prevent  the  happening  of  these  mis- 
fortunes, but  it  is  often  of  the  greatest  moment  to  those  intimately 
concerned  to  guard  against  the  loss  of  property  or  future  earnings 
which  their  occurrence  entails. 

This  result  may  be  accomplished  by  means  of  a  general  fund 
obtained  by  the  imposition  of  a  proportionate  contribution,  called 
the  premium,  upon  many  who  are  exposed  to  the  common  hazard, 
out  of  which  the  few  who  actually  suffer  may  be  indemnified. 

Insurance  is  the  system  for  distributing  losses  of  this  charac- 
ter in  the  manner  just  described.^  Its  principal  branches  are  fire, 
life  (including  also  accident),  and  marine  insurance;  ^  and,  as  an 
institution,  the  development  of  these  branches  of  insurance  among 

1  The   contract   of   insurance   is   "a  tion  or  injury  of  something  in  which 

contract  whereby,  for  a  stipulated  con-  the    other    party    has    an    interest," 

sideration,    one    party    undertakes    to  Claflin  v.  U.  S.  Credit  System  Co.,  165 

indemnify    the   other   against    certain  Mass.  501,  43  N.  E.  293,  52  Am.  St.  R. 

risks,"   People   v.    Rose,    174   111.   310,  528.     The  written  instrument  embody- 

51  N.  E.  246,  44  L.  R.  A.  124,  citing  ing  the    contract    is   called  a   policy, 

also  many  other  definitions  of  insur-  The  party  promising  protection  is  called 

ance.      "A    contract,  whereby  for   an  the  insurer  or  underwriter.     The  other 

agreed  premium,  one  party  undertakes  party  is  called  the  insured  or  assured, 

to  compensate  the  other  for  loss  on  a  Great  Brit.,  etc.,   Ins.   Assn.  v.   Wyllie 

specified   subject  by  specified    perils,''  (1889),  22  Q.  B.  D.  724,  726.     As  to 

State  V.  Pittsburg,  etc.,  R.  Co.,  68  Ohio  benefits  accruing  from  practice  of  ma- 

St.  9,  67  N.  E.  93,  96  Am.  St.  R.  635.  rine  in.surance,  see  1  Duer,  Ins.,  p.  54. 

"A  contract  of  insurance  is  an  agree-  2  The  purposes  for  which  insurance 

ment  by  which  one  party,  for  a  con-  corporations  may  be  organized  in  New 

sideration,  promises  to  pay  money  or  York  are  enumerated  in  the  Ins.  Law 

its  equivalent,  or  to  do  some  act  of  of  1892,  c.  690,  as  amended  L.  1906, 

value  to  the  assured  upon  the  destruc-  c.  326  and  L.  1907,  c.  206. 

1  [1] 


2  THE    LAW    OF  INSURANCE 

civilized  peoples  of  modern  times  has  assumed  a  vast  and  increas- 
ing importance. 

Fire  insurance  concerns  a  larger  number  of  persons  probably 
than  any  other  branch,  though  life  insurance  has  become  very 
popular,  especially  in  this  country/  while  marine  insurance,  from  its 
nature,  is  somewhat  restricted  and  localized,  and  both  the  business 
and  the  practice  of  the  law  of  this  class  of  insurance  fall  into  the 
hands  of  specialists  to  a  greater  extent  than  in  the  case  of  any  other. 

Certain  other  forms  of  insurance,  some  of  them  rapidly  develop- 
ing, must  not  be  overlooked,  for  example,  insurance  against  loss 
by  lightning,  tornadoes,  hail-storms,  boiler  explosions,  automobile 
collisions,  burglaries  and  thefts,  injuries  to  plate  glass,  liability  of 
employers  for  negligence  of  emploj^ees  and  for  injuries  to  their 
employees,  defaults  or  breaches  of  trust  on  the  part  of  officers, 
trustees,  agents,  or  employees,  defects  in  real  estate  titles,  death  to 
live-stock,  and  to  indemnify  merchants  for  loss  from  giving  credit. 

Insurance  against  accident  to  the  body  or  health  of  persons  may 
be  considered  a  branch  of  life  insurance,  and  subject  to  the  same 
principles  of  law. 

§  2.  Conditions  Necessary. — The  conditions  which  in  general 
are  necessary  to  the  successful  operation  of  a  system  of  insurance 
are  said  to  be  these:  There  must  be  a  risk  of  real  loss  which  it  ought 
to  be  beyond  the  power  of  either  the  insurer  or  the  insured  to  avert 
or  to  hasten;  a  large  number  of  persons  must  be  liable  to  the  like 
risk;  the  casualty  contemplated  must  be  likely  to  fall  on  a  com- 
paratively small  number  of  the  persons  exposed  to  the  risk  of  it; 
the  probabilities  of  its  occurrence  must  be  capable  of  being  esti- 
mated beforehand  with  some  approximation  to  certainty;  the  loss 
apprehended  must  be  so  considerable  when  it  does  occur  as  to  be 
worth  providing  against;  and  the  cost  of  that  provision  must  be 
comparatively  so  small  as  not  to  be  prohibitive. 

To  this  list  of  requisites  may  be  added  an  honest  administration, 
and  some  means  of  securing  permanency  and  integrity  to  the  gen- 
eral fund. 

§  3.  Insurance  Companies. — The  bulk  of  the  business  of  insur- 
ance is  now  transacted  by  corporations,  which,  on  account  of  their 
exemption  from  liability  to  natural  death,  and  their  facility  for  rais- 

iThe  recent  spread  of  industrial  in-       well-nigh  lo  an  equality  with  the  nuin- 
surance  among  the  working  classes  may       l>er  of  those  insured  against  fire  loss. 
bring  up  the  number  in  life  insurance 


INTRODUCTORY 


ing  capital  and  extending  their  operations  over  wide  areas  of  terri- 
tory, are  peculiarly  well  adapted  to  serve  in  the  capacity  of  insurers.^ 
A  not  inconsiderable  part  of  life  insurance  business,  however,  is 
in  the  hands  of  fraternal  organizations  and  benefit  societies,  guilds, 
orders.  Odd  Fellows,  Knights,  and  unions,  of  one  sort  or  another,  most 
of  which  are  incorporated,  and  some  of  which  are  not.  The  mem- 
bers of  these  organizations  are  governed  by  their  constitution  and 
by-laws,  as  well  as  by  the  statutes  and  common  law  of  the  land.^ 


1  Where,  however,  no  statute  pro- 
hibits, individuals  or  unincorporated 
associations  may  lawfully  engage  in 
the  business  of  insurance  upon  com- 
pliance with  statutory  regulations, 
Hoadley  v.  Pimfoy,  107  Ala.  276,  18 
So.  220,  30  L.  R.  A.  351;  Banies  v. 
People,  168  111.  425,  48  N.  E.  91.  Such 
associations  in  this  country  are  often 
known  as  "Lloyds"  or  "individual 
underwriters."  See  §  11.  But  it  has 
been  held  that  a  statute  confining  the 
business  of  insurance  exclusively  to  cor- 
porations is  not  an  unreasonable  inter- 
ference with  the  freedom  of  the  in- 
dividual citizen  and  is  a  constitutional 
exercise  of  police  power,  Common- 
wealth V.  Vrooman,  164  Pa.  306,  80 
Atl.  217.  25  L.  R.  A.  250,  44  Am.  St.  R. 
603,  three  judges  dissenting.  Com- 
pare as  to  constitutional  right  of  citi- 
zen to  pursue  ordinary  occupations 
without  unreasonable  interference, 
Butcher  Union  Slaughter  House  Co.  v. 
Crescent  City  Live  Stock,  etc.,  Co.,  Ill 
U.  S.  746,  4  S.  Ct.  652,  28  L.  Ed.  585; 
Lochner  v.  New  York,  198  U.  S.  45, 
25  S.  Ct.  539;  Matter  of  Jacobs,  98  N.  Y. 
98;  Schnaier  v.  Hotel  &  Import.  Co., 
182  N.  Y.  83,  74  N.  E.  561;  Wright  v. 
Hart,  182  N.  Y.  330,  75  N.  E.  404.  A 
statute  limiting  business  of  banking  to 
corporations  is  held  constitutional  in 
State  V.  Woodmansee,  1  N.  D.  246,  46 
N.  W.  970,  11  L.  R.  A.  420.  But  see 
State  V.  Scougal,  3  S.  D.  55,  51  N.  W. 
858, 15  L.  R.  A.  477,  44  Am.  St.  R.  756. 
The  interesting  question  involved  in 
such  an  inquiry  is  not  destined,  proba- 
bly, to  play  a  very  important  part 
eventually  in  the  law  of  insurance, 
since  it  is  easily  within  the  power  of  a 
legislature  to  pass  binding  regulations 
governing  the  conduct  of  insurance, 
.which  it  would  be  impracticable  for  in- 
dividual underwriters  generally  to  ob- 
serve with  any  assurance  of  pecuniary 
profit  to  themselves.  See  §  6.  Gund- 
Ung  y.  Chicago.  177  U.  S.  183,  188, 
20  S.  Ct.   633;  Knoxville  Iron  Co.   v. 


Harbison,  183  U.  S.  13,  21,  22,  22  S.  Ct. 
1.  Individual  underwriters  have  al- 
ready been  driven  out  of  business  to 
some  extent  by  state  statutes.  N.  Y. 
Laws,  1903,  c.  471,  1902,  c.  297,  1892, 
c.  690,  §  57. 

2  Fidelity  Mul.  Life  Assn.  v.  Mettler, 
185  U.  S.  308,  46  L.  Ed.  922,  22  S.  Ct. 
662;  Modern  Woodmen  v.  Tevis,  117 
Fed.  369,  54  C.  C.  A.  293;  Treadway  v. 
Hamilton  Mut.  Ins.  Co.,  29  Conn.  68; 
People  V.  Gra7id  Lodge,  156  N.  Y.  533, 
51  N.  E.  299  (holding  that  the  con- 
stitution, by-laws,  and  certificate  when 
authorized  by  law  form  the  contract 
upon  which  the  rights  of  the  parties 
rest).  "The  modern  mutual  benefit 
life  insurance  organizations  generally 
called  benefit  societies  have  a  dual 
nature  and  in  determining  their  re- 
sponsibilities, powers,  and  rights  and 
those  of  their  members  this  fact  must 
never  be  lost  sight  of.  .  .  .  They  are, 
in  the  first  place,  social  organizations 
or  clubs.  .  .  .  They  are  also  business 
organizations.  .  .  .  These  societies  are 
the  poor  man's  life  insurance  com- 
panies, for  thev  furnish  to  those  of 
moderate  income  a  cheap  and  simple 
substitute  for  life  insurance."  Bacon, 
Ben.  Societies,  §§  la-3.  "A  benevo- 
lent association  which  issues  benefit 
certificates  to  its  members  payable 
from  a  fund  maintained  by  assess- 
ments upon  the  certificate  holders  is  in 
effect  a  mutual  life  insurance  company 
and  is  governed  by  the  general  rules 
of  law  applicable  to  such  companies," 
Modern  Woodmen  v.  Coleman,  68  Neb. 
660  (1903),  94  N.  W.  814,  96  N.  W.  154. 
"The  chief  difference  between  ordi- 
nary contracts  of  life  insurance  com- 
panies and  those  usual  in  benefit  soci- 
eties is  that  in  the  former  the  policy 
and  documents  referred  to  in  it  contain 
the  agreement,  while  in  the  latter  the 
certificate  together  with  the  charter 
and  by-laws  are  to  be  looked  to  for  the 
contract,"  Shipman  v.  Protected  Home 
Circle,  174  N.  Y.  398,  409,  67  N.  E.  83, 


4"  THE    LAW    OF    INSURANCE 

§  4.  What  are  Insurance  Companies. — In  the  case  of  bene- 
ficiary and  other  associations,  the  furnishing  of  insurance  may  be 
only  one  of  many  objects  of  the  organization,  perhaps  purely  inci- 
dental at  that,  and  the  question  sometimes  arises  whether  the  com- 
pany granting  insurance  is  to  be  regarded  as  an  insurance  company. 


63  L.  R.  A.  347.  The  same  doctrine 
governs  the  distribution  of  assets  after 
insolvency  of  the  company,  Belts  v. 
Conn.  Life  Ins.  Co.,  78  Conn.  442,  62 
Atl.  345.  By-laws  or  other  rules  of  the 
beneficiary  association  may  be  ex- 
pressly made  a  part  of  tlie  contract  of 
insurance  by  reference,  Robson  v. 
United  Order  of  Foresters,  93  Minn.  24, 
100  N.  W.  381.  But  without  express 
reference  it  has  been  held  that  they  are 
binding  upon  the  members,  Conway 
V.  Supreme  Council,  131  Cal.  437,  63 
Pac.  727;  Farmers'  Mid.  Hail  Ins. 
Assn.  V.  Slattery,  115  Iowa,  410,  88 
N.  W.  949;  Maginnis  v.  Aid  Assn.,  43 
La.  Ann.  1136,  10  So.  180;  Supreme 
Council  V.  Brashears,  89  Md.  624,  43 
Atl.  866;  Newton  v.  Northern  Mid. 
Relief  Assn.,  21  R.  I.  476,  44  Atl.  690. 
United  Moderns  v.  Colli /an,  34  Tex. 
Civ.  App.  173,  77  S.  W.  1032.  The 
member  is  bound  to  take  notice  of 
them,  though  not  specifically  referred 
to  in  his  certificate  or  contract,  Clark 
V.  Mut.  Res.  Fund  L.  Assn.,  14  App. 
D.  C.  154,  43  L.  R.  A.  390;  Pfister  v. 
Gerwig,  122  Ind.  567,  23  N.  E.  1041; 
Sulz  V.  Mid.  Res.  Fund  Life  Assn.,  14.5 
N.  Y.  563,  568,  40  N.  E.  242,  28  L.  R. 
A.  379;  United  Moderns  v.  Colligan,  34 
Tex.  Civ.  App.  173,  77  S.  W.  1032. 
The  association  in  its  contract  often 
expressly  reserves  the  right  to  subse- 
quently change  the  constitution  and 
by-laws.  The  members  will  then  be 
bound  by  such  changes  if  not  unrea- 
sonable, Bowie  v.  Grand  Lodge,  99 
Cal.  392,  34  Pac.  103;  Gilmore  v. 
Knights  of  Columbus,  77  Conn.  58,  58 
Atl.  223  (occupation  of  switchman 
added  to  extra  hazards).  Covenant 
Mut.  Life  Ins.  Co.  v.  Kentner,  188  111. 
431,  58  N.  E.  966;  Shipman  v.  Pro- 
tected Home  Cirde,  174  N.  Y.  398,  67 
N.  E.  83,  63  L.  R.  A.  347  (suicide 
clause  made  retroactive) .  but  see  Bott- 
jer  v.  Supreme  Council,  78  App.  Div. 
546,  75  N.  Y.  Supp.  805,  79  N.  Y.  Supp. 
684.  But  the  courts  are  disposed  to 
regard  the  rights  of  a  member  as  so  far 
vested  that  he  should  be  protected 
from  unreasonable  changes  in  the  by- 
laws, though  he  has  agreed  to  be  bound 


by  changes,  Hall  v.  West.  Trav.  Ace. 
Assn.,  69  Neb.  601,  96  N.  W.  170 
(vertigo);  Russv.  Modern  Brotherhood, 
120  Iowa,  692  (1903),  95  N.  Y.  207 
(definition  of  "broken  leg"  reason- 
able); Starling  v.  Supreme  Council,  108 
Mich.  440,  66  N.  W.  340,  62  Am.  St.  R. 
709  (definition  of  total  disability); 
Ayers  v.  Grand  Lodge,  188  N.  Y.  280 
(excluding  occupation  of  liquor  .selling 
unreasonable);  Evans  v.  So.  Fier,  etc., 
Assn.,  152  N.  Y.  453,  75  N.  E.  317; 
Beach  v.  Supreme  Tent,  177  N.  Y.  100, 
69  N.  E.  281;  Wiedgnska  v.  Pulaski, 
etc.,  Soc,  110  App.  Div.  732,  97  N.  Y. 
Supp.  413;  Williams  v.  Supreme  Coun- 
cil, 80  App.  Div.  402,  80  N.  Y.  Supp. 
713  (definition  of  total  disability  un- 
reasonable). Matter  of  Brown  v.  Order 
of  Foresters,  176  N.  Y.  132,  68  N.  E. 
145;  Berg  v.  Verein,  90  App.  Div.  474, 
86  N.  Y.  Supp.  429;  Strauss  v.  Mut. 
Res.  Fund  Life  Assn.,  128  N.  C.  465, 
39  S.  E.  55;  Sovereign  Camp  v.  Fraley, 
94  Tex.  200,  59  S.  W.  879,  51  L.  R.  A. 
898.  As  to  proper  and  improper 
amendments  see  Parish  v.  A".  Y. 
Produce  Exchange,  169  N.  Y.  34,  61 
N.  E.  977,  56  L.  R.  A.  149.  Thus  it 
has  repeatedly  been  held  that  it  is  not 
permissible  for  the  company  to  change 
the  amount  payable  from  $5,000  to 
$2,000,  Supreme  Council  v.  Jordan, 
117  Ga.  808,  45  S.  E.  33;  Russ  v.  Su- 
preme Council,  110  La.  588,  34  So.  697, 
98  Am.  St.  R.  469;  Porter  v.  American 
Legion,  183  Mass.  326,  67  N.  E.  238; 
Newhall  v.  Supreme  Council,  181  Mass. 
Ill,  63  N.  E.  1;  Langan  v.  Supreme 
Council,  174  N.  Y.  266,  66  N.  E.  932. 
And  see  McAlarney  v.  Supreme  Coun- 
cil, 131  Fed.  538;  Smith  v.  Supreme 
Council,  94  App.  Div.  357,  88  N.  Y. 
Supp.  44.  But  the  contract  cannot  be 
changed  by  subsequent  amendments 
of  constitution  or  by-laws  if  no  such 
right  is  reserved.  Miller  v.  T utile  (Kan. 
1903),  73  Pac.  88;  Weber  v.  Supreme 
Tent,  172  N.  Y.  490,  65  N.  E.  258, 
92  Am.  St.  R.  753  (unreasonable 
change  from  one  to  five  years  in  self- 
destruction  clause).  Fargo  v.  Supreme 
Tent,  96  App.  Div.  491,  89  N.  Y.  Supp. 
65  (suicide  clause). 


INTRODUCTORY  5 

and  its  certificate  or  contract,  an  insurance  contract,  within  the 
meaning  of  the  body  of  statutes  and  decisions  relating  to  this  subject. 

Thus,  it  has  been  held  that  the  relief  department  of  a  railway 
company,  organized  to  collect  and  manage  a  common  fund  and  to 
make  payments  from  it  upon  the  death  or  injury  of  members,  is  not 
an  insurance  company,  nor  its  establishment  by  the  railway  com- 
pany an  act  ultra  vires;  ^  nor  the  contract  between  the  railway  com- 
pany and  the  member  an  insurance  contract.-  But  where  a  corpo- 
ration in  return  for  a  specified  consideration  undertook  to  guarantee 
a  fixed  revenue  per  acre  from  farming  lands,  and  agreed  to  pay  such 
fixed  amount  for  the  crop  irrespective  of  its  actual  value,  the  con- 
tract was  held  to  be  one  of  insurance,^  and  a  corporation  engaged 
in  the  business  of  guaranteeing  the  fidelity  of  persons  holding  places 
of  trust,  and  the  performance  of  contracts,  or  undertakings,  is  an 
insurance  company.^ 

Fraternal  beneficiary  associations  and  similar  organizations  are 
in  general  held  to  be  life  insurance  companies,^  but  special  regard 


i  Donald  v.  Chi.,  B.  &  Q.  Ry.  Co., 
93  Iowa,  284,  61  N.  W.  971,  33  L.  R.  A. 
492;  Maine  v.  Chi.,  B.  &  Q.  R.  Co.,  109 
Iowa,  260,  70  N.  W.  630,  80  N.  W.  315; 
State  V.  Pittsburg,  etc.,  Ry.  Co.,  68 
Ohio,  9,  67  N.  E.  93.  64  L.  R.  A.  405, 
96  Am.  St.  R.  635;  Johnson  v.  Phil.  & 
R.  R.  Co.,  163  Pa.  127,  29  Atl.  854. 
But  see  Mason  v.  Mason,  160  Ind.  191, 
65  N.  E.  585. 

2  Beck  V.  Penn.  R.  R.  Co.,  63  N.  J.  L. 
232,  43  Atl.  908,  76  Am.  St.  R.  211. 
Many  railways  have  such  departments 
coupled  with  hospital  and  other  privi- 
leges, in  return  for  which  the  member 
often  must  agree  to  release  the  railway 
from  common-law  liability  and  to 
allow  abatement  of  part  of  his  salary. 
Such  agreement  is  binding,  Chi.,  B. 
&  Q.  R.  Co.  V.  CuHis,  51  Neb.  442, 
71  N.  W.  42;  Ringle  v.  Penn.  R.  R.,  164 
Pa.  529,  30  Atl.  492.  The  business  of 
inspecting  and  certifying  as  to  the 
sanitary  condition  of  buildings  and 
premises  is  not  insurance.  People  v. 
Rosendale,  142  N.  Y.  126,  36  X.  E.  806. 
Nor  an  agreement  in  consideration  of  a 
specified  annual  payment  to  repair  or 
replace  bicycles  injured  or  destroyed  by 
accident.  Commonwealth  v.  Provident 
Bicycle  Assn.,  178  Pa.  636,  36  Atl.  197, 
36  L.  R.  A.  589. 

3  State  V.  Hogan,  8  N.  D.  301 ,  78  N.  W. 
1051,  45  L.  R.  A.  166,  73  Am.  St.  R. 
759.  So  also  an  agreement  with  a 
firm  to  purchase  for  a  fixed  price  the 


unsatisfied  accounts  which  it  might 
have  with  insolvent  or  judgment 
debtors,  Claflin  v.  U.  S.  Credit  Si!ste77i 
Co.,  165  Mass.  501,  43  N.  E.  293,  52 
Am.  St.  R.  528. 

*  American  Surety  Co.  v.  Pauly,  170 
U.  S.  133,  18  S.  Ct.  563,  42  L.  Ed.  987; 
People  V.  Rose,  174  111.  310,  51  N.  E. 
246,  44  L.  R.  A.  124.  As  to  whether 
contract  is  one  of  suretyship  or  one  of 
insurance,  see  Dane  v.  Mtge.  Ins.  Corp. 
(1894),  1  Q.  B.  54;  Denton's  Instate 
(1904),  2  Ch.  178.  For  comparison  be- 
tween contract  of  guarantee  and  con- 
tract of  insurance,  see  Anglo,  etc.,  Bk. 
V.  London,  etc.,  Ins.  Co.  (1904),  10 
Com.  Cas.  8;  Seaton  v.  Heath  (1899),  1 
Q.  B.  792. 

^Supreme  Lodge  v.  Wellenvoss,  119 
Fed.  671,  674,  56  C.  C.  A.  287  ("they 
do  not  issue  policies  of  insurance 
strictly  speaking,  but  the  benefit  cer- 
tificate is  a  contract  of  insurance  none 
the  less").  Brown  v.  Modern  Woodmen, 
115  Iowa,  450,  88  N.  W.  965;  Catholic 
Knights  v.  Board  of  Review,  198  111.  441, 
64  iSr.  E.  1104;  State  v.  Nichols,  78 
Iowa,  747,  41  N.  W.  4;  Sherman  v. 
Commonwealth,  82  Ky.  102,  105;  Sims 
v.  Commonwealth,  114  Ky.  827,  71  S.  W. 
£29;  Kern  v.  Supreme  Council,  167  Mo. 
471;  67  S.  W.  252,  as  to  foreign  com- 
panies; Modern  Woodman  v.  Coleman 
68  Neb.  660,  94  N.  W.  814,  96  N.  W. 
154;  Alden  v.  Supreme  Tent,  178  N.  Y. 
535,  71  N.  E.  104  (construing  N.  Y. 


6  THE  LAW   OF  INSURANCE 

must  be  had  to  the  phraseology  of  the  statutes    applicable  in  each 
case.^ 

§  5.  Corporations  Classified. — In  this  country  insurance  cor- 
porations are  usually  organized  under  general  laws  instead  of  special 
charters  and  are  divided  into  stock,  mutual,  and  mixed  companies. 

A  stock  or  proprietary  company  has  for  its  basis  a  capital  stock, 
owned  by  stockholders  who  constitute  the  corporation, ^  and  who 
may  be  quite  distinct  from  the  insured.  Its  profits  over  and  above 
the  liabilities  of  the  company  and  required  accumulations  are  di- 
vided in  the  shape  of  dividends  among  the  shareholders. 

In  strictly  mutual  companies  there  are  no  stockholders,  but  the 
insured  th9mselves  are  the  members  of  the  company,  entitled  to 
manage  its  affairs  through  officers  and  agents  and  to  receive  any 
share  of  divisible  surplus  over  and  above  the  funds  retained  to  meet 
losses  and  other  liabilities.'  Thus,  the  members  of  a  mutual  com- 
pany in  their  aggregate  or  corporate  capacity  are  the  insurers  while 
individually  they  are  the  insured.  While  a  stockholder  need  not 
be  one  of  those  insured  by  his  company,  one  insuring  in  a  mutual 
company  thereby  becomes  a  member  of  the  association  and  thus 
occupies  in  a  sense  the  dual  relationship  of  insurer  and  insured. ** 
The  capital  fund  of  such  organizations  is  often  obtained  by  cash 
premiums  or  assessable  premium  notes  or  both,  contributed  by  the 
members  ratably.^ 

Ins.  L.   Art.  7);    Lubrano  v.  Imperial  Grand  Lodge,  133  Cal.  686,  66  Pac.  25; 

Council  20  R.  I.  27,  37  Atl.  345,  38  Schillinger  v.  Boes,  85  Ky.  357,  3  S.  W. 

I/.  R.  A.  546,  where  the  benefit  accru-  427;  State  ex  rel.   Royal  Arcanum  v. 

ing  upon  the  death  or  disabihty  of  a  Benton,  35   Neb.   463,   53  N.  W.  567. 

member    -vvas    conditioned    upon    the  And  see  N.  Y.  In.s.  L.  §  57. 

collection     of     assessments.     Supreme  2  Commercial  Fire  Ins.  Co.  v.  Board 

Council  V.   Lurmour,   81   Tex.    71,    16  of  Revenue,  99  Ala.  1,  14  So.  490,  42 

S.  W.  633;  Daniher  v.  Grand  Lodge,  10  Am.  St.  R.  17. 

Utah,  110,  37  Pac.  245.    Contra,  Penn-  ^Carlton  v.   Southern  Mid.  Ins.  Co., 

eylvania,  where  beneficiary  associations  72  Ga.  371. 

are  classed  as  philanthropic  societies,  •*  Trendwaij   v.    Hamilton   Mid.    Ins. 

Commonwealth  v.  Eq.  Ben.  Assn.,   137  Co.,  29  Conn.  68;  Corey  v.  Sherman,  96 

Pa.  412,  18  Atl.  1112;  N.  Masonic  Aid  Iowa,  114,  64  N.  W.  828.  32  L.  R.  A. 

Assn.  V.  Jones,  154  Pa.  99.  26  Atl.  253.  490;    Lehigh    Valley   Fire   Ins.    Co.    v. 

iNeutony.  S.W.Mid.  L.  Assn.,U(j  Schimpf.    13    Phila.    (Pa.)    515;    Great 

Iowa.  311,  317,  90  N.  W.   73;  as  to  Brit.,  etc.,  Asso.  v.   Wyllie  (1889),  22 

Missouri   statute   see    Toomey   v.    Su-  Q.  B.  D.  710,  and  opinion  of  Mathew,  J., 

preme  Lodge,  147  Mo.  129,  48  S.  W.  936  at  p.  723.     But  a  mere  applicant  for 

(suicide  a  defense);  Hudnall  v.  Modern  insurance  is  not  yet  a  member,  Rus- 

Woodmen,  103  Mo.  App.  356,  77  S.  W.  sell  v.  Detroit  Mut.  Fire  Ins.  Co.,  80 

84,  Rev.  Stat.  (Mo.)  1899,  §§  1408-1410.  Mich.  407,  45  N.  W.  356;  Eiknberger  v. 

Fraternal  beneficiary  associations  often  Protective  Mut.  Fire  Ins.  Co.,  89  Pa. 

are  expressly  excepted  from  the  appli-  464. 

cation    of    certain    general    insurance  ^  Spruance  v.   Farmers'   cfc  M.  Ins. 

laws,  the  state  regarding  them  as  so  Co.,  9  Colo.  73,  10  Pac.  285;  Taylor  v. 

far  philanthropic   that   they  ought   to  Xorth  Star  M id.  Ins.  Co.,  i6  ^Ihm.  19S, 

be   specially  encouraged,  Mur.shuU    \.  48  N.  W.  772. 


INTRODUCTORY  7 

Cooperative  assessment  companies  and  fraternal  beneficiary  asso- 
ciations are  organized  upon  the  mutual  plan  and  for  the  sole  benefit 
of  the  members.  In  the  case  of  an  assessment  company  of  any  class 
assessments  are  generally  levied  to  liquidate  specific  losses  as  they 
occur/  whereas  in  the  regular  or  old-time  companies  a  fixed  premium 
is  paid  in  cash  in  advance  at  stated  intervals.^ 

Mixed  companies  partake  of  the  nature  of  stock  and  mutual 
companies,  and  in  them  a  certain  portion  of  the  profits  is  paid  to 
the  stockholders,  and  the  remainder  distributed  among  the  insured. 

In  the  United  States,  as  a  general  thing,  in  the  laws  governing 
the  organization  and  scope  of  insurance  corporations,  the  business 
of  ocean-marine,  fire,  and  life  insurance,  respectively,  is  kept  some- 
what distinct  and  exclusive;  in  New  York  and  elsewhere  life  com- 
panies are  not  allowed  to  take  marine  or  fire  risks,^  but  fire  insurance 
companies  are  often  organized  to  insure  against  inland  marine 
disasters,  lightning,  and  tornadoes."* 

.§  6.  Statutory  Safeguards. — Every  state  has  now  its  system  of 
statutory  laws,  not  only  governing  the  organization  of  insurance 
companies  and  associations,  and  prescribing  their  powers  and  duties 
but  also  regulating  their  business.^     For  the  better  protection  of  the 


^McDonald  v.' Bankers'  Life  A.ssn. , 
154  Mo.  618,  55  S.  W.  999;  Modern 
Woodmen  v.  Colman,  68  Neb.  660,  94 
N.  W.  814,  96  N.  W.  154;  State  v. 
Matthews,  58  Ohio  St.  1,  49  X.  E.  1034, 
40  L.  R.  A.  418;  State  v.  Xational  Ace. 
Soc.  103  Wis.  208,  79  X.  W.  220.  The 
company  is  bound  to  le\y  such  assess- 
ment, Laivler  v.  Murphy,  58  Conn. 
294,  20  Atl.  457,  8  L.  R.  A.  113  (con- 
taining specimen  of  certificate  and  by- 
laws); Railway  Pass.,  etc.,  Assn.  v. 
Robinson,  147  111.  138,  35  N.  E.  168; 
Fitzgerald  v.  Eq.  Reserve  Fund,  15 
Daly,  229,  24  N.  Y.  St.  R.  493,  5  N.  Y. 
Supp.  837,  but  not  until  proper  proofs 
of  death  are  received;  Coyle  v.  Ky. 
Grangers,  etc.,  Soc,  8  Ky.  L.  R.  604, 
2  S.  W.  676.  Not  for  anticipated  losses. 
Grossman  v.  Mass.  Ben.,  etc.,  Assn.,  143 
Mass.  435,  9  N.  E.  753.  The  existence 
of  the  lodge  system  of  organization  and 
social  intercourse,  often  coupled  with  a 
secret  ritual,  seems  to  be  a  distinguish- 
ing feature  of  the  fraternal  benefit  soci- 
ety. Supreme  Commandery  v.  Hughes, 
114  Kv.  175,  24  Ky.  L.  R.  984,  70  S.  W. 
405;  brotherhood  Ace.  Co.  v.  Linehan, 


71  N.  H.  7, 51  Atl.  266.  And  see  N.  Y, 
Ins.  L.  §  y. 

-  Assessment  company  allowed  to 
change  to  old  line  plan,  Wright  v. 
Minn.  Mut.  Life  Ins.  Co.,  193  U.  S. 
657,  24  S.  Ct.  .549,  48  L.  Ed.  832.  And 
see  Schuarzualder  v.  Tegen,  58  N.  J. 
Eij.  319,  43  Atl.  587.  Some  companies 
issue  what  is  kno\^•n  as  industrial  in- 
surance for  the  benefit  more  especially 
of  the  working  classes,  the  policies 
being  for  comparatively  small  amounts 
with  weekly  premiums,  Russell  v. 
Prudential  Ins.  Co.,  176  N.  Y.  178,  180. 
68  N.  E.  252,  98  Am.  St.  R.  656;  Xew- 
bold  Friendly  Soc.  v.  Barlow  (1893),  2 
Q.  B.  128.  And  see  N.  Y.  Ins.  L.  §§ 
91,92, 101.  In  some  countries,  notabl}"^ 
Germany,  the  government  conducts  a 
system  of  industrial  insurance. 

■^  N  .Y.  Ins.  L.  %  70. 

<X.  Y.  Ins.  L.  §  110. 

estate  V.  St07ic,  118  Mo.  388,  402, 
24  S.  W.  164.  25  L.  R.  A.  243,  40  Am. 
St.  R.  388;  State  v.  Ackertnan,  51  Ohio 
St.  163,  190,  37  N.  E.  828,  24  L.  R.  A. 
298  (no  license);  for  example,  N.  Y. 
General  Insurance  Law,  1892,  o.  690, 
as  amended  L.  1906,  c.  326. 


8 


THE    LAW    OF    INSURANCE 


insured,  it  has  become  the  custom  throughout  the  states  of  this  Union, 
as  well  as  in  England,  to  establish  an  insurance  department,  or 
superintendent  or  commissioner  of  in.surance,  or  other  official  ^  with 
whom,  as  a  rule,  foreign  insurance  companies  doing  business  within 
the  state,  and  domestic  life  insurance  companies,  with  certain  ex- 
ceptions, are  required,  upon  organization  or  commencement  of 
business  within  the  state,  to  make  deposits  of  money  or  equivalent 
securities,  which  are  held  as  collateral  by  the  department  for  the 
security  of  the  insured.^ 

The  insurance  department  receives  stated  reports  under  oath 
from  each  company,  setting  forth  with  some  detail  its  business 
affairs  and  financial  condition,  including  its  assets  and  debts,  amount 
of  insurance,  and  other  particulars.^  It  also  has  a  visitorial  power 
over  the  companies,  to  see  that  their  investments  are  made  accord- 
ing to  law,  and  to  examine  their  books  and  papers  in  case  of  sus- 
pected misconduct  or  insolvency.  If  it  appear  that  any  company 
falls  below  the  statutory  standard  of  solvency,  proper  steps  may  be 
taken  to  wind  it  up  and  distribute  its  assets. 

In  addition  to  these  safeguards,  we  find  laws  prescribing  a  mini- 
mum capital  stock;  laws  governing  the  character  of  investments 


1  However  desirable  and  economical 
it  might  be  to  place  a  uniform  and 
effective  federal  bureau  in  charge,  Con- 
gress has  no  jurisdiction  to  superintend 
the  business  of  insurance  generally 
throughout  the  country,  since  it  has 
repeatedly  been  decided  that  the  issu- 
ance of  a  policy  by  a  corporation  of  one 
state  to  a  citizen  of  another  is  not  in- 
terstate commerce  within  the  meaning 
of  the  federal  constitution,  Paul  v. 
Virginia,  8  Wall.  168,  19  L.  Ed.  357 
(fire);  Phila.  Fire  Asso.  v.  New  York, 
119  U.  S.  110,  7  S.  Ct.  108;  Hooper  v. 
California,  155  U.  S.  648,  15  S.  Ct.  207, 
39  L.  Ed.  297  (marine);  A'.  1'.  Life  Ins. 
Co.  V.  Cravens,  178  U.  S.  389,  401,  20 
S.  Ct.  962  (life,  etc.);  List  v.  Common- 
xveolth,  118  Pa.  322,  12  Atl.  277;  D'Arcij 
V.  Mut.  Life  Ins.  Co.,  108  Tenn.  568, 
573,  69  S.  W.  768. 

2  Primarily,  for  the  resident  in- 
sured. Deposit  with  insurance  depart- 
ment is  a  trust  fund  and  cannot  be 
withdrawn  and  used  like  general  capi- 
tal, Lancashire  Ins.  Co.  v.  Maxivell, 
131  N.  Y.  286,  30  N.  E.  192.  Interest 
on  deposited  securities  follows  the 
principal;  a  receiver  of  the  corporation 
cannot  take  it,  People  v.  Ins.  Co.,  147 
N.  Y.  25,  41  N.  E.  423.  As  to  how  far 
an  insurance  commissioner  may  or  may 


not  in  his  discretion  refuse  license  to  a 
foreign  company  applying  for  admis- 
sion to  do  business,  see  Am.  Casualty 
Co.  V.  Fyler,  60  Conn.  448,  22  Atl.  494; 
People  V.  Van  Cleave,  183  111.  330,  55 
N.  E.  698;  Citizens'  Life  Ins.  Co.  v. 
Commissioner,  128  Mich.  85,  87  N.  W. 
126;  U.  S.  Fidelity  &  G.  Co.  v.  Linehan, 
73  N.  H.  41,  58  Atl.  956;  Brotherhood 
Ace.  Co.  V.  Linehan,  71  N.  H.  7,  51 
Atl.  266;  People  v.  Payn,  59  N.  Y. 
Supp.  851,  aff'd  60  N.  Y.  Supp.  1146, 
55  N.  E.  849;  State  v.  Vorys,  69  Ohio, 
56,  68  N.  E.  580;  Bankers'  Life  Ins. 
Co.,  V.  Fleetwood,  76  Vt.  297,  57  Atl. 
239.  The  superintendent  may  be  com- 
pelled by  mandamus  to  grant  license 
or  file  proper  certificate  if  company 
complies  with  the  statute.  People  v. 
Payn,  161  N.  Y.  22.4,  55  N.  E.  84.^  (his 
duties  largely  ministerial);  State  v. 
Vorys,  m  Ohio,  56,  68  N.  E.  580. 
Similarity  of  name  to  that  of  home 
corporation  is  good  ground  for  discre- 
tionary refusal  to  grant  certificate  to 
foreign  corporation.  Employers'  As- 
surance Corporation  v.  Employers'  Ins. 
Co.,  78  Hun,  446,  29  N.  Y.  Supp.  217. 
3  Statute  requiring  such  annual  re- 
port is  constitutional,  Eagle  Ins. 
Co.  V.  Ohio,  153  U.  S.  446,  14  S.  Ct. 
868. 


INTRODUCTORY  9 

and  restricting  expenses,  and  commissions  to  agents;  laws  limiting 
the  amount  of  insurance  upon  one  risk;  laws  requiring  the  com- 
panies, before  paying  out  dividends  or  profits,  to  accumulate  and 
reserve  a  certain  amount  of  assets  with  which  to  meet  future  lia- 
bilities; laws  directing  foreign  companies  to  appoint  a  representative 
within  the  state  upon  whom  service  of  papers  can  be  made;  ^  laws 
limiting  business  to  authorized  and  licensed  companies;  ^  and  laws 
prohibiting  the  removal  of  actions  from  state  to  federal  courts  upon 
penalty  of  loss  of  license  to  do  business  within  the  state.^ 

The  object  of  insurance  is  to  compensate  the  insured  for  loss  and 
not  to  prevent  the  occurrence  of  loss;  but  in  many  of  the  cities  the 
fire  insurance  companies  have  established  a  system  of  patrol  with 
statutory  powers,  which  does  much  to  prevent  the  spread  of  fire, 
and  to  protect  from  unnecessary  injury  or  theft  the  property  ex- 
posed during  and  after  the  conflagration. 

Any  state  has  the  right  to  control  the  conduct  of  insurance  busi- 


1  In  the  absence  of  superintendent, 
deputy  may  take  his  place,  People  v. 
H opsins,  55  N.  Y.  74,  and  be  served 
with  process,  Quinn  v.  Royal  Ins.  Co., 
81  Hun,  207,  30  N.  Y.  Supp.  714,  but 
service  by  mail  is  not  good,  Farmer  v. 
Nat.  Life  Assn.,  138  N.  Y.  265,  33 
N.  E.  1075.  Service  on  Labor  Day  is 
valid,  Flunn  v.  Union  Surety  &  G. 
Co.,  170  N.  Y.  145,  63  N.  E.  61.  Judg- 
ment valid  founded  upon  service  of 
process  upon  insurance  commissioner, 
Woodirard  v.  Mid.  Res.  Fund  Life  ins. 
Co.,  178  N.  Y.  485;  71  N.  E.  10;  Biggs 
v.  Mut.  Res.  Fund  L.  Assn..  128  N.  C. 
5,  37  S.  E.  955.  Designation  of  person 
to  be  served  with  process,  McClure  v. 
Supreme  Lodge,  41  App.  Div.  131,  59 
N.  Y.  Supp.  764;  Mihcaukee  Trust  Co. 
V.  Germania  Ins.  Co.,  106  La.  669,  31 
So.  298,  299.  Discontinuance  of  busi- 
ness does  not  revoke  power  of  attorney 
to  insurance  commissioner,  nor  can 
company  cancel  while  obligations  re- 
main, Midual  Res.  Fund  Life  Assn. 
v.  Phelps,  190  U.  S.  147,  23  S.  Ct.  707 
Collier  v.  Mut.  Res.  Fund  Life  Assn. 
119  Fed.  617  (but  see  184  N.  Y.  136) 
Johnston  v.  Mid.  Res.  Fund  Life  Assn. 
104  App.  Div.  544,  93  N.  Y.  Supp 
1048;  Hunter  v.  Life  Assn.,  97  App 
Div.  222,  89  N.  Y.  Supp.  849;  Moore  v 
Life  As.m.,  129  N.  C.  31 ,  39  S.  E.  637 

'  A  state  may  penalize  the  soliciting 
by  agents  within  its  borders,  of  con- 
tracts of  insurance  in  unlicensed  for- 
eign companies  or  declare  such  con- 


tracts void.  Nutting  v.  Massachusetts, 
183  U.  S.  553,  22  S.  Ct.  238,  46  L.  Ed. 
324;  List  v.  Commonwealth,  118  Pa. 
322,  12  Atl.  277,  but  cannot  prevent 
its  own  citizens  from  making  a  valid 
contract  outside  the  state  with  such  a 
company  though  the  propeity  be 
located  within  the  state,  Allgeyer  v. 
Louisiana,  165  U.  S.  578,  17  S.  Ct.  427, 
41  L.  Ed.  832;  Hooper  v.  People,  155 
U.  S.  648,  15  S.  Ct.  207,  39  L.  Ed.  297; 
Commonuealth  v.  Biddle,  139  Pa.  605, 

21  Atl.  134,  11  L.  R.  A.  561;  French  v. 
People,  6  Colo.  App.  311,  40  Pac.  463; 
Pierce  v.  People,  106  111.  11.  46  Am. 
Rep.  683,  and  see  Baler  v.  Spaulding, 
71  Vt.  169,  42  Atl.  982;  and  a  state 
cannot  subject  to  its  laws  and  penalties 
the  property  of  a  foreign  corporation 
situated  outside  the  state,  Douglass 
V.  his.  Co.,  138  N.  Y.  209,  33  N.  E.  938. 

3  Federal  courts  cannot  by  agree- 
ment be  ousted  of  their  jurisdiction,  and 
a  statute  requiring  such  agreement 
from  a  foreign  company  as  a  pre- 
i-equisite  to  a  license  is  unconstitutional, 
Home  Ins.  Co.  v.  Morse,  20  Wall.  450, 

22  L.  Ed.  367;  but  removal  of  cause  by 
foreign  company  in  violation  of  its 
agreement  with  the  state  hns  been  held 
sufficient  ground  for  revocation  of  its 
license  to  do  business  within  the  state 
inasmuch  as  the  state  may  revoke  a 
license  either  with  or  without  cause, 
Security  Mut.  L.  Ins.  Co.  v.  Preuitt, 
202  U.  S.  246,  26  S.  Ct.  61:^.  Dorle  v. 
Ins.  Co.,  94  U.  S.  535,  24  L.  Ed.  148. 


10 


THF.    LAW    f)F    INSURANCE 


ness  by  the  enactment  of  suitul)le  statutory  regulations.'  It  may 
make  a  compliance  with  these  by  a  foreign  company  the  condition 
of  doing  business  within  the  state,  or  it  may  capriciously  shut  its 
doors  to  a  foreign  corporation  without  any  reason  at  all.' 

But  under  the  federal  constitution  which  secures  to  the  citizens 
of  each  state  the  privileges  of  citizens  in  the  several  states  it  has 
been  held  unconstitutional  to  impose  upon  individual  non-resi- 
dents, such  as  unincorporated  Lloyd  associations,  restrictions  or 
conditions   not   imposed  upon  resident  individuals.-"' 

§  7.  Contracts  with  Unlicensed  Companies.— Where  a  statute 
expressly  declares  the  policy  void  if  issued  within  the  state  by  a 
foreign   company  which   has   not  complied   with  statutory   require- 


1  Fidelity  Mut.  Life  Ins.  Co.  v. 
Mettler,  185  U.  S.  308,  22  S.  Ct.  662, 
46  L.  Ed.  922;  Hancock  Mut.  Lije  Ins. 
Co.  V.  Warren,  181  U.  S.  73,  21  S^  Ct. 
535;  Allgeyer  v.  Louisiana,  165  U.  S. 
578,  17  S.  Ct.  427,  41  L.  Ed.  832;  Cow- 
momvealth  v.  Vrooman,  164  Pa.  306,  80 
Atl.  217,  25  L.  R.  A.  250.  A  law  mak- 
ing it  a  crime  for  an  agent  to  allow  a 
rebate  on  the  premium  is  constitu- 
tional, People  V.  Formo.'ia,  131  N.  Y. 
478,  30  N.  E.  492.  So  is  a  law  allowing 
a  counsel  fee  or  extra  damages  to  the 
successful  plaintiff  if  compelled  to  liti- 
gate the  issue  of  total  loss.  Farmers' 
&  M.  Ins.  Co.  V.  Dahney,  189  U.  S. 
301,  23  S.  Ct.  565;  Ins.  Co.  v.  Mettler, 
185  U.  S.  308,  22  S.  Ct.  662.  Ex- 
changes and  associations  of  under- 
writers, needful  to  the  systematic  con- 
duct of  the  business  are  not  illegal  as 
trusts  or  in  restraint  of  trade,  though 
incidentally  they  may  establish  a  fixed 
tariff  of  premium  rates,  Continental 
Ins.  Co.  V.  Board,  67  Fed.  310;  Queen 
Ins.  Co.  V.  State,  86  Tex.  250;  but 
see  McCarter  v.  Firemen's  Ins.  Co. 
(N.  J.  Eq.  1905),' 61  Atl.  705,  reargu- 
ment  granted,  66  Atl.  398.  But  such 
combinations  may  be  forbidden  by 
statute. 

^  Doyle  V.  Continental  Ins.  Co.,  94 
U.  S.  535;  Phil.  Fire  Asso.  v.  N.  Y., 
119  U.  S.  110,  7  S.  Ct.  108;  Barron  v. 
Burnside,  121  U.  S.  186,  7  S.  Ct.  931. 
And  what  a  state  may  do  with  corpo- 
rations of  its  own  creation  it  may  do 
with  foreign  corporations  admitted 
into  the  state,  Orient  Ins.  Co.  v. 
Daggc,  172  U.  S.  557,  19  S.  Ct.  281; 
see  also  McClain  v.  Provident  Sav.  L. 
Assn.  Soc,  110  Fed.  80,  49  C.  C.  A.  31. 
While,  however,  state  legislatures  may 


impose  such  conditions  and  limitations 
upon  a  foreign  company  as  they  deem 
proper,  yet,  after  its  admission  its 
property  must  be  dealt  with  on  terms 
of  equality  ^\-ith  the  property  of  the 
citizen.  State  v.  Fleming  70  Neo.  523,  97 
N.  W.  1063.  Its  vested  rights  must  be 
respected,  Manchester  F.  Ins.  Co.  v. 
Herriott,  91  Fed.  711.  Insurance  com- 
panies may  be  ousted  for  violating  ex- 
press statutes  against  pools,  trusts, 
etc.  State  v.  Fireman's  Fund  Ins. 
Co.,  15^  Mo.  1,  52  S.  W.  595,  45 
L.  R.  A.  363.  Sending  an  unlicensed 
afrent  to  adjust  a  loss  is  not  "transact- 
'■:  '  the  business  of  insurance ' '  within 
^'p  state.  People  v.  Gilbert,  44  Hun, 
o^.  Citizens  of  the  state  may  obtain 
insurance  by  mail  from  foreign  unau- 
thorized corporation,  the  contract  be- 
ing made  outside  the  state.  People  v. 
Imla,y,  20  Barbour,  68. 

^  State  V.  Board  of  Insurance  Com'rs, 
37  Fla.  564,  20  So.  772,  33  L.  R.  A.  288; 
Barnes  v.  People,  168  111.  425,  48  N.  E. 
91;  State  v.  Stone,  118  Mo.  388,  24 
S.  W.  164,  25  L.  R.  A.  243,  40  Am.  St. 
R.  388;  Noble  v.  Mitchell.  164  U.  S. 
367,  17  S.  Ct.  110,  41  L.  Ed.  472.  But 
compare  State  v.  Acker  man,  51  Ohio 
St.  163,  37  N.  E.  828,  24  L.  R.  A.  298, 
in  which  it  was  held  that  non-resident 
individuals  must,  like  corporations,  at 
least  secure  a  license,  cited  apparently 
with  approval  in  Hancock  Mut.  Life 
Ins.  Co.  V.  Warren,  181  U.  S.  73,  74, 
21  S.  Ct.  535.  A  corporation  is  not  a 
citizen  within  this  clause  of  the  federal 
constitution,  Barnes  v.  People,  168 
III.  425,  430,  48  N.  E.  91.  Waters- 
Pierce  Oil  Co.  V.  Texas,  111  U.  S.  28, 
20  S.  Ct.  518. 


INTRODUCTORY 


U 


merits  of  the  state,  it  cannot  be  enforced  by  either  party. ^  But  if, 
as  is  usual,  the  act  merely  prohibits  and  penalizes  the  transaction  of 
business  until  certain  prescribed  conditions  have  been  fulfilled  by 
a  company  seeking  admission  to  the  state,  many  cases  hold  that  the 
company  cannot  escape  the  obligations  of  its  contract  by  reason  of 
its  own  dereliction  ^  though  not  in  a  position  to  enforce  the  collec- 
tion of  premiums,  or  assessments,  from  the  insured.^  If,  however, 
the  act  merely  imposes  upon  the  insurer  or  its  agent  a  penalty  for 
conducting  the  business  of  insurance  in  violation  of  the  terms  pre- 
scribed, in  some  jurisdictions  the  contract  is  held  enforceable  by 
both  parties,  the  specified  penalty  being  held  to  be  exclusive  of  any 
other.'* 


1  Wood  V.  Ins.  Co.,  8  Wash.  427,  36 
Pac.  267,  40  Am.  St.  R.  917,  holding 
also  that  if  the  contract  is  void  where 
made  it  will  not  be  enforced  in  another 
state.  But  see  Western  Mass.  F.  Ins. 
Co.  V.  Hilton,  42  App.  Div.  52,  holding 
that  policy  of  non-admitted  company 
will  be  enforced  in  New  York  if  made  in 
Massachusetts,  and  valid  there.  So  also 
Swing  v.  Brister,  87  Miss.  516  (March, 
1906),  40  So.  146,  citing  cases;  and 
Swine  V.  Hill,  165  Ind.  411  (Oct.,  1905), 
and  see  §  6.  The  state  has  the  power 
to  pass  such  a  statute,  Pierce  v.  People, 
106  111.  11,  46  Am.  Rep.  683. 

2  Wotertown  Fire  Ins.  Co.  v.  Ru.st,  141 
111.  85,  30  N.  E.  772,  statute  is  for  pro- 
tection not  injury  of  insured;  Pheni.r 
Ins.  Co.  V.  Penn.  R.  Co.,  134  Ind.  215, 
33  N.  E,  970,  20  L.  R.  A.  405;  Gan.^er 
V.  Firemen's  Fund  Ins.  Co.,  34  Minn. 
372,  25  N.  W.  943;  Marshall  v.  Reading 
Fire  Ins.  Co.,  78  Hun,  83,  29  N.  Y. 
Supp.  334,  aff'd  149  N.  Y.  617,  policy 
of  foreign  company  not  void  though 
agent  failed  to  obtain  'Statutory  li- 
cense; Suan  V.  Watertown  Fire  Ins.  Co., 
96  Pa.  37.  Mere  mistake  or  neglect  of 
state  official  will  not  render  contract 
void,  American  Ins.  Co.  v.  Butler,  70 
Ind.  1;  American  Ins.  Co.  v.  Pressell, 
78  Ind.  442. 

^  Cincinnati  Mut.  Health  Assur.  Co. 
v.  Rosenthal  55  111.  85,  8  Am.  Rep.  626; 
Parker  v.  Lamb  d:  Sons,  99  Iowa,  265, 
68  N.  W.  686,  34  L.  R.  A.  704;  Williams 
V.  Cheney,  8  Gray  (Mass.),  206;  Swing 
V.  Cameron  (Mich.)  (July,  1906),  108 
N.  W.  506,  (;iting  cases;  Seanians  v. 
Temple  Co.,  105  Mich.  400,  63  N.  W. 
408,  28  L.  R.  A.  430,  55  Am.  St.  R.  457; 
Seamens  v.  Mill  Co.,  66  Minn.  205, 
68    N.    W.    1065    Cowan   v.    London 


Assw.  Corp.,  73  Miss.  321,  19  So.  298, 
55  Am.  St.  R.  535;  Commonwealth  Mid. 
Fire  Ins.  Co.  v.  Hayden,  60  Neb.  636, 
83  N.  W.  922,  83  Am.  St.  R.  545; 
Haverill  Ins.  Co.  v.  Prescott,  42  N.  H. 
547,  SO  Am.  Dec.  123;  (but  see  Union 
Ins.  Co.  V.  Smart,  60  N.  H.  458);  Swing 
V.  Munson,  191  Pa.  582,  43  Atl.  342, 
58  L.  R.  A.  223,  71  Am.  St.  R.  772; 
Rose  V.  Kimberhi  &  C.  Co.,  89  Wis. 
545,  62  N.  W.  526,  27  L.  R.  A.  556, 
46  Am.  St.  R.  855;  but  a  premium  paid 
cannot  be  recovered  back,  Leonard  v. 
Washburn,  100  Mass.  251.  An  un- 
licensed insurer  having  paid  a  loss  is 
entitled  to  .  subrogation,  St.  Louis, 
etc.,  R.  Co.  V.  Commercial  Union  Ins. 
Co.,  139  U.  S.  223,  11  S.  Ct.  554,  35 
L.  Ed.  154;  St.  Louis,  etc.,  R.  Co.  v. 
Fire  Assn.,  55  Ark.  163;  18  S.  W.  43, 
60  Ark.  325,  30  S.  W.  350,  28  L.  R.  A. 
83;  Lumbermen's  Mut.  Ins.  Co.  v. 
Kansas  Citv,  etc.,  R.  Co.,  149  Mo.  165, 
50  S.  W.  281;  Phenix  Ins.  Co.  v.  Penn. 
R.  Co.,  134  Ind.  215,  33  N.  E.  970,  20 
L.  R.  A.  405.  And  the  better  view  is 
that  it  is  also  entitled  to  compel  its 
own  agent  to  account  for  premiums 
collected,  though  on  business  unau- 
thorized by  statute,  Roc  ford  Ins.  Co. 
V.  Roger,  9  Colo.  App.  121,  47  Pac.  848; 
Georgia  Home  Ins.  Co.  v.  Boi/lin,  137 
Ala.  350,  34  So.  1012;  Perm.  Mut.  Ins. 
Co.  v.  Bradley,  21  N.  Y.  Supp.  876, 
aff'd  142  N.  Y.  660,  37  N.  E.  569; 
contra,  People's  Mut.  Ben.  Soc.  v. 
Lester,  105 'Mich.  716,  63  N.  W.  977, 
but  the  insurance  company  cannot 
recover  on  its  agent's  note  for  un- 
collected premiums  on  such  business, 
Nev)  Hampshire  Ins.  Co.  v.  Kennedy, 
96Tenn.  711,36  8.  W.  709. 

■^  State    Mut.    Fire    Ins.    Assn.    v. 


12  THE    LAW   OF    INSURANCE 

§  8.  License  to  Procure  from  Non-admitted   Companies. — Many 

fire  risks  are  so  valuable  or  so  hazardous  that  it  is  impossible  to 
fully  cover  them  in  authorized  companies.  Statutes  have  been 
passed  under  which  agents  are  licensed  to  protect  the  deficit  with 
non-admitted  companies.^ 

§  9.  Origin  of  Insurance  and  Insurance  Law.— The  origin  of 
insurance  is  obscure.  Loans  on  bottomry  are  of  ancient  date,  and 
from  this  maritime  usage  the  earliest  form  of  insurance  may  have 
developed.  The  practice  of  marine  underwriting  probably  started 
in  connection  wath  the  revival  of  commerce  in  the  twelfth  or  thir- 
teenth century.  At  that  time  the  ocean  commerce  of  Christendom 
was  largely  undertaken  by  the  Lombards,  merchants  of  the  north 
of  Italy,  who  had  established  trading  companies  generally  through- 
out Europe,  and  who  appear  to  have  carried  the  practice  of  ma- 
rine insurance  wherever  they  had  mercantile  dealings.  The  word 
"policy  "  is  of  Italian  derivation. ' 

At  its  initial  stage,  the  contract  of  insurance  was  underwritten  by 
individuals  and  was  regulated  by  mercantile  custom,  which  became 
the  foundation  of  all  the  laws  and  codes  subsequently  enacted  upon 
the  subject. 

A  recorded  mention  of  insurance  in  England  in  1548  indicates 
that  the  practice  of  insuring  had  been  in  vogue  there  for  some  time,^ 
and  somewhat  later,  on  opening  Queen  Elizabeth's  first  parliament, 
Lord  Bacon  said:  "Doth  not  the  wise  merchant  in  every  adventure 
of  danger  give  part  to  have  the  rest  assured?"  But  for  many  years 
after  its  introduction  into  that  country,  the  law  of  insurance  was 

Brinkley  Stave  &  Heading  Co.,  61  272,  aff'd  178  N.  Y.  551;  Shepard  v. 
Ark.  1,'31  S.  W.  157,  29  L.  R.  A.  712,  Davis,  42  App.  Div.  462;  Burges  v. 
54  Am  St.  R.  191;  Pennypacker  v.  Jackson,  18  App.  Div.  296,  aff'd  162 
Ins.  Co.  80  Iowa,  56,  45  N.  W.  408,  8  N.  Y.  632,  57  N.  E.  1105. 
L.  R.  A.  236,  20  Am.  St.  R.  395;  2  From  Latin  pollicitaho,  a  promise, 
Union  Mut.  Life  Ins.  Co.  v.  McMUlen,  or  possibly  from  pohjpticum,  a  folded 
24  Ohio  St.  67;  Toledo  Tie  &  Lumber  WTiting.  A  "chamber  of  assurance" 
Co.  V.  Thomas,  33  W.  Va.  566.  11  S.  E.  was  established  in  the  city  of  Bruges 
37,  35  Am.  St.  R.  925;  and  see  Fritts  as  early  as  a.  d.  1310.  .\  form  of  policy, 
V.  Palmer,  132  U.  S.  282,  10  S.  Ct.  93,  supposed  to  be  the  oldest  extant,  will 
33  L.  Ed.  317.  be  found  in  the  Appendix,  ch.  II,  the 
1  N.  Y.  Gen.  Ins.  L.  §  137.  Affi-  original  of  which  is  in  the  Italian  Ian- 
davits  are  filed  showing  the  facts.  guage,  and  was  established  by  the  stat- 
Such  companies  often  give  brief  stipu-  ute  of  Florence,  January  28.  1.523.  The 
lation  in  substance  to  follow  action  and  earliest  extant  English  policy  is  dated 
adjustment  of  some  prominent  domes-  1613  and  for  the  most  part  accords  with 
tic  company.  If  a  broker  improperly  the  present  Lloyd's  policy.  See  Mar- 
place  order  with  non-authorized  com-  tin's  History  Mar.  Ins.  46. 
pany  he  is  personally  responsible  for  3  Perhaps  introduced  by  representa- 
loss,  Landusky  v.  Beirne,  80  App.  Div.  tives  of  the  Hanseatic  League. 


INTRODUCTORY  13 

unknown  to  the  common-law  courts,  and  insurance  disputes  were 
as  a  rule  settled  by  the  arbitration  of  mercantile  men.^ 

The  first  reported  insurance  case  belongs  to  the  year  1589,  and 
is  mentioned  b}^  Sir  Edward  Coke,^  in  which  it  was  held,  "where  as 
well  the  contract  as  the  performance  of  it  is  wholly  made  or  to  be 
done  beyond  sea,  it  is  not  triable  by  our  law,  hut  if  the  promise  be 
made  in  England  it  shall  be  tried." 

In  1601  a  special  tribunal  for  the  trial  of  marine  insurance  cases 
was  established  in  England.^  This  court — which  consisted  of  the 
judge  of  the  Admiralty,  the  recorder  of  London,  two  doctors  of  the 
civil  law,  two  common  lawyers,  and  eight  grave  and  discreet  mer- 
chants, or  any  five  of  them — fell  into  disuse  within  a  century  after 
its  organization,  and  by  degrees  insurance  disputes  began  to  come 
within  the  jurisdiction  of  the  common-law  courts  of  England. 

In  1756  Lord  Mansfield  was  appointed  Chief  Justice  of  the  Court 
of  King's  Bench,  and  during  his  long  and  illustrious  career  as  a 
judge  he  was  conspicuous  in  making  the  policy  of  insurance  the  sub- 
ject of  careful  study.  From  foreign  ordinances,"*  writings  of  jurists, 
and  usages  of  trade,  he  d^ew  and  shaped  the  principles  of  insurance 
law. 

§  10.  Lloyd's  and  Lloyd's  Usages. — The  body  of  rules  or  trade 
customs  under  which  the  business  of  insurance  had  grown  up  was 
known  as  "the  usages  of  Lloyd's."  To  these  usages  and  earlier 
maritime  customs  we  must  look  to  find  an  origin  for  such  far-reaching 
and  significant  principles  of  insurance  law  as  the  following:  namely, 

1  "The  contract  of  marine  insurance  tymes  it  hathe  bene.  And,  whereas  it 
is  an  exotic  in  the  common  law,"  Ins.  hathe  bene  tyme  out  of  mynde  an  usage 
Co.  V.  Dunham,  11  Wall.  (U.  S.)  1,  31-  among  the  merchantes,  both  of  this 
34,  20  L.  ed.  90,  in  which  an  instruct-  realme  and  of  forraine  nacyons,  when 
ive  account  is  given  of  the  early  history  they  make  any  great  adventure  (es- 
of  insurance  and  insurance  law.  (Ju  peciallie  into  remote  parts),  to  give 
the  continent  of  Europe  maritime  and  some  Consideracion  of  money  to  other 
mercantile  cases  are  relegated  to  special  persons  (which  commonlie  are  in  no 
commercial  tribunals.  small  number),  to  have  from  them  as- 

2  Dowdale's  case,  6  Coke  R.  47b;  surance  made  for  their  goodes,  mer- 
and  see  Crane  v.  Bell,  4  Coke's  Inst.  chandize,  ships  and  things  adventured, 
139  (1546).  or  some  parts  thereof ,  at  such  rates  and 

343  Eliz.  c.   12.     "Whereas  it  ever  in  such  sorte  as  the  parties  assurers  and 

hathe  bene  the  policie  of  this  realme  by  the  parties  assured  can  agree,   which 

all  good  means  to  comforte  and  en-  course  of  dealinge  is  commonlie  termed 

courage  the  merchante,  therebie  to  ad-  a  policie  of  assurance,  etc." 

vance  and  increase  the  generall  wealth  *  See,    for    example,    Marine    Ordi- 

of  the  realme,  her  Majestie's  customes,  nances    of    Louis    XIV,    published    in 

and  the  Strength  of  Shippinge,  which  1681,  Title  Sixth  (reprinted  in  30  Fed. 

Consideracion  is  nowe  the  more  requi-  Cas.,   p.     1211),   Guidon    de    la    Mer 

site  because  trade  and  traffique  is  not  (Rouen,  about  1600). 
at  this  present  soe  open  as  at  other 


14 


THK    LAW    OK    INSURANCE 


that  the  contract  is  one  vbcrrimw  fidei,  demanding  a  disclosure  of 
all  material  facts  affecting  the  risk;  that  acts  of  the  insured  which 
materially  change  and  enliance  the  character  of  the  risk  during  the 
pendency  of  the  policy  will  avoid  the  contract;  that  there  must  be 
no  deviation  from  the  usual  voyage  as  prescribed  by  custom;  that 
the  vessel  must  be  seaworthy  at  the  commencement  of  the  risk  in 
a  voyage  policy;  that  any  statement  appearing  on  the  face  of  a 
marine  policy  is  a  warrant}^  and  must  be  rigidly  complied  with 
and  that  goods  stowed  on  deck  are  not  protected  by  the  policy  in 
the  absence  of  a  general  trade  usage  to  the  contrary.^ 


1  Lloyd's  was  originally  a  coffee- 
house in  London,  a  celebrated  resort 
of  merchants  and  underwriters.  In 
1688  it  was  located  in  Tower  Street, 
but  within  three  or  four  years  from 
that  date,  the  establishment  was  re- 
moved to  the  corner  of  Lombard  Street 
and  Abchurch  Lane,  where  it  became 
the  world-renowned  center  for  com- 
mercial intelligence  and  for  the  busi- 
ness of  marine  underwriting.  After 
several  otiier  removals,  it  ultimately 
took  possession  of  its  apartments  in 
the  Royal  Exchange.  In  1769  the 
principal  merchants  and  underwriters 
frequenting  the  coffee-house  formed 
themselves  into  a  society  with  rules  and 
regulations.  In  1779  the  society 
adopted  the  form  of  policy  thencefor- 
ward known  as  "  Lloyd's  Policy,"  which 
closely  resembles  the  policies  now  in 
use  in  the  United  States,  and  which 
corresponds  with  the  policy  prescribed 
by  the  English  marine  insurance  act 
or  codification  of  1906,  except  that  the 
words  "Be  it  known  that  "  have  been 
substituted  for  the  introductory  words 
"In  the  Name  of  God,  Amen,"  appear- 
ing in  the  earlier  form,  a  change  ef- 
fected in  the  year  1850.  Justice  Buller 
characterized  this  instrument  as  "ab- 
surd and  incoherent  "  Brough  v.  Whit- 
more,  4  T.  R.  206;  Lord  Mansfield 
called  it  "a  very  strange  instrument." 
Le  Cheminant  v.  Pearson,  4  Taunt.  380; 
Justice  Lawrence  said  it  was  '"drawn 
with  much  laxity,''  Marsden  v.  Reid, 
3  East,  579.  Nevertheless,  almost 
every  word  of  it  has  been  judicially 
construed,  and  therein  consists  its 
value.  Simona  v.  Boydell.  Doug.  268. 
In  its  stability  it  is  in  striking  con- 
trast -wnth  the  fire  polify,  which  during 
its  history  has  exhibited  a  series  of 
shifting  forms,  which  have  given  rise 
to    much    confusion    and    uncertainty 


both  in  the  business  and  in  the  law  of 
insurance.    As  the  courts  from  time  to 
time    have    adjudicated    away    by    a 
strict  construction  the  restrictions  and 
exemptions  from  liability  named  in  the 
fire  policy,  its  phraseology  has  been 
altered  by  the  insertion  of  a  more  and 
more  explicit  wording  in  favor  of  the 
insurers,  until  in  many  instances  the 
legislatures  of  the  several  states  have 
been    provoked    to    interference    by 
sweeping  statutory  enactments  which 
govern  the  contents  and  legal  effect  of 
the  fire  insurance  contract  within  those 
states,  Reilly  v.  7ns.  Co.,  43  Wis.  456, 
and  see  Appendix,  ch.  I.     It  was  froui 
early    times    the    custom    at    Lloyd's 
rooms   to   pass   around   the   proposed 
policy    of    the    applicant    among    the 
members,    and    each    member    under- 
wrote or  subscribed  his  name  for  such 
portion  of  the  retfuired  amount  as  he 
wished  to  undertake,  together  with  the 
date  of  subscription,  until  in  this  way. 
by  successive  subscriptions  by  differ- 
ent persons  on   the  same   policy,   the 
desired  amount  was  covered.     In  1871 
the  Society  of  Lloyd's  was  incorporated 
by  special  act  of  parliament  (34  Vict, 
c.  xxi),  one  of  the  express  objects  of 
incorporation    being    the    "collection, 
publication,    and    diffusion    of    intelli- 
gence and  information  with  respect  to 
shipping."     In  the  accomplishment  of 
this  object  it  has  attained  an  unrivaled 
standard  of  perfection.     Lloyd's  mem- 
bers have  developed  a  system  of  agency 
radiating  eA-erywhere   throughout  the 
maritime    world,    by   whic]\    they   are 
enabled  to  receive  the  promptest  and 
most   reliable    information   of   all   de- 
partures from  and  arrivals  at  ports,  as 
well  as  of  losses,  casualties,  and  other 
useful    shipping    news.      A    standard 
London  periodical  has  said:  "Towering 
head  aud  shoulders  above  the  crowd  <u 


INTRODUCTORY 


15 


§  11.  American  Lloyds. — Modeled  in  a  measure  in  imitation  of 
the  original  society  of  English  Lloyds,  many  unincorporated  asso- 
ciations have  been  formed  in  this  country,  some  with  the  object  of 
transacting  marine,  and  others  with  the  object  of  transacting  fire 
or  other  forms  of  insurance,  and  all  known  generally  as  American 
Lloyds.  The  basis  of  organization  is  a  written  agreement,  resembhng 
articles  of  copartnership  of  a  limited  liability,  executed  by  the 
underwriters,  who  contribute  to  a  common  guaranty  fund  and  who 
by  a  written  power  of  attorney  put  the  actual  management  in  the 
hands  of  an  agent,  usually  a  broker  or  other  expert.  This  agent  or 
attorney,-  sometimes  under  the  supervision  of  an  executive  com- 
mittee, solicits  and  attends  to  the  business,  signs  each  policy  on  be- 
half of  the  underwriters,  settles  losses,  and  receives  a  fiat  conmiission 
on  premiums  to  cover  compensation  and  office  expenses.^  By  this 
device  the  aim  has  been  to  evade  in  great  measure  the  statutory  re- 
quirements imposed  upon  insurance  corporations,  for  instance,  those 
relating  to  capital,  reserve  fund,  and  annual  reports.  With  some 
notable  exceptions  the  earlier  American  Lloj^ds  proved  to  be  a  dis- 
appointment either  to  the  underwriters  or  to  the  patrons,  and  such 
associations  have  now  been  largely  brought  within  the  reach  of 
statutory  regulations.^ 


institutions  that  have  helped  to  win 
for  England  the  maritime  supremacy 
of  the  world,  stands  the  corporation  of 
Lloyd's.  Its  collapse  v.ould  be  more 
widely  felt  than  that  of  any  other 
commercial  institution  of  the  world." 
For  history  of  marine  iixsurance  see 
Chalmers  &  Owen  Ins.  (1907),  p. 
170;  Martin's  History  Lloyd's  &  Mar. 
Ins.  (1876).  For  present  Lloyd's  cus- 
toms and  practice  of  English  Asso. 
of  Average  Adjusters  see  Chalmers 
&  Owen  Ins.  (1907),  pp.  173-177; 
Am.  Ins.  (7th  ed.),  pp.  1523-38.  As 
to  legal  effect  of  these  rules  of  practice 
see  Steamship  C.  Co.  v.  London,  etc.. 
Ins.  Co.  (1901),  6  Com.  Cas.  297. 

1  States  V.  Ackerman,  .51  Ohio  St.  I(j3. 
37  N.  E.  828,  24  L.  R.  A.  298. 

2  For  form  of  Lloyd's  accident  policy 
see  State  v.  Ackerman,  51  Ohio  St.  163, 
37  N.  E.  828.  Each  underwriter  is  liable . 
but  only  to  the  amount  subscribed  by 
him  on  each  policy,  not  for  any  part  of 
the  liability  of  his  associates,  hability 
being  several  but  not  joint,  Barnes  v. 
People,  168  111.  425,  48  N.  E.  91;  Im- 
perial Shale  Brick  Co.  v.  Jeuett,  42  App. 
Div.  588,  60  N.  Y.  Supp.  35;  Straus  v. 
Hoadhy,  23  App.  Div.  360,  48  N.  Y. 


Supp.  239.  Estate  of  subscriber  is 
liable  after  his  death  on  policy  issued 
before  and  the  death  does  not  revoke 
power  of  attorney,  Durbrow  v.  Ep- 
pens,  65  N.  J.  L.  10,  46  Atl.  582.  When 
the  fund  measured  by  the  limited  lia- 
bility is  exhausted  there  must  be 
further  contribution  if  the  policy  was 
issued  after  its  impairment,  Burke  v. 
RLoades,  82  App.  Div.  325,  81  N.  Y. 
Supp.  1045,  id.  79  N.  Y.  Supp.  407, 
39  Misc.  208.  If  the  policy  so  provide, 
the  insured  must  bring  test  suit  against 
the  agent  before  suing  underwriters, 
Enterprise  Lumber  Co.  v.  Mundy,  62 
N.  J.  L.  16,  42  Atl.  1063,  55  L.  R.  A. 
193;  Ketchum  v.  Belding,  58  App.  Div. 
(N.  Y.)  295, 68  N.  Y.  Supp.  1099;  Leiter 
V.  Beecher,  2  App.  Div.  577,  37  X.  Y. 
Supp.  114;  Lawrence  v.  Schaefer,  20 
App.  Div.  80,  46  N.  Y.  Supp.  719. 
but  not  if  there  be  no  attorney. 
American  Liicol  Co.  v.  Lou-e,  41  App. 
Div.  500,  58  N.  Y.  Supp.  687.  Judg- 
ment in  the  test  suit  is  conclusive  upon 
the  underwTiters,  Conant  v.  Jones,  50 
App.  Div.  336,  64  N.  Y.  Supp.  189, 
but  not  if  fraudulently  procured,  Cuff 
V.  Heine,  58  X.  Y.  Supp.  324,  27  Misc. 
498.     The  one-year  limitation  in  the 


16  THE    LAW   OF  INSURANCE 

§  12.  Fire  Insurance.— Fire  insurance  as  an  organized  system  has 
had  an  origin  comparatively  recent,  and  it  was  not  until  after  the 
great  London  fire  of  1666  that  it  took  any  very  practical  shape, 
though  liack  in  Anglo-Saxon  times  there  is  evidence  of  attempts 
among  friendly  guilds  to  guarantee  protection  against  fire  and  other 
cahunities  by  "mutual  contribution.  In  168).  the  first  regular  office 
for  insuring  against  loss  by  fire  was  opened  by  a  combination  of 
persons  at  the  rear  of  the  Royal  Exchange,  and  in  1710  the  Sun  Fire 
Office,  the  earliest  mutual  and  stock  company,  was  organized  in 
London. 

The  first  fire  company  established  in  the  United  States  was  "The 
Philadelphia  Contributionship  for  Insuring  Houses  from  Loss  by 
Fire,"  incorporated  on  the  mutual  plan  in  1752,  one  of  its  early 
directors  having  been  Benjamin  Franklin. 

§  13.  Life  Insurance. — The  earliest  practical  embodiment  in  the 
direction  of  life  insurance  was  the  foundation  in  1706  by  royal  charter 
in  Great  Britain  of  "The  Amicable  Society  for  a  Perpetual  Assur- 
ance Office."  The  scheme  was  simply  to  raise  a  fixed  contribution 
from  each  member,  and  from  the  proceeds  to  distribute  a  certain 
sum  each  year  among  the  representatives  of  those  who  had  died 
during  the  year.  No  one  was  to  be  admitted  under  the  age  of  twelve, 
nor  above  the  age  of  fifty-five,  but  all  were  to  pay  the  same  rate  of 
contribution. 

In  1734  the  society  made  arrangements  for  guaranteeing  that 
the  dividend  for  each  deceased  member  should  not  be  less  than 
£100,  which  was  the  first  approach  to  an  assurance  of  a  definite  sum 
at  death,  whenever  that  might  occur. 

The  Equitable  Assurance  Society  of  London,  which  was  organized 
under  a  deed  of  settlement  and  commenced  business  in  1762,  may 
be  regarded  as  the  pioneer  of  the  modern  system  of  life  insurance. 
It  issued  policies  for  the  assurance  of  fixed  sums  on  single  or  joint 

policy  for  bringing  suit  applies  only  to  Misc.  276.     A  Lloyd's  association  or- 

that  suit  and  not  to  subsequent  pro-  ganized  merely  to  be  sold  is  not  an 

ceedings     against     the     underwTiters,  association     "engaged     in     business" 

Laurence  v.  Schaefer,  20  App.  Div.  80,  uithin    N.    Y.    Laws,     1892,    c.     690, 

46  N.  Y.  Supp.  719.     If  plaintiff  join  People  v.  Loew,  23  Misc.  574,  52  N.  Y. 

all   the   underwriters   in   one   suit   in-  Supp.   799.     Right    of    individual  un- 

Btead    of    sui:ig    them    separately,  de-  derwriter   under   contract   of   reinsur- 

fendants   must   plead   the   misjoinder,  ance,    Thompson    v.    Colonial    Assur. 

hear  v    Hoadley,  44   App.    Div.    161,  Co.,  68  N.  Y.  Supp.  143,  33  Misc.  37, 

60  N.   Y.   Supp.  609.     Liable  for  no  aff'd  70  N.  Y.  Supp.  85,  60  App.  Div. 

greater    proportion    of   loss   than    the  325.     For  statutory  provisions  relating 

polifv  bears  to  the  whole  insurance,  to  Lloyds,  see  X.  "^  .  Ins.  L.  §§  57,  121, 

Cno:.'  V.  L>m:u:,  09  \.  V.  Supp.  614,  34  138,  139,  162. 


INTRODUCTORY  17 

lives,  or  on  survivorships,  and  for  any  terms.  The  premiums  were 
regulated  according  to  age.  Lives  were  admitted  with  due  regard 
to  their  state  of  health  and  other  circumstances. 

The  creation  of  corporations  in  America  with  power  to  insure  lives 
and  grant  annuities  dates  back  beyond  the  Revolution,  one  of  the 
earliest  companies  being  chartered  in  the  colony  of  Pennsylvania 
as  early  as  1769,  for  the  benefit  of  the  families  of  Presbyterian  clergy- 
men. But  the  business  of  life  insurance  did  not  assume  conspicuous 
importance  until  within  little  more  than  a  half  centur3\  The  first 
reported  life  insurance  case  in  the  United  States  ^  shows  the  exist- 
ence of  a  contract  of  life  insurance  as  early  as  1809.  It  was  in  that 
case  contended  by  the  defendant  that  no  valid  contract  of  life  insur- 
ance could  be  made  within  the  state  of  Massachusetts,  inasmuch  as 
the  law  of  England  in  that  regard,  it  was  said,  had  never  been 
adopted  in  this  country;  but  the  court  sustained  the  contract  on 
the  ground  that  it  was  not  repugnant  to  the  general  policy  of  the 
law  or  to  good  morals,  and  that  no  reason  had  been  given  for  con- 
demning such  contracts,  except  by  the  French  courts,  which  con- 
sidered "that  it  is  indecorous  to  set  a  price  upon  the  life  of  a  freeman 
which  is  above  all  price" — a  reason  which  was  pronounced  insuffi- 
cient. 

In  the  United  States,  life  insurance  has  attained  a  greater  relative 
importance  among  financial  institutions  than  in  any  other  countr}'. 
During  the  years  w^iich  immediately  followed  the  close  of  the  Civil 
War,  it  grew"  with  unparalleled  rapidity;  new  companies  were  estab- 
lished in  great  numbers;  new  features  of  insurance  contracts  were 
devised,  and  soliciting  agents  canvassed  the  countr}'  from  one  end 
to  the  other.  It  is  to  be  observed  that  fire  policies  on  the  average 
are  for  a  much  shorter  term  than  life  policies,  and  that  a  life  com- 
pany is  ordinarily  obliged  to  accumulate  for  the  payment  of  future 
losses  a  much  larger  amount  of  assets  than  is  required  in  the  conduct 
of  the  business  of  marine  or  fire  insurance,  since,  unlike  the  perils 
of  shipwreck  and  fire,  the  peril  of  death  is  sure  to  occur  sooner  or 
later  to  the  persons  whose  life  is  insured.  Moreover,  popular 
modern  forms  of  life  insurance  policies  have  involved  the  payment 
of  deferred  dividends  of  indefinite  amount  at  stated  periods  in  the 
distant  future  to  fortunate  survivors  of  a  class. ^  The  result  followed 
that  large  life  companies  in  this  country,^  in  a  wild  race  for  su- 
premacy among  themselves,  amassed  enormous  amounts  of  assets 

^  Lord  V.  Dall,  12  Mass.  115.  s  Conspicuously  the  three  great  New 

2  Tontine  and  similar  forms,  see  York  companies,  the  Mutual,  the  Equit- 
5  21.  able,  and  the  New  York  Life. 

2 


18  THE    LAW   OF   INSURANCE 

and  surpluses  which  were  not  set  aside  for  proposed  betterments, 
or  appropriated  for  present  dividends,  Hke  the  assets  of  a  rail- 
road or  industrial  corporation,  or  kept  subject  to  call  like  the  as- 
sets of  a  savings  bank,  but  were  retained  for  purposes  which  only 
the  company's  actuaries  could  fathom,  a  colossal,  trust  fund  which 
carried  with  it,  especially  to  the  officers  and  finance  committees, 
temptations  of  an  exceptional  and  subtle  character.  The  machinery 
of  the  insurance  departments  proved  ineffective  to  protect  the  policy 
holders  from  evil  consequences  of  startling  proportions,  and  after  a 
notable  investigation  by  a  committee  of  the  New  York  legislature, 
statutes  of  a  drastic  character  were  recently  adopted  in  that  state.^ 

§  14.  Accident  Insurance. — Accident  insurance,  which  is  a 
branch  of  life  insurance,  is  an  important  development  of  later  growth. 
Ordinary  life  insurance  protects  against  the  stipulated  pecuniary 
loss  occasioned  to  a  man's  family  or  to  creditors,  or  others,  by  his 
death,  whether  caused  by  old  age  or  accident.  But  ordinary  acci- 
dent insurance  protects  only  against  losses  caused  by  accident 
whether  resulting  in  death  or  not. 

§  15.  Classification  of  Risks. — In  fire  and  marine  insurance, 
risks  are  classified  according  to  the  degree  of  hazard,  and  the  premi- 
ums graded  accordingly.  But  in  life  insurance,  as  a  rule,  only  healthy 
persons  are  accepted,  and  consequently  the  premiums  are  scaled 
according  to  age;  sometimes,  however,  special  risks  are  taken  involv- 
ing a  hazardous  occupation,  or  an  unhealthy  location  of  residence, 
for  which  an  extra  premium  is  paid.  So  also  some  companies,  for 
an  extra  premium,  insure  persons  of  unsound  health.^  In  all 
branches  of  insurance  the  amount  of  the  premium  is  made  to  depend 
more  or  less  upon  average  results  which  have  been  arrived  at  after 

1  N.   Y.    Law,     1906,   c.   326.     The  panies  obliged  to  make  equitable  dis- 

Armstrong  committee,  the  Hon.  Chas.  tribution  of  surplus  to  policyholders  at 

E.    Hughes,    counsel.      The    following  stated  periods.     7.  Investments  regu- 

results    among    others    were    accom-  lated  and  control  of  subsidiary  com- 

plished  by  these  laws  affecting  life  in-  panies  prohibited.— The  New  York  court 

surance   companies.      1.  Policyholders  had   decided  substantially  that  upon 

given   a   more   effective   A'oice   in   the  maturity   of   his   pohcy  m  a   mutual 

government  of  the  companies.    2.  Full  company   the   policyholder   could   get 

publicity  secured    to   policyholders  in  for  his  share  of  the  surplus  only  what 

regard  to  management  of  companies'  the  directors  saw  fit  to  divide,  Greeff 

affairs.      3.    PoHcies    limited    to    four  v.  Society,  160    N.    Y.    19,    54    N.    E. 

standard     forms.       4.     Policies     safe-  712,  46  L.  R.  A.  288,  73  Am.  St.    R. 

guarded    against    forfeiture,    warran-  659. 

ties  being  converted  into  representa-  ^Security  Trust  Co.  v.  Tarpey,  182 

tions  in  absence  of  fraud.    5.  Deferred  III.  52,  54  N.  E.   1041,  "substandard 

dividend  policies  prohibited.     6.  Com-  risks." 


INTRODUCTORY  19 

elaborate  observations  and  careful  collection  of  statistics  bearing 
upon  the  subject. 

In  accepting  or  rejecting  a  proposed  risk,  the  insurers  are  governed 
by  their  familiarity  with  these  general  rules  of  average.  But  it  is 
also  verv  important  for  them  to  gain  a  thorough  acquaintance  with 
the  facts  and  circumstances  relating  to  the  particular  case,  to  ascer- 
tain whether  it  falls  within  or  outside  the  general  rule. 

Formerly  much  of  this  information  was  obtained  from  the  insured 
by  means  of  a  written  document  called  an  application  containing 
such  interrogatories  and  answers  as  were  appropriate  to  furnish  the 
desired  facts.  But  now  in  fire  insurance  the  use  of  an  application 
in  detail  is  for  the  most  part  confined  to  certain  farm  properties  and 
to  exceptional  instances.  In  the  cities  and  towns  generally  the  in- 
surers have  come  to  rely  very  much  upon  their  own  means  of  exami- 
nation; and  for  use  in  the  larger  cities  they  have  prepared  elaborate 
and  accurate  insurance  maps  and  surveys  showing  the  character  of 
the  risk  involved  in  every  building. 

In  marine  insurance  the  rating  of  ships  and  statistics  regarding 
them  are  to  a  considerable  extent  a  matter  of  record,  but  more  or 
less  information  is  often  required  by  the  insurers  from  the  insured 
in  relation  to  the  proposed  risk.  They  should  be  advised  from  some 
source  of  the  ownership,  quality,  and  nationality  of  the  vessel,  the 
course  of  the  proposed  voyage,  the  character  of  the  captain,  the 
nature  of  the  commodity  carried,  the  state  of  political  relations,  and 
in  time  of  war  whether  the  ship  is  to  sail  with  convoy. 

In  marine  insurance  the  scale  of  premiums  varies  very  greatly  ac- 
cording to  circumstances,  and  ma}^  sometimes  well  nigh  equal  the 
value  of  the  insured  property.  The  subject  of  insurance  is  some- 
times insured  "lost  or  not  lost,"  provided  neither  party  knows 
whether  the  risk  has  already  terminated. 

§  16.  Mortuary  Tables. — The  premiums  to  be  charged  for  life 
policies  are  based  upon  calculations  made  from  mortality  tables, 
which  are  tabulated  exhibits  of  the  number  of  survivors  and  the 
number  of  those  dying  each  subsequent  year  among  a  given  number 
of  persons  taken  at  various  given  ages  respectively.^     The  tables 

1  A    considerable    number   of     such  structed  by  Dr.  Thomas  Price  from  the 

tables  have  been  prepared  at  different  registers    kept    in    the    parish    of    All 

times,    the    earhest    of    which    are    so  Saints   Northampton.  England,  for  the 

rough  and  inaccurate  that  they  possess  forty-six   years,    1735    to    1780.      An- 

only  a  historical  interest.    Of  the  more  other  English  table  very  extensively 

reliable  tables  which  have  been  in  use  used  by  insurance  companies  v.as  the 

in  recent  times  may  be  mentioned  the  Carlisle    Table,    constructed    by    Mr. 

Northampton  Table,   which  was  con-  Joshua  Milne  from  materials  furnished 


20  THE    LAW    OF    INSURANCE 

which  thus  give  the  average  duration  of  hves  indicate  the  average 
amount  wliich  must  he  paid  for  losses.  The  assumption  is  made  that 
the  company  will  succeed  in  so  investing  its  assets  as  to  gain  an 
average  income  therefrom  of  a  certain  ))er  cent,  sa}'  three  and  a  half 
or  four  per  cent  annually  in  addition  to  receipts  from  premiums. 
The  lower  the  specihed  estimated  rate  of  future  interest  on  assets 
the  safer  the  standard  of  solvency,  and  the  greater  the  amount  of 
present  assets  required  to  satisfy  that  standard.  The  higher  the 
estimated  rate  of  future  interest,  the  more  danger  that  the  company 
will  fail  to  earn  it  and  in  order  to  meet  its  liabilities  will  be  obliged 
to  exhaust  its  surplus  and  impair  itg  capital.  A  net  premium  is  the 
rate  at  which,  according  to  the  table  of  mortality  and  interest,  an 
insurance  could  be  effected.  But  to  this  must  be  added  in  practice 
an  important  percentage  which  is  called  "loading,"  or  "margin," 
in  order  to  defray  the  expenses  of  the  business,  and  to  provide  for 
a  possible  excess  of  mortality.  A  gross  or  office  premium  is  the  net 
premium  increased  by  the  loading. 

§  17.  Reserve. — That  portion  of  the  premiums  of  a  policy  with 
the  interest  thereon  which  is  required  to  be  reserved  or  set  aside  as 
a  fund  for  the  payment  of  the  policy  when  it  becomes  due  is  called 
the  "reserve."^  The  mean  or  average  duration  of  the  life  of  an 
individual  after  any  specified  age,  according  to  a  given  table  of 
mortality,  is  called  the  "expectation  of  life."  Statistical  observa- 
tions on  the  duration  of  human  life  point  to  the  conclusion  that, 
after  the  period  of  extreme  youth  is  passed,  the  death  rate  among 
any  given  body  of  persons  increases  gradually  with  advancing  age; 
and  where  the  annual  premium  is  fixed  at  a  uniform  rate  during  the 
life  of  the  policy,  as  is  customary  in  life  insurance,  it  is  evident  that 
if  the  policy  is  surrendered  by  the  insured  before  its  expiration,  the 
insurers  can  generally  afford  to  make  a  return  of  a  portion  of  the 
premiums  which  have  been  paid.  Of  the  reserve  value  which  the 
policy  is  estimated  to  have  at  the  time  of  surrender,  a  part  called 
"the  surrender  value,"  the  company  offers  to  pay  to  the  insured 

by  the  labors  of  Dr.  John   Heysham.  much  more  carefully  collected  statis- 

These   materials   comprised    two   enn-  tics  and  giving  more  accurate  results, 

merations  from  the  population  of  the  Conspicuous     among     these     are     the 

parishes  oi  Saint  Mary  and  Saint  Cuth-  American   Experience  Table   and   the 

bert  Carlisle  in  1780  and  1787,  and  the  Actuaries'    or    Combined   Experience 

abridged  bills  of  mortality  of  those  two  Table.     The  mathematics  of  the  busi- 

parishes   for   the   nine   years    1779   to  ness,   of  great   practical   consequence 

1787.       Since    then    many    mortuary  are  managed  by  actuaries, 
tables  have  been  prepared  in  England  i  N.  Y.  Law,  1892,  c.    690,  §§  205, 

and   the   United    States,    based    upon  305,  N.  Y.  Law,  1898,  c.  85. 


INTRODUCTORY  21 

in  return  for  the  cancellation  of  the  policy  before  its  natural  expira- 
tion.^ 

From  these  same  considerations  it  appears,  also,  that  in  the  event 
of  the  insolvency  and  winding  up  of  a  life  insurance  company,  there 
is  a  basis  for  calculating  the  present  value  of  unexpired  policies,  by 
which  an  equitable  distribution  of  assets  may  be  made  to  all  the 
policy  holders  in  accordance  with  the  laws  of  priority.^ 

The  test  of  solvency  is  the  rule  which  the  insurance  department 
is  required  to  apply  to  determine  the  ability  of  a  company  to  pay 
all  losses  which,  according  to  the  standard  table  of  mortalitj'  and 
rate  of  interest,  may  occur.  The  liabilities  of  a  company  consist  of 
its  actual  unpaid  losses,  its  expenses  and  contingent  obligations,  for 
the  payment  of  which  its  assets  are  held  liable.  The  whole  amount 
insured  is  really  a  contingent  obligation,  but  in  testing  the  present 
solvency  of  a  company,  this  is  regarded  as  a  liability  only  to  the 
extent  of  the  reserve  on  each  policy.^ 

§  18.  Different  Kinds  of  Policies. — The  forms  of  printed  poli- 
cies of  insurance  in  use  are  varied  and  numerous.  They  are  filled 
up  in  writing  to  suit  each  particular  case,  and  are  often  further  modi- 
fied by  special  clauses,  which  may  be  pasted  or  attached  in  the  shape 
of  printed  riders  to  the  more  general  form. 

A  valued  policy  is  one  which  specifies  an  agreed  value  of  the 
subject-matter  insured;  for  example,  a  policy  of  $5,000,  on  "the 
ship  Argus,  valued  at  $10,000."  In  case  of  total  loss  of  property 
such  a  valuation,  if  not  dishonest,  furnishes  the  basis  of  adjustment. 

An  unvalued,  sometimes  called  an  open  policy,  is  one  in  which 
the  value  of  the  subject  insured  is  not  specified  but  is  left  to  be 
ascertained  in  case  of  loss. 

Policies  on  lives  are  valued.  Policies  on  ships  are  usually  valued. 
Fire  policies  on  contents  of  buildings  are  usually  unvalued  and,  in 
the  absence  of  valued  policy  laws,  so  are  fire  policies  on  buildings. 

§  19.  Same  Subject:  Marine. — A  time  policy  is  one  in  which  the 
duration  of  the  risk  is  defined  at  the  beginning  and  at  the  end,  by 

1  In  case  of  lapse  for  non-payment  tion,  People  v.  Association,  150  N.  Y. 
of  premium,  company  by  statute  must  94,  45  N.  E.  8;  People  v.  his.  Co.,  154 
use  reserve  for  benefit  of  assured  to  N.  Y.  95,  47  N.  E.  968.  Claims  valued 
purchase  paid-up  insurance,  etc.  Niel-  as  of  date  of  beginning  of  action  for 
sin  V.  Society,  139  Cal.  332,  73  Pac.  dissolution,  Equitable  Reserve  Fund 
168.  See  Appendix  of  Statutes  and  Ass7i.,  131  N.  Y.  354,  30  N.  E. 
Haskell  v.  Society,  181  Ma.ss.  341,  63  114. 

N.  E.  899.  3  As  to  statutory  test  of  solvency,  see 

2  Reserve,  how  distributed  on  dissolu-      N.  Y.  Ins.  L.  §21. 


22  THE   LAW    OF    INSURANCE 

fixed  dates,  as,  for  example,  from  noon  of  January  1,  1907,  until 
noon  of  January  1,  1908. 

A  voyage  policy  is  one  in  which,  irrespective  of  time,  the  dura- 
tion of  the  risk  is  established  by  geographical  termini;  as,  for  exam- 
ple, from  New  York  to  Liverpool.* 

§20.  Same  Subject:  Fire.— The  term  "open  policy"  or  "run- 
ning policy"  is  sometimes  employed  to  indicate  a  general  form  of 
insurance  frequently  used  where  the  insured  is  likely  to  effect  many 
successive  insurances  from  the  same  company.  It  covers  such 
goods,  at  such  amounts  of  insurance,  in  such  storehouses  and  places, 
and  at  such  rates  of  premiums,  as  from  time  to  time  shall  be  agreed 
upon  and  indorsed  on  the  policy  or  in  a  book  attached  thereto,  the 
purpose  being  to  obviate  the  necessity  of  executing  a  fresh  policy 
for  every  transaction.^ 

A  floating  policy  also  is  a  general  form  of  insurance,  but  usually 
upon  goods  within  a  certain  specified  area  of  territory,^  or  otherwise 
designated,  and  is  intended  to  cover  property  which  cannot  well  be 
described  specifically  because  of  its  fluctuating  quantity  and  loca- 
tion; as,  for  example,  merchandise  in  freight  trains,  warehouses,  or 
lighters.  The  amount  of  goods  covered  by  such  a  policy  is  ascer- 
tainable at  the  moment  of  loss  only.'*  An  excess  policy,  usually  a 
floater,  attaches  only  to  property  or  to  an  excess  of  value  not  covered 
by  the  specific  insurance.''* 

Insurance  is  said  to  be  in  the  blanket  form,  as  contrasted  with 
specific,  when  different  buildings  or  different  classes  of  property  are 
insured  in  an  aggregate  amount  without  apportionment;  for  exam- 
ple, a  policy  of  S5,000  on  a  factory  plant  in  its  entirety,  including 
buildings,  machinery,  and  stock.  While  a  policy  of  S5,000  on  one  of 
the  buildings  alone  is  called  specific.     A  rent  policy  is  an  insurance 


1  Coriijoot  V.  Royal  Exch.  Assn.  are  left  to  be  defined  by  subsequent 
Corp.  (1903),  2  K.  B.  363.  For  de-  declaration,  Snowden  v.  Guion,  101 
scription    of    "disbursement"    marine  N.  Y.  458,  5  N.  E.  322. 

policJ^   si'f  International  NaiK    Co.   v.  ^  Golde    v.    Whrpplr,    7    App.    Div. 

Atlantic  Mut.  Ins.  Co.,  100  Fed.  304.  (N.  Y.)  48,  39  N.  Y.  8upp.  964;  Macon 

Launch  and  trial   trip  policy,  Jaclson  Fire  Ins.  Co.  v.  Powell,  116  Ga.  703, 

V.  Mumjord  (1904),  9  Com.  Cas.  114.  43  S.  E.  73. 

2  Imperial  Shale  Brick  Co.  v.  Jeweti,  ^  An  excess  floater,  United  L'nder- 
169  N.  Y.  143,  02  N.  E.  107;  Conti-  writers  Ins.  Co.  v.  Poivell.  94  Ga  359, 
nental  Ins.  Co.  v.  Mna  Ins.  Co.,  138  21  S.  E.  565;  Peabody  v.  L.  &  L.  &  G. 
N.  Y.  16,  33  N.  E.  724.  Ins.    Co.,    171    Mass.    114    (1898),    50 

3  So  also  in  marine  insurance  the  N.  E.  526;  Fairchild  v.  his.  Co.,  51 
term  "open  policy"  or  "floating  N.  Y.  65,  69.  As  to  blanket  or  corn- 
policy"  is  often  used  to  indicate  one  pound  polifies  and  specific  policies,  see 
in  which  the  ships  or  other  particulars  Page  v.  Sun  Ins.  Ofjtce,  64  Fed.   194. 


INTRODUCTORY  23 

on  rents,  usually,  but  not  of  necessity,  in  favor  of  the  landlord.' 
A  use  and  occupancy  policy  is  adapted  to  indemnify  one  in  occupa- 
tion of  mill,  factory,  hotel,  store,  or  other  business  premises,  for  loss 
of  commercial  use  or  earning  capacity  during  the  period  after  a  fire 
and  before  reinstatement.  The  phrase  "use  and  occupancy"  being 
somewhat  indefinite  and  such  a  policy  being  almost  always  valued  ' 
it  is  difficult  to  ascertain  or  define  with  precision  the  subject-matter 
of  this  class  of  insurance.*  The  contract  seems  in  general  to  be  in- 
tended to  furnish  indemnity  for  loss  of  estimated  earnings  or  some 
part  thereof  which  would  have  accrued  from  the  business  except 
for  the  fire.'*  It  is  analogous  to  rent  insurance  or  insurance  on  profits 
and  must  be  carefully  distinguished  from  insurance  on  the  buildings 
themselves  or  on  their  contents. 

§21.  Same  Subject:  Life.— The  regular  old-style  life  policy  is 
payable  on  the  death  of  the  person  insured,  and  the  payment  of 
premiums  continues  annually  throughout  life.  The  limited  payment 
policy  is  payable  at  the  death  of  the  person  insured,  but  the  payment 
of  premiums  ceases  after  a  certain  limited  period,  say  ten,  fifteen,  or 
twenty  years.  An  endowment  policy  ■'  is  payable  at  the  expira- 
tion of  the  endowment  period  or  upon  the  earlier  decease  of  the 
insured. 

A  regular  life  policy  is  in  the  nature  of  an  investment  by  the  insured 
usually  for  the  benefit  of  his  family,  or  some  member  of  it,  while  an 
endowment  policy  is  intended  as  a  contingent  investment  for  his 
own  benefit,  being  payable  to  himself  if  alive  at  the  expiration  of  the 
period  named.  A  term  policy  is  one  taken  for  a  limited  number  of 
years,  the  policy  being  payable  only  in  case  of  the  death  of  the  in- 
sured within  that  period.  If  he  is  alive  at  the  end  of  the  term,  the 
insurance  ceases  altogether.'^  A  joint-life  policy  is  one  payable  on 
the  earliest  death  of  two  or  more  persons  insured.  A  survivorship 
policy  is  one  payable  on  the  death  of  the  survivor  of  two  or  more 
persons. 

•See  Appendix  of  Forms.    Generally  policy  combines  generally  in  its  plan  an 

by  statute  or  by  the  lease  a  tenant  is  insurance   of   the   life   and   an   invest- 

relieved  from  paying  rent  if  premises  ment  of   the    money  paid.''  Miller  v. 

are  rendered  untenable  by  fire.  Campbell,  140  N.  Y.  457,  463,  35  N.  E. 

2  See  Appendix  of   1  orms.  651. 

3  Michael  v.  Prusman  National  his.  «  These  four  are  now  the  statutory 
Co.,  171  N.  Y.  25.  O;^  N.  E.  810.  forms  for  New  York  thou,s;h  the  super- 

4  The  aim  is  sometimes  to  cover  intendent  of  insurance  upon  apphca- 
expenses  which  continue  in  spite  of  tion  is  allowed  to  sanction  other  forms, 
fire.  General  Ins.  Law  as  amended  1906,  § 

^Walker     v.    Giddirujs,    103    Mich.       101. 
344,  61  N.  W.  512.     "An  endowment 


24  THE    LAW    OF    INSURANCE 

A  tontine  policy  is  one  in  which  it  is  agreed  that  certain  accumu- 
lations or  profits  of  the  business  shall  be  apportioned  among  those 
of  the  insured  of  a  certain  class  surviving,  at  certain  intervals;  for 
example,  every  ten,  fifteen,  or  twenty  years. ^  The  lapsed  policies 
of  the  class  forfeit  their  reserve  and  dividends  to  the  survivors.  A 
tontine  dividend  is  tlie  distribution  of  such  profits  among  the  sur- 
vivors who  are  entitled  to  it  after  the  given  period.  A  semi-tontine 
policy  is  one  in  which  it  is  agreed  that  the  dividends  only  shall  be 
apportioned  among  the  survivors  of  the  class. ^ 

§  22.  Mixed  Risks,  Sea  and  Land. — To  meet  modern  demands  of 
commerce  a  marine  policy  is  sometimes  altered  to  include  all  kinds 
of  risks  by  land  and  by  water  between  certain  termini.'** 

§  23.  Reinsurance. — A  feature  of  insurance  business  which  has 
developed  into  great  magnitude  is  the  practice  of  reinsurance. 
Where  a  compan}'^  finds  itself  in  embarrassed  circumstances,  or  for 
any  reason  desires  to  limit  its  liability,  in  certain  classes  of  risks,  or 
in  certain  localities,  or  under  a  particular  policy,  it  secures,  if  possi- 
ble, reinsurance  from  one  or  more  other  companies.  The  entire 
business  of  an  insurance  company  is  not  infrequently  absorbed  in 
this  way  by  some  stronger  competitor.  The  owner  of  an  important 
risk,  for  example,  a  warehouseman  or  common  carrier,  often  prefers 
to  deal  exclusively  with  one  insurance  company  of  high  standing 
rather  than  with  many  companies.  This  course  of  procedure  greatly 
simplifies  for  a  railway  company  the  serious  business  of  adjusting 
numerous  losses.  Accordingly  one  policy  is  obtained  by  the  assured 
from  the  company  of  his  choice  to  the  full  amount  required,  some- 
times millions  of  dollars.  But  ever}'  prudent  insurance  company 
must  limit  its  liability  upon  any  one  risk.^  The  company  issuing 
the  original  policy,  called   the  straight  or  direct  insurance,  must 

liV.  Y.  Life   Ins.    Co.  v.  Miller,   22  K.   B.   665   (goods);  Jacob  v.   Gaviller 

Ky.  L.  Rep.  230,  56  S.  W.  97.5;  Cohmi-  (1902),    7   Com.    Cas.    116    (prizo   fox 

bia  Bank  v.  Equitable  L.  Assn.  Soc,  79  terrier  from  London  to  Bombay  thence 

App.  Div.  (N.  Y.)  601,  SO  N.  Y.  Supp.  by  rail  to  Lahore);  Hyderabad  D.  Co.  v. 

428;   Ellison  v.  Straic,   119  Wis.   502,  Willoughby  (1899),  2  Q.   B.  5.30  (gold 

97  N.  W.  168.  from  mines  in  India  to  London);   Yuill 

2  Everson  v.  Eq.  Life  Assnr.  Co.,  68  v.   Rohson   (1907)    1    K.   B.   695.     The 

Fed.  258.    Many  life  companies  also  in  policy  is  also  often  made  applicable  to 

return  for  a  present  lump  amount  will  inland  marine  insurance,  lake,  riyer,  or 

guarantee  a  stated  annuity  running  for  canal,  Quebec  Nav.   Ins.  Co.  v.  Bank, 

the    life    of    the    annuitant,    or    other  (1870),  L.  R.  3  P.  C.  234;  Shclbourne  v. 

period,  payable  annually  or  at  stated  Ins.  Co.  (1898),  8  Asp.  Mar.  Cas.  445. 
mtervals.  *  Limits     are    also     jjrescribed    by 

■^  Schloss    Bros.  v.  Stevens  (1906),  2  statute. 


INTRODUCTORY  25 

therefore  assume  the  burden  of  dividing  up  the  excess  of  liabiUty, 
if  hirge,  among  many  other  companies,  and  this  it  does  by  taking  out 
from  them  in  its  turn  many  policies  of  reinsurance,  each  for  some 
share  of  this  HabiHty.^ 

1  For  form  of  reinsurance  rider  see  Appendix  of  Forms. 


CHAPTER  II 

General  Principles  of  Insurance  Law 

Nature  and  Characteristics  of  the  Contract 

§  24.  Indemnity  the  Object — Pure  Wagers  Void. — From  a  con- 
sideration of  the  peculiar  nature  and  varied  application  of  insurance, 
as  described  in  the  foregoing  introductory  chapter,  we  come  in  this 
and  the  following  chapters  of  Part  First  to  the  important  study  of 
certain  general  principles  of  insurance  law,  thorough  familiarity 
with  which  is  essential  to  a  fair  comprehension  of  the  meaning  and 
legal  effect  of  numerous  clauses  and  conditions,  contained  in  policies 
and  set  forth  in  Part  Second  of  this  treatise.  While  all  of  these 
general  principles  serve  as  a  guide  to  a  sound  interpretation  of  the 
purport  of  insurance  contracts  in  their  diversified  forms,  some  of 
them  peremptorily  govern  the  rights  of  the  parties,  regardless  of 
policy  stipulations,  as,  for  example,  the  rule  requiring  an  insurable 
interest  to  support  the  contract,  and  the  rule  excluding  a  foreign 
enemy  from  the  list  of  parties  insurable;  others  form  a  supplement 
to  the  written  contract,  as  effective  as  though  expressed  in  the 
policy  itself,  as,  for  example,  the  implied  warranties  respecting 
seaworthiness,  deviation  and  the  legality  of  the  adventure,  an- 
nexed by  inference  of  law  to  the  contract  of  marine  insurance. 

At  the  very  outset  it  must  be  noted  that  insurance  is  essentially 
a  contract  of  indemnity,^  and  that  from  this  cardinal  principle  arise 

1  By  this  proposition  is  meant  that  insurance  ...  as  applied  to  injuries 
the  object  sought  to  be  accomplished  resulting  in  death,  is  really  but  a  con- 
by  the  contract  of  insurance  must  be  tract  of  life  insurance  limited  to 
protection  against  a  real  loss  to  an  specified  risks;  ...  it  must  contain 
insured  interest,  not  that  the  measure  the  essential  element  of  indemnity  for 
of  indenmity  allowed  must  be  exactly  loss,"  etc..  State  v.  Federal  Investment 
commensurate  with  the  loss.  Thus  Co.,  48  Minn.  110,  111,  by  Mitchell,  J. 
the  English  court  in  a  leading  case  de-  In  a  learned  and  thoughtful  opinion  a 
clares  that  the  doctrine  of  indemnity  New  York  judge  concludes  that  "a  life 
"is  really  the  basis  and  foundation  of  insurance  is  made  under  our  statute 
all  insurance  law,"  CasteUain  v.  Pres-  for  the  indemnity  of  the  assured. 
ton,  11  Q.  B.  D.  3S0,  407,  by  Bowen,  J.  That  is  the  purpose  and  object  which 
And  the  Minnesota  court  says,  "The  makes  it  a  lawful  contract,"  Miller  v. 
very  essence  of  any  definition  of  in-  Eagle  Life  &  H.  Co.,  2  E.  D.  Smith 
surance  is  indemnity  for  loss  in  respect  (N.  Y.),  268,  295,  by  Woodruff,  J. 
of  a  specified   subject.  .  .  .  Casualty  See  also  definition  in  Phillips,  Ins.,  §  1. 

[27] 


28 


GENERAL    PHINCIPLKS    OF   INSUKANCE    LAW 


many  of  its  distinctive  characteristics,  such  as  the  rule  requiring  an 
insurable  interest,  the  doctrine  of  double  insurance  contribution, 
and  the  right  of  subrogation  accruing  on  settlement  of  a  loss.*  Al- 
tliough  the  agreement  is  aleatory  or  speculative  in  one  sense,  that  is, 


But  if  regard  is  had  not  to  the  general 
nature  and  predominant  purpose  of 
the  contract,  but  to  the  measure  of 
recovery  actually  permitted  under 
technical  rules  of  law,  some  of  them 
while  convenient  more  or  less  arbitrary, 
some  favorable  to  the  assured,  some  to 
the  underwriters,  we  may  easily  con- 
clude that  rarely  is  a  marine  policy  a 
strict  contract  of  indenmity,  and  a  life 
policy  never.  Indeed  human  life  is 
incapable  of  money  valuation;  there- 
fore, in  most  instances,  the  life  insur- 
ance company  is  held  to  the  amount 
which  it  has  agreed  to  pay,  regardless 
of  the  actual  value  of  the  life  insured, 
or  of  the  amount  of  other  insurance. 
Moreover,  premium  rates  are  estimated 
upon  the  hypothesis  that  upon  the 
death  of  the  insured  or  other  event 
named  the  life  company  will  pay  the 
full  amount  specified  in  its  policy,  and 
therefore  the  rule  of  law  is  now  settled 
that  if  the  life  policy  is  valid  when 
issued,  the  assured,  as  for  instance  a 
creditor  of  the  life  insured,  may  lose  all 
insurable  interest,  through  payment  of 
the  debt,  without  invalidating  his 
policy.  See  §  46.  These  considera- 
tions' have  induced  some  of  the  judges 
to  declare  that  life  insurance  is  not  to 
be  classified  as  a  contract  of  indemnity, 
Dalby  v.  7ns.  Co.,  15  C.  B.  365  (creditor 
insurance  in  question,  "in  no  way 
resembles  a  contract  of  indemnity"); 
Emerick  v.  Coakley,  35  Md.  188  ("in 
no  way  resembles  a  contract  of  in- 
demnity"); Mtd.  L.  Ins.  Co.  v.  Allen, 
138  Mass.  24  ("not  a  contract  for 
indemnity  for  actual  loss");  Scott  v. 
Dickson,  108  Pa.  St.  6  ("not  a  con- 
tract of  indemnity").  But  in  these 
and  similar  instances  the  courts  ap- 
parently were  passing  not  so  much 
upon  the  general  nature  of  the  con- 
tract as  upon  a  narrower  question, 
to  wit,  the  relation  in  the  particular 
instance  between  the  measure  of  re- 
covery allowed  and  the  extent  of  in- 
surable interest  existing  at  the  time  of 
loss.  In  regard  to  this  attempted 
exclusion  of  life  insurance  from  the 
general  rule,  a  recent  author  says, 
"Though  the  courts  have  seized  upon 
this  interpretation  of  the  contract  as  a 


principle  to  conjure  with,  they  have 
applied  it  to  uphold  such  contradictory 
decisions  that  it  is  doubtful  if  there  is 
any  real  ground  for  the  distinction 
attempted  to  be  made  between  life  and 
other  forms  of  insurance  in  this  re- 
spect." Cooley  Ins.  (1905),  p.  90. 
And  May  says:  "A  distinction  has 
sometimes  been  taken  between  marine 
and  other  insurances,  and  life  insur- 
ance, on  the  ground  that  while  the 
former  have  for  their  object  to  in- 
demnify for  loss,  the  latter  is  an  abso- 
lute engagement  to  pay  a  fixed  sum  on 
the  happening  of  a  certain  event, 
without  reference  to  any  damage  in 
fact  suffered  by  the  insured  in  conse- 
quence. But  this  distinction  is  super- 
ficial, and  rests  rather  upon  the  mode 
of  applying  the  principles  and  of  de- 
termining the  amount  of  indemnity, 
than  upon  any  difference  in  the  princi- 
ples themselves."  May,  Ins.,  §  7.  By 
the  California  Civil  Code,  §§2527 
2766,  life  insurance  is  a  contract  of  in- 
demnity. So  of  civil  codes  generally. 
Some  civil  codes  go  so  far  as  to  provide 
that,  "the  sole  object  of  insurance  is 
the  indemnity  of  the  insured,  and  if  he 
has  no  insurable  interest  the  contract 
is  void,"  Cal.  Civil  Code,  §  2551;  Mon- 
tana Civil  Code  (1895),  §3405;  No. 
Dak.  Civil  Code  (1905),  §5904;  So 
Dak.  Civil  Code  (1903),  §  1807. 

1  This  doctrine,  however,  does  not 
require  that  the  insured  should  recover 
more  than  the  face  of  his  insurance 
when  his  loss  exceeds  that  amount. 
"Indemnity  is  the  prime  object  of  in- 
surance," Deming  v.  Merchant's  Cot- 
ton Press,  etc.,  Co.,  90 Tenn.  306,  347, 17 
S.  W.  89,  13  L.  R.  A.  518;  Carpenter  v. 
Prov.  Wash.  Ins.  Co.,  16  Pet.  495,  10 
L.  Ed.  1044;  Eaqer  v.  Atlas  Ins.  Co., 
14  Pick.  (Mass.)  141,  146,  25  Am.  Dec. 
363;  Cummings  v.  7ns.  Co.,  55  N.  H. 
458;  Castellain  v.  Preston,  11  Q.  B. 
Div.  380.  The  contracts  of  fire  and 
marine  insurance  are  much  more  rigidly 
governed  by  the  doctrme  of  indemnity 
than  is  the  contract  of  life  insurance, 
Holmes  v.  Oilman,  138  N.  Y.  369,  381, 
34  N.  E.  205,  20  L.  R.  A.  566,  34  Am. 
St.  R.  463;  Crosswell  v.  Conn.  Indem. 
Assn.,  51  S.  C.  112,  28  S.  E.  200. 


INDEMNITY    THE    OBJECT — PURE    WAGERS    VOID 


29 


the  parties  may  not  know  whether  the  event  insured  against  will 
occur  or  not,^  and  in  return  for  a  comparatively  small  sum  of  money 
the  one  party  assumes  the  risk  of  incurring  liability  to  a  much  greater 
amount,  nevertheless,  compensation  for  a  real  loss,  rather  than  a 
purely  speculative  venture,  must  be  the  aim  and  object,  and  con- 
sequently the  party  insured  must  be  able  to  show  an  insurable 
interest  in  the  subject  of  insurance,  an  interest  of  a  material  and 
valuable  character,  and  not  merely  moral  and  sentimental,  or  else 
the  contract  will  be  altogether  void.  The  doctrines  of  indemnity 
and  of  the  necessity  of  an  insurable  interest  are  correlative  and 
complementary  in  all  branches  of  the  law  of  insurance.^ 

It  must  be  observed,  however,  that  in  life  insurance  ^  a  sufficient 
insurable  interest  and  f(  r  a  policy  to  any  amount  is,  under  ordinary 
circumstances,  presumec  from  certain  near  relationships.  Thus,  for 
this  purpose  the  law  tal.es  it  for  granted  that  the  life  of  a  husband 
is  valuable  to  his  wife  i.nd  the  life  of  the  wife  to  the  husband;  the 


1  This  proposition  is  true  ( ven  as  ap- 
plied to  life  insurance  policies  if  we 
regard  premature  death  as  the  peril 
insured  against. 

^Imperial  Fire  Ins.  Co.  v  Coos  Co., 
151  U.  S.  452,  462,  14  S.  Ct.  379,  38  L. 
Ed.  231,  "contracts  of  insurance  are 
contracts  of  indemnity;"  Central  Na- 
tional Bank  v.  Hume,  128  U.  S.  195, 
205,  9  S.  Ct.  41,  32  L.  Ed.  370,  "life 
insurance  is  also  a  contract  of  in- 
demnity," court  by  Fuller,  C.  J.;  Life 
his.  Co.  V.  O'Neill,  106  Fed.  800,  803. 
45  C.  C.  A.  641,  54  L.  R.  A.  225,  ;'the 
tendency  of  the  recent  decisions  is  to 
insist  upon  an  actual  or  presumed 
pecuniary  interest  in  every  case,  al- 
though such  interest  may  no  doubt 
be  contingent  and  to  some  extent  un- 
defined;" Helmetag's  Admr.  v.  Miller, 
76  Ala.  183,  187,  52  Am.  Rep.  316,  by 
weight  of  authority  the  "interest  must 
be,  in  some  sense,  pecuniary;"  Lewis  v. 
Phcenix  Mid.  Life  Ins.  Co.,  39  Conn. 
100,  104,  "interest  must  be  required  of 
a  pecuniary  nature;"  Burton  v.  Conn. 
Mut.  Life  Ins.  Co.,  119  Ind.  207,  211, 
21  N.  E.  746,  12  Am.  St.  R.  405,  ex- 
pected benefit  must  be  pecuniary  and 
not  sentimental;  Continental  Life  Ins. 
Co.  V.  Volger,  89  Ind.  572,  575,  46  Am. 
Rep.  185,  "the  insurable  interest  must 
be  a  pecuniary  interest;"  Guardian  M. 
L.  Ins.  Co.  V.  Hogan,  80  111.  35,  45,  22 
Am.  Rep.  ISO,  there  must  be  "reason- 
able expectation  of  some  pecuniary 
advantage ' '  and  reconciling  Ins.  Co.  v. 


Bailey,  13  Wall.  619,  supposed  by  some 
to  be  authority  for  a  different  view; 
Society  v.  Dyon,  79  111.  App.  100; 
Adams  v.  Reed  (Ky.),  36  S.  W.  568, 
life  insurance  is  a  contract  of  indem- 
nitv;  Rov)hach  v.  In^.  Co.,  35  La.  Ann. 
233,  234,  48  Am.  Rep.  239,  "the  in- 
surable interest  in  the  life  of  another 
is  a  pecuniary  interest;"  Mutual  Life 
Ins.  Co.  V.  Allen,  138  Mass.  24.  27,  52 
Am.  Rep.  245,  "it  is  necessary  that  the 
insured  should  have  some  pecuniary 
interest  in  the  continuance  of  the  life 
insured;"  Morell  v.  Ins.  Co.,  64  Mass. 
282,  57  Am.  Dec.  92,  note  by  Judge 
Field,  annotator,  showing  that  a  pe- 
cuniary interest  is  really  the  te.st;  Wfiit- 
viore  V.  Supreme  Lodge,  100  Mo.  36,  46, 
13  S.  W.  495,  "the  person  who  secures 
such  policy  must  have  a  pecuniary  in- 
terest;" Currier  v.  Continental  Life 
Ins.  Co.,  57  Vt.  496,  52  Am.  Rep.  134, 
pecuniary  interest  necessary.  The 
word  "interest"  in  the  English  stat- 
ute is  construed  to  mean  "pecuniary 
interest,"  Halford  v.  Kymer,  10  Barn. 
&  C.  724,  728;  Charter  Oak  Life  Ins.  Co. 
V.  Brant,  47  Mo.  419,  4  Am.  Rep.  328; 
Exchange  Bank  v.  Loh,  104  Ga.  446,  31 
S.  E.  459,  44  L.  R.  A.  372  (life  insur- 
ance for  a  creditor  a  contract  of  in- 
demnity); Healey  V.  Mut.  Ace.  Assn., 
133  111.  556,  25  N.  E.  52,  9  L.  R.  A.  371, 
23  Am.  St.  R.  637  (accident  insurance 
a  contract  of  indemnity). 
3  §  34. 


30  GENERAL   PRINCIPLES   OF  INSURANCE   LAW 

life  of  a  father  to  his  minor  child  and  the  life  of  the  minor  child  to 
the  father.^  Pecuniary  dependence,  personal  service,  natural  affec- 
tion, one  or  all,  may  be  elements  of  this  value.  It  is  immaterial  in 
certain  jurisdictions  whether  all  are  present  or  whether  all  are  absent. 
The  fact  that  all  are  usually  present  is  deemed  justification  for  a 
convenient  general  rule.^ 

It  must  further  be  observed,  most  notably  in  life  insurance,^  but 
also  in  other  classes  of  insurance  as,  for  example,  accident,  and  use 
and  occupancy,  that  the  interest  of  the  insured  in  the  subject  in- 
sured may  be  incapable  of  exact  pecuniary  measurement,  but  none 
the  less  is  essential  as  a  prerequisite  to  the  validity  of  the  contract. 

Consonant  with  the  general  doctrine  of  indemnity,  it  follows  that 
the  sum  named  in  the  fire  or  marine  policy  is  not  the  measure  but 
the  extreme  limit  of  recovery.'*  No  matter  how  large  the  amount 
of  insurance,  the  recovery  is  restricted  to  the  loss  actually  sustained. 

The  principle  that  the  contract  of  insurance  is  one  of  indemnity 
is  subject  to  modifications  which  will  presently  be  noticed.^  Such 
modifications  have  been  engrafted  upon  the  general  rule  largely  out 
of  regard  to  convenience.  Thus,  the  parties  are  permitted  to  agree 
in  advance  upon  the  value  ^  of  the  subject  of  insurance  by  means  of 
a  valued  policy,  which  in  case  of  total  loss  is  then,  in  the  absence  of 
fraud  or  intent  to  evade  the  law,  conclusive  evidence  of  the  proper 

1  Holmes  v.  Oilman,  138  N.  Y.  369,  husbands  and  some  children  for  their 
381,  34  N.  E.  205,  20  L.  R.  A.  566,  34  fathers.  An  element  of  service  or  de- 
Am.  St.  R.  463;  Geoff roy  v.  Gilbert,  5  pendente  or  other  pecuniary  value  is 
App.  Div.  98,  100,  aff'd  154  N.  Y.  741.  generally  to  be  found  in  the  case  of  the 

2  Life  Ins.  Clearing  Co.  v.  O'Neill,  closest  relationships,  while  love  refuses 
106  Fed.  800,  45  C.  C.  A.  641,  54  L.  R.  to  conform  to  legal  presumptions  and 
A.  225;  Warnock  v.  Davis,  104  U.  S.  at  best  is  an  uncertain  and  variable 
755,  26  L.  Ed.  924,  parent  in  child  or  factor.  It  may  also  be  remarked  that 
child  in  parent;  Conn.  Mut.  Ins.  Co.  v.  where  the  rule  of  insurable  interest  as 
Schaefer,  94  U.  S.  457,  24  L.  Ed.  251.  between  those  thus  closely  aUied  by 
But  see  Currier  v.  7ns.  Co.,  57  Vt.  496,  mai-riage  or  blood  is  established,  the 
52  Am.  Rep.  134,  as  to  invalid,  help-  discussion  of  reasons  for  it  is  largely 
less  \^-ife;  People's  Mut.  Ben.  Soc.  v.  academic. 

Templeton,  16  Ind.  App.  126,  44  N.  E.  ^  Nye  v.  Grand  Lodge,  9  Ind.  App. 
809;  Mitchell  v.  Ins.  Co.,  45  Me.  104,  131,  36  N.  E.  429. 
71  Am.  Dec.  529.     Some  authorities  in  ^  Exceptions  will  be  recognized  here- 
seeking  to  explain  the  basis  for  the  after. 

existence  of  an  insurable  interest  as  »  That  even  the  fire  contract  is  not 

between     husbands    and     wives     and  always  construed  as  one  of  strict  in- 

parents  and  children  have  been  dis-  demnity   see,    for    example,    Foley   v. 

posed   to   discard   the    theory  of   the  Farragut  F.  Ins.  Co.,  152  N.  Y.  131, 

pecuniarv  value  of  the  life  insured  to  46  N.  E.  318:  Michael  v.  Prussian  Nat. 

the  beneficiary  and  have  laid  all  the  Ins.  Co.,  171N.  Y.  25,  63  N.  E.  810. 

stress  upon  the  ties  of  natural  affection.  ^  Michael  v.  Prussian  N^at.  Ins.  Co. , 

Nothing  seems  to  be  gained  by  such  a  171  N.  Y.  25,  63  N.  E.  810;  Living  v. 

narrow  course  of  reasoning.     Many  a  Manning,  6  C.  B.  391,  1  H.  L.  Cas.  287, 

friend  has  more  love  for  a  friend  and  307  (like  liquidated  damages),  cited  with 

many  an  uncle  has  more  love  for  his  approval  in  Aitchison  v.  Lohre,  L.  R.  4 

niece  than  some  wives  have  for  their  App.  Cas.  755,  761. 


INDEMNITY   THE   OBJECT — PURE   WAGERS  VOID 


3] 


basis  of  adjustment,  although  in  fact  the  estimated  and  specified 
value  may  be  erroneous  at  the  time  when  it  was  made  and  far  from 
accurate  at  the  time  of  the  loss.^ 

And  so  also  akin  to  a  valued  policy  on  property  is  the  regular  life 
insurance  policy,  which  is  also  classified  as  a  valued  policy,  but  in 
which,  however,  the  amount  specified  as  payable  on  the  death  of 
the  insured  or  other  event  is  not  construed  to  be  a  controlling  esti- 
mate of  the  whole  value  of  the  subject,  towards  the  payment  of 
which  any  other  subsisting  insurance  must  contribute,  but  simply  a 
measure  of  the  engagement  of  the  particular  insurer.^ 


1  Snowden  v.  Guion.  101  N.  Y.  458, 
5  N.  E.  322;  Steamship  Balmoral  Co. 
(1902),  A.  C.  511;  Woodside  v.  Globe 
Mar.  Ins.  Co.  (1896),  1  Q.  B.  D.  105; 
The  Main  (1894),  Prob.  320.  Valued 
policy  conclusive  imless  fraudulent, 
Patapsco  Ins.  Co.  v.  Biscoe,  7  Gill.  &  J. 
293,  28  Am.  Dec.  219;  Sturm  v.  Atlantic 
Mvt.  Ins.  Co.,  63  N.  Y.  77;  Voisin  v. 
Commercial  M.  L.  Ins.  Co.,  62  Hun 
(N.  Y.),  10,  11;  Voisin  v.  Prov.  Wash. 
Ins.  Co.,  51  App.  Div.  553,  65  N.  Y. 
Supp.  333.  The  amount  written  in 
the  policy  is  also  conclusive  where 
the  statute  so  provides,  Home  Fire 
Ins.  Co.  v.  Bean.  42  Neb.  537,  60  N.  W. 
907,  47  Am.  St.  R.  711;  Reillif  v.  Frank- 
lin his.  Co.,  43  Wis.  449,  28  Am.  Rep. 
552.  In  the  United  States  in  order  to 
recover  upon  a  valued  policy  on  profits 
it  is  not  necessary  to  prove  tha'  there 
would  liave  been  profits,  Canada  Sugar 
Ref.  Co.  V.  Ins.  Co.,  175  U.  S.  609,  621, 
20  S.  Ct.  239;  Patapsco  v.  Coxdtcr,  6  .':'st.. 
222,  7  L.  Ed.  659.  Compare  Eyre  v. 
Glover,  3  Camp.  276,  1;;  Ecst,  218; 
Hodgson  v.  Glover,  G  East,  31G  (giving 
English  rule  to  the  contrary).  These 
infringements  upon  the  strict  theory  of 
indemnity,  however,  are  of  practical 
convenience,  for  often  the  casualty 
which  destroys  the  insured  prop- 
erty destroys  with  it  the  best  evi- 
dence of  its  A-alue,  and  the  estimate 
of  the  adjuster  often  differs  widely 
from  that  of  the  insured.  Accord- 
ingly, some  of  the  states  have  passed 
valued  policy  laws  applicable  to 
realty,  which  provide  that  in  the  ab- 
sence of  fraud  the  value  of  the  build- 
ing written  in  the  policy  shall  be  taken 
to  be  its  true  value  and  the  amount  of 
loss  where  the  building  is  wholly  de- 
stroyed. These  laws  are  not  to  be 
commend(^d,  because  they  impose  too 
arbitrarj'^    a    standard    of    value    and 


encourage  fraudulent  overvaluation 
and  arson,  although  it  is  said  that  they 
are  not  intended  to  disturb  the  general 
doctrine  of  indemnity,  Ampleman  v. 
Citizens'  Ins.  Co.,  35  Mo.  App.  308. 
Some  courts  say  that  if  the  companies 
exercise  care  which  it  is  for  the  public 
interest  they  should  use  in  making  the 
valuation  there  will  be  no  danger  of 
overinsurance,  Reilly  v.  Franklin  Ins. 
Co.,  43  Wis.  449,  458,  28  Am.  Rep.  552. 
The  difficulty  with  this  view  is  that  in 
the  case  of  most  risks  of  small  amount 
the  premium  does  not  warrant  the  ex- 
pense of  survey  or  examination.  The 
local  agent,  especially  in  the  country,  is 
apt  to  write  the  value  given  and  is 
often  quite  as  friendly  towards  his 
neighbor,  the  insured,  as  towards  the 
insurance  company,  his  principal.  A 
valued  polic  •  law  is  not  unconstitu- 
tional as  impairing  right  of  contract,  or 
depriving  of  life,  liberty,  or  property 
A\ithout  due  process  of  law,  etc.  J^tna 
Ins.  Co.  V.  Brigham  120  Ga.  925,  48 
S.  E.  348;  Orient  Ins.  Co.  v.  Daggs,  172 
U.  S.  557,  19  S.  Ct.  281.  In  the  last 
case  the  Federal  Supreme  Court  con- 
cluded that  a  valued  policy  law  was  not 
contrary  to  public  policy.  See  also 
Dagger  v.  Insurance  Co.,  95  Tenn.  245, 
32  S.  W.  5,  28  L.  R.  A.  796  (three- 
fourths  clause  of  the  policy  held  super- 
seded by  the  statute) .  Another  modi- 
fication of  the  doctrine  of  strict 
indemnity  is  the  arbitrary  rule  of  one- 
third  off  for  repairs,  new  for  old,  in 
marine  risks,  Aitchison  v.  Lohre,  L.  R. 
4  App.  Cas.  755. 

2  Bevin  v.  Conn.  Mid.  L.  Ins.  Co.,  23 
Conn.  244;  Chisholm  v.  Nat.  Cap.  Ins. 
Co.,  52  Mo.  213,  215,  14  Am.  Rep.  414; 
Trenton  Mut.  L.,  etc.,  Co.  v.  Johnson, 
24  N.  J.  L.  576,  581;  Miller  v.  Eagle  L. 
it-  H.  Co.,  2  E.  D.  Smith  (N.  Y.),  268, 
295. 


32 


GENERAL   PRINCIPLES   OF   INSURANCE   LAW 


The  rule  requiring  an  insurable  interest  to  give  support  to  the 
contract  exists  in  this  country  irrespective  of  statutory  provisions/ 
and  everywhere  is  grounded  upon  important  considerations  of  public 
policy. 2  Without  it  the  contract  would  be  a  wager,  and  a  wager 
policy  is  more  to  be  condemned  than  an  ordinary  wager,  since  it  is 
not  only  at  variance  with  sound  business  ethics,  but  it  also  offers 
peculiar  inducements  to  the  assured  to  bring  about  fraudulently  the 
event  insured  against.^ 


§  25.  Insurable  Interest — Fire. — The  question,  what  constitutes 
an  insurable  interest,  though  important,  is  not  of  as  much  practical 
consequence  as  the  amount  of  case  law  relating  to  it  would  indicate. 
As  before  shown,  the  contract  of  insurance  is  in  general  construed 
to  be  a  contract  of  indemnity,  therefore,  in  case  of  losses  to  property, 
recovery  must  usually  be  limited  to  damage  actually  sustained. 
Persons  who  have  no  real  pecuniary  interest  in  property  to  protect 
seldom  go  to  the  fruitless  expense  of  taking  insurance  upon  it. 

It  may  be  stated  generally,  that  any  legal  or  equitable  estate,  or 
any  right  which  may  be  prejudicially  affected,  or  any  liability  which 
may  be  brought  into  operation,  by  a  fire,,  will  confer  an  insurable 


1  Rombach  v.  7ns.  Co.,  35  La.  Ann. 
233,  48  Am.  Rep.  239;  Lord  v.  Ball,  12 
Mass.  115,  7  Am.  Dec.  38;  Rittler  v. 
Smith,  70  Md.  261,  16  Atl.  890,  2 
L.  R.  A.  844;  Singleton  v.  St.  Louis 
Mut.  Ins.  Co.,  66  Mo.  63,  27  Am.  Rep. 
321;  Ruse  v.  Mid.  Ben.  L.  Ins.  Co.,  23 
N.  Y.  516.  Contra  as  to  life  insurance 
in  some  states,  Vivar  v.  Supreme 
Lodge,  52  N.  J.  L.  455, 20  Atl.  36.  (But 
see  Meyers  v.  Schumann,  54  N.  J.  Eq. 
414,  417,  34  Atl.  1066);  Hurd  v.  Doty, 
86  Wis.  1,  56  N.  W.  371,  21  L.  R.  A. 
746.  And  see  Abbott  v.  Sebor,  3  Johns. 
Cas.  (N.  Y.)  39,  2  Am.  Dec.  139  (marine) 
and  Juhel  v.  Church,  2  Johns.  Cas.  333. 
New  Jersey  statute  against  wagers  is 
not  applied  to  insurance,  Flagg  v. 
Baldwin,  38  N.  J.  Eq.  219,  48  Am. 
Rep.  308. 

2  Trinity  College  v.  Travelers'  bis. 
Co.,  113  N.  C.  244,  18  S.  E.  175,  22 
L.  R.  A.  291. 

3  The  policy  of  the  law  is  to  preserve 
life,  health,  and  property  and  not  to 
encourage  iheir  impairment  or  de- 
struction, Ruse  V.  Mut.  Ben.  Life  Ins. 
Co.,  23  N.  Y.  516;  and  see  §  34.  Wager 
contracts  of  insurance,  Fuller  v.  Met- 
ropolitan L.  Ins.  Co.,  70  Conn.  647,  675, 
41  Atl.  4;  Gambs  v.  Covenant  M  ut.  L. 
Ins.  Co.,  50  Mo.  44,  47;  Guardian  M.  L. 


Ins.  Co.  V.  Hogan,  80  111.  35,  44,  22  Am. 
Rep.  150.  See  also  Conn.  Mut.  L.  Ins. 
Co.  V.  Schaefer,  94  U.  S.  457,  460,  were 
at  one  time  tolerated  in  England,  Conn. 
Mut.  Life  Ins.  Co.  v.  Schaefer,  94  U.  S. 
457, 460,  24  L.  Ed.  251 ,  but  subsequent- 
ly were  forbidden  by  two  statutes,  ap- 
plicable to  marine  and  life  policies  re- 
spectively. 19  Geo.  II,  c.  37;  14  Geo. 
Ill,  c.  48.  Although  the  Stat.  14  Geo. 
Ill,  has  never  been  part  of  the  common 
law  of  Vermont  its  rule  has  generally 
been  followed  in  this  country  as  declar- 
atory of  the  common  law,  Cronin  v. 
Vermont  L.  Ins.  Co.,  20  R.  I.  570,  40 
Atl.  497.  The  preamble  of  tlie  earlier 
statute  is  as  follows:  "Whereas  it  hath 
been  found  by  experience  that  the  mak- 
ing of  assurances,  interest  or  no  in- 
terest, or  without  further  proof  of  in- 
terest than  the  policy,  hath  been  pro- 
ductive of  many  pernicious  practices 
whereby  great  numbers  of  ships  with 
their  cargoes  have  either  been  fraudu- 
lently lost  and  destroyed  or  taken  by 
the  enemy  in  time  of  war,  and  such 
assurances  have  encouraged  the  ex- 
portation of  wool  and  the  carrying  on 
of  many  other  prohibited  and  clan- 
destine trades."  etc.  In  most  of  the 
states  of  the  Union  there  are  statutes 
against  ivagering  contracts. 


INSURABLE    INTEREST — FIRE 


33 


interest.^  Nor  is  an  insurable  interest  disturbed  by  reason  of  the 
fact  that  sources  of  indemnification  are  available  to  the  insured 
independent  of  his  policy.^  A  defeasible  interest  is  insurable,^  as 
also  is  a  contingent,^  or  inchoate,^  or  partial  interest.^  On  the 
other  hand,  it  has  often  been  declared  that  a  mere  expectancy  in 
property,  for  example,  in  favor  of  an  heir  apparent,  during  the  clos- 
ing days  of  the  life  of  the  ancestor,  even  though  the  ancestor  be 
intestate  and  a  lunatic,  will  afford  no  basis  for  an  insurable  interest 
in  the  ancestor's  property^  But  it  is  not  easy  to  reconcile  some 
of  the  modern  decisions  with  such  a  restriction.* 

While  certain  general  principles  relating  to  this  subject  are  clear, 
numerous    border-line    decisions    demand    attention.     Thus,    in    a 


1  Bunyon,  Ins.  (5th  ed.),  p.  42.  The 
EngHsh  court  says:  "To  be  interested 
in  the  preservation  of  a  tiling  is  to  be 
so  circumstanced  with  respect  to  it  as 
to  have  benefit  from  its  existence, 
prejudice  from  its  destruction."  Lu- 
cena  v.  Craufurd,  3  B.  &  P.  7.5.  Simi- 
larly the  N.  Y.  court  says:  "The  rule 
is  well  settled  that  it  is  not  necessary 
to  support  an  insurance  that  the  in- 
sured should  have  an  interest,  legal  or 
equitable,  in  the  property  destroyed. 
It  is  enougii  if  he  is  so  situated  with 
reference  to  it  that  he  would  be  liable 
to  loss  if  it  be  destroyed  or  injured  by 
the  peril  insured  against.  The  test  of 
insurable  interest  is  whether  an  injury 
to  the  property  or  its  destruction  by 
the  peril  insured  against  would  involve 
the  insured  in  pecuniary  loss,"  Berrtf 
v.  Am.  Cent.  Ins.  Co.,  132  N.  Y.  49,  56, 
30  N.  E.  254,  28  Am.  St.  Rep.  548.  The 
Mass.  court  says:  "We  think  that 
the  tendency  of  the  modern  deci- 
sions is  to  relax  the  stringency  of 
some  of  the  earlier  cases  and  to  ad- 
mit to  the  protection  of  the  con- 
tract all  property  standing  in  such  a 
relation  to  the  person  seeking  insur- 
ance that  its  loss  would  probably 
directly  affect  his  pecuniary  condi- 
tion," Doyle  V.  American  F.  Ins.  Co., 
181  Mass.  139,  63  N.  E.  394;  Moran  v. 
Uzielli  (1905),  2  K.  B.  555,  562.  563, 
in  which  the  court  says,  "an  interest 
to  be  insurable  is  not  necessarily  a 
right,  legal  or  equitable,  in  or  charge 
upon,  or  arising  out  of  the  ownership 
of  the  thing  exposed  to  the  risks  in- 
sured against,  and  any  interest  may  be 
insured  which  is  dependent  on  the 
safety  of  the  thing  exposed  to  such 
risks,  still  it  must  in  all  cases  at  the 
time  of  the  loss  be  an  interest,  legal  or 


equitable,  and  not  merely  an  expecta- 
tion, however  probable.  .  .  .  The  defi- 
nition of  insurable  interest  has  been 
continuously  expanding." 

-  Owner  of  unused  revenue  stamps 
though  redeemable  from  the  govern- 
ment if  lost.  United  States  V.  American 
Tobacco  Co.,  166  U.  S.  468,  17  S.  Ct. 
619,  41  L.  Ed.  1081.  Mortgagee  regard- 
less of  amount  of  other  security. 
Excelsior  Fire  Ins.  Co.  v.  Royal  lis. 
Co.,  55  N.  Y.  343,  14  Am.  Rep.  271. 
Owner  of  buildings  imder  construction 
though  restorable  without  cost  to  him, 
Foley  V.  Mfrs.  &  Builders  Fire  Ins. 
Co.,  152  N.  Y.  131,  46  N.  E.  318,  43 
L.  R.  A.  664. 

3  McCutchen  v.  Ingraham,  32  W.  Va. 
378,  9  S.  E.  260;  Stirling  v.  Vaughan, 
11  East,  619,  629. 

4  Fenn  v.  New  Orleans  Mut.  Ins.  Co., 
53  Ga.  578.    For  example,  reinsurance. 

^  Hancox  v.  Fishing  Ins.  Co.,  3 
Sumn.  (C.  C.)  132.  For  example,  an- 
ticipated commissions  or  profits,  §  48; 
curtesy  initiate,  §  26;  or  expected 
future  crops,  Sawyer  v.  Dodge  Co.,  37 
Wis.  503;  Grant  v.  Parkinson,  3  Bos.  & 
P.  85,  n. 

6  Imlis  V.  Stock  (1885),  10  App.  Cas. 
263,  274.  For  example,  partner,  joint 
tenant,  or  tenant  in  common,  Page  v. 
Fry,  2  B.  &  P.  240;  Moitke  v.  Mil.  Mich. 
Ins.  Co.,  113  Mich.  166,  71  N.  W.  463. 

7  See  leading  case  of  Lucena  v. 
Craufurd,  3  B.  &  P.  75,  2  B.  &  P.  N.  S. 
269,  1  Taunt.  325;  Moran  v.  Uzielli 
(1935),  2  K.  B.  555;  Riggs  v.  Commer- 
cial Mut.  Ins.  Co.,  125  N.  Y.  7,  25  N.  E. 
1058,  10  L.  R.  A.  684,  21  Am.  St.  R. 
716. 

8  Home  Ins.  Co.  v.  Mendenhall,  164 
111.  458,  45  N.  E.  1078,  36  L.  R.  A.  374, 
and  authorities  cited. 


34  GENERAL   PHINCIPLES   OF   INSURANCE    LAW 

Pennsylvania  case,  a  turnpike  company  owning  and  operating  a 
toll  highway,  insured  a  county  bridge,  upon  the  integrity  of  which 
its  patronage  depended,  and  indeed  to  the  construction  of  which  it 
had  voluntarily  contributed.  But  unfortunately  it  took  out  the 
policy  as  though  it  were  owner  of  the  bridge.  The  court  held  that 
there  could  be  no  recovery  since  the  plaintiff  disclosed  no  insurable 
interest  as  owner  of  the  bridge.'  This  decision  has  often  been 
misunderstood.  If  the  insured  had  procured  a  valued  policy  on 
the  use  of  the  bridge  or  for  loss  of  toll  earnings,  or  had  otherwise 
correctly  described  his  interest  in  the  preservation  of  the  bridge, 
the  contract  ought  to  have  been  declared  valid,  although  the  prop- 
erty of  the  assured  was  not  immediately  exposed  to  the  peril.^ 
This  conclusion  finds  analogy  in  a  South  Carolina  case  in  which  an 
insured  superintendent,  having  in  charge  a  stock  of  goods  belonging 
to  another  person,  had  contracted  for  a  salary  for  a  term  of 
years.  The  court  was  of  opinion  that  his  pecuniary  interest  in  the 
preservation  of  the  goods  furnished  sufficient  evidence  of  an  in- 
surable interest  in  them.'"'  So  also  a  stockholder  has  an  insurable 
interest,  though  no  title,  in  the  corporate  property,  since  its  preser- 
vation is  of  pecuniary  interest  to  him.^ 

§  26.  Same   Subject — Legal    Title. — That    legal    title    affords    a 
valid  insurable  interest  in  property  is  indisputable.^ 

1  Farmers'   Mut.    Ins.    Co.    v.    New  instance,   in   case  of  a  railroad   in  a 

Holland  Turnpike  Co.,  122  Pa.  St.  37,  distant  colony  where  the  engine  could 

15  Atl.  .563;  and  see  144  Pa.  St.  543.  not    be    replaced    for    a    considerable 
^  Cohn  V.  Virginia  F.  &  M.  Ins.  Co.,  period.       See   authorities   cited,    §25, 

3  Hughes,  272;  Fed.  Cas.  No.  2,970;  note  \,  ante,  p.  33. 

Graham  v.  Fire  his.  Co.,  48  S.  C.  195,  *  I^if/gs  v.  Commercial  Mut.  Ins.  Co., 

26  S.  E.  323,  .59  Am.  St.  R.  707.    The  125  N.  Y.  7,  25  S.  E.  10.58,  10  L.  R.  A. 

United  States  Supreme  Court  says:  "It  684;   Warren  v.   Davenport    Fire   Ins. 

is  well  settled  that  any  person  has  an  Co.,    31    la.    464,    7    Am.    Rep.    160. 

insurable  interest  in  property,  by  the  Contra,  dictum,  Phillips  v.  Knox,  etc., 

existence  of  which  he  will  gain  an  ad-  7ns.  Co.,  20  Ohio  St.  174. 

vantage  or  by  the  destruction  of  which  s  Curtesy    or    dower    consummate, 

he  will  suffer  a  loss  whether  he  has  or  Kyte  v.  Commercial  Union  Assur.  Co., 

has  not  any  title  in,  or  hen  upon  or  144  Mass.  43,  10  N.  E.  518;  Louden  v. 

Sossession    of    the    property     itself,"  Waddle,  98  Pa.  St.  242;  or  other  life 

Harrison  v.  Fortlage,  161  U.  S.  57,  65,  tenancy,  Beekman  v.  Fulton  As.'in  ,  66 

16  S.  Ct.  488,  40  L.  Ed.  616;  .so  also  App.  Div.  72,  73  N.  Y.  Supp.  110. 
Luceim  v.  Craujurd,  2  Bos.  &  P.  N.  R.  Tenants  for  years,  Phila.  Tool  Co.  v. 
269,  302,  by  Lawrence,  J.  British  Am.  Ins.  Co.,  132  Pa.  St    236 

3  Graham  v.  Fire  Ins.  Co.,  48  S.  C.  19  Atl.  77,  19  Am.  St.  Rep.  596.    Sub- 

195,  26  S.  E.  323,  59  Am.  St.  R.  707.  tenant    for   years,  Fowler  v.  Insurance 

Similarly  a  railroad  engineer,  mechanic,  Co.,  122  Mass.  191.     A  tenant  at  will, 

or  chauffeur  should  be  allowed  to  take  Schaeffer  v.  Ins.  Co.,  113  Iowa,  652,  85 

out  a  valued  policy  upon  the  use  of  N.  W.  985.     Trustees,    Howard    Fire 

another's  machine  if  it  appear  that  a  7ns.  Co.  v.  Chose.  5  Wall.  (N.  S.)  .509; 

continuance  of  his   occupation   is  de-  Stevens  \.  Melcher.  \o2  ^.Y .  Hbl,  51^. 

pendent    upon     its     preservation,    for  46  N.  E.  965.    Assignees  for  the  iaenefil 


INSURABLE   INTEREST — EQUITABLE   TITLE 


35 


§  27.  Same  Subject— Equitable  Title.— An  equitable  title  to 
property  constitutes  a  good  insurable  interest  therein.^ 

Thus,  a  vendee  in  possession,  or  conditionally  obligated  to  pay 
the  purchase  price,  has  such  an  interest  from  the  date  of  an  executory 
contract  of  purchase,^  or  from  the  receipt  of  a  bond  for  title. ^ 

In  a  New  York  case  a  bank  made  an  executory  contract  of  sale 
to  the  plaintiff,  who  took  out  insurance.  The  title  to  the  property, 
however,  was  standing  in  the  name  of  the  president  individually, 
owing  to  a  statute  which  forbade  the  holding  of  real  estate  by  the 
bank  itself.  Nevertheless,  the  bank  having  been  the  intended  bene- 
ficiary, it  was  held  that  an  insurable  interest  in  the  property  could 
be  transferred  by  it  to  the  plaintiff."* 


of  creditors,  Sibley  v.  Prescott  Ins.  Co., 
57  Mich.  14,  23  N.  W.  473.  Executors 
and  administrators,  Sheppard  v.  Pea- 
body  Ins.  Co.,  21  W.  Va.  368.  Admin- 
istrators of  insolvent  estate,  Herkimer 
V.  Rice,  27  N.  Y.  163.  Executor  in 
property  devised  for  trust  purposes, 
Savage  v.  Insurance  Co.,  52  N.  Y.  502, 
11  Am.  Rep.  741.  Tenancy  by  the 
entirety,  in  the  whole  premises,  Claw- 
son  V.  Citizens  Mid.  Ins.  Co.,  121  Mich. 
591,  80  N.  W.  573,  80  Am.  St.  Rep.  538. 
Vendors  and  grantors  under  executory 
contract  of  sale,  Continental  Ins.  Co. 
V.  Brooks,  131  Ala.  614,  30  South.  876; 
Merchants'  Ins.  Co.  v.  Nowlin  (Tex. 
Civ.  App.),  56  S.  W.  198.  Curtesy 
initiate  gives  such  an  interest,  Doyle 
V.  American  Fire  Ins.  Co.,  181  Ma.ss. 
139,  63  N.  E.  394;  Trade  Ins.  Co.  v. 
Barracliff,  45  N.  J.  L.  543,  46  Am. 
Rep.  792;  Harris  v.  York  Ins.  Co.,  50 
Pa.  St.  341.  But  see,  contra,  Traders' 
Ins.  Co.  V.  Newman,  120  Ind.  554,  22 
N.  E.  428;  Clark  v.  Dwelling  House 
Ins.  Co.,  81  Me.  373,  17  Atl.  303,  which 
also  seem  to  hold  that  dower  inchoate 
does  not  give  an  insurable  interest. 
And  see  Fhmn  v.  Flynn,  171  Mass.  312, 
50  N.  E.  650,  42  L.  R.  A.  98,  68  Am.  St. 
R.  427.  A  bankrupt  or  insolvent, 
though  estate  is  vested  in  trustee,  has 
insurable  interest,  Marks  v.  Hamilton, 
7  Exch.  323.  Mortgagor's  interest 
ceases  after  time  for  redemption  ex- 
pires, Essex  Sav.  Bank  v.  Meriden  F. 
Ins.  Co.,  57  Conn.  335,  17  Atl.  930,  4 
L.  R.  A.  759.  So  as  to  owner's  interest 
in  goods  sold  under  execution,  Cone  v. 
Niagara  F.  Ins.  Co.,  60  N.  Y.  619. 

1  Gerringer  v.  North  Carolina  Home 
Ins.  Co.,  133  N.  C.  407,  45  S.  E.  773. 

3  Franklin  F.  Ins.  Co.  v.  Martin,  40 


N.  J.  L.  568,  29  Am.  Rep.  271;  Brooks 
V.  Erie  Fire  Ins.  Co.,  76  App.  Div.  275, 
78  N.  Y.  Supp.  748,  aff'd  177  N.  Y. 
572;  Davis  v.  Phoenix  Ins.  Co.,  Ill  Cal. 
409,  43  Pac.  1115;  Dunn  v.  Yakish,  10 
Okla.  388,  61  Pac.  926;  Gettelman  v. 
Commercial  Union  Assur.  Co.,  97  Wis. 
237,  72  N.  W.  327;  Gilman  v.  Dwelling 
House  Ins.  Co.,  81  Me.  488,  17  Atl.  544. 

3  Clapp  V.  Farmers'  Mut.  Fire  Ins. 
Co.,  126  N.  C.  388,  35  S.  E.  617. 

4  Carpenter  et  al.  v.  Ger.  Am.  Ins. 
Co.,  135  N.  Y.  298,  31  N.  E.  1015. 
Purchasers  of  goods,  title  to  pass  at 
future  time,  Tabbid  v.  American  Ins. 
Co.,  185  Mass.  419,  70  N.  E.  430;  Bohn 
Mfg.  Co.  V.  Saivyer,  169  Mass.  477, 
48  N.  E.  620;  Sheridan  v.  Peninsular 
Sav.  Bank,  116  Mich.  545,  74  N.  W. 
874.  Vendee  under  option,  to  extent 
of  advances,  Wunderlich  v.  Palatine 
Fire  Ins.  Co.,  104  Wis.  395,  80  N.  W. 
471.  Trust  company  under  contract  to 
buy  a  deed  of  trust  and  notes  secured 
thereby,  International  Trust  Co.  v. 
Norwich  Fire  Ins.  Soc,  71  Fed.  81,  17 
C.  C.  A.  608.  Beneficiary  under  a 
trust  deed,  Harvey  v.  Cherry,  76  N.  Y. 
436;  Southern  Bldg.  and  Loan  Assn.  v. 
Miller,  110  Fed.  35,  49  C.  C.  A.  21; 
Tilley  v.  Conn.  Fire  Ins.  Co.,  86  Va. 
813,  11  S.  E.  120.  So  in  Cone  v.  Ni- 
agara Ins.  Co.,  60  N.  Y.  619,  it  was  held 
that  one  whose  premises  had  been  sold 
on  execution  had  an  insurable  interest 
therein  after  his  own  right  to  redeem 
had  lapsed,  while  a  right  remained  in 
judgment  creditors.  For,  while  that 
right  continued,  he  could  have  pro- 
cured a  loan,  confessed  judgment  as 
security  therefor,  and  thereby  created 
a  right  to  redeem. 


36 


GENERAL    PRINCIPLES   OF   INSURANCE    LAW 


J  28.  Illegal  or  Defective  Title.— One  in  possession  under  an 
illegal  or  (lefoctive  title  has  in  general  an  insurable  interest.^  But 
it  has  also  ])eon  held  that  a  conveyance  absolutely  illegal  and  void 
ab  initio  will  not  confer  a  suflicient  interest. - 

§  29.  Same  Subject— Representative  Capacity.— Where  the  in- 
sured is  intrusted  with  tiic  goods  of  otluM'  persons  as  in  the  case 
of  a  common  carrier,^  warehouseman,^  commission  merchant,^ 
wharfinger,*^  agent,''  or  factor,*  he  may  either  insure  his  own  in- 
terest or  his  own  liability  in  respect  to  the  property,  or  he  may  insure 
the  property  to  its  full  value  for  the  benefit  of  all  concerned,  pro- 
vided the  policy  properly  describes  the  interests  intended  to  be 
covered.'* 


§  30.  Same  Subject — Liens. — A  lien  upon  property  carries  with 
it  an  insurable  interest  in  that  property.^"  The  lien  need  not  be 
specific.  The  general  lien  of  a  judgment  creditor  before  levy  or 
attachment  upon  his  debtor's  property  has  been  held  sufficient/^ 


1  Travis  v.  Continental  Ins.  Co.,  32 
Mo.  App.  198.  Deed  of  gift  adjudged 
void  as  to  creditors,  Steintneyer  v. 
Steinmeyer,  64  S.  C.  413,  42  S.  E.  184, 
59  L.  R.  A.  319,  92  Am.  St.  R.  809. 
Deed  good  as  between  the  parties, 
Home  Ins.  Co.  v.  Allen,  93  Ky.  270, 
19  S.  W.  743.  Deed  in  fraud  of  grantor, 
Phoenix  Ins.  Co.  v.  Mitchell,  67  111.  43. 
Deed  from  executor  without  power, 
Home  Ins.  Co.  v.  Oilman,  112  Ind.  7, 
13  N.  E.  118.  Transfer  void  because 
between  husband  and  wife,  Wolfe  v. 
Security  Fire  Ins.  Co.,  39  X.  Y.  49. 
Deed  improperly  acknowledged,  San- 
ford  V.  Ins.  Co.,  174  Mass.  416,  54  N.  E. 
883,  75  Am.  St.  R.  358. 

2  Perry  v.  Mechanics'  Mut.  Ins.  Co. , 
11  Fed.  478  (parol  agreement  to  convey 
land,  husband  not  joining);  and  see 
Sweeny  v.  Franklin  Ins.  Co.,  20  Pa.  St. 
337;  Stockdale  v.  Dunlap,  6  M.  &  W. 
224. 

3  California  Ins.  Co.  v.  Union  Com- 
press Co.,  133  U.  S.  387, 10  S.  Ct.  365, 
33  L.  Ed.  730;  Lancaster  Mills  v. 
Merchants',  etc.,  Co.,  89  Tenn.  1,  14 
S.  W.  317,  24  Am.  St.  R.  586. 

*  Home  Ins.  Co.  v.  Baltimore  Ware- 
house Co., ^ZV.  S.  527. 

5  Wagner  v.  Westchester  F.  Ins.  Co., 
92  Tex.  549,  50  S.  W.  569. 

6  Waters  v.  Monarch  Fire  Office,  5 
EU.  &  B.  870. 

^  Hartford  F.  Ins.  Co.  v.  Keating,  86 


Md.  130,  148,  38  Atl.  29,  63  Am.  St.  R. 
499;  Ferguson  v.  Pekin  Plow  Co.,  141 
Mo.  161,  42  S.  W.  711;  Roberts  v.  Fire- 
man's Ins.  Co.,  165  Pa.  St.  55,  30  Atl. 
450,  44  Am.  St.  R.  642. 

8  Phoenix  Ins.  Co.  v.  Hamilton,  14 
Wall.  (U.  S.)  504,  20  L.  Ed.  721. 

0  Carpenter  v.  Ins.  Co.,  16  Pet. 
(U.  S.)  495.  Consignees  or  persons 
holding  properly  in  trust  or  on  com- 
mission, Ebs\vorth  v.  Alliance  Mar. 
Ins.  Co.,  L.  R.  8  C.  P.  596,  42  L.  J.  C.  P. 
305,  29  L.  T.  N.  S.  479  (and  elaborate 
examination  of  authorities  as  to 
amount  of  interest);  Providence  Wash- 
ington Ins.  Co.  V.  The  Sidney  (D.  C), 
23  Fed.  88;  Hamburg- Bremen  Ins.  Co. 
V.  Lewis,  4  App.  D.  C.  66.  Bailees  in 
general,  Home  Ins.  Co.  v.  Peoria,  etc., 
R.  Co.,  178  111.  64,  52  N.  E.  862;  Fire 
Assn.  of  Eng.  v.  Merchants'  and  Marine 
Trans.  Co.,  66  Md.  339,  59  Am.  Rep. 
162,  7  Atl.  905.  Hirers  of  chattels, 
Oliver  v.  Greene,  3  Mass.  133,  3  Am. 
Dec.  96;  Bartlet  v.  Walter,  13  Mass.  267, 
7  Am.  Dec.  143.  Receivers,  McLaugh- 
lin V.  Park  City  Bank,  22  Utah,  473,  63 
Pac.  589;  In  re  Hamilton,  102  Fed.  683. 

10  Ins.  Co.  V.  Stinson,  103  U.  S.  25,  26, 
L.  Ed.  473;  Donnell  v.  Donnell,  86  Me. 
518,  30  Atl.  67;  McLaughlin  v.  Park 
City  Bank,  22  Utah,  473,  63  Pac.  589 

11  Rohrbach  v.  Germania  Fire  Ins  Co 
62  N.  Y.  47,  20  Am.  Rep.  451;  Spare  v. 
Home  Mutual  Ins.  Co.,   15  Fed.  707. 


ILLEGAL   OR.  DEFECTIVE    TITLE — POSSESSION 


37 


but  one  having  no  lien,  as  a  simple  contract  creditor,  has  no  such 
interest.^ 


§  31.  Same  Subject — Possession. — Possession  of  property  coupled 
with  a  claim  of  title  gives  an  insurable  interest,^  which  con- 
tinues, it  is  said,  until  the  title  has  been  judicially  declared  to  be 
invalid,'"'  and  where  possession  is  coupled  with  a  beneficial  use  there 
is  likewise  a  sufficient  interest.^  But  a  mere  trespasser  or  intruder, 
or  one  who  has  no  color  of  title  to  property,  has  no  insurable  interest 
in  it.^     Illustrative  of  the  efficacy  of  mere  use  or  possession  in  this 


708;  but  see,  contra,  Grevemeuer  v. 
Southern  Mut.  Fire  Ins.  Co.,  62  Pa.  St. 
340,  1  Am.  Rep.  420;  Light  v.  Ins.  Co., 
169  Pa.  St.  310,  32  Atl.  439,  47  Am.  St. 
R.  904. 

1  Foster  v.  Van  Reed,  5  Hun  (N.  Y.), 
321;  Creed  v.  Sun  Fire  0]Jice,  101  Ala. 
522,  14  South.  323,  23  L.  R.  A.  177,  46 
Am.  St.  R.  134;  Grcvemeyer  v.  Soidh- 
ern  Mut.  Fire  Ins.  Co.,  supra;  Bishop 
V.  Clay  Fire  &  Marine  Ins.  Co.,  49 
Conn.  167.  But  see  where  debtor  died 
and  insurable  interest  resulted,  Creed 
V.  Sun  Fire  Office.  101  Ala.  522,  46 
Am.  St.  R.  134,  23  L.  R.  A.  177,  14 
South.  323.  Holder  of  mortgage  to 
extent  of  his  claim,  Sussex  Co.  Mut. 
Ins.  Co.  V.  Woodruff,  26  N.  J.  L.  541. 
Mortgagor  after  foreclosure,  with  any 
title  or  equitable  right  remaining, 
Strong  v.  Mjgrs.  Ins.  Co.,  27  Mass.  40, 
20  Am.  Dec.  507;  Essc.v  Savings  Bank 
V.  Meriden  Fire  Ins.  Co.,  57  Conn.  335, 
17  Atl.  930,  18  Atl.  324,  4  L.  R.  A.  759; 
Pope  V.  Glen  Falls  Ins.  Co.,  136  Ala. 
670,  34  South.  29;  Slobodis'y  v. 
Phoenix  Ins.  Co.,  53  Neb.  816,  74  N.  W. 
270.  Other  lienors  with  insurable  in- 
terest include,  for  example,  agents 
Shaw  V.  Ins.  Co.,  49  Mo.  578,  8  Am. 
Rep.  150.  Carriers,  Savagre  v.  Ins.  Co., 
36  N.  Y.  655;  Hough  v.  Ins.  Co.,  36  Md. 
398.  Mechanics,  Harvey  v.  Cherry, 
76  N.  Y.  436;  Stout  v.  Ins.  Co.,  12  la. 
371,  79  Am.  Dec.  539;  Edwards  v. 
Arquette,  88  Wis.  450.  60  N.  W.  782. 
Landlord  witli  statutory  lien  for  rent, 
Mut.  Fire  I  U.S.  Co.  v.  Ward,  95  Va.  231. 
28  S.  E.  209.  Storage  company  with 
lien  for  charges  on  merchandise,  Pitts- 
burgh Storage  Co.  v.  Scottish  Union  & 
Nat.  Ins.  Co.,  168  Pa.  St.  522,  32  Atl. 
58. 

2  City  of  X.  Y.  V.  Brooklyn  Fire  Ins. 
Co.,  41  Barb.  (N.  Y.)  231,  aff'd  3  Abb. 
Dec.  251,  4  Keye3,  465.  Even  though 
obtained    by  trespass,   Franklin   Fire 


Ins.  Co.  V.  Chicago  Ice  Co.,  36  Md.  102, 
11  Am.  Rep.  409. 

^Helvetia  v.  Swiss  Fire  Ins.  Co.,  11 
Colo.  App.  264,  53  Pac.  242.  In  Wainer 
V.  MilfordMut.  Ins.  Co.,  153  Mass.  335, 
26  N.  E.  877,  11  L.  R.  A.  598,  the 
owner  of  an  undivided  half  of  a  dwell- 
ing house  bought  the  other  half  from 
his  brother  by  an  oral  contract  and 
paid  him  full  price  therefor  under 
promise  of  a  deed,  and  thereupon  en- 
tered into  exclusive  possession  of  the 
whole  claiming  title.  Five  years  later 
in  an  application  for  insurance  he  de- 
scribed himself  as  owner  thereof  and 
upon  a  subsequent  loss  under  the 
policy  the  insurance  company  refused 
payment  on  the  ground  that  he  had  no 
insurable  interest  in  the  entire  house. 
A  week  after  the  fire  his  brother,  who 
had  never  disputed  his  title  or  refused 
to  give  him  a  deed,  gave  him  one  in 
pursuance  of  his  promise;  Judge  Allen, 
holding  that  he  did  have  an  insurable 
interest  admits  that  he  had  no  means 
either  at  law  or  in  equity  of  compelling 
the  execution  of  a  deed,  but  says:  "It 
is  not  necessary  to  show  an  insurable 
interest  which  may  be  called  owner- 
ship. Insurance  against  loss  by  fire  is  a 
personal  contract  of  indemnity.  If  a 
person  has  such  an  interest  in  property 
that  he  will  suffer  pecuniary  loss  by  its 
destruction  he  has  an  insurable  in- 
terest." 

4  Holbrook  v.  St.  Paul  Fire  and 
Marine  Ins.  Co.,  25  Minn.  229;  Schaefer 
v.  Anchor  Mut.  Ins.  Co.,  100  N.  W. 
(la.)  857;  Jacobs  v.  Mutual  Ins.  Co.,  52 
S.  C.  110,  29  S.  E.  533.  One  in  posses- 
sion with  reasonable  expectation  of 
becoming  owner  in  fee.  Home  Ins.  Co. 
v.  Mendenhall,  164  111.  458,  45  N.  E. 
1078,  36  L.  R.  A.  374. 

5  Sweeny  v.  Franllin  Ins.  Co.,  20  Pa. 
St.  337.  Whether  a  tenant  at  suffer- 
ance enjoying  possession  and  usufruct 


38 


GENERAL   I'RINCIPLES  OF   INSURANCE   LAW 


regard,  is  a  recent  decision  in  Nebraska,  establishing,  for  that  state 
at  least,  the  important  and  practical  proposition  that  a  husband 
and  a  wife,  either  tseparately  or  jointly,  have  an  insurable  interest 
in  the  furniture  and  household  effects  in  use  in  the  maintenance 
of  the  domestic  relation,  regardless  of  whose  money  paid  for  the 
articles,  or  from  what  sources  or  by  what  means  they  were  obtained, 
or  to  whom  thev  mav  belong.' 


§  32.  Same  Subject — Contract  Rights.— a  contract  ngnt  tne 
value  of  which  is  dci)eiKleni  upon  the  preservation  of  property  be- 
longing to  another  gives  an  insurable  interest  in  that  property .- 


A    contract    right    the 

insurable  interest  in  that  property .- 

§  33.  Same   Subject — Liability. — Mere  responsibility   or  liability 
to  another  will  confer  an  insurable  interest.^      Therefore  a  mort- 


has  an  insurable  interest  is  not  very 
definitely  settled,  Binningbum  v.  7n.s. 
Co.,  42  Barb.  (N.  Y.)  Abl;  Bunyon, 
Ins.  (5th  ed.),  p.  56.  I'nless  policy 
were  valued  it  would  be  difficult  to 
establish  value  of  his  interest.  It  has 
been  held  under  married  women's  acts 
that  husband  has  no  insurable  interest 
in  wife's  separate  property  if  having 
no  legal  right  of  control  or  possession, 
Planters'  Mvt.  Ins.  Co.  v.  Loijd,  71 
Ark.  292,  75  S.  W.  725;  Traders'  Ins. 
Co.  V.  Xewinan,  120  Ind.  554,  22  N.  E. 
428;  German  Ins.  Co.  v.  Paul,  2  Ind. 
Ter.  625.  53  S.  W.  442;  Trolt  v.  Wool- 
wich Mid.  F.  Ins.  Co..  S3  Me.  362,  22 
Atl.  245;  Acpicidturullns.  Co.  v.  Monta- 
gue, 38  Mich.  548,  31  Am.  Rep.  320. 
Although  residing  with  her  in  the 
house  insured,  Tyree  v.  Virginia  F. 
&  M.  7n,s.  Co.,  .55  W.  V-  -iS,  46  S.  E. 
706,  66  L.  R.  A.  657.  On  liie  contrary, 
it  has  been  held  that  a  husband  occupy- 
ing a  homestead  belonging  to  his  wife 
has  an  insurable  interest  in  it,  Carey 
V.  Home  his.  Co.,  97  Iowa,  619,  66 
N.  W.  920;  Reynold  v.  Iowa,  etc..  Ins. 
Co.,  80  Iowa,  563,  46  N.  W.  659. 
Especially  if  he  has  inchoate  right  of 
curtesy,  Traders'  Ins.  Co.  v.  BarracUj'f. 
45  N.  J.  L.  543,  46  Am.  Rep.  792  (per- 
.sonal  property);  Continental  F.  Assoc. 
v.  Wing  field,  7  Tex.  Ct.  Rep.  53,  73 
S.  W.  847;  and  see  American  Cent. 
Ins.  Co.  v.  McLanathan,  11  Kan.  533; 
Horsch  V.  Dwelling  House  Ins.  Co.,  77 
Wis.  4,  45  N.  W.  945,  8  L.  R.  A.  806. 
But  under  standard  fire  policy  any 
limited  interest  must  be  set  forth. 

^  Lenagh  v.  Commercial  Union  Ass. 
Co.  (Neb.,  1906),  110  N.  W.  740. 

•  Thus,  patentee   with  contract   for 


royalties  in  property  used  in  connec- 
tion with  patents,  Nat.  Filtering  Oil 
Co.  V.  Citizens'  Ins.  Co.,  106  N.  Y.  535, 
13  N.  E.  337,  60  Am.  Rep.  473.  Con- 
tractor in  house  he  is  moving.  Planters' 
(fc  Merchants'  Ins.  Co.  v.  Thurston,  93 
Ala.  255,  9  South.  268.  Building  con- 
tractor in  building  in  course  of  erec- 
tion, Sullivan  v.  Spring  Garden  Ins. 
Co.,  34  App.  Div.  128,  58  N.  Y.  Supp. 
629;  Gushing  v.  Williamsburg  City  Fire 
Ins.  Co.,  4  Wash.  538,  30  Pac.  736. 
Superintendent  in  goods  of  another's 
establishment,  Graham  v.  Fire  Ins. 
Co.,  48  S.  C.  195,  26  S.  E.  323,  59  Am. 
St.  R.  707.  One  entitled  to  share  of  net 
profits  of  an  insurance  company  may 
insvu-e  the  property  insiu-ed  by  it, 
Hayes  v.  Milford  Mut.  Ins.  Co.,  170 
Mass.  492,  49  N.  E.  754.  But  it  has 
been  said  that  a  person  can  have  no  in- 
surable interest  in  property  under  a 
contract  whicli  cannot  be  enforced 
<'ither  in  law  or  eciuity,  Pope  v.  Glen 
Falls  Ins.  Co.,  136  Ala.  670,  34  South. 
29;  Perry  v.  Mechanics'  Mut.  Ins.  Co., 
11  Fed.  478. 

■*  As  to  common  carriers,  warehouse- 
men, and  bailees  generally,  see  §  29. 
Bern/  v.  Am.  Cent.  Ins.  Co.,  132  N.  Y. 
49,  .30  X.  E.  2.54,  28  Am.  St.  R.  548; 
Statutory  liability  of  railroads  for  in- 
jury to  property  by  their  engines. 
Railroad  Co.  v.  Relief  Fire  Ins.  Co.,  98 
Mass.  420,  105  Mass.  570;  Lumberman's 
Mut.  Ins.  Co.  V.  Kansas  City  R.  R.  Co., 
149  Mo.  165,  50  S.  W.  281.  One  agree- 
ing for  consideration  to  care  for  prop- 
erty and  keep  insured.  Cross  v.  A' at. 
Fire  Ins.  Co.,  132  N.  Y.  133,  30  N.  E 
390. 


INSUHAHIJ;    IN  TKHKST  -   LIFE  39 

gagor  retains  an  insurable  interest,  even  though  he  has  conveyed 
away  the  mortgaged  premises  to  a  vendee  who  also  assumes  pay- 
ment of  the  mortgage  debt,  since  the  mortgagor  also  is  still  liable 
on  his  bond.^  Upon  the  same  principle,  an  insurance  company 
may  reinsure  with  another  company  the  whole  or  any  part  of  its 
liability  as  an  insurer,  whether  existing  under  one  or  all  of  its 
policies.- 

§  34.  Insurable  Interest — Life. — While,  as  before  shown,  pure 
speculation  in  human  life  is  not  to  be  tolerated,^  provident  arrange- 
ments by  means  of  life  insurance  in  favor  of  dependents  are  of  ad- 
vantage to  the  lieneficiaries  and  of  benefit  to  the  state  and,  there- 
fore, to  be  encouraged.'* 

Few  persons,  however,  would  invest  in  life  insurance  if  they  knew 
in  advance  that  the  person  insured  was  destined  to  fill  out  the 
average  span  of  life.  Such  an  investment  must  be  considered 
pecuniarily  unprofitable.  The  insurance  company  out  of  its  re- 
ceipts must  meet  its  heavv  expenses,  also  its  obligations  arising 
from  the  early  deaths  among  its  patrons.  The  conclusion  cannot 
be  escaped  that  the  primary  purpose  of  the  insured,  as  well  as  the 
main  utility  of  the  contract,  is  to  cover  loss  occasioned  by  premature 
rather  than  by  normal  death.  But  all  insurance  and  notably  life 
insurance  is  in  some  respects  in  the  nature  of  an  investment.^     In 

1  Hanover  Fire  Ins.  Co.  v.  Bohn,  48  C.  C.  A.  580  (contrary  to  public  policy 

Neb.  743,  67  N.  W.  774,  58  Am.  St.  that  policyholders  should  be  interested 

R.    719;    Waring   v.   Loder,  53    N.  Y.  to  shorten  human  life);  Union  Frater- 

581.     Sureties,  Ins.  Co.  v.   Thompson,  nal  League  v.   Walton,  109  Ga.   1,  34 

95  U.  S.  547,  24  L.  Ed.  487.    Indorsers,  S.  E.  317,  77  Am.  St.  R.  350,46  L.  R.  A. 

Williams  v.  Roger  Willia>ns  Ins.  Co.,  424;   Bloomington  Mut.  Ben.  Assn.  v. 

107  Mass.  377,  7  Am.  Rep.  41.    Sheriff  Blue,  120  111.  121,  60  Am.  Rep.  558,  11 

in  goods  seized    on    execution,   IT7)//('  N.  E.  331;  Met.  Life  Ins.  Co.  v.  Brown, 

V.  Madison,  26  N.  Y.  117,  26  How.  Pr.  159  Ind.  644,  65  N.  E.  908;  Burbage  v. 

487;  Smith  v.  Huddleston,  103  Ala.  223;  Windlejf,  108  N.  C.  357,  12  S.  E.  839, 

15  South.  521.    Vendee  under  contract  12  L.  R.  A.  409  (demoralizing,  contra 

of  conditional  sale  if  liable  for  loss  by  bonos   mores).     Other   illustrations  of 

fire  has  insurable  interest  to  full  value,  wager  policies,  Fuller  v.   Metro.   Life 

and  not  simply  to  amount  of  his  ad-  Ins.    Co.,    70   Conn.    647,   41    Atl.    4; 

vancements,  Ryayi  v.  Agricultural  Ins.  Golden  Ride  v.  People,  118  111.  492,  9 

Co.,  188  Mass.  11,  73  N.  E.  849.  N.  E.  342;  People  v.  Golden  Rule,  114 

2/ns.  Co.  of  N.  A.  V.  Ilibernia  his.  111.  34,  28  N.  E.  383;  Gilbert  v.  Moose, 

Co.,  140  U.  S.  565,  11  S.  Ct.  909,  35  104  Pa.  St.  74,  80,  49  Am.  Rep.  570 

L.Ed.   517;   Pha:nix  Ins.   Co.   v.   Erie  ("life  insvu-ance  gambling  fraught  with 

Transp.  Co.,  117  U.  S.  312,  323,  6  S.  dishonesty  and  disaster");    Wilton  v. 

Ct.  750;  Barnes  v.  Heckla  F.  Ins.  Co.,  N.  Y.  Life  Ins.  Co.,  34  Tex.  Civ.  App. 

56  Minn.  38,  57  N.  W.  314,  45  Am.  St.  156,  78  S.  W.  403. 
R.  438,  note;  Hunt  v.  New  Hanip.,  etc.,         *  Ulrich  v.  Reinoehl,  143  Pa.  St.  238, 

As-wc,  68  N.  H.  305,  38  Atl.  145,  38  252,  22  Atl.  862,  13  L.  R.  A.  433,  24 

L.  R.  A.  514,  73  Am.  St.  R.  602.  Am.  St.  R.  534. 

^Crotty  V.  Ins.  Co.,  144  U.  S.  621,  '^Mutual  Life  his.  Co.  v.  Allen,  138 

12  S.  Ct.  749,  36  L.  Ed.  566;  Gordon  v.  Mass.  24,  52  Am.  Rep.  245.     An  en- 

Ware   Nat.    Bank,    132    Fed.    444,   65  dowment  policy  is  said  to  have  more 


40  GENEJKAL    I'UJXnin.KS   <H'    INSLKANCK    LAW 

return  for  premiums  paid,  the  insured  expects  to  secure  protection 
for  himself  or  for  others,  or  to  collect  insurance  moneys,  or  both, 
and  in  the  case  of  life  insurance,  since  death  is  sure  to  occur  sooner 
or  later,  he  expects  to  reap  both  kinds  of  benefit.^  To  call  the  con- 
tract of  life  insurance  a  contract  of  strict  indemnity,  on  the  one  hand, 
or,  on  the  other,  to  isolate  it  from  the  general  law  of  insurance  and 
classify  it  as  an  investment,  as  many  have  done,  is  unwise.  It  par- 
takes of  tlie  nature  of  both  arrangements.^ 

By  these  and  other  considerations  we  are  easily  led  to  approve 
the  better  doctrine  that  the  valid  life  insurance  contract  is  in  so  far 
one  of  indemnity  that  the  necessity  of  an  insurable  interest,  and  an 
interest  actually  or  presumptively  of  a  valuable  character,  lies  at 
its  foundation.^  But  every  man's  life  is  presumed  to  be  valuable  to 
himself ;''  therefore,  whenever  the  insured  takes  out  a  policy  on 
his  own  life,  whether  payable  to  himself,  his  estate  or  other  bene- 
ficiaries of  his  own  selection,  until  it  is  affirmatively  shown  that  he 
entered  into  the  contract  with  the  purpose  of  hastening  his  death,^ 
or  evading  the  law,  the  usual  love  of  life  is  held  by  the  better  au- 
thority to  satisfy  the  legal  demand  for  evidence  of  a  sufficient  in- 
surable interest.^  Accordingly,  every  man  is  said  to  have  an  in- 
surable interest  in  his  own  life  and  to  any  amount.'^  But  when  the 
insurance  is  taken  out  by  a  person  other  than  the  life  insured,  the 

of  the  character  of  an  investment  than  604.      Court   will    not    enforce    pohcy 

has  the  regular  life  policy,  Talcott  v.  void  for  lack  of  interest,  though  ille- 

Field,   34    Neb.    611,   615,   52    N.    W.  gality  be  not   pleaded,  Gedge  v.  Royal 

400.  I^xch.  (1900),  2  K.  B.  214. 

1  Trenton  Mut.  L.  &  F.  Ins.  Co.  v.  *  Fidelity  Mut.  Life  A.ssn.  v.  Jef- 
Johnson,  24  N.  J.  L.  576.  fords,  107    Fed.  402,  410,  46   C.  C.  A. 

2  Any  statute  defining  insurable  in-  377. 

terest    controls,    Gillam     v.    Dale,    69  ^  Ritter  v.  Ins.  Co.,  169  U.  S.   139, 

Kan    362  (1904),  76  Pac.  861;  Barnes  18  S.  Ct.  300,  42  L.  Ed.  693;  Schmidt  v. 

V  London  E.  &   G.  L.  Ins.  Co.,  L.  R.  Assoc,  112  Iowa,  41,  83  N.  W.  800,  51 

(1892)  1  Q.  B.  D.  864.      Many    states  L.  R.  A.  141,  84  Am.  St.  R.  323. 

have  statutes  prohibiting  wagers.  6  Conn.  Mid.  Life  Ins.  Co.  v.  Schaefer. 

3  If  no  insurable  interest  were  re-  94  U.  vS.  457,  460,  24  L.  Ed.  251;  f/mon 
quired  to  give  the  contract  a  valid  Fraternal  League  v.  Walton,  109  Ga.  1, 
inception  not  only  would  beneficiaries  34  S.  E.  317,  46  L.  R.  A.  424,  77  Am. 
be  tempted  to  shorten  the  life  insured,  St.  R.  350;  Prudential  Ins.  Co.  v. 
but  unscrupulous  persons  would  con-  Hunn,  21  Ind.  App.  525,  52  N.  E.  772, 
stantly  be  seeking  to  defraud  insur-  09  Am.  St.  R.  380;  Bloomington  Mut. 
ance  companies  by  taking  out  policies  B.  As.sn.  v.  Blue,  120  111.  121,  11  N.  E. 
upon  risks  believed  by  the  applicants,  331,  60  Am.  Rep.  558;  Campbell  v.  Ins. 
for  reasons  undisclosed,  to  be  bad.  The  Co.,  98  Mass.  381 ;  Albert  v.  Mut.  L.  Ins. 
whole  business  would  thus  be  thrown  Co.,  122  N.  C.  92,  30  S.  E.  327,  65  Am. 
into  confusion,  Burbage  v.  Windley,  St.  R-.  693;  A^orttnrestern  Masonic  Aid 
108  N.  C.  357,  12  S.  E.  839,  12  L.  R.  A.  Assn.  v.  Jones,  154  Pa.  St.  99,  26  Atl. 
409;  Gilbert  v.  Moo.se,  104  Pa.  St.  74,  253,  35  Am.  St.  R.  810. 

80,49  Am.  Rep.  570.    Insurable  interest  ^  Fidelity   Mut.    Life   Assn.    v.    Jef' 

must  be  shown  in  spite  of  incontest-  fords,  107  Fed.  402,  410,  46  C.  C.  A. 

able    clause,  Anctil    v.  Manufacturers'  "All;  Foster  v.  Preferred  Ace.  Ins.  Co. 

L.   Ins.  Co.,  L.  R.  (1899),  App.  Cas.  125  Fed.  536. 


INSUKAJbtLE   INTEREST — LIFE 


41 


problems  presented  are  not  always  so  easy  of  solution  and  the  rules 
relating  to  insurable  interest  become  more  or  less  arbitrary.^ 

It  has  been  held,  however,  that,  if  the  beneficiary  has  an  insurable 
interest,  the  party  taking  out  the  insurance  need  have  none.^  And 
similarly  it  has  been  held  that  if  only  one  of  the  beneficiaries  has  an 
insurable  interest  the  policy  will  not  be  avoided."''  The  doctrine  of 
the  necessity  of  an  insurable  interest  has  not  been  adopted  for  the 
benefit  of  the  insurance  company,  but  out  of  regard  to  the  public 
welfare."* 


1  "It  is  not  easy  to  define  ^vith  pre- 
cision what  will  in  all  cases  constitute 
an  insurable  interest  so  as  to  take  the 
contract  out  of  the  class  of  wager 
policies.  It  may  be  stated  generally, 
however,  to  be  such  an  interest,  aris- 
ing from  the  relations  of  the  party  ob- 
taining the  insurance,  either  as  creditor 
of,  or  surety  for  tlie  assured,  or  from 
the  ties  of  blood  or  marriage  to  him,  as 
will  justify  a  reasonable  expectation 
of  benefit  from  the  continuance  of  his 
life,"  Wnrrwck  v.  Davis,  104  U.  S. 
775,  779,  26  L.  Ed.  924  (cited  with  ap- 
proval in  Cisna  v.  Sheibleu,  88  111.  App. 
385,  390) .  In  HirUon  v.  Mid ual  Reserve 
F.  &  L.  Assn.,  1.35  N.  C.  314,  47  S.  E. 
474,470,65  L.  R.  A.  161,  102  Am.  St. 
R.  545,  the  following  rule  is  relied  on: 
"  Except  in  cases  where  there  are  ties  of 
blood  or  marriage  the  expectation  of 
ad\-antage  from  the  continuance  of  the 
life  of  tlie  insured  in  order  to  be  rea- 
sonable as  the  law  counts  reasonable- 
ness, must  be  founded  on  the  existence 
of  some  contract  between  the  person 
whose  life  is  insured  and  the  bene- 
ficiary, the  fulfillment  of  which  the 
death  will  prevent;  it  must  appear  that 
by  tlie  death  there  will  come  some 
damage  which  can  be  estimated  by 
.some  rule  of  law,  for  which  loss  or  dam- 
age the  insurance  company  has  under- 
taken to  indemnify  the  beneficiary 
imder  its  policy.  When  this  con- 
tractual relation  does  not  exist,  and 
there  are  no  ties  of  blood  or  marriage, 
an  insurance  policy  becomes  what  the 
law  denominates  a  wagering  contract." 
But  in  Carpenter  v.  U.  S.  Life  Ins.  Co., 
161  Pa.  St.  9,  28  Atl.  943,  23  L.  R.  A. 
571 ,  41  Am.  St.  R.  880,  there  was  no  con- 
tract and  no  kin.ship,  and  the  plaintiff, 
a  poor  girl,  was  held  to  have  an  insur- 
able interest  in  the  life  of  her  bene- 
factor. Keystone  Mid.  Ben.  Assn.  v. 
Norris,  115  Pa.  St.  446,  451,  8  Atl.  638, 
2  Am.  St.  R.  572;  Appeal  of  Corson,  113 
Pa.  St.  438,  445,  6  Atl.  213,  57  Am. 


Rep.  479;  Cronin  v.  Vermont  L.  Ins. 
Co.,20R.  I.  570,572,60Atl.  497.  The 
so-called  test  or  definition  of  mere 
"good  faith"  or  benevolent  desire  for 
the  continuance  of  the  life  insured  is 
practically  worthless  in  determining 
the  legal  sufficiency  of  an  insurable 
interest.  A  relative  or  friend  or  neigh- 
bor without  the  shadow  of  insurable 
interest  might  take  out  a  policy,  to  the 
validity  of  which  substantially  all  the 
authorities  would  refuse  sanction,  and 
yet  it  might  be  quite  impossible  to 
prove  any  bad  faith  or  any  desiie  for 
the  early  death  of  the  insured,  U.  B. 
Mut.  Aid  Soc.  V.  McDonald,  122  Pa. 
St.  324,  15  Atl.  439,  1  L.  R.  A.  238,  9 
Am.  St.  R.  111.  A  ciuestion  of  good 
faith  involves  usually  not  a  legal  defini- 
tion but  an  issue  of  fact  for  a  jury. 
"Good  faith"  offers  no  criterion  foi 
testing  the  validity  of  a  policy  until 
the  standard  of  good  faith  is  first  made 
clear.  Life  insurance  often  involves  the 
payment  of  premiums  for  a  long  course 
of  years.  The  validity  of  the  policy 
should  be  removed  as  far  as  possible 
from  the  realm  of  uncertainty.  If  the 
policy  is  issued  to  the  insured,  the 
beneficiary,  in  most  jurisdictions,  need 
not  allege  nor  prove  insurable  interest, 
Northuestern  Masonic  Aid  Assn.  v. 
Jones,  154  Pa.  St.  99,  26  Atl.  253,  35 
Am.  St.  R.  810,  but  such  allegation  and 
proof  are  required  when  the  policy  is 
taken  out  by  a  person  other  than  the 
insured,  Continental  Life  Ins.  Co.  v. 
Volger,  89  Ind.  572,  46  Am.  Rep.  185. 
3  McCann  v.  Met.  Life  Ins.  Co.,  177 
Mass.  280,  58  N.  E.  1026  (beneficiary 
a  daughter).  So  also  where  the  estate 
of  the  insured  was  beneficiary.  Pru- 
dential Ins.  Co.  V.  Leyden,  20  Ky.  L. 
Rep.  881  (1898),  47  S.  W.  767. 

3  Beard  v.  Sharp,  100  Ky.  606,  33 
S.  W.  1057. 

4  Reed  v.  Prov.  Savings  L.  Assn.  Soc, 
36  App.  Div.  250,  55  N.  Y.  Supp.  292; 
Forbes  v.  Am.  Mut.  Life  Ins.  Co.,  1.5 


^ 


genkkal  i'HiX(JiPLr:i^  uv  insuran'ce  law 


§  J5.  Ties  of   Affection,  Blood,  or  Marriage.— Ties   of   affection 

do  not  in  themselves  constitute  an  insurable  interest.^  As  to 
how  far  ties  of  marriage  or  near  kinship  raise  a  conclusive  presump- 
tion of  insurable  interest,  the  courts  are  not  in  harmony. 

A  wife  has  a  legal  right  to  support  from  her  husband,^  and  even 
under  modern  statutes  relating  to  married  women  a  husband  has  a 
riglit  to  expect  valuable  services  from  his  wife.'"*  For  these  reasons, 
coupled  with  the  intimacy  of  the  relationship,  the  sound  rule  seems 
to  be  that  a  wife  should  be  conclusively  presumed  to  have  an  in- 
surable interest  in  the  life  of  her  husband  and  the  husband  in  the 
life  of  the  wife."*  And  when  other  relationships  or  kinships  are 
accompanied  by  a  reasonable  expectation  of  pecuniary  benefit  to 
accrue  from  a  continuance  of  the  life  insured,  though  not  based  upon 


Gray  (Mass.),  249,  254,  77  Am.  Dec. 
360.  Some  of  the  states  have  statutes 
providing  that  no  one  can  take  out  in- 
surance on  another's  life  without  his 
consent,  for  example,  N.  Y.  Ins.  L. 
§  55.  Atn.  Mut.  Life  Ins.  Co.  v.  Ber- 
tram,  163  Ind.  51,  70  N.  E.  258,  64 
L.  R.  A.  935  (assessments  can  be  re- 
covered back),  Work  v.  Am.  Mut.  L. 
Ins.  Co.,  31  Ind.  App.  153,  67  N.  E.  458 
(a  felony  in  that  state  to  procure  a 
pohcy  on  life  of  another  without  his 
consent;  and  held  that  premiums  could 
not  be  recovered  back  though  company 
knew  the  facts).  Fultqn  v.  Met.  L.  Ins. 
Co.,  1  Misc.  478,  21  N.  Y.  Supp.  470, 
premiums  may  be  recovered  back  [com- 
pare on  this  point  the  recent  English 
case,  Harse  v.  Pearl  Life  Assur.  Co. 
(1904),  1  K.  B.  558],  and  the  Kentucky 
court  has  in  numerous  cases  declared 
that  a  policy  without  such  consent  is 
void  as  against  public  policy,  Griffens 
V.  Equitable  Assur.  Soc.,  119  Ky.  856, 
84  S.  W.  1164  (held  that  premiums 
could  be  recovered);  Met.  Life  Ins.  Co. 
V.  Asmus,  25  Ky.  L.  R.  1550,  78  S.  W. 
204  (the  same  holding);  Met.  Life  Ins. 
Co.  V.  Smith,  22  Ky.  L.  R.  868,  59  S.  W. 
24,  53  L.  R.  A.  817;  Met.  Life  Ins.  Co. 
V.  Blesch,  22  Ky.  L.  R.  530,  58  S.  W. 
436,  and  cases  cited;  Met.  L.  Ins.  Co.  v. 
Monohan,  102  Ky.  13,  42  S.  W.  924. 
But  it  is  ditficult  in  the  absence  of  stat- 
ute or  contract  provision  to  sustain  the 
proposition  either  on  principle  or  au- 
thority. See  McCann  v.  Met.  Life  Ins. 
Co.,  177  Mass.  280,  58  N.  E.  1026;  De- 
louche  V.  Met.  L.  Ins.  Co.,  69  N.  H.  587, 
45  Atl.  414.  The  insurance  company 
before  accepting  an  appUcation  gener- 
ally requires  a  medical  examination  of 


the  person  to  be  insured,  involving  his 
consent,  but  if  the  company  acquiesces 
there  is  no  approved  doctrine  of  com- 
mon law  to  prevent  a  person,  with  a 
good  insurable  interest  in  the  life  of 
another,  from  taking  out  insurance  to 
protect  that  interest  without  consult- 
ing the  latter,  for  instance,  a  creditor 
to  secure  his  claim,  or  a  father  in  the 
life  of  his  infant  son,  or  a  large  share- 
holder in  the  life  of  a  promoter  upon 
whom  the  success  of  the  venture  de- 
pends. 

1  Mutual  Benefit  Assn.  v.  Hoijt,  46 
Mich.  473,  9  N.  W.  497  (a  friend); 
Lanouette  v.  Laplante,  67  N.  H.  118,  36 
Atl.  981;  Harse  v.  Pearl  Life  As.^ur. 
Co.  (1903),  2  K.  B.  92,  72  L.  J.  K.  B. 
638,  89  Law  T.  94,  reversed  on  another 
point  (1904),  1  K.  B.  558. 

^  Rombach  v.  Ins.  Co.,  35  La.  Ann. 
233,  48  Am.  Rep.  239;  Gambs  v.  Cove- 
nant Mut.  Life  Ins.  Co.,  50  Mo.  44; 
Reed  v.  Assur.  Co.,  Peake,  Add.  Cas., 
70. 

■^Goodrich  v.  Treat,  3  Colo.  408; 
Currier  v.  Ins.  Co.,  57  Vt.  496,  52  Am. 
Rep.  134. 

*  Connecticut  Mut.  Life  Ins.  Co.  v. 
Schaefer,  94  U.  S.  457,  24  L.  Ed.  251; 
Crotty  V.  Ins.  Co.,  144  U.  S.  621,  627, 
12  S.  Ct.  749,  36  L.  Ed.  566;  Trenton 
Mut.  L.  &  F.  Ins.  Co.  v.  Johnson,  24 
N.  J.  L.  576.  But  see  Currier  v.  Con- 
tinental Life  Ins.  Co.,  57  Vt.  496,  52 
Am.  Rep.  134,  in  which  there  is  the 
dictum;  "cases  may  exist  where  the 
husband  has  no  insurable  interest 
whatever  in  his  wife's  life.  She  may  be 
a  burden — a  hopeless  maniac  or  in- 
valid." 


TIES   OF  AFFECTIOK,    13LOOD,    OK   MARRIAGE 


43 


any  legal  right,  an  insurable  interest  is  established.^  Indeed  in 
this  country  it  has  repeatedly  been  held  that  a  woman  has  such  a 
reasonable  right  to  expect  pecuniary  advantage  from  the  continu- 


1  Life  Ins.  Clearing  Co.  v.  O'Neill, 
106  Fed.  800,  45  C.  C.  A.  641,  54  L.  R. 
A.  225,  and  cases  supra.  As  to  who 
in  New  York  can  take  out  a  policy  on 
the  Hfe  of  a  child  and  to  what  amount, 
see  L.  1892,  c.  690,  sec.  55,  and  c.  437. 
But  it  has  been  held  that  an  adult  son 
has  no  insurable  interest  in  the  life  of 
his  father  simply  by  virtue  of  the  re- 
lationship. Prudential  Ins.  Co.  v. 
Hunn,  21  Ind.  App.  525,  52  N.  E.  772; 
Chi.  G.  F.  &  L.  Soc.  v.  D//o/^,  79  111. 
App.  100;  Guardian  Mat.  L.  Ins.  Co.  v. 
Hogan,  80  111.  35,  22  Am.  Rep.  180; 
and  see  Rombach  v.  Ins.  Co.,  35  La. 
Ann.  233,  48  Am.  Rep.  239.  Contra, 
Valley  Mid.  L.  Assn.  v.  Teewalt,  79 
Va.  421,  423.  Nor  a  daughter  simply 
by  virtue  of  the  relationship,  Conti- 
nental Life  Ins.  Co.  v.  Volger,  89  Ind. 
572,  46  Am.  Rep.  185;  but  compare, 
contra.  Farmers'  &  Traders'  Bk.  v. 
Johnson,  118  Iowa,  282,  91  N.  W.  1074 
and  many  cases  cited.  Nor  a  stepson 
in  his  stepfather's  life  when  no  de- 
pendence or  responsibility  for  support 
exists,  U.  B.  Nat.  Aid  Soc.  v.  Mc- 
Donald, 122  Pa.  St.  324,  15  Atl.  439,  1 
L.  R.  A.  238.  Relationship  coupled 
wath  payments  of  money  by  the  son, 
Life  Ins.  Clearing  Co.  v.  O'N^eill,  106 
Fed.  800,  45  C.  C.  A.  641,  .54  L.  R.  A. 
225.  Again,  a  nephew  has  no  insurable 
interest  in  the  life  of  an  uncle,  Reed  v. 
Prov.  S.  Life  Ins.  Soc,  36  App.  Div. 
(N.  Y.)  250,  55  N.  Y.  Supp.  292;  Moury 
V.  Home  Life  his.  Co.,  9  R.  I.  346.  See 
Singleton  v.  St.  Louis  Mid.  Ins.  Co.,  66 
Mo.'  63,  27  Am.  Rep.  321;  or  of  an  aunt, 
Appeal  of  Corson,  113  Pa.  St.  438,  6  Atl. 
213,  57  Am.  Rep.  479;  where  he  is  in  no 
way  dependent  upon  her,  Ainerican 
Mut.  L.  Ins.  Co.  V.  Bertram,  163  Ind. 
51  (1904),  70  N.  E.  258;  Wilton  v.  New 
York  L.  Ins.  Co.,  34  Tex.  Civ.  App.  156 
(1904),  78  S.  W.  403  (a  niece  with  a  mere 
probability  of  occasional  gifts);  nor  a 
son-in-law  in  the  life  of  a  mother-in- 
law,  Rombach  v.  Piedmont  &  A.  Life 
Ins.  Co.,  35  La.  Ann.  233,  48  Am.  Rep. 
239;  or  of  a  father-in-law,  Ramsey  v. 
Meijers,  6  Pa.  Dist.  R.  468,  54  Leg. 
Intell.  317.  But  see  Adams  v.  Reed, 
18  Ky.  L.  R.  858,  38  S.  W.  420,  35  L. 
R.  A.  692.  A  brother  has  no  insurable 
interest  in  the  life  of  a  brother,  Lewis 
v.  Phoenix  Mid.  Life  Ins.  Co.,  39  Conn. 


100.  But  as  to  rule  at  common  law, 
see  Hosmcr  v.  Welch,  107  Mich.  470,  67 
N.  W.  504,  65  N.  W.  280,  merely  a  dic- 
tum. Nor  a  person  in  the  life  of  his 
cousin,  Whitmore  v.  Supreme  Lodge, 
100  Mo.  36,  13  S.  W.  495;  Brett  v.  TT^or- 
nick,  44  Ore.  511,  75  Pac.  1061;  Stern- 
berg V.  Levy,  159  Mo.  617,  60  S.  W. 
Ili4,  53  L.  R.  A.  438  (Rev.  Stat.  1889, 
Mo.,  §  5853.  Widowed  sister  had  an 
insurable  interest  in  brother's  life). 
Again,  certain  relationships  are  so  apt 
to  involve  a  legal  claim  to  services, 
support,  or  pecuniary  obligation  or 
advantage  that  their  existence  has 
been  held  in  some  jurisdictions  to  es- 
tablish conclusively  an  insurable  inter- 
est, Rombach  v.  Piedmont  <&  A.  L.  Ins. 
Co.,  35  La.  Ann.  233;  Trenton  Mut.  L. 
&  F.  Ins.  Co.  V.  Johnson,  24  N.  J.  L. 
576;  Corson's  Appeal,  113  Pa.  St.  438, 
6  Atl.  213,  57  Am.  St.  R.  479.  Interest 
by  consanguinity  is  said  to  exist  only 
in  favor  of  husband,  wife,  parent,  child., 
brother,  or  sister  of  insured,  Wilton  v. 
New  York  L.  Ins.  Co.,  34  Tex.  Civ. 
App.  156  (1904),  78  S.  W.  403.  Thus, 
as  already  stated,  a  wife  has  an  insur- 
able interest  in  the  life  of  her  husband, 
and  the  validity  of  the  policy  will  sur- 
vive a  divorce,  Conn.  Mut.  Life  Ins. 
Co.  V.  Schaefer,  94  U.  S.  460,  24  L.  Ed. 
251;  Holmes  v.  Gilman,  138  N.  Y.  369, 
34  N.  E.  205,  20  L.  R.  A.  566,  34  Am. 
St.  R.  463;  Bauer  v.  Union  Mut.  L. 
Ins.  Co.,  43  N.  Y.  283.  Statutes  in 
many  states  affect  rights  of  wife  and 
children,  Charter  OaK  L.  Ins.  Co.  v. 
Brant,  47  Mo.  419,  4  Am.  Rep.  328. 
See  Gambs  v.  Covenant  Mut.  L.  Ins.  Co., 
.50  Mo.  44;  Ellison  v.  Straw,  116  Wis. 
207,  92  N.  W.  1094.  Wife  has  insur- 
able interest  in  life  of  husband,  Wash- 
ington Cent.  Nat.  Bk.  v.  Hume,  128 
U.  S.  195,  205,  9  S.  Ct.  41,  32  L.  Ed. 
370,  16  Wash.  L.  Rep.  777.  At  com- 
mon law  wife  had  insurable  interest  in 
her  husband's  life,  so  that  policy  taken 
out  by  him  for  her  would  be  valid,  and 
upon  her  death  policy  could  be  changed 
for  second  wife's  benefit,  Gambs  v. 
Covenant  Mut.  Ins.  Co.,  50  Mo.  44. 
As  to  wife's  insurable  interest  and 
statutes  see  note  53  L.  R.  A.  817-826. 
Interest  survives  divorce,  Overhiser  v. 
Overhiser,  63  Ohio  St.  77,  50  L.  R.  A 
552,  57  N.  E.  965,  81  Am.  St.  R.  612 


44 


GENERAL   PRINCIPLES   OF   INHL'KAiXCE    LAW 


ance  of  the  life  of  her  fiance  as  to  confer  upon  her  an  insurable  in- 
terest in  his  lifo.^ 

Any  element  of  dependency  coupled  with  relationship  will  furnish 
the  basis  for  an  insurable  interest.'  Thus,  where  the  brother  had 
supported  and  educated  his  sister,  it  was  held  that  she  had  an  in- 
surable interest  in  his  lifo.^ 


but  compare  Hatch  v.  Hatch,  35  Tex. 
Civ.  App.  373  (1904),  80  S.  W.  411. 
And  the  illegality  of  the  marriage  -will 
not  defeat  it,  Equitable  Life  Assur.  So. 
V.  Paterson,  41  Ga.  .3.38,  5  Am.  Rep. 
535.  E.speeiallv  if  she  believes  it  to  be 
legal,  Scott  V.  Scott,  25  Ky.  1356  (1904), 
77  S.  W.  1 122.  See  Supreme  Tent  K.  of 
M.  of  W.  V.  McAllister,  132  M-'ch.  09, 
92  N.  \V.  770,  102  Am.  St.  R.  386.  Mis- 
tress may  have  insurable  interest  in 
life  of  paramour,  Lampkin  v.  Travelers' 
Ins.  Co.,  11  Colo.  App.  249,  52  Pac. 
1040.  See  Ruoff  v.  John  Hancock  Mid. 
L.  Ins.  Co.,  83  N.  Y.  Supp.  758,  86  App. 
Div.  447.  A  woman  may  insure  the 
life  of  her  fianc^,  Chishnlm  v.  Xational 
Capitol  Life  Ins.  Co.,  52  Mo.  213, 14  Am. 
Rep.  414;  Bograt  v.  Thomp.so7i,  53  N.  Y. 
Supp.  622,  24  Misc.  581;  Taylor  v. 
Travelers'  Ins.  Co.,  15  Tex.  Civ.  App. 
254,  39  S.  W.  185;  Opitz  v.  Karel,  118 
Wis.  .527,  95  N.  W.  948.  A  father  has 
an  insurable  interest  in  the  life  of  his 
minor  .son,  Loom  is  v.  Ins.  Co.,  6  Gray 
(Mass.),  396;  Mitchell  v.  Union  Life 
Ins.  Co.,  45  Me.  104,  71  Am.  Dec.  529; 
Grattan  v.  National  L.  his.  Co.,  15 
Hun  (N.  Y.).  74.  Indeed,  it  has  been 
held  by  some  courts  in  this  country 
that  children  generally,  without  regard 
to  age  or  position,  have  such  an  interest 
in  a  father's  life.  Reserve  Mid.  Ins.  Co. 
V.  Kane,  81  Pa.  St.  1.54,  22  Am.  Rep. 
741;  Valley  Mid.  L.  Assn.  v.  Teewalt, 
79  Va.  421,  423.  See  also  Washington 
Cent.  Nat.  Bk.  v.  Hume,  128  U.  S.  195, 
205,  9  S.  Ct.  41 ,  32  L.  Ed.  370, 16  Wash. 
L.  Rep.  777;  Warnock  v.  Davis,  104 
U.  S.  775,  26  L.  Ed.  924  (parent  in 
child  or  child  in  parent ) .  Holmes  v.  Gil- 
man,  138  N.  Y.  369.  34  N.  E.  205,  20 
L.  R.  A.  566,  34  Am.  St.  R.  463  (parent 
in  child  or  child  in  parent).  Daughter 
has  insurable  interest  in  father's  lifp. 
Farmers'  &  Traders'  Bk.  v.  Johnson, 
118  Iowa,  282,  91  N.  W.  1074,  citing 
many  cases,  but  daughter's  policy  on 
father's  life  taken  out  without  his 
knowledge  or  consent  held  void, 
Metropolitan  L.  Ins.  Co.  v.  Blesch,  22 
Ky.  L.  Rep.  530,  58  S.  W.  436.    That 


child  has  no  insurable  interest  in  life  of 
mother  where  there  is  no  liability  for 
support,  etc.,  see  People's  Mid.  Ben. 
Soc.  V.  Templeton,  16  Ind.  App.  126, 
44  N.  E.  809.  Son  must  aver  some  rea- 
sonable expectation  of  pecuniary  bene- 
fit in  mother's  life,  People's  Mut.  Ben. 
Soc.  V.  Templeton,  16  Ind.  App.  260, 
44  N.  E.  809,  811.  Held,  under  English 
statute,  that  a  son's  mere  relationship 
does  not  impose  upon  him  .such  an  ex- 
pectation of  having  to  pay  his  mother's 
funeral  expenses  as  to  give  him  an  in- 
surable interest  in  her  life,  Harse  v. 
Peorl  L.  A.s.swr.  Co.,  72  L.  J.  K.  B.  638, 
89  Law  T.  94  (1903),  2  K.  B.  92,  re- 
vensed  on  another  point  in  (1904),  1 
K.  B.  558,  court  holding  that  premi- 
luns  could  not  be  recovered  back  if 
contract  was  illegal  and  parties  in  pari 
delicto.  In  this  case  the  policy  was 
worded  "son  for  funeral  expenses." 
A  liability  for  support  under  the  poor 
laws  may,  however,  give  an  insurable 
interest  in  a  parent's  life,  Reserve  Mut- 
Ins.  Co.  V.  Kane,  81  Pa.  St.  155,  22  Am. 
Rep.  741.  But  see  Mut.  Ben.  Soc.  v. 
Templeton,  16  Ind.  App.  260,  44  N.  E. 
809,  811;  Life  Ins.  Clearing  Co.  v. 
O'Neill,  106  Fed.  800,  45  C.  C.  A.  641, 
54  L.  R.  A.  225. 

i  Opitz  V.  Karel,  118  Wis.  527,  95 
N.  W.  948  (an  interesting  case,  decid- 
ing also,  that  a  gift  of  the  policy  to  the 
lady  was  complete  without  written 
assignment,  and  was  effective  without 
the  company's  consent). 

2  Berdan  v.  Mil.  Mut.  Life  Ins.  Co., 
136  Mich.  396,  99  N.  W.  411. 

3  Lord  V.  Ball,  12  Mass.  115,  7  Am. 
Dec.  38;  Carpenter  v.  U.  S.  Life  Ins. 
Co.,  161  Pa.  St.  9,  28  Atl.  943,  23 
L.  R.  A.  571,  41  Am.  St.  R.  880  (child 
in  life  of  benefactor).  Cronin  v.  Ver- 
mont L.  Ins.  Co.,  20  R.  I.  570,  40  Atl. 
497  (niece  under  moral  obligations  to 
£«jT5port  aunt) .  Barnes  v.  London,  Edin- 
burgh &  Glasgow  L.  Ins.  Co.,  Law  Rep. 
(1892),  1  Q.  B.  D.  864  (understanding 
that  stepsister  should  be  supported. 
held,  a  sufficient  pecuniary  interest). 


CREDITOR    L\    LIFE   OV    DEBTOK 


45 


The  interest  which  one  has  in  his  own  hfe,  being  incapable  of 

exact  pecuniary  estimate,  may  be  valued  at  any  amount  which  the 
parties  agree  upon,  and  so  generally  of  all  insurable  interests  which 
are  founded  upon  relationship.^ 

§  36.  Creditor  in  Life  of  Debtor. — The  rule  is  well  settled  that 
a  creditor  has  an  insurable  interest  in  the  life  of  his  debtor  ^ 
which  is  said  to  survive  a  discharge  in  bankruptcy  ^  or  general  as- 
signment for  creditors."*  And  the  rule  applies  whether  the  creditor 
is  assignee  or  insures  his  debtor's  life;^  and  although  the  debt  is 
voidable,^  or  not  enforceable  on  account  of  the  statute  of  limita- 
tions.'^ 

In  a  recent  case  a  nephew,  an  agent  for  life  insurance  companies, 
agreed  with  his  uncle  and  his  uncle's  children  to  take  out  and  main- 
tain $25,000  of  insurance  upon  the  uncle's  life,  the  children  to  have 
an}'  balance  of  insurance  money  after  return  to  the  nephew  of  the 
amount  of  premiums  and  interest  thereon,  together  with  a  bonus  to 
him  of  $5,000.  The  uncle  joined  in  and  signed  the  application  and 
also  gave  to  the  nephew  promissory  notes  under  seal,  not  for  a  past 


1  Bcvin  V.  Conn.  Mid.  Life  Infi.  Co., 
23  Conn.  244. 

2  Walker  v.  Larkin,  127  Ind.  100,  26 
N.  E.  684  (a  judgment  creditor).  Bel- 
knap  V.  Johnston,  114  Iowa,  26.5,  86 
N.  W.  267;  Hale  v.  Life  Ind.  &  Invest- 
ment Co.,  65  Minn.  .548,  68  N.  W.  182; 
Goodwin  v.  Ma.ss.  Mid.  Life  Ins.  Co., 
73  N.  Y.  480;  Mace  v.  A.^.'iociation,  101 
N.  C.  122,  7  S.  E.  674;  Ulrich  v.  Rei- 
noehl,  143  Pa.  St.  238,  28  W.  N.  C.  419, 
13  L.  R.  A.  433,  24  Am.  St.  R.  534, 
22  Atl.  862;  Shaffer  v.  Spongier,  144 
Pa.  St.  223,  22  Atl.  865. 

3  Ferguson  v.  Mass.  Mid.  Life  Ins. 
Co.,  32  Hun,  306,  aff'd  102  N.  Y.  647; 
Mutual  Res.  Fund  L.  Assn.  v.  Bcatty, 
93  Fed.  747,  756,  35  C.  C.  A.  573,  after 
discharge  in  bankruptcy  and  new 
promise  to  pay. 

•>  Manhattan  Life  Ins.  Co.  v.  Hen- 
nessy,  99  Fed.  64,  39  C.  C.  A.  625. 

5  First  Nat.  Bk.  v.  Terni,  99  Va.  194, 
37  S.  E.  843,  3  Va.  Sup.  Ct.  Rep.  125. 
See  Morris  v.  Georgia  Sav.  &  Bkg.  Co., 
109  Ga.  12,  34  S.  E.  378;  46  L.  R.  A. 
506;  Gordon  v.  Ware  Nat.  Bk.,  132 
Fed.  444,  446,  65  C.  C.  A.  580.  Com- 
pare Equitable  L.  Ins.  Co.  v.  Hazleivood, 
75  Tex.  338,  16  Am.  St.  R.  893,  12  S. 
W.  621,  7  L.  R,  A.  217. 


^  Rivers  v.  Gregg,  5  Rich.  Eq.  (S.  C.) 
274. 

7  Rawls  V.  Amer.  Mut.  Life  Ins.  Co., 
27  N._  Y.  282,  84  Am.  Dec.  280.  Insur- 
able interest  must  not  be  based  upon  a 
mere  moral  claim.  Guardian  M.  L. 
Ins.  Co.  V.  Hogna,  80  111.  35,  22  Am. 
Rep.  180.  Nor  has  a  community  cred- 
itor such  an  interest  in  the  life  of  his 
debtor's  wife,  where  there  is  no  personal 
liability  against  her,  Cameron  v.  Bar- 
cus,  31  Tex.  Civ.  App.  46,  71  S.  W.  423. 
See  Wheeland  v.  Atwood,  192  Pa.  St. 
237,  44  W.  N.  C.  386,  73  Am.  St.  R. 
803,  43  Atl.'  946  (as  to  assignments  by 
wife  to  husband  and  by  him  to  his  own 
creditor) .  A  creditor  of  an  infant,  how- 
ever, for  necessaries  sold  to  him  has  an 
insurable  interest  in  his  life,  Rivers  v. 
Gregg,  5  Rich.  Eq.  (S.  C.)  274.  So  a 
voidable  note  given  for  a  debt  con- 
tracted during  the  minority  of  the 
debtor  is  sufficient  to  give  an  insurable 
interest,  because  the  infant  alone  can 
avoid  the  note,  Dwyer  v.  Eais,  Park 
on  Ins.  432.  A  creditor  of  a  co- 
partnership has  also  an  insurable  in- 
terest in  the  life  of  each  copartner, 
Morrell  v.  Trenton  Mid.  L.  and  F.  Ins. 
Co.,  10  Cush.  (Mass.)  282,  57  Am.  Dec. 
92;  Kennedy  v.  N.  Y.  Life  Ins.  Co.,  10 
La.  Ann.  809. 


Ml  GENERAL    PHlNCHMvES   UF    JNSUHAXCE    LAW 

indebtedness,  but  apparently  to  evidence  an  insurable  interest  in 
the  nephew.  The  policy  sued  upon,  $10,000  in  amount,  was  in 
terms  payable  to  the  nephew  alone,  and  was  taken  out  by  him  two 
years  after  execution  of  the  agreement  in  order  to  replace  policies 
of  like  amount  in  bankrupt  companies  payable  to  him  and  his  cousins. 
By  that  time  the  nephew  had  actually  paid  out  about  $2,000  for 
l)remiums  under  the  agreement,  in  part  performance  of  which  the 
new  insurance  was  obtained.  The  court  held  that  the  policy  was 
altogether  valid  and  that  the  children,  all  of  whom  had  intervened 
in  the  action  brought  by  the  nephew  against  the  insurance  com- 
pany, were  entitled  to  their  share  of  the  proceeds,  and  that  the 
nephew  was  entitled  to  his  share  in  pursuance  of  the  family  arrange- 
ment described.^ 

§  37.  Same — To  What  Amount. — As  to  the  amount  of  insurance 
which  shall  be  permitted  in  proportion  to  the  amount  of  the  debt, 
the  views  of  different  courts  are  not  in  harmony.  Insurance  limited 
to  the  face  of  the  indebtedness,  if  such  indebtedness  remained  un- 
paid, would  fall  short  of  indemnifying  the  creditor  by  the  sum  total 
of  the  premiums  paid  with  interest  thereon,  and  many  courts  have 
expressed  the  opinion  that  the  creditor  should  be  allowed  to  provide 
for  an  amount  of  insurance  sufficient  when  collected  to  cover  his 
debt,  together  with  such  expense  as  may  be  required  to  keep  the 
policy  in  force  and  interest  also.^  But  the  practical  embarrass- 
ment in  applying  this  plausible  test  is  twofold;  first,  the  validity  of 
the  contract  should  be  determined  according  to  the  motives  of  the 
parties  and  the  prospect  as  viewed  at  its  date  rather  than  after  the 
death  of  the  insured;  ^  and,  second,  the  total  amount  of  premiums 
as  thus  viewed  with  interest  thereon  will  always  exceed  the  whole 
face  of  the  policy  no  matter  how  large  or  how  small  the  amount  of 

1  Reed  v.  Prov.  S.  L.  Assur.  Soc,  36  -  Crotty  v.  Union  Mut.  Life  Ins.  Co., 

App.  Div.  250,  55  N.  Y.  Supp.  292.  144  U.  S.  621,  12  S.  Ct.  749,36  L.  Ed. 

Compare  a  case  in  which  a  creditor,  566;  Wheeland  v.  Atwood,  192  Pa.  St. 

the  sole  payee  named  in  poUcy,  was  237,  44  W.  N.  C.  386,  73  Am.  St.  R. 

regarded  as  trustee  for  wife  of  insured,  803,  43  Atl.  946;    Ulrich  v.   Reinoehl, 

A.  L.  &  H.  Ins.  Co.  v.  RoheHshaw,  26  143 Pa.  St.  238, 28  W.  N.  C.  419, 13  L.  R. 

Pa.  St.  189.     And  compare  two  other  A.  433,  24  Am.  St.  R.  534,  22  Atl.  862; 

cases  in  which  there  had  been  no  prom-  Equitable  Life  Ins.  Co.  v.  Hazehmod,  75 

ise  by  the  insured  to  repay  the  pre-  Tex.  338,  12  S.  W.  621,  7  L.  R.  A.  217, 

miums  to  the  person  who  took  out  the  16  Am.  St.  R.  893;  First  Nat.  Bank  v. 

insurance  an<l  in  which  the  insurance  Terry,  99  Va.  194,  37  S.  E.  843. 

was  for  the  benefit  in  part  of  himself  3  Conn.  Mut.  Life  Ins.  Co.  v.  Lucks, 

and  in  part  of  wife  of  the  insured.  West  108  U.  S.  498,  2  S.  Ct.  949,  27  L.  Ed. 

V.  Sanders,  104  Ga.  727,  31  S.  E.  619,  8'}0;  Curtiss  v.  ,€t7ia  Life  Ins.  Co.,  90 

held   void;    Burbage   v.    Windley,    108  Cal.  245,  27  Pac.  211,  25  Am.  St.  R. 

N.  C.  357,  12  S.  E.  839,  12  L.  R.  A.  114,    further   advances   were   contem- 

400,  held  void.  plated,  policy  valid. 


CEEDITOR   IN   LIFE   OF   DEBTOR — TO   WHAT   AMOUNT  47 

insurance,  leaving  to  the  creditor  nothing  at  all  to  apply  upon  the 
debt.^ 

On  the  other  hand,  to  permit  the  creditor  to  take  out  insurance, 
greatly  in  excess  of  the  debt,  offers  a  clear  inducement  to  the  creditor 
to  shorten  the  debtor's  life  and,  therefore,  contravenes  a  recognized 
principle  of  public  policy.^ 

Two  inconsistent  rules  have  been  evolved  from  the  considerations 
just  mentioned.  One  may  be  called  the  Texas  rule  which  allows  the 
creditor  to  take  out  as  much  insurance  as  he  pleases,  but  limits  his 
interest  in  the  recovery  to  the  amount  of  debt,  premiums,  and  in- 
terest upon  premiums,  any  balance  to  inure  to  the  benefit  of  the 
debtor,  for  whom  he  is  looked  upon  as  trustee  to  that  extent.^ 
This  rule  though  simple  is  open  to  the  grave  objection  that  its  appli- 
cation may  deprive  the  creditor  of  the  whole  or  a  large  portion  of 
the  insurance  on  which  he  alone  has  paid  the  premiums,  and  may 
turn  it  over  to  one  who  is  altogether  a  stranger  to  the  contract  of 
insurance. 

The  other  rule  has  been  adopted  by  the  United  States  Supreme 
Court.  It  provides,  though  more  indefinitely,  that  the  creditor's 
insurance  must  not  so  largely  exceed  the  amount  of  the  debt  as  to 
indicate  a  wagering  contract  rather  than  a  bo7ia  fide  effort  to  obtain 
security  for  the  indebtedness."* 

1  Exchange  Bank  \.  Loh,10i  Ga.  446,  Laplante,  67  N.  H.  118,  36  Atl.  981: 
471,  472,  31  S.  E.  459,  44  L.  R.  A.  372,  Riner  v.  Riner,  166  Pa.  St.  617,  31  Atl. 
Little,  J.,  exposes  the  fallacy  of  the      437,  45  Am.  St.  R.  693. 

doctrine  that  the  insurable  interest  is  ^  Carnmack  v.  Lewis,  15  Wall.  643, 

limited  to  the  amount  of  the  debtor's  21  L.  Ed.  244  (policy  held  void  where 

liability.     Where  the  policy  is  taken  debt  was  $70.00  and  policy  $3,000). 

out  by  the  debtor  and  assigned  to  the  Rittler  v.  Smith,  70  Md.  261,  16  Atl. 

creditor  as  collateral,  the  interest  of  890,  2  L.  R.  A.  844  (insurance  in  mu- 

the  assignee  is  limited   to   the  debt,  tuals    $6,500,   collection   $2,124,  debt 

Morris  v.  Georgia  Sav.  &  Bkg.  Co.,  109  $1,000,  held  valid).     Givens  v.  Veeder,  9 

Ga.    12,   34  S.    E.   378,   46   L.   R.   A.  N.    M.   256,   50   Pac.   316;    Talbert  v, 

506.  Storum,  7  App.   Div.   456,  39  N.  Y. 

2  Reg.  V.  Flanagan,  15  Cox  Cr.  Cas.  Supp.  1047;  Appeal  of  Corson,  113  Pa. 
411.  Defendant,  poisoned  her  debtors  St.  438,  6  Atl.  213,  57  Am.  Rep.  479 
after  insuring  their  lives.  (policy  for  $2,000    valid,  debt   $743). 

^Cheeves   v.    Anders,   87   Tex.   287,  Grani  v. /i:Z?:ne,  115  Pa.  618,  9  Atl.  150 

28   S.   W.   274,   47   Am.    St.    R.    107:  (poUcy  for  $3,000  valid,  debt  $743). 

Equitable  Life  his.  Co.  V.  Hazleii'ood.7o  Cooper   v.    Weaver's   Adrn.,   (Pa.    St.) 

Tex.  338,  16  Am.  St.  R.  893,  12  S.  W.  11   Atl.   780,  and  Cooper  v.  Shaeffer, 

621,  7  L.  R.  A.  217;  Schonfield  v.  Titr-  20  W.   N.   C.    (Pa.)    123,  11   Atl.  548 

ner,  75  Tex.  324,  12  S.  W.  626,  7  L.  R.  (pohcyfor  $3,000  void,  debt  $100).   The 

A.  189;  Mut.  Life  Ins.  Co.  v.  Blodgett,  Pennsylvania    court    has   also    formu- 

8  Tex.  Civ.  App.  45,  27  S.  W.  286;  lated  the  rule  that  the  creditor  may 

Morris  v.  Georgia  L.  S.  &  B.  Co.,  109  insure  his  debtor's  life  in  an  amount 

Ga.  12,  34  S.  E.  378,  46  L.  R.  A.  506;  equal   to   the  debt  together  with  all 

Strobe  v.  Meyer  Bros.  Drug    Co.,  101  premiums  according  to  Carlisle  Tables 

Mo.  App.  627,  74  S.  W.  379;  and  see  to  of  expectancy  and  interest  on  debt  and 

similar  effect,  Weigelman  v.   Bromjer.  premiums,    Wheeland  v.   Atwood,    192 

96  Ky.  132,  28  S.  W.  334;  Lanoiietfr  v.  Pa.  St.  237, 44  W.  N.  C.  386,  43  Atl.  946, 


48 


GENERAL    PRINCIPLES   OF   INSURANCE    LAW 


§  38.  Other  Business  Relations.— Any  property  or  commercial 
relationship  may  lawfully  be  the  subject  of  an  insurable  interest. 
Thus,  one  holding  a  property  interest  contingent  upon  another's 
arriving  at  a  specified  age  may  insure  against  the  loss  that  he  would 
suffer  by  the  earlier  termination  of  the  other  life.^ 


73  Am.  St.  R.  803;  McHale  v.  Mc- 
Donnell, 175  Pa.  St.  632,  34  AtL  960; 
Shaffer  v.  Spangler,  144  Pa.  St.  223,  22 
Atl.  865;  Ulrich  v.  Rcinoehl,  143  Pa.  St. 
238,  28  W.  N.  C.  419,  22  Atl.  862,  13 
L.  R.  A.  433,  24  Am.  St.  R.  534; 
arant's  Adm.  v.  Kline,  1 15  Pa.  St.  618, 9 
Atl.  150.  Thi.s  rule  is  impracticable 
and  would  allow  a  policy  no  matter 
how  large  inasmuch  as  the  amount  of 
premiums  and  interest  by  the  tables 
always  exceeds  the  amount  of  the 
policy.  Fallacy  in  Pennsylvania  rule 
explained  in  Exchange  Bank  v.  Luh, 
104  Ga.  446,  31  S.  E.  459,  44  L.  R.  A. 
372,  by  Little,  J. 

1  Law  V.  Policy  Co.,  3  Eq.  338,  1  Kay 
&  J.  223.  For  the  same  reason  an 
employer  may  take  out  accident  in- 
surance to  protect  himself  from  loss  by 
reason  of  his  liability  for  the  negli- 
gence of  his  employees  in  engines,  cars, 
vehicles  of  any  sort,  elevators,  and  in 
the  use  of  machinery  and  so  forth, 
Am.  Employers'  Liability  Ins.  Co.  v. 
Fordyce,  62  Ark.  562,  36  S.  W.  1051, 
54  Am.  St.  R.  305;  Employers'  Lia- 
bility Assur.  Corp.  v.  Merrill,  155 
Mass.  404,  29  N.  E.  529.  A  tenant  of  a 
landlord  who  has  only  a  life  interest  in 
the  premises  demised  may  insure  the 
landlord's  life.  Sides  v.  Knicker- 
bocker Life  Ins.  Co.,  16  Fed.  650. 
Some  of  those  pecuniarily  interested  in 
the  preparations  for  the  coronation  of 
the  King  of  England  insured  his  life. 
So  also  a  partner  has  an  insurable  in- 
terest in  the  life  of  a  copartner,  Conn. 
Mut.  Life  Ins.  Co.  v.  Luchs,  108  U.  S. 
498,  27  L.  Ed.  800,  2  S.  Ct.  949;  Mut. 
Life  Ins.  Co.  v.  Armstrong,  117  U.  S. 
591 ,  6  S.  Ct.  877, 29  L.  Ed.  997;  but  the 
wife  of  a  partner  has  no  such  interest 
Met.  Life  Ins.  Co.  v.  O'Brien,  92  Mich. 
584;  52  N.  W.  1012;  but  compare 
Pou-ell  v.  Mut.  Ben.  L.  Ins.  Co.,  123 
N.  C.  103,  105,  31  S.  E.  381,  68  Am. 
St.  R.  818.  So  in  case  of  joint  venture. 
Miller  v.  Eagle  Life  cfe  Health  Ins.  Co., 
2  E.  D.  Smith  (N.  Y.),  268;  Bevin  v. 
Conn.  Mut.  L.  Ins.  Co.,  23  Conn.  244; 
Mitchell  V.  Union  Life  Ins.  Co.,  45 
Me.  104,  71  Am.  Dec.  529;  Trenton 
Mvt.  L.  &  F.  In.'<.  Cu.  v.  JolwHon,  24 


N.  J.  L.  576.  A  clerk  in  life  of  em- 
ployer, inaster  in  life  of  servant, 
Ilebdon  v.  West,  3  Best  &  Smith,  578; 
Ilillinrd  v.  Sanford,  6  Ohio  Dec.  449, 
4  Ohio  N.  P.  363.  Master  in  life  of  his 
slave,  Summers  v.  United  States  Ins. 
Annuity  &  Tr.  Co.,  13  La.  Ann.  504; 
Woadfin  V.  Ashcville  Mut.  Ins.  Co.,  51 
N.  C.  558.  A  surety  on  a  bond  in  the 
life  of  the  )>rincipal,  though  no  breach 
of  tlie  bond  occur,  Scott  v.  Dickson,  108 
Pa.  St.  6,  56  Am.  Rep.  192;  Embry  v. 
Harris,  107  Ky.  01,  52  S.  W.  958; 
Hebdon  v.  West,  3  Best  &  Smith,  579; 
Branford  v.  Saunders,  25  Weekly  Re- 
porter, 650;  but  the  principal  has  no 
such  interest  in  the  life  of  the  surety 
and  therefore  the  fact  that  a  member 
is  surety  for  a  building  association 
does  not  give  the  corporation  an  in- 
surable interest  in  his  life  if  he  is  not 
indebted  to  it,  Tate  v.  Building  Assn. 
97  Va.  74,  33  S.  E.  382,  45  L.  R.  A. 

243,  75  Am.  St.  R.  770.  It  cannot  be 
held,  however,  as  matter  of  law,  that 
one  who  is  furnishing  funds  to  carry 
on  the  business  of  a  corporation  has 
no  insurable  interest  in  the  life  of  its 
manager  and  promoter.  Mechanics' 
Nat.  Bk.  v.  Comi7is,  72  N.  H.  12,  55 
Atl.  191,  101  Am.  St.  R.  650.  It  is 
reported  that  some  of  the  stockholders 
in  companies  financed  by  Mr.  J.  P. 
Morgan  have  taken  out  insurance  upon 
his  life.  In  North  Carolina  held  that  a 
denominational  college  sustained  and 
controlled  by  the  Methodist  church 
has  no  insurable  interest  in  the  Ufe  of 
a  member  of  that  church.  Trinity 
College  v.  Travelers'  Ins.  Co.,  113  N.  C. 

244,  18  S.  E.  175,  22  L.  R.  A.  291  (the 
question  arises  whether  the  policy 
should  not  have  been  held  valid  inas- 
much as  the  insured  himself  made  the 
application  for  it.  This  point  was  con- 
sidered but  not  passed  upon  in  Reed 
V.  Prov.  S.  L.  Assur.  Soc,  36  App.  Div. 
250,  55  N.  Y.  Supp.  292).  A  policy 
taken  out  by  one  "as  protector  of  the 
insured  whenever  he  stood  in  need  of 
protection"  gives  no  insurable  inter- 
est. Anctil  V.  Manufacturers  L.  Ins. 
Co.,  L.  R.  (1899),  App.  Gas.  604; 
§  2590,  Civ.  Code  Lower  Can.     An  ae- 


INSURABLE   INTEREST — AIARINE 


40 


§  39.  Insurable  Interest — Marine. — The  same  general  prin- 
ciples are  applicable  as  in  fire  insurance.  Thus,  the  owner  of  a 
vessel  has  in  all  cases  an  insurable  interest  in  it,  even  when  it  has 
been  chartered  by  one  w-ho  covenants  to  pay  him  its  value  in  case 
she  is  lost  during  the  voyage.^  So  also  the  charterer  has  an  in- 
surable interest  in  the  vessel,-  and  anyone  interested  in  cargo  **  or 
in  freight  may  insure  his  interest.^ 


signee  in  bankruptcy,  Re  McKinncy, 
15  Fed.  535,  or  under  an  assignment 
for  creditors,  Barbour's  Adm.  v.  Larue's 
Assiq7}ee,  106  Ky.  54G,  51  S.  W.  5,  has 
no  insurable  interest  in  the  life  of  the 
insolvent. 

1  Hobbs  V.  Hannarn , 3  Camp.  93.  And 
though  vessel  is  not  enrolled  in  his  own 
name,  McColdin  v.  Greenwich  Ins.  Co., 
10  N.  Y.  St.  R.  390;  and  see  Oliver  v. 
Greene,  3  Mass.  133,  3  Am.  Dec.  96 
(plaintiff  owned  one-half  and  was  re- 
sponsible for  other  half);  Kenny  v. 
Clarkson,  1  Johns.  (N.  Y.)  385,  3  Am. 
Dec.  336,  holding  that  the  owner, 
though  there  be  a  bottomry  bond,  may 
insure  his  interest  generall}%  but  the 
holder  of  the  bond  must  insure  his  in- 
terest eo  nomine.  International  Marine 
Im.  Co.  V.  Winsmore,  124  Pa.  St.  61,23 
W.  N.  C.  204,  16  Atl.  516  (owners  in 
joint  venture  with  lien  for  advances). 
The  insurable  interest  of  the  owner  of 
a  ship  hypothecated  by  bottomry  is 
only  the  excess  of  its  value  over  the 
amount  secured  by  bottomry.  The 
lender  on  bottomry  may  insure  his  in- 
terest in  the  ship  to  the  amount  of  the 
loan,  Robertson  v.  United  Ins.  Co.,  3 
Johns.  Cas.  (N.  Y.)  499;  Read  v.  Mat. 
Safety  Ins.  Co.,  5  N.  Y.  Super.  Ct.  54; 
Smith  V.  Williams,  2  Caine's  Cas.  (N. 
Y.)  110. 

2  The  Gulnare,  42  Fed.  861.  And  a 
charterer  agreeing  to  keep  vessel  in- 
sured, Bartlett  v.  Walter,  13  Mass.  267, 
7  Am.  Dec.  143. 

^Wiggin  v.  Mercantile  Ins.  Co.,  7 
Pick.  (Mass.)  271 ;  Prov.  Wash.  Ins.  Co. 
v.  The  Sidney,  23  Fed.  88;  Pouverin  v. 
La.  State  M.  &  F.  Ins.  Co.,  4  Rob. 
(La.)  234. 

^  Clark  V.  Ocean  Ins.  Co.,  16  Pick. 
(Mass.)  289;  Adams  v.  Warren  Ins.  Co., 
22  Pick.  (Mass.)  163;  McGraw  v. 
Ocean  Ins.  Co.,  23  Pick.  (Mass.)  405; 
Gordon  v.  Am.  Ins.  Co., 4  Denio  (N.  Y.), 
360  (though  goods  not  yet  laden 
aboard).  Williams  v.  Ins.  Co.,  1  Hilt. 
(N.    Y.)    345;    Riley    y.    Delaficld,    7 


Johns.  (N.  Y.)  522  (no  insurable  in- 
terest). The  owners  may  insure  freight 
.  though  the  vessel  sail  under  a  charter 
party,  Hodgson  v.  Mississippi  Ins. 
Co.,  2  La.  341;  Adayns  v.  Warren  Ins. 
Co.,  22  Pick.  (Mass.)  163.  The 
charterer  may  also  insure  it.  Barber 
V.  Fleming,  L.  R.  5  Q.  B.  59.  The  in- 
sured may  hold  either  a  legal  or  an 
equitable  title  or  no  title  at  all  to  the 
property  insured,  Locke  v.  Xorth 
Am.  his.  Co.,  13  Ma.ss.  61  (different  in- 
terests may  be  insured  and  sometimes 
each  to  full  value  of  property) ;  and  see 
Xorth  Brit.  &  M.  Ins.  Co.  \\  L.  &  L.  & 
G.  Ins.  Co.  (1877),  5  Ch.  D.  569. 
Mortgagor  may  insure,  Wilkes  v. 
People's  Fire  his.  Co.,  19  N.  Y.  184 
(though  mortgage  cover  full  value) 
Higginson  v.  Dall,  13  Mass.  96  (vessel) 
Schultz  V.  Pacific  Ins.  Co.,  14  Fla. 
73  (freight  pledged).  ^Mortgagees  may 
insure  Clark  v.  Wa.skington  Ins.  Co., 
100  Mass.  509,  1  Am.  Rep.  135.  Also 
vendor  under  executory  contract. 
Bell  V.  Western  Mar.  &  F.  Ins.  Co.,  5 
Rob.  (La.)  423.  39  Am.  Dec.  542; 
Gordon  v.  Mass.  F.  &  M.  Ins.  Co.,  2 
Pick.  (Mass.)  249;  Slocovich  v.  Oriental 
Mut.  Ins.  Co.,  13  Daly  (N.  Y.),  264. 
Also  vendee  though  title  has  not 
passed.  Rider  v.  Ocean  Ins.  Co.,  20 
Pick.  (Mass.)  259;  Kenny  v.  Clarkson, 
1  Johns.  (N.  Y.)  385,  3  Am.  Dec.  336. 
And  though  contract  is  oral  or  voida- 
ble, Amsinck  v.  Am.  Ins.  Co.,  129 
Mass.  185.  Similarly  vendees  of  goods 
who  will  get  title  to  them,  only  on  their 
delivery  have  an  insurable  interest  in 
them,  though  contract  be  "no  arrival 
no  sale,"  Harrison  v.  Fortlage,  161 
U.  S.  57,  16  S.  Ct.  488,  40  L.  Ed.  616. 
A  stockholder  in  the  company  has  an 
insurable  interest  in  its  steamers. 
Seaman  v.  Enterprise  F.  &  M.  Ins. 
Co.,  18  Fed.  250,  21  Fed.  778.  And 
even  in  shipments  on  its  steamers, 
Mannheim  Ins.  Co.  v.  Hollander,  112 
Fed.  549. 


50 


GENERAL   PRINCIPLES   OF   INSURANCE  LAW 


Any  lien  or  interest  in  the  nature  of  a  lien  for  advances  for  repairs 
or  for  other  purposes  will  give  an  insurable  interest.^ 

A  person  may  insure  to  protect  his  own  property  or  he  may  insure 
in  a  representative  capacity  for  the  protection  of  the  interests  of 
others,  as  where  a  charterer  takes  out  insurance  for  the  benefit  of 
himself  and  the  owner,^  or  where  an  agent  ^  or  carrier  insures  his 
own  interest  or  liability  and  for  whom  it  may  concern.'' 


§  40.  Payee    of     Life    Policy    Need    Have    no    Insurable   Inter- 

est._By  the  weight  of  authority  a  person  taking  out  insurance 
upon  his  own  life  may  be  trusted  to  designate  in  his  discretion  any 
person  whatever  as  beneficiary,  whether  such  beneficiary  have  an 
insurable  interest  or  not,^  provided  the  transaction  is  not  a  mere 


1  Merchants'  Mid.  Mar.  Ins.  Co.  v. 
Baring,  20  Wall.  (U.  S.)  159,  22  L.  Ed. 
250;  PhoFnix  Ins.  Co.  v.  Parsons,  129 
N.  Y.  86,  29  N.  E.  87.  A  surety  liable 
to  value  of  cargo  in  case  of  condemna- 
tion by  court  has  an  insurable  interest 
therein,  Russell  v.  Union  Ins.  Co.,  1 
Wash.  C.  C.  409,  4  Dall.  421,  Fed.  Cas. 
No.  12,146,  1  L.  Ed.  892.  So  also  a 
person  giving  a  bond  for  release  of  an 
attached  vessel,  Firemen's  Ins.  Co.  v. 
Powell,  13  B.  Mon.  (Ky.)  311.  But 
advances  voluntarily  made  without 
authority  may  give  no  insurable  in- 
terest, China  Mid.  Ins.  Co.  v.  Ward, 
59  Fed.  712,  8  C.  C.  A.  229,  20  U.  S. 
App.  292;  Buchanan  v.  Ocean  Ins.  Co., 
6  Cow.  (N.  Y.)  318;  and  see  Lee  v. 
Barreda,  16  Md.  190.  Supercargo  has 
an  insurable  interest  to  extent  of  his 
commissions,  N.  Y.  Ins.  Co.  v.  Rob- 
inson, 1  Johns.  (N.  Y.)  616.  Master 
with  commisr.ion  on  cargo,  Holbrook 
v.  Brown,  2  Mass.  280.  Commission 
merchant  consignee  of  cargo,  Putnam 
V.  Mercantile  Mar.  Ins.  Co.,  5  Mete. 
(Mass.)  386.  Assignee  of  commission, 
Wells  V.  Phila.  Ins.  Co.,  9  Serg.  &  R. 
(Pa.)  103. 

2  Compare  §  29.  Murdoch  v.  Frank- 
lin Ins.  Co.,  33  W.  Va.  407,  10  S.  E. 
777.  7  L.  R.  A.  572. 

a  Buck  V.  Chesapeake  Ins.  Co.,  1  Pet. 
(U.  S.)  151,  7  L.  Ed.  90.  But  agent 
without  personal  interest  must  not 
insure  on  his  own  account  or  as  owner. 
Sawyer  v.  Mayheiv,  51  Me.  398. 

4  Van  Natta  v.  Mut.  Sec.  Ins.  Co.,  2 
Sandf.  (N.  Y.)  490;  Cunard  S.  Co.  v. 
Marten  (1902),  2  K.  B.  624;  The  Syd- 
ney, 23  Fed.  88.  Independent  insur- 
able interests  may  exist  at  the  same 


time  in  the  same  property.  Thus,  be- 
sides the  owner  of  a  cargo,  a  consignee 
with  lien  on  it  for  advances,  Ebsworth 
V.  Alliance  Mar.  Ins.  Co.  (1873),  L.  R. 
8  C.  P.  596;  the  insurer  of  the  cargo, 
§  33;  the  carrier  who  transports  it, 
Cunard  S.S.  Co.  v.  Marten  (1903),  2 
K.  B.  511,  have  each  a  separate  in- 
surable interest  in  the  cargo. 

5  Where  insurance  is  taken  out  by 
third  parties,  the  insured  person  must 
almost  always  practically  join  in  the 
application  by  submitting  to  a  medical 
examination.  The  New  York  Supreme 
Court  has  raised  the  interesting  and 
important  query  whether  joining  in 
the  application  of  another  is  not  legally 
equivalent  to  the  voluntary  appoint- 
ment of  a  beneficiary  in  a  policy  taken 
out  by  the  insured  himself.  The 
learned  justice,  now  chief  justice  of  the 
Court  of  Appeals,  could  find  no  sub- 
stantial difference.  Reed  v.  Prov.  Sav. 
Life  A,9sur.  Soc,  36  App.  Div.  250, 
55  N.  Y.  Supp.  292;  Conn.  Ins.  Co.  v. 
Schaefer,  94  U.  S.  457,  460,  24  L.  Ed. 
251  (for  benefit  of  a  relative  or  friend). 
Jitna  L.  Ins.  Co.  v.  France,  94  U.  S. 
561,  24  L.  Ed.  287,  for  benefit  of  sister. 
Foster  v.  Preferred  Ace.  Ins.  Co.,  125 
Fed.  536,  a  brother.  U.  S.  Mid.  Ace. 
Assn.  V.  Hodgskin,  4  App.  D.  C.  516; 
Merchants'  L.  Assn.  v.  Yoakum,  98 
Fed.  251,  39  C.  C.  A.  56;  Am.  Life  Ins. 
Co.  V.  Barr,  68  Fed.  873,  32  U.  S.  App. 
444,  16  C.  C.  A.  51  (accident  policy). 
Allen  V.  Hartford  L.  Ins.  Co.,  72  Conn. 
693,  45  Atl.  955;  Union  Fraternal 
League  v.  Walton,  109  Ga.  1 ,  34  S.  E. 
317,  77  Am.  St.  R.  350,  46  L.  R.  A.  424; 
Bloomington  Mut.  Ben.  Assn.  v.  Blue, 
120111.  121,60Am.  St.  R.  558,  11  N.  E. 


PAYEE   NEED   HAVE   NO   INSURABLE    INTEREST — ASSIGNEE       51 

device  to  evade  the  law  against  wagering  contracts.  And  the  rule 
has  been  held  applicable  though  the  beneficiary  pays  the  premiums.^ 
Other  courts  on  grounds  of  supposed  public  policy  have  held  that 
the  insured  must  not  appoint  as  beneficiary  one  having  no  insurable 
interest.^  Indeed,  the  Federal  Supreme  Court  has  stated  broadly: 
"It  is  the  settled  law  of  this  court  that  a  claimant  under  a  life  in- 
surance policy  must  have  an  insurable  interest  in  the  life  of  the  in- 
sured." ^ 


§  41.  Same  Subject — Assignee. — In  like  manner,  under  the  pre- 
vailing rule,  and  in  order  not  to  impair  the  usefulness  and  com- 
mercial value  of  life  insurance,  many  courts  have  held  that  a  person 
taking  out  insurance  upon  his  own  life  may  subsequently  assign  the 
policy  in  good  faith  to  anyone  either  for  value  or  by  way  of  gift, 
whether  the   assignee    have    an    insurable   interest    or  not.^     This 


331;  Met.  Life  Ins.  Co.  v.  Brown,  159 
Ind.  644,  65  N.  E.  908;  Heinlein  v. 
Imperial  L.  Ins.  Co.,  101  Mich.  250,  59 
N.  W.  615,  25  L.  R.  A.  627,  45  Am.  St. 
R.  409  (mother  for  benefit  of  sou  who 
paid  first  premium).  Albert  v.  Mut.  L. 
Ins.  Co.,  122  N.  C.  92,  30  S.  E.  327,  65 
Am.  St.  R.  693;  Hill  v.  United  L.  Ins. 
Assn.,  154  Pa.  St.  29,  25  Atl.  771,  31 
W.  N.  C.  483,  35  Am.  St.  R.  807  (ton- 
tine arrangement  held  vahd).  Cross- 
well  V.  Connecticut  Indem.  Assn.,  51 
S.  C.  103,  28  S.  E.  200;  Clements  v. 
N.  Y.  Life  Ins.  Co.,  101  Tenn.  22,  46 
S.  W.  561,  42  L.  R.  A.  247,  and  note, 
70  Am.  St.  R.  650  (unlawful  pre- 
existing agreement).  Ashley  v.  Ashletj, 
3  Sim.  149;  Vezina  v.  7ns.  Co.,  6  Can. 
Sup.  Ct.  30. 

1  Fidelity  Mut.  Life  Assn.  v.  Jef- 
fords, 107  Fed.  402,  46  C.  C.  A.  377,  53 
L.  R.A.  193  (brother  the  appointee  but 
he  had  agreed  to  make  some  provision 
for  children  of  insured).  Ancient  Order 
V.  Brown,  112  Ga.  545  (1901),  37  S.  E. 
890;  Heinlein  v.  Imperial  L.  Ins.  Co., 
101  Mich.  250,  59  N.  W.  615,  25  L.  R. 
A.  627,  45  Am.  St.  R.  409.  Mother  in- 
sured for  benefit  of  son  who  paid  first 
premium, 

2.V.  Y.  Life  Ins.  Co.  v.  Broum.  23 
Ky.  L.  R.  2070,  66  S.  W.  613;  Gilbert 
V.  Moose,  104  Pa.  74,  78,  49  Am.  Rep. 
570  ("If  we  admit  that  one  man  may 
insure  his  life  for  the  benefit  of  another 
who  is  neither  a  relative  nor  a  creditor 
our  whole  doctrine  concerning  wager- 
ing policies  goes  by  the  board;  the  very 
foundation  of  that  doctrine  is  that  no 
one  shall  have  a  beneficial  interest  of 


any  kind  in  a  life  policy  who  is  not 
presumed  to  be  interested  in  the 
preservation  of  the  life  insured.  .  .  . 
Moreover,  if  such  a  transaction  were 
permitted  the  wager  could  always  be 
concealed  under  the  mere  form  of  the 
policy,"  held,  policy  not  void  but  in- 
surance reverts  to  estate  of  insured). 
Equitable  Life  Ins.  Co.  v.  Hazleuood,  75 
Tex.  338,  16  Am.  St.  R.  893,  12  S.  W. 
621,  7  L.  R.  A.  217,  insurance  may  be 
collected  for  benefit  of  the  estate  of 
insured. 

3  Crottij  v.  Union  Mut.  Ins.  Co.,  144 
U.  S.  621,  623,  12  S.  Ct.  749,  36  L.  Ed. 
566,  citing  also  Warnock  v.  Davis,  104 
U.  S.  775.  26  L.  Ed.  924;  Conn.  Mut. 
Life  Ins.  Co.  v.  Schaefer,  94  U.  S.  457, 
24  L.  Ed.  251,  in  which,  however,  there 
is  a  dictum  that  insured  might  ap- 
point his  friend,  and  in  the  federal 
supreme  court  any  intimate  relation- 
ship seems  to  import  an  insurable  in- 
terest, Cammack  v.  Lewis,  15  Wall. 
643,  21  L.  Ed.  244;  but  see  Gordon  v. 
Ware  Nat.  Bk.,  132  Fed.  444,  65  C.  C. 
A.  580,  and  cases  cited. 

*  M'ut.  Life  Ins.  Co.  v.  Armstrong, 
117  U.  S.  591,  6  S.  Ct.  877,  29  L.  Ed. 
997  (valid  if  valuable  consideration). 
Gordon  v.  Ware  Nat.  Bk.,  132  Fed. 
444,  giving  long  lists  of  cases  pro  and 
con  and  holding  that  federal  court 
would  not  be  controlled  by  law  of  state 
where  assignment  was  made  (on  last 
point  compare  Miller  v.  Campbell,  140 
N.  Y.  457,  35  N.  E.  651.  55  N.  Y.  St. 
R.  787;  Groff  v.  Mut.  Life  Ins.  Co.,  92 
111.  App.  207);  Fitzgerald  v.  Ins.  Co.,  56 
Conn.   116,  13  Atl.  673,   17  Atl.  411, 


52 


GENERAL   PRINCIPLES   OF   INSURANCE    LAW 


doctrine  has  been  further  extended  to  allow  to  a  creditor  or  to  any 
lawful  beneficiary  holding  a  policy  the  right  to  assign  it  to  one  hav- 
ing no  insurable  interest,  provided  in  each  case  the  transaction  is 
not  a  mere  cloak  to  conceal  a  wager. ^  Other  courts  condemn  such 
a  rule,  holding  in  effect  that  in  such  a  case  motive  is  immaterial,^ 


7  Am.  St.  R.  288  (owner  of  policy  lias 
the  world  for  a  market).  Union  Fra- 
ternal Lcanite  v.  Walton,  109  Ga.  1,  3-i 
S.  E.  317,  77  Am.  St.  R.  350,  46  L.  R. 
A.  424;  Rrlander  v.  Allen,  125  Ga.  206, 
53  S.  E.  1032,  giving  long  list  of  author- 
ities; Martin  v.  Stuhbings,  126  111.  387, 
18  N.  E.  657,  9  Am.  St.  R.  625;  Met. 
Life  Ins.  Co.  v.  Brown,  159  Ind.  644,  65 
N.  E.  908;  Farmers'  &  T.  Bk.  v.  John- 
son, 118  Iowa,  282,  91  N.  W.  1074;  Re 
Hearing,  26  La.  Ann.  326  (but  see  Hays 
V.  Lapeyre,  48  La.  Ann.  749);  19  So. 
821;  35  L.  R.  A.  647;  Ritller  v.  Smith, 
70  Md.  261,  16  Atl.  890,  2  L.  R.  A.  844; 
King  v.  Crarn,  185  Mass.  103,  69  N.  E. 
1049  (whether  assignee  is  purchaser 
or  donee);  Dixon  v.  Nat.  L.  Ins.  Co., 
168  Mass.  48,  46  N.  E.  430;  Mut.  L. 
Ins.  Co.  V.  Allen,  138  Mass.  24,  52 
Am.  Rep.  245;  Prudential  Ins.  Co.  v. 
Liersch,  122  Mich.  436,  81  N.  W.  258; 
Murphy  v.  Red,  64  Miss.  614,  1  So.  761, 

60  Am.  Rep.  68;  Chamberlain  v.  Butler, 

61  Neb.  730,  86  N.  W.  481,  54  L.  R.  A. 
338,  87  Am.  St.  R.  478  (commercial 
value  and  usefulness  should  be  fostered 
rather  than  crippled) .  Mechanics'  Nat. 
Bk.  V.  Comins,  72  N.  H.  12,  55  Atl. 
191;  Vivar  v.  Supreme  Lodge,  52  N.  J.  L. 
455,  20  Atl.  36;  Steinback  v.  Diepen- 
brock,  158  N.  Y.  24,  52  N.  E.  662,  44 
L.  R.  A.  417,  70  Am.  St.  R.  424; 
Wright  v.  Mut.  Ben.  L.  Assn.,  118 
N.  Y.  237,  23  N.  E.  186,  6  L.  R.  A.  731, 
16  Am.  St.  R.  749;  Olmsted  v.  Keyes,  85 
N.  Y.  593;  St.  John  v.  Am..  Mut.  L.  Ins. 
Co.,  13  N.  Y.  31,  64  Am.  Dec.  529; 
McDonough  v.  ^^tna  L.  Ins.  Co.,  78 
N.  Y.  Supp.  217,  38  Misc.  625  (endow- 
ment policy).  Eckel  v.  Renner, 41  Ohio, 
232;  Clark  v.  Allen,  11  R.  I.  439,  23 
Am.  Rep.  496;  Crossioell  v.  Conn.  Ind. 
Assn.,  51  S.  C.  103,  28  S.  E.  200; 
Clement  v.  .Y.  Y.  Life  Ins.  Co.,  101 
Tenn.  22,  46  S.  W.  501,  42  L.  R.  A. 
247,  and  note,  70  Am.  St.  R.  650; 
Fairchild  v.  Association,  51  Vt.  613; 
Bursinger  v.  Bank,  67  Wis.  75,  30 
N.  W.  290,  58  Am.  Rep.  848;  Strike  v. 
7ns.  Co.,  95  Wis.  583,  70  N.  W.  819. 
Contra,  that  assignee  must  have  in- 
surable interest,  Warnock  v.  Davis, 
104  U.  S.  775,  26  L.  Ed.  924;  Alahnmn 


G.  L.  Ins.  Co.  V.  Mobile  Mut.  Ins.  Co., 
81  Ala.  329,  1  So.  561;  Stoelker  v. 
Thornton,  88  Ala.  241,  6  So.  680,  6 
L.  R.  A.  140;  Missouri  Valley  Life  Ins. 
Co.  V.  Sturges,  18  Kan.  93,  26  Am. 
Rep.  761 ;  Missouri  Valley  Life  Ins.  Co. 
V.  McCrum,  36  Kan.  146,  12  Pac.  517, 
59  Am.  Rep.  537;  Bromley  v.  Wash.  L. 
Ins.  Co.  (Ky.  1906),  33  S.  W.  17,  35 
Ins.  L.  J.  498;  N.  Y.  Life  Ins.  Co.  v. 
Brown,  23  Ky.  L.  R.  2070,  66  S.  W. 
613  (assignee  cannot  recover  but  estate 
of  insured  can).  Schlamp  v.  Berner,  21 
Ky.  L.  R.  324,  51  S.  W.  312;  McDonald 
V.  Birss,  99  Mich.  329,  58  N.  W.  359; 
Heusner  v.  Mut.  Life  Ins.  Co.,  47  Mo. 
App.  336;  Mutual  Life  Ins.  Co.  v. 
Richards,  99  Mo.  App.  88,  72  S.  W.  487 
(valid  only  to  extent  of  premiums  paid 
by  assignee).  Powell  v.  Dewey,  123  N.  C. 
103,  31  S.  E.  381,  68  Am.  St.  R.  818; 
Carpenter  v.  U.  S.  Life  Ins.  Co.,  161 
Pa.  St.  9,  15,  28  Atl.  943,  41  Am.  St.  R. 
880,  23  L.  R.  A.  571;  Gilbert  v.  Moose, 
104  Pa.  St.  74, 49  Am.  Rep.  570;  Downey 
v.  Hojfer,  110  Pa.  St.  109,  20  Atl.  655; 
Ridh  V.  Katterman,  112  Pa.  St.  251,  3 
Atl.  833  (good  only  to  amount  paid  by 
assignee) .  Hoffman  v.  Hoke,  122  Pa.  St. 
377,  15  Atl.  437,  1  L.  R.  A.  229; 
Equitable  Life  Ins.  Co.  v.  Hazlewood,  75 
Tex.  338,  351,  12  S.  W.  621,  16  Am. 
St.  R.  893,  7  L.  R.  A.  217  (but  pro- 
ceeds may  be  collected  for  estate  of 
insured).  Dugger  v.  Mut.  L.  Ins.  Co. 
(Tex.  Civ.  App.),  81  S.  W.  335;  Roller 
V.  Moore,  86  Va.  512,  10  S.  E.  241,  6 
L.  R.  A.  136;  Tate  v.  Commercial  Bldg. 
Assn.,  97  Va.  74,  33  S.  E.  382,  45  L.  R. 
A.  243,  75  Am.  St.  R.  770. 

1  Gordon  v.  Ware  Nat.  Bk.,  132  Fed. 
444,  65  C.  C.  A.  580,  giving  for  many 
states  the  rule  pro  and  con;  Farmers' 
&  Traders'  Bk.  v.  Johnson,  118  Iowa, 
282,  91  N.  W.  1074;  Mechanics'  Nat. 
Bk.  v.  Comins,  72  N.  H.  12,  55  Atl.  191, 
101  Am.  St.  R.  650  (but  the  insured 
also  joined  in  the  assignment).  Stein- 
back v.  Diepenbrock,  158  N.  Y.  24,  52 
N.  E.  662,  44  L.  R.  A.  417,  70  Am.  St. 
R.  424,  48  Cent.  L.  J.  175,  and  note  (if, 
in  good  faith,  to  be  treated  like  any 
other  chose  in  action). 

2  U.  B.  Mid.  Aid  Soc.  v.  McDonald, 


APPOINTEES — ASSIGNEES — UNITED   STATES   SUPREME    COURT     53 

inasmuch  as  the  transaction  inherently  and  necessarily  contravenes 
what  they  consider  to  be  sound  public  policy.  They  contend  that 
to  vest  all  title  to  the  expected  insurance  moneys  in  a  claimant  who 
has  no  interest  in  the  preservation  of  the  life  insured,  and  especially 
if  without  the  knowledge  and  consent  of  the  insured  himself,  is  sub- 
stantially to  abrogate  altogether  the  doctrine  of  the  necessity  of 
an  insurable  interest.^ 

§  42.  Express  Restrictions. — It  must  be  observed,  however, 
that  appointments  of  beneficiaries  and  assignments  alike  are  sub- 
ject to  statutory  or  contract  restrictions. - 


§  43.   Appointees — Assignees — United    States    Supreme    Court. — 

Exactly  what  view  of  this  subject  is  entertained  by  the  Federal  Su- 
preme Court  cannot  be  stated  with  certainty.  Certain  expressions  in 
their   opinions   would   seem   to    require    further   explanation.^     In 


122  Pa.  St.  324,  15  Atl.  439,  1  L.  R.  A. 
238,  9  Am.  St.  R.  Ill;  Downey  v. 
H offer,  110  Pa.  St.  109,  20  Atl.  655. 

^  Croity  v.  Union  Mid.  L.  Ins.  Co., 
144  U.  S.  621,  623,  12  S.  Ct.  749,  36 
L.  Ed.  566,  dictum;  Warnock  v.  Davis, 
104  U.  S.  775,  26  L.  Ed.  924,  dictum; 
Alabama  G.  L.  Ins.  Co.  v.  Mobile  Mid. 
bis.  Co.,  81  Ala.  329,  1  So.  561; 
Missouri  Valley  L.  Ins.  Co.  v.  McCrum, 
36  Kan.  146,  12  Pac.  517,  59  Am.  Rep. 
537;  Gilbert  v.  Moose,  104  Pa.  St.  74,  78, 
49  Am.  Rep.  570;  Holler  v.  Moore,  86 
Va.  512,  10  S.  E.  241,  6  L.  R.  A.  136; 
and  see  Mid.  L.  Assur.  Co.  v.  Ander- 
son (Can.),  1  N.  B.  Eq.  466. 

^Ancient  Order  v.  Brown,  112  Ga. 
545  (1901),  37  S.  E.  890;  Nat.  Exch. 
Bk.  V.  Bright,  18  Ky.  L.  Rep.  588;  36 
S.  W.  10;  Prudential  Ins.  Co.  v.  Liersch, 
122  Mich.  436,  81  N.  W.  258;  Supreme 
Conclave  v.  Dailei/,  61  N.  J.  Eq.  145, 
47  Atl.  277;  McCord  v.  McCord,  40 
App.  Div.  (N.  Y.)  275,  57  N.  Y.  Supp. 
1049.  Produce  Exchange  gratuity 
fund).  Kimball  v.  Lester,  43  App.  Div. 
27,  59  N.  Y.  Supp.  540,  aff'd  167  N.  Y. 
570,  60  N.  E.  1117.  But  such  statute 
cannot  be  retroactive,  Moore  v.  Chi. 
Guar.  F.  Life  Soc. ,  178  111.  202,  52  N.  E. 
882.  Claimant  must  show  interest  if 
policy  so  provide,  Page  v.  Burnstine, 
102  U.  S.  664,  25  L.  Ed.  268.  But 
company  may  waive  the  clause.  Bank 
V.  Comins,  72  N.  H.  12,  55  Atl.  191. 

3 Thus,  the  court  says:  "It  is  the 
settled  law  of  this  court  that  a  claim- 
ant under  a  life  insurance  policy  must 


have  an  insurable  interest  in  the  life  of 
the  insured,"  Croity  v.  Union  Mid. 
Ins.  Co.,  144  U.  S.  621,  623,  12  S.  Ct. 
749,  36  L.  Ed.  566.  And  in  one  of  the 
cases  cited  in  support  occur  the  follow- 
ing statements:  "If  there  be  any  sound 
reason  for  holding  a  policy  invalid 
when  taken  out  by  a  party  who  has  no 
interest  in  the  life,  of  the  assured  it  is 
difficult  to  see  why  that  reason  is  not 
as  cogent  and  operative  against  a  party 
taking  an  assignment  of  a  policy  upon 
the  life  of  a  person  in  which  he  has  no 
interest.  The  same  ground  which  in- 
validates the  one  should  invalidate  the 
other,  so  far,  at  least,  as  to  restrict  the 
right  of  the  assignee  to  the  sums  ac- 
tually advanced  by  him.  In  the  con- 
flict of  decisions  on  this  subject  we  are 
free  to  follow  those  which  seem  more 
fully  in  accord  with  the  general  policy 
of  the  law  against  speculative  contracts 
upon  human  life,"  Warnock  v.  Davis, 
104  U.  S.  775,  782,  26  L.  Ed.  924.  But 
the  agreement  in  that  case  was  clearly 
speculative  and  other  courts  have  dis- 
tinguished the  case  and  endeavored 
on  that  ground  to  avoid  the  rule,  for 
example,  Chamberlain  v.  Butler,  61 
Neb.  730.  86  N.  W.  481,  54  L.  R.  A. 
338,  87  Am.  St.  R.  478;  Steinback  v. 
Diepenbrock,  158  N.  Y.  24,  52  N.  E. 
662,  44  L.  R.  A.  417,  70  Am.  St.  R. 
424;  Gordon  v.  Ware  Nat.  Bk.,  132  Fed. 
444,  65  C.  C.  A.  580.  But  in  another 
case  the  United  States  Supreme  Court 
has  said,  "there  is  no  doubt  that  a  man 
may  effect  an  insurance  on  his  own  life 


54  GENERAL   FRINCirLES   OF   INSURANCE    LAW 

endeavoring  to  harmonize  and  apply  the  various  statements  quoted 
in  the  notes,  lower  federal  courts  have  since  concluded  that  if  a  pol- 
icy is  taken  out  in  good  faith  an  appointee  or  assignee  without 
any  insurable  interest  whatever  may  maintain  claim;  ^  while  other 
courts  have  understood  the  Federal  Supreme  Court  to  mean  that 
regardless  of  motive  if  the  appointee  or  assignee  is  altogether  devoid 
of  insurable  interest  the  transaction  can  only  be  interpreted  as  an 
evasion  or  violation  of  the  law,  a  mere  cover  for  a  wager.^  The 
question  perhaps  turns  very  much  upon  what  is  understood  b}'  the 
elastic  phrase  "insurable  interest."  The  doctrine  of  the  highest 
court  seems  in  general  to  be  this:  Where  a  man  effects  insurance 
upon  his  own  life  for  the  benefit  of  another  and  pays  the  premiums, 
an  insurable  interest  will  readily  be  inferred  from  almost  any  kin- 
ship or  intimate  relationship,  and  where  even  a  stranger  buys  the 
policy  in  good  faith,  his  payment  of  a  consideration  will  be  regarded 
as  creating  an  insurable  interest,  at  all  events  to  that  extent,  some- 
what analogous  to  the  insurable  interest  of  a  creditor.^ 

§  44.  When  Must  Insurable  Interest  Exist — Marine  Insur- 
ance.—  In  the  law  of  marine  insurance  the  rule  must  be  considered 
well  settled  that  if  the  insurance  is  taken  out  in  good  faith  with  in- 
tent to  cover  an  expected  interest,  and  if  an  interest  exists  at  the 
time  of  the  loss,  it  is  not  essential  that  any  interest  should  have  been 
actually  acquired  at  the  time  of  making  the  contract  or  at  the  time 
of  the  issuance   of   the   policy.'*     The   policy,  of   course,  however, 

for  the  benefit  of  a  relative  or  friend,  591,  597,  6  S.  Ct.  877,  29  L.  Ed.  997; 

or  two  or  more  persons  on  their  joint  and    see    Merchants'    Life    Assn.     v. 

lives,  for  the  benefit  of  the  survivor  or  Yoakum,  98  Fed.  251,  39  C.  C.  A.  56. 

survivors,"  Conn.  Mut.  Life  Ins.  Co.  v.  Contra,   that   assignee   must   have   in- 

Schaefer,  94  U.  S.  457,  460,  24  L.  Ed.  surable   interest.  Sivick  v.   Home  Ins. 

251.     Again,  the  same  court  held  that  Co.,    23    Fed.    Cas.    550;    Langdon    v. 

the  relationship  between  a  party  and  Vnion  Mut.  L.  Ins.  Co.,  14  Fed.  272, 

another  for  whose  benefit  he  effects  an  i  Foster  v.   Preferred  Ace.   Ins.   Co., 

insurance  upon  hi.s  life,  if  a  good  and  125  Fed.  536;  Gordon  v.  Ware  Nat.  Bk., 

valid  consideration  in  law  for  any  gift  132  Fed.  444,  65  C.  C.  A.  580,  indubit- 

or  grant,  furnishes  no  ground  for  the  ably  well  decided  on  the  facts, 

imputation  that  the  transaction  was  by  ^Mvt.  L.  Ins.  Co.  v.  Lane,  151  Fed. 

way  of  cover  for  a  wager  policy,  JStna  276;  KoUer  v.  Moore,  86  Va.  512,  10 

Life  Ins.  Co.  v.  France,  94  U.  S.  561,  S.  E.  241,  6  L.  R.  A.  136. 

364,  24  L.  Ed.  287  (a  brother  appointed  3  Mut.    L.    Ins.     Co.    v.  Lane,  151 

liis  sister).     And  again:  "A  policy  of  Fed.  276. 

life      insurance,      without      restrictive  *  Boston  Ins.  Co.  v.  Globe  Fire  Ins. 

words,  is  assignable  by  the  assured  for  a  Co.,  174  Mass.  229,  54  N.  E.  543,  75 

valuable    consideration    equally    with  Am.  St.  R.  303;  Barnes  v.  L.  E.  &  G.  L. 

any  other  chose  in  action  when  the  as-  Ins.  Co.,  L.  R.  (1892),  1  Q.  B.  D.  864; 

signment  is  not  made  to  cover  a  mere  Eng.  Mar.  Ins.  Act,  1906,  §  6.    Thus,  in 

speculative  risk,  and  tlms  evade  the  an  early  English  case  it  was  held  that 

law  against  wager  policies,  A'.  Y.  Mut.  an  averment  of  insurable  interest  at 

Life  Ins.  Co.  v.  Armstrong,  117  U.  S.  the  time  of  the  commencement  of  the 


WHEN   MUST   INSURABLE    INTEREST   EXIST — FIRE 


55 


will  not  attach  to  the  risk  until  the  assured  has   acquired  his  in- 
terest.-^ 

§  45.  Same  Subject — Fire  Insurance. — Many  declarations  of  a 
general  character  may  be  found  in  the  opinions  of  courts  and  in 
text-books  to  the  effect  that  in  the  law  of  fire  insurance  an  insurable 
interest  at  the  time  of  making  the  contract,  as  well  as  at  the  time 
of  loss,  is  required.-  But  it  would  appear  that  the  exigencies  of 
business  demand  precisely  the  same  rule  in  the  case  of  policies  against 
fire  only,  as  in  the  case  of  policies  against  marine  risks  including 
fire.^     This  conclusion  has  received  express   adoption  or  approval 


risk  as  well  as  at  the  time  of  loss,  was 
sufficient  and  that  no  allegation  or 
proof  of  insurable  interest  at  the  time 
of  effecting  the  insurance  was  re- 
quired. Rhind  v.  Wilkinson,  2  Taunt. 
237  (the  court  also  said:  "It  is  every 
day's  practice  to  insure  goods  on  a 
return  voyage  before  the  goods  are 
bought").  Anderson  v.  Morice  (1876), 
1  App.  Cas.  713.  So  also  the  federal 
supreme  court  adopts  the  same  rule  as 
laid  down  by  Arnould,  1  Mar.  Ins.,  238. 
Hooper  v.  Robinson,  98  U.  S.  528,  537, 
25  L.  Ed.  219;  Haven  v.  Gray,  12  Mass. 
71  (return  cargo,  from  proceeds  of 
outward  cargo) .  Sutherland  v.  Pratt ,  1 1 
Mees.  &  W.  296.     "Lost  or  not  lost." 

1  Boston  Ins.  Co.  v.  Globe  F.  his.  Co., 
174  Mass.  229,  54  N.  E.  543,  75  Am. 
St.  R.  303  (marine  fire  risks,  reinsur- 
ance). Sawyer  v.  Dodge  Co.  Mid.  Ins. 
Co.,  37  Wis.  '503,  545.  But  may  insure 
in  good  faith  "lost  or  not  lost,"  Suth- 
erland V.  Pratt  (1843),  11  M.  &  W.  296. 

^ Among  these  see,  for  example, 
Sadler's  Co.  v.  Babcock,2  Atk.  554,  556, 
Lord  Hardwicke;  Carpenter  v.  Prov. 
Wash.  Ins.  Co.,  16  Pet.  (U.  S.)  495, 
503.  10  L.  ed.  1044;  Ohio  Farmers'  Ins. 
Co.  V.  Vogel,  30  Ind.  App.  281  (1903), 
65  N.  E.  1056;  Clinton  v.  Norfolk  Mid. 
F.  Ins.  Co.,  176  Mass.  486,  489,  57  N.  E. 
998,  50  L.  R.  A.  833,  79  Am.  St.  R.  325; 
Howard  v.  Albany  Ins.  Co.,  3  Denio 
(N.  Y.),  301;  Fowler  v.  Ins.  Co.,  26 
N.  Y.  422;  Loclhart  v.  Lundsford,  87 
N.  C.  149.  151,  42  Am.  Rep.  514; 
Chrisman  v.  State  Ins.  Co.,  16  Ore.  283. 
288,  18  Pac.  466;  Dickerman  v.  Fire 
Ins.  Co.,  67  Vt.  99.  30  Atl.  808;  Shep- 
pard  v.  Iris.  Co..  21  W.  Va.  368,  379 
(stated  only  "as  a  general  rule"). 
As  a  summing  up  of  many  authoiities 
collected  by  them  the  editors  of  the 
Lawyers'     Reports,    Annotated,    say: 


"The  general  rule  is  that  the  insured 
must  at  the  time  of  insurance  and  also 
at  the  time  of  loss  have  an  insurable 
interest  in  the  property  burned  in 
order  to  recover  on  a  fire  policy." 
52  L.  R.  A.  330-334.  Whether  the 
learned  editors  have  based  this  con- 
clusion upon  the  express  warranties 
of  the  fii-e  policy  does  not  appear. 

3  The  rule  requiring  an  insurable 
interest  should  be  invoked  only  to 
prevent  the  evils  of  wagering  con- 
tracts, not  to  disturb  the  sane  and 
orderly  course  of  business.  So  far  as 
the  public  welfare  is  concerned  there  is 
no  adequate  reason  why  a  man  intend- 
ing next  week  to  buy  a  stock  of  goods, 
whether  to  be  put  on  ship  board  or  in 
a  warehouse,  should  not  be  allowed  to 
take  out  his  insurance  to-day  to  guard 
against  lo.ss  by  fire  or  other  peril  after 
he  shall  have  become  owner.  If  he 
neglects  insurance  until  he  has  ac- 
quired title  it  may  be  too  late.  If  the 
goods  are  valuable  it  may  require 
policies  from  many  companies  to  pro- 
tect them.  To  secure  these  may  in- 
volve considerable  expenditure  of 
time.  Meanwhile  the  loss  may  occur. 
It  is  not  always  practicable  to  make 
purchases  and  insurances  simultane- 
ously. No  injustice  is  done  to  the  in- 
surance companj^  by  the  adoption  of 
the  safe  and  convenient  method  of  pro- 
cedure since  imtil  the  insurable  interest 
is  acquired  the  risk  will  not  attach  and 
the  underwriters  will  not  become  liable. 
The  doctrine  of  the  text  gains  con- 
firmation from  the  well-established 
rule  that  where  the  policy  is  valid  at 
its  inception  it  may  be  made  to  cover 
after-acquired  property.  Hooper  v. 
Ins.  Co.,  17  N.  Y.  424;  Hoffman  v. 
Ins.  Co.,  32  N.  Y.  405,  88  Am.  Dec. 
337;  Wol'ie  \.  Security  Fire  Ins.   Co., 


56 


GENERAL    I'HlNCirLEtt   OF    IX.SUKAiNCE    LAW 


in  several  more  recent  adjudications  and  text-books/  and  must  be 
considered  as  supported  by  the  weight  of  authority,  inasmuch  as 
the  declarations  to  the  contrary  though  numerous  are  mostly  mere 
dicta  and  of  a  general  character. 

§  46.  Same  Subject — Life  Insurance. — In  the  case  of  life  in- 
surance, the  general  rule  is  that  the  insurable  interest  must  exist  at 
the  time  the  contract  is  made,^  but  that  though  it  may  chance  to 
cease  altogether  before  the  maturity  of  the  contract,  the  contract 
will  not  thereby  be  avoided.'"'  Thus,  a  creditor  who  has  taken  a 
policy  upon  the  life  of  his  debtor,  may,  on  the  death  of  the  insured, 
recover  the  full  amount  of  the  insurance,  notwithstanding  the  debt 
may  have  been  previously  paid.'^  This  rule  when  rightly  regarded 
is  not  so  much  at  variance  with  the  doctrine  of  indemnity  as  in 
harmony  with  it.  Premiums  for  marine  and  fire  policies  are  in  most 
instances  trivial  in  amount  compared  with  the  face  of  the  policy  and 
are  estimated  upon  a  probability  that  the  peril  named  will  not  occur, 
but  not  so  in  life  insurance.  The  rate  of  premium  for  the  life  policy 
is  large,  since  it  is  based  upon  the  known  fact  that  the  event  upon 


39  N.  Y.  49,  and  so  also  by  the  rule 
that  in  the  absence  of  express  pro- 
vision to  the  contrary,  temporary  sus- 
pension of  interest  does  not  avoid  §  4  7. 

1  Sun  Ins.  Office  v.  Merz,  64  N.  J.  L. 
301,  45  Atl.  785,  52  L.  R.  A.  330 
(reinsurance  but  the  rule  is  the  same) . 
Boston  Ins.  Co.  v.  Globe  Fire  Ins.  Co., 
174  Mass.  229,  54  N.  E.  543,  75  Am.  St. 
R.  303;  Davis  v.  Neiv  England  F.  Ins. 
Co.,  70  Vt.  217,  39  Atl.  1095;  and  see 
Mills  V.  Farmers'  Ins.  Co.,  37  Iowa, 
400;  Sawyer  v.  Dodge  Co.  Mut.  Ins. 
Co.,  37  Wis.  503;  Bunyon  (5th  ed.). 
p.  52;  Vance,  §48;  Joyce,  §901;  El- 
liott, §  45;  May  (4th  ed.),  §  100  A. 

2  Barnes  v.  London  E.  &  G.  Life  Ins. 
Co.,  L.  R.  (1892)  1  Q.  B.  D.  864. 

3  Conn.  Mid.  Life  Ins.  Co.  v.  Schaefer, 
94  U.  S.  457,  24  L.  Ed.  251;  Manhattan 
L.  Ins.  Co.  V.  Hennessy,  99  Fed.  64,  39 
C.  C.  A.  625  (sufficient  if  assignee  has 
interest  at  time  of  assignment).  Over- 
hiser  v.  Overhiser,  03  Ohio  St.  77,  57 
N.  E.  965  (policy  sur^•ives  divorce). 
Appeal  of  Corson,  113  Pa.  St.  438, 6  Atl. 
213,  57  Am.  Rep.  479.  Contra.  Cheeves 
V.  Anders,  S7  Tex.  287,  28  S.  AV.  274, 
47  Am.  St.  R.  107. 

<  Dalbji  V.  India  &  London  &  Life 
Assur.  Co.,  15  C.  B.  365  (a  leading  case 
overruling  Godsall  v.  Bolder o,  9  East. 
12),Amick  v.  Butler,  111  Ind.  578,  12 


N.  E.  518,  60  Am.  St.  R.  722;  Ferguson 
V.  Mass.  Mid.  Life  Ins.  Co.,  32  Hun, 
306,  afi'd  102  N.  Y.  647.  Contra, 
Cheeves  v.  Anders,  87  Tex.  287,  28 
S.  W.  274, 47  Am.  St.  R.  107  (recovery 
limited  to  debt  and  expense  of  insur- 
ance). As  to  Penn.sylvama  rule  see 
§  37.  If  policy  is  taken  out  by  debtor 
and  a.ssigned  absolutely  to  creditor,  the 
creditor  in  some  jurisdictions  may  col- 
lect the  whole,  Mut.  Life  Ins.  Co.  v. 
Allen,  138  Mass.  24,  52  Am.  Rep.  245; 
Wright  v.  Mut.  Ben.  Life  Ass.,  118 
N.  Y.  237,  23  N.  E.  186,  6  L.  R.  A.  731, 
16  Am.  St.  R.  749.  In  other  jurisdic- 
tions the  creditor  is  limited  to  the  debt 
and  expense  of  keeping  up  insurance, 
Cheever  v.  Anders,  87  Tex.  287,  28 
S.  W.  274,  47  Am.  St.  R.  107,  and  §  37. 
If,  however,  a  policy  taken  out  by  the 
debtor  is  merely  assigned  or  pledged 
conditionally  as  collateral  security  for 
the  debt,  the  debtor  paying  the  pre- 
miums, any  balance  over  the  debt  u-ill 
belong  to  the  debtor.  Central  Nat.  Bk. 
V.  Hume,  128  U.  S.  195,  9  S.  Ct.  41,  32 
L.  Ed.  370;  Exchange  Ban':  v.  Loh,  104 
Ga.  446,  31  S.  E.  459,  44  L.  R.  A,  372. 
The  burden  is  then  upon  the  creditor  to 
show  the  continuance  and  amount  of 
the  debt,  Crotty  v.  Union  Mid.  Life 
Ins.  Co.,  144  U.  S.  621,  12  S.  Ct.  749,  36 
L.  Ed.  566. 


INSURANCE    DOES    N</J'    ALWAYS    (iUANT    FULL    LN'DEMNITY         O/ 

which  payment  is  to  be  made  to  the  insured  will  certainly  occur,  and 
if  a  creditor  after  paying  premiums  for  a  long  term  of  years  were  likely 
at  the  end  to  lose  all  return  from  his  insurance,  it  would  practically 
prevent  the  use  of  this  important  kind  of  security.  He  would  in 
such  case  receive  no  indemnity,  but  on  the  contrary,  would  be  largely 
out  of  pocket  for  premiums  which  the  company  would  retain  with- 
out making  fair  return.^ 

§  47.  Temporary  Suspension  does  not  Avoid. — If  there  is  no 
provision  in  the  contract  prohibiting  a  change  of  interest,  a  tem- 
porary suspension  of  the  interest  of  the  insured  does  not  vitiate  a 
policy  of  insurance,  but  only  suspends  its  operation.' 

§  48.  Insurance  does  not  always  Grant  Full  Indemnity. — Only 
such  damages  as  are  caused  proximately  by  the  specified  perils 
are  covered  by  the  policy.  This  rule,  also,  is  grounded  upon  con- 
siderations of  utility,  and  ordinarily  limits  the  scope  of  the  contract 
because  of  the  inconvenience  of  attempting  to  form  an  estimate  after 
loss  of  the  extent  of  remote,  uncertain,  and  fluctuating  elements  of 
damage.  Thus,  the  incidental  loss  of  trade,  or  of  the  use  of  a  build- 
ing or  ship  while  being  repaired,^  or  of  prospective  profits,"*  or  any 
pretium  afjectionis  attaching  to  the  property  destroyed,  is  too  re- 
mote, and  is  not  supposed  to  enter  into  the  calculation  of  the  con- 
tracting parties.  Where,  however,  the  parties  do  in  fact  expressly 
take  into  their  account  these  more  remote  items  of  damage,  they 
may  make  them  the  subject  of  a  valid  insurance.  Thus,  the  loss  of 
use  and  occupation,^  or  of  expected  profits  ^  may  be  specifically 
insured  as  such,  and  frequently  is.     In  marine  insurance  profits  are 


^Mut.   Life  Ins.   Co.   v.   Allen,   138  Be  V^'right  &  Pole,  1  Adol.  &  E.  621; 

Mass.  24,  52  Am.  Rep.  24.5.  Stock  v.  biglis,  L.  R.  9  Q.  B.  D.  708. 

^  Hancox    v.    Fishing    Ins.    Co..    3  ^Michael  v.  Prussian  Nat.  Ins.  Co., 

Sumn.  132,  140;  Lane  v.  Maine  Mvt.  171  N.  Y.  25,  63  N.  E.  810;  Tancnbaum 

Fire  Ins.  Co.,  12  Me.  44,  28  Am.  Dec.  v.  Freundlich,  81  N.  Y.  Supp.  292,  39 

150;   Worthington  v.   Bearse,   12  Allen  Misc.  819;  Same  v.  Simon,  81   N.   Y. 

(Mass.),  382,  90  Am.  Dec.  152;  Clinton  Supp.  655,  40  Misc.  174,  aff'd  84  App. 

V.  Norfolk  Mid.  F.  Ins.  Co.,  176  Mass.  Div.  642. 
486,  57  N.  E.  998,  79  Am.  St.  R.  325.  «  Patapsco    Ins.     Co.    v.    Coulter,    3 

3  Thus,  a  policy  on  a  bridge  does  not  Pet.  (U.  S.)  222,  7  L.  Ed.  659;  Barclay 

cover  incidental  loss  of  tolls  from  the  v.    Cousins,   2    East.  544;    Fosdick   v. 

adjacent  turnpike  belonging  to  plain-  Norivich  Alar.  Ins.  Co.,  3  Day  (Conn)., 

tiff.    Farmer.'i'  Ins.  Co.  v.  New  Holland  108;  French  v.  Hope  Ins.  Co.,  16  Pick 

Turnpike  Co.,  122  Pa.  37,  15  Atl.  -563.  (Mass.)   397;    Tom  v.  Smith,  3  Caines 

*  Niagara  Fire  Ins.  Co.  v.  Hcilin.  22  (N.  Y.),  245;  Abbott  v.   Sebor,  3  John. 

Ky.L.Rep.  1212,60  8.  W.  393; //rt^T^•v.  Cas.   39;  Re  Hogan,  8  N.  D.  301,  78 

Ins.  Co.,  170  Mass.  492.  49  N.  E.  754;  N.  W.  1051,  45  L.  R.  A.  166,  73  Am 

Nihlo  V.  Ins.  Co.,  1  Sandf.  (X.  Y.)  551;  St.  R.  759. 


r)S 


GENERAL    I'KIXCIPLES   OF    INSURANCE    LAW 


generally  added  in  the  shape  of  a  percentage  to  the  value  of  the 
goods. ^ 

What  results  of  fire,  accident,  and  marine  casualties  are  proxi- 
mate, and  what  are  remote,  will  h(^  considered  under  the  clauses  of 

the  ])olieies. 

§  49.  Insurance  Grants  Indemnity  for  Results  of  Negligence. 
— Where  the  loss  is  caused  proximately  by  the  peril  insured 
against,  the  fact  that  the  negligence  of  the  insured  or  his  agent  con- 
tributed to  the  disaster  will  not  deprive  him  of  the  protection  of  his 
policy;  because  it  is  of  the  nature  and  purpose  of  insurance  to  grant' 
indemnity  for  the  results  of  carelessness  as  well  as  of  accident.  This 
rule,  as  originally  adopted  by  the  courts,  was  arbitrary,  but  is  also 
eminently  just  and  sensible.- 

In  the  case  of  fire  insurance,  for  example,  the  security  offered 
to  the  insured  by  his  policy  would  be  seriously  impaired  if  it  were 
open  to  the  insurers  to  plead  in  defense  contributory  negligence  on 
the  part  of  the  insured  or  his  servants;  since  many  if  not  most  fires 
have  their  origin  in  some  act  of  carelessness.  Accordingly  the  in- 
sured has  the  right  to  look  to  the  company  for  indemnity  notwith- 
standing anv  amount  of  carelessness  in  occasioning  the  loss,^  pro- 


1  A  policy  on  profits  is  valued. 
Mumford  v.  Hallett,  1  John.  R.  (N.  Y.) 
433. 

2  Union  Ins.  Co.  v.  Smith,  124  U.  S. 
40.5,  8  S.  Ct.  534;  Gove  v.  Farmers' 
Mid.  Fire  Ins.  Co.,  48  N.  H.  41,  97 
Am.  Dec.  572;  Matheivs  v.  Howard  Ins. 
Co.,  11  N.  Y.  21.  The  rule  is  applica- 
ble as  well  to  marine  insurance;  neg- 
ligence of  master  and  mariners,  Orient 
Ins.  Co.  V.  Adams,  123  U.  S.  67,  8  S.  Ct. 
68;  31  L.  Ed.  63  (also  of  owners); 
Phoeni.v  Ins.  Co.  v.  Erie  d*  W.  Transp. 
Co.,  117  U.  S.  312,  6  S.  Ct.  750,  29 
L.  Ed.  873;  Ilutchins  v.  Ford,  82  Me. 
363,  19  Atl.  832;  Louisville  Ins.  Co.  v. 
Monarch,  99  Ky.  578,  36  S.  W.  563, 
(river  policy).  Willful  negligence  or 
misconduct  may  fall  ^vithin  "  bar- 
ratry," Trinder  v.  Thames,  etc.,  Ins. 
Co.  (1898),  2  Q.  B.  114,  67  L.  J.  Q.  B. 
N.  ^  S.  666,  78  L.  T.  R.  485  (a  loss  of 
freight  by  stranding  by  negligent  act  of 
master  or  part  owner).  Holdsivorth  v. 
Wise,  7  B.  &  Cr.  794  (captain  negli- 
gently sailed  home  in  leaky  ship); 
Di.ron  V.  Sadler,  5  M.  &  W.  405,  8  id. 
895  (captain  negligently  but  not  bar- 
•atrously    heaved    ballast    overboard 


causing  wreck);  Busk  v.  Royal  Exch. 
Assur.  Co.,  2  B.  &  Aid.  72  (negligence 
of  mate  in  not  extinguishing  fire); 
Walker  v.  Maiiland,  5  B.  &  Aid.  171 
(seamen  all  asleep);  Bishop  v.  Pevi- 
land,  7  B.  &  Cr.  219  (gross  neglect  of 
mate  in  not  using  rope  strong  enough 
to  fasten  boat  to  pier);  Redman  v. 
Wilson,  14  M.  &  W.  476  (unskillful 
loading  on  home  voyage);  Davidson  v. 
Bxmiand,  L.  R.  4  C.  P.  117  (damage 
by  sea  water  Trom  leaving  machinery 
valves  open).  But  it  has  been  said 
that  by  wrongful  act  of  owners  directly 
causing  the  loss  though  falling  short  of 
fraud,  the  insurer  is  relieved,  Stand- 
ard Mar.  Ins.  Co.  v.  Nome  Beach,  etc., 
Co.,  133  Fed.  636,  and  cases  cited 
p.  649. 

3  Columbian  Ins.  Co.  v.  Laurence, 
10  Pet.  507,  9  L.  Ed.  512;  Des  Moines 
Ice  Co.  V.  Niagara  Fire  Ins.  Co.,  99 
Iowa,  193,  68  N.  W.  600;  St.  Paid  F. 
&  M.  Ins.  Co.  V.  Owens,  69  Kan.  602, 
77  Pac.  544;  Gates  v.  Ins.  Co.,  5  N.  Y. 
469,  55  Am.  Dec.  360,  Pool  v.  Ins.  Co. 
91  Wis.  530,  65  N.  W.  54,  51  Am.  St 
R.  919. 


RULE   OF  INDEMNITY   QUALIFIED   IN   MARINE  59 

vided  it  does  not  involve  an  element  of  evil  design,^  or  fraud, ^  or 
a  violation  of  some  contract  obligation  on  his  part,  and  provided 
the  loss  is  the  proximate  result  of  the  peril  insured  against.^ 

This  consideration,  however,  will  not  avail  to  excuse  a  breach  of 
warranty,  imposed  upon  the  insured  by  the  contract,  which  has  been 
l)rought  about  by  the  negligence  of  himself  or  his  agent;  as,  for 
example,  a  violation  of  the  implied  or  express  warranty  that  the 
ship  must  be  seaworthy  at  the  commencement  of  the  voyage."*  Nor 
will  it  relieve  the  insured  from  the  obligation  of  any  other  engage- 
ments of  the  contract;  as  where  in  the  accident  policy  it  is  provided 
that  the  insurers  shall  be  exempt  for  losses  caused  by  voluntary 
exposure  to  unnecessary  risk;  or  where  in  the  fire  policy  it  is  stipu- 
lated that  the  company  shall  not  be  liable  for  loss  caused  by  neglect 
of  the  insured  to  use  reasonable  means  to  save  the  property  at  and 
after  a  fire.^ 

§  50.  Rule  of  Indemnity  Qualified  in  Marine — Insured  When 
a  Coinsurer. — The  rules  of  recovery  applicable  to  fire  and  marine 
insurance,  respectively,  differ  in  an  important  particular.  In  fire, 
in  the  absence  of  a  coinsurance  clause,  or  other  express  restriction, 
the  assured  recovers  his  damage  up  to  the  amount  of  the  insurance, 
but  in  marine,  where  the  assured  is  insured  for  an  amount  less  than 
the  insurable  value,  or,  in  the  case  of  a  valued  policy,  for  an  amount 
less  than  the  policy  valuation,  he  is  deemed  to  be  his  own  insurer 
in  respect  of  the  uninsured  balance.^  Except  for  this  rule  of  marine 
insurance,  in  case  of  partial  loss,  although  paying  premiums  only 
for  part  insurance,  the  assured  might  recover  as  much  as  though 
he  had  been  paying  premiums  for  full  insurance."    Such  a  result,  it 

1  Schmidt  v.  .V.  Y.  Union  Mut.  Fire     Navigation  Co.  v.  Boston  Marine  Ins. 
Ins.  Co.,  1  Gray  (Mass.),  529.  Co.,  13G  U.  S.  408,  10  S.  Ct.  934;  Gibson 

2  Huckins  V.  People's  Mut.  Fire  Ins.      v.  Small,  4  H.  L.  Cas.  353. 

Co.,  31  N.  H.  238.  5  Thornton  v.  Security  Ins.  Co.,  117 

3  A  contract    to   indemnify  a   com-      Fed.  773. 

men  carrier  against  losses  from  in-  e  Egayi  v.  7ns.  Co.,  193  111.  295,  61 
juries  to  its  passengers,  negligently  N.  E.  1081;  Natchez,  etc.,  Co.  v.  Louis- 
caused  by  its  servants,  is  not  invalid  ville  Underwriters,  44  La.  Ann.  714, 
as  against  public  policy,  though  it  may  11  So.  54. 

encourage  a  lax  management,    Trenton  7"  in    cases    of    marine    insurance 

Pass    R.    Co.   V.   Guarantors^    etc..  In-  where  a  partial  loss  is  incurred  the  in- 

demnitii  Co.,  60  N.  J.  L.  246,  37  Atl.  surer  pays  only  such  a  proportion  of 

609;    Crescent   Ins.   Co.  v.  Paclet   Co.,  the    actual    loss    as    the   sum    insured 

69  Miss.  208,  13  So.  254.     Nor  a  con-  bears  to  the  value  of  the  property  at 

tract  guaranteeing  against  dishonesty  risk,"       Western    Ins.    Co.    v.    South- 

of  employees,   Fidelity   &   Cas.  Co.  v.  western    Transp.    Co.,    68    Fed.    923; 

v.  Eichoff,  63  Minn.   170,  65  N.  W.  Nicolet  v.  Ins.  Co.,  3  La.  366,  23  Am. 

351 .  30  L.  R.  A.  586,  56  Am.  St.  R.  464.  Dec.  458.    This  rule  becomes  stringent 

4  Whitney  v.  Ocean  Ins.  Co.,  14  La.  in  the  case  of  very  valuable  ships  of 
485,  33  Am.  Dec.  595;  Richelieu  &  Ont.  modern  times,  to  fully  cover  which  the 


60  GENERAL    I'KJNCI  rLi:s    oF    INSURANCE   LAW 

is  considered,  would  be  inequitable.  It  would  mean  that  other  per- 
sons, fully  insured,  must  pay  more  than  their  fair  share  of  premiums. 
The  great  majority  of  losses  are  partial,  not  total.  Underwriters 
usually  have  little  knowledge  until  loss  occur,  as  to  the  total  amount 
of  insurance,  or  as  to  the  relation  of  that  amount  to  the  total  value 
of  the  subject  insured;  therefore,  rates  of  premiums  are  not,  and  can- 
not well  be,  graded  according  to  the  amounts  of  shortage  in  insur- 
ance.    The  insured  alone  is  at  fault  if  his  insurance  is  inadequate. 

Thus,  if  a  man  takes  out  fire  insurance  for  $5,000  on  furniture 
worth  $10,000,  and  a  loss  of  $2,500  occurs,  he  may  recover  his  loss 
in  full;  but  if  he  has  marine  insurance  for  $5,000  on  his  cargo  worth 
$10,000,  which  sustains  a  loss  of  $2,500,  he  will  recover  only 
$1,250. 

So  also,  if  a  ship  worth  $100,000  is  insured  for  $10,000  only,  by  ten 
underwriters,  eacli  subscribing  for  $1,000,  and  a  loss  of  $500  occurs, 
each  underwriter  will*  be  liable  only  for  $5.00.  Nine-tenths  of  the 
loss  will  fall  upon  the  insured,  although  his  aggregate  insurance 
largely  exceeds  the  amount  of  loss.^  Fire  insurance  underwriters, 
insisting  that  this  rule  of  marine  insurance  is  equitable,  and  in  order 
to  make  the  fire  insurance  policy  either  exactly  or  approximately 
similar  to  the  marine  policy  in  this  respect,  commonly  insert  in 
their  policies  upon  commercial  and  other  valuable  properties,  some 
special  coinsurance  clause.  Such  clauses,  to  be  noticed  hereafter 
in  connection  with  the  fire  policy,  are  inconvenient  to  the  insured, 
and  are  so  unpopular  that  in  some  states  they  are  prohibited  by 
statute.^ 

§  51.  Double  Insurance  Contribution. — Growing  out  of  the 
doctrine  of  indemnity  is  the  rule  that  where  the  assured  is  over- 
insurance  market  both  at  home  and  compendious  term  "disbursements  is 
abroad  may  be  scarcely  adequate,  used  to  describe  any  interest  which  is 
inasmuch  as  each  insurer  is  wiUing  to  outside  the  ordinary  interests  on  hull, 
incur  only  a  comparatively  small  lia-  machinery,  cargo,  and  freight,"  Bu- 
bility  on  any  one  risk.  The  desired  chanan  v.  Faber  (1899),  4  Com.  Cas. 
result  is  sometimes*  approximated  by  223.  The  term  covers,  for  instance, 
taking  out  as  much  insurance  as  may  coals,  stores,  expenses,  etc.,  Roddick  v. 
be  obtainable  with  general  liability,  Indemnitii  Mut.  Mar.  Ins.  Co.  (1895), 
but  upon  low  agreed  valuations  of  the  2  Q.  B.  380.  64  L.  J.  Q.  B.  733.  Simi- 
subject,  and  then  covering  the  balance  larly  in  fire  insurance  a  co-insurance 
of  its  actual  value  with  insurance  clause  becomes  rigorous  when  all  the 
against  total  loss  only  and  in  the  form  stock  companies  combined  will  not 
of  what  is  known  as  disbursement  fvilly  cover  the  risk, 
policies,  International  Nav.  Co.  v.  i  Thus  it  will  be  observed  that,  in 
Atlantic  Mvt.  Ins.  Co.,  100  Fed.  304  practice,  marine  insurance  often  falls 
(agreed  value  $1,3.50,000;  actual  value  far  short  of  being  a  contract  of  in- 
.S2,100,000);  Lauther  v.  Black  (1900),  demnity. 
6  Com.  Cas.  5;  Moran  v.  Uzielli  (1905),  -  See  Appendix,  ch.  I. 
2  K.  B.  555.  74  L.  J.  K.  B.  494.    The 


SUBROGATION,    FIRE    AND    MARINE  61 

insured  by  double  insurance,  each  insurer  is  bound  as  between  him- 
self and  the  other  insurers  to  contribute  ratably  to  the  loss  in  pro- 
portion to  the  amount  for  which  he  is  liable  under  his  contract.^ 
Where  two  or  more  policies  are  effected  on  behalf  of  the  assured  on 
the  same  risk  and  interest,  or  any  part  thereof,  and  the  sums  in- 
sured exceed  the  indemnity  allowed  by  law,  the  assured  is  said  to 
be  overinsured  by  double  insurance.- 

Except  for  the  usual  contract  limitation  called  the  contribution 
or  'pro  rata  clause,  the  insured  might  recover  his  loss  in  full  against 
any  of  the  coinsurers,  but  not  exceeding  the  amount  of  the  policy, 
leaving  the  insurers  to  apportion  the  loss  by  subsequent  contribu- 
tion among  themselves.^  Such  circuity  of  action  is  prevented  by 
the  usual  contribution  clause  of  the  fire  policy. 

The  doctrine  of  double  insurance  contribution  is  not  applicable 
to  the  ordinary  life  insurance  policy,  payable  to  the  insured  or  his 
relatives.  As  before  stfied,  the  law  has  prescribed  no  method  for 
ascertaining  the  value  oi  a  human  life.  Hence  no  matter  how  many 
policies,  no  matter  how  great  the  amount  of  insurance,  existing  at 
the  time  of  the  death  of  the  assured,  the  fact  of  over-insurance  can- 
not be  established.  Where,  however,  the  value  of  the  insured  in- 
terest is  ascertainable,  as,  within  the  views  of  some  tribunals,  is  the 
case  with  creditor  insurance,  it  has  been  held  that  other  insurance 
must  be  brought  into  the  account,  and  recovery  limited  to  the  loss 
actually  sustained  by  the  creditor.** 

§  52.  Subrogation,  Fire  and  Marine. — Another  corollary  inci- 
dent to  the  doctrine  of  indemnity  is  the  right  of  subrogation.^  Upon 
paying  the  loss  under  a  fire  or  marine  policy,  the  insurer  becomes 
subrogated  pro  tanto  ^  to  such  rights  and  remedies  as  the  insured 
may  have  against  third  persons  who  are  primarily  liable  to  him  for 

1  Deming  v.  Merchant's  Cotton,  etc.,  ^May,  Ins.,  §  440;  Hebdon  v.  West, 
Co.,  90  Tenn.  306,  350,  17  S.  W.  89;  3  Best  &  Smith,  579.  In  England  in 
North  Brit.  Ins.  Co.  v.  London  &  G.  estimating  the  amount  of  compensa- 
Ins.  Co.  (1877).  5  Ch.  D.  583;  Newby  tion  recoverable  under  Lord  Camp- 
V.  Reed,  1  W.  Bl.  416.  bell's  Act,  insurance  money  received 

2  "Double  insurance  exists  only  in  must  be  deducted,  Mayne,  Damages 
the  case  of  risks  upon  the  same  interest  (7th  ed.),  p.  552.  This  rule  has  been 
in  property  and  in  favor  of  the  same  criticised  and  some  companies  have 
person."  Cal.  Ins.  Co.  v.  Union  Com-  waived  it  by  the  terms  of  their  poli- 
press  Co.,  133  IT.  S.  387,  420,  10  S.  Ct.  cies. 

365,  33  L.  Ed.  730;  Lowell  Mfg.  Co.  v.  &  Here   considered   apart    from    any 

Safeguard  F.  Ins.  Co.,  88  N.  Y.  591.  express  provisions  of  the  policy. 

3Wiggin    v.    Suffolk    Ins.    Co.,    18  *^  The  Livingston,  130    led.   746,65 

Pick.   (Mass.)   145;  Lucas  v.  Jcffersoji  v.  C.  C.  A.  610;  Cumberland  Tel.  Co. 

Ins.  Co.,  6  Cow.   (N.  Y.)  635.     Note  Dooley,    110    Tenn.    104,    72    S.    W. 

in  28  Am.  Dec.  121;  Morgan  v.  Price  457. 
(1849),  4  Exch.  621. 


62 


GENERAL   PRINCIPLES   OF   INSURANCE   LAW 


his  damage  sustained.^     The  person  who  has  caused  the  loss  is  said 
to  be  the  one  primarily  liable.^ 

Thus,  if  a  common  carrier  is  responsible  for  a  fire  caused  by  the 


1  Kennedy  Bros.  v.  State  Ins.  Co., 
1 19  Iowa ,  l'29,  91  N.  W.  831 .  Whether 
stipulated  in  the  policy  or  not,  Pclzer 
Mfg.  Co.  V.  Sun  Fire  Office,  36  S.  C. 
213,  15  S.  E.  562. 

■i  Hall  V.  Railroad  Co.,  13  Wall.  367, 
20  L.  Ed.  594.  Burden  of  the  loss 
ought  ultimately  to  rest  upon  person 
who  has  caused  it,  Stoughton  v.  Gas 
Co.,  165  Pa.  428,  30  Atl.  1001.  Except 
for  rule  of  subrogation,  insured  on  pur- 
suing a  double  remedy  might  obtain 
double  inde.iuiity,  Liverpool,  etc.,  S. 
Co.  V.  Phenix  Ins.  Co.,  129  U.  S.  397, 
9  S.  Ct.  469,  32  L.  Ed.  788;  King  v. 
Victoria  Ins.  Co.  (1896),  App.  Cas.  250, 
74  L.  T.  R.  206.  The  U.  S.  Supreme 
Court  says:  "In  fire  insurance,  as  in 
marine  insurance,  the  insurer,  upon 
paying  to  the  assured  the  amount  of  a 
loss  of  the  property  insured,  is  doubt- 
less subrogated  in  a  corresponding 
amount  to  the  assured 's  right  of  action 
against  any  other  person  responsible 
for  the  loss.  But  the  right  of  the  in- 
surer against  such  other  person  does 
not  rest  upon  any  relation  of  contract 
or  of  privity  between  them.  It  arises 
out  of  the  nature  of  the  contract  of  in- 
surance as  a  contract  of  indemnity,  and 
is  derived  from  the  assured  alone,  and 
can  be  enforced  in  his  right  only.  By 
the  strict  rules  of  the  common  law,  it 
must  be  asserted  in  the  name  of  the 
assured.  In  a  court  of  equity  or  of 
admiralty,  or  under  some  state  codes, 
it  may  be  asserted  by  the  insurer  in  his 
own  name;  but  in  any  form  of  remedy 
the  insurer  can  take  nothing  by  sub- 
rogation but  the  rights  of  the  assured, 
and  if  the  assured  has  no  right  of  ac- 
tion none  passes  to  the  insurer,"  St. 
Louis,  I.  M.  &  S.  Ry.  Co.  v.  Commer- 
cial Union  Ins.  Co.,  139  U.  S.  223.  235, 
11  S.  Ct.  554,  35  L.  Ed.  154.  Subroga- 
tion has  been  likened  to  an  equitable 
assicnrient.  Mobile  &  M.  R.  Co.  v. 
Jurey,  HI  U.  S.  584,  4  S.  Ct.  566,  28 
L  Ec\  527;  Caledonia  Ins.  Co.  v.  No. 
Pac.  R.  Co.,  32  Mont.  46,  79  Pac.  544. 
It  has  been  declared  that  the  equity  is 
not  so  strong  against  a  railroad  com- 
pany made  liable  by  statute  irrespec- 
tive' of  negligence,  Home  Ins.  Co.  v. 
Atch.,  etc.,  R.  Co.,  19  Colo.  46,  34  Pac. 
281.  But  the  prevailing  rule  seems  to 
be  that  such  a  statute  does  not  affect 


the  question,  Crissey,  etc.,  Co.  v. 
Denver  &  R.  G.  R.  Co.,  17  Colo.  App. 
275,  68  Pac.  670;  Hart  v.  West.  R. 
Corp.,  13  Mete.  (Mass.)  99,  46  Am. 
Dec.  719;  Mathews  v.  St.  L.,  etc.,  R. 
Co.,  121  Mo.  298,  24  S.  W.  591,  25 
L.  R.  A.  161.  Such  a  statute  makes 
the  act  of  the  railroad  company,  in 
causing  the  fire,  presumptively  negli- 
gent, and  to  support  the  right  of  sub- 
rogation the  insurer  need  not  allege  or 
prove  negligence,  Mtna  Ins.  Co.  v. 
R.  R.  Co.  (S.  C,  1907),  56  S.  E.  788 
(citing  cases).  The  right  of  subrogation 
exists  independent  of  contract  or  stat- 
ute, Hamburg-Brem.  Fire  Ins.  Co.  v. 
43  S.  E.  548;  Lcavite  v.  Canadian  Pac. 
Atlantic  Coast  Line  R.  Co.,  132  N.  C.  75, 
R.  Co.,  90  Me.  153,  37  Atl.  886,  38  L.  R. 
A.  152,  and  applies  also  to  marine  in- 
surance, Nord-Deidscher  Lloyd  v.  Presi- 
dent, etc.,  Ins.  Co.  of  N.  A.,  110  Fed. 
420,  49  C.  C.  A.  1;  International  Nav. 
Co.  V.  Atl.  Mid.  Ins.  Co.,  100  Fed.  304, 
aff'd  108  Fed.  987,  48  C.  C.  A.  181; 
Mercantile  Mar.  Ins.  Co.  v.  Clark,  118 
Mass.  288  (though  company  refused  to 
conduct  the  action  for  tort) .  In  marine 
the  right  exists  independent  of  aban- 
donment, but  is  subordinate  to  rights 
of  damage  claimants  to  the  fund,  The 
St.  Johns,  101  Fed.  469;  The  Catskill, 
05  Fed.  700.  Marine  insurers  may 
intervene  to  present  their  claim  before 
distribution  of  fund  recovered  by 
owners.  Mason  v.  Marine  Ins.  Co., 
110  Fed.  452,  49  C.  C.  A.  106.  54  L.  R. 
A.  700.  The  English  rule  in  marine 
insurance  is  thus  defined:  "Where  the 
insurer  pays  for  a  total  loss  either  of 
the  whole,'  or  in  the  case  of  goods,  of 
any  apportionable  part  of  the  subject- 
matter  insured  he  thereupon  becomes 
entitled  to  take  over  the  interest  of  the 
assured  in  whatever  may  remain  of  the 
subject-matter  so  paid  for,  and  he  is 
thereby  subrogated  to  all  the  rights 
and  remedies  of  the  assured  m  and  in 
respect  to  that  subject-matter  as  from 
the  time  of  the  casualty  causing  the 
loss.  Subject  to  the  foregoing  provi- 
sions where  the  insurer  pays  for  a 
partial  loss,  he  acquires  no  title  to  the 
subject-matter  insured,  or  such  part  of 
it  as  may  remain,  but  he  is  thereupon 
subrogated  to  all  rights  and  remedies 
of  the  assured  in  and  in  respect  of  the 


SUBROGATION,    FIRE   AND   MARINE 


63 


negligent  emission  of  sparks  from  its  locomotive,  which  burns  the 
property  of  the  insured,  the  insurer  upon  paying  the  loss  under 
the  policy  becomes  subrogated  to  the  right  of  recourse  which  the 
insured  had  against  the  common  carrier.^ 

Though  usually  referred  to  in  this  connection  as  the  tort  feasor, 
it  is  pertinent  to  observe  that,  in  order  to  lay  the  basis  for  a  right 
of  subrogation,  it  is  not  necessary  for  the  insured  to  shov/  that  the 
party  causing  the  loss  was  guilty  of  actual  negligence.  It  is  enough, 
if  it  appear  that  the  insured  has  a  right  of  action  against  him,  created 
by  statute  or  otherwise,  for  occasioning  such  a  result.  If  so,  then 
the  insured,  upon  paying  the  loss,  is  subrogated  to  the  same  remedy 
for  reimbursement." 

Except  as  varied  by  express  agreement,  the  insurer  has  no  rights 
agamst  the  wrongdoer  other  than  those  vested  in  the  insured  at 
the  time  of  loss,  and  the  company  cannot  enforce  those  without 
meeting  its  liability  under  the  policy,^  but  a  bona  fide  payment, 


subject-matter  insured  as  from  the 
time  of  the  casualty  causing  the  loss, 
in  so  far  as  the  assured  has  been  in- 
demnified according  to  this  act,  by 
such  payment  for  the  loss."  Mar.  Ins. 
Act  (1906),  §  79;  Simpson  v.  Thomson 
(1877),  3  App.  Cas.  292.  See  many 
illustrations,  Chalmers  &  Owen  Ins. 
(1907) ,  pp.  120,  121 .  When  the  marine 
msurer  settles  for  a  total  loss,  "the 
assured,"  says  Lord  Cottenham,  "must 
give  up  to  the  underwriters  all  the  re- 
mains of  the  property  recovered,  to- 
gether with  all  benefit  and  advantage 
belonging  or  incident  to  it,  or  rather 
such  property  vests  in  the  under- 
writers," Stewart  v.  Greenock  Mar. 
Ins.  Co.  (1848),  2  H.  L.  C.  at  p.  183. 
According  to  this  rule  the  insurer  by 
virtue  of  the  doctrine  of  subrogation 
may  sometimes  more  than  recoup  him- 
self for  his  payment  to  the  insured, 
Mobile  &  M.  R.  Co.  v.  Jersey.  Ill  U.  S. 
584,  4  S.  Ct.  566,  28  L.  Ed.  527;  contra, 
The  Livingston,  130  Fed.  746,  65  C.  C. 
A.  610.  if  several  insurers,  they  share 
in  proportion  to  their  several  liabilities, 
De  Hart  &  Simey,  Ins.  (1G07),  p.  89. 
And  according  to  a  recent  decision 
a  "disbursement"  policy  is  entitled 
to  share  with  the  ordinary  insurance. 
Brown  v.  Merchants'  Mar.  Ins.  Co.,  152 
Fed.  411. 

^  Phcenix  Ins.  Co.  v.  Erie,  etc., 
Transp.  Co.,  117  U.  S.  312,  6  S.  Ct.  750, 
29  L.  ed.  873;  Home  Mid.  Ins.  Co.  v. 
Oregon  R.  &  Nav.  Co.,  20  Oreg.  569, 
26  Pac.  857,  23  Am.  St.  R.  151 ;  Dem- 


ing  V.  Storage  Co.,  90  Tenn.  306,  17 
S.  W.  89,  13  L.  R.  A.  518.  Rule  ap- 
plies where  railroad  company  is  abso- 
lutely liable,  under  a  statute,  to  the 
owner,  Crissey  &  Fowler  L.  Co.  v. 
Denver  &  R.  G.  R.  Co.,  17  Colo.  App. 
275  (1902),  68  Pac.  670.  See  also  Lake 
Erie  &  W.  R.  R.  Co.  v.  Falk,  62  Ohio, 
297,  56  M.  E.  1020,  1023.  If  a  carrier 
is  one  of  the  parties  insured,  for  in- 
stance, under  the  phrase  "for  benefit 
of  whom  it  may  concern,"  the  under- 
writer can  have  no  right  of  subrogation 
against  it,  though  the  policy  has  been 
paid  to  the  owner  on  the  order  of  the 
carrier,  Wager  v.  Prov.  Ins.  Co.,  150 
U.  S.  99,  109,  14  S.  Ct.  55,  37  L.  ed. 
1013.  And  see  The  Clintonia,  104  Fed. 
92.  Subrogation  applies  whether  a 
policy  is  open  or  valued  and  an  agreed 
value  is  applicable  for  purposes  of  sub- 
rogation. The  St.  Johns,  101  Fed.  469; 
North  of  Eng.  Ins.  Ass.  v.  Armstrong, 
L.  R.  5  Q.  B.  244. 

2  .Etna  his.  Co.  v.  R.  R.  Co.  (S.  Car., 
1907),  56  S.  E.  788;  and  see  Lake  Erie, 
etc.,  Co.  V.  Falk,  62  Ohio  St.  297,  56 
N.  E.  1020. 

3  Phoenix  Ins.  Co.  v.  Erie'&  W.  Tr. 
Co.,  117  U.  S.  312,  118  U.  S.  210;  Mid- 
land Ins.  Co.  V.  SiHith,  6  Q.  B.  D.  561. 
Company  must  pay  loss  before  it  can 
enforce  right  of  subrogation.  New 
Hampshire  F.  Ins.  Co.  v.  National  Life 
Lis.  Co.,  112  Fed.  199,  50  C.  C.  A.  188. 
Right  of  subrogation  is  not  disturbed 
by  reason  of  the  fact  that  policy  might 
liave  been  successfully  contested,  nor 


64 


GENERAL  PRINCIPLES   OF   INSURANCE   LAW 


under  the  policy,  by  the  insurer  to  the  insured,  carries  with  it  a 
right  of  subrogation,  ahhough  in  fact  the  insurer  be  not  legally 
liable  to  pay.^  And  the  fact  that  the  insurer  is  a  member  of  a  trust 
or  combination  of  companies  in  violation  of  a  statute  will  not  bar 
its  right  of  subrogation.' 

In  the  absence  of  subrogation  receipt  or  assignment  transferring 
larger  rights,  it  has  been  held  in  this  country  that  the  insurers  can 
recover  only  what  they  have  paid  under  the  policy.^ 

It  is  well  settled,  however,  in  fire  insurance,  that  in  the  absence  of 
express  stipulation  the  doctrine  of  subrogation  must  not  be  applied 
to  prevent  the  insured  from  receiving  a  full  indemnity."*  But  this 
rule  ought  not  to  be  construed  to  mean  that  where  the  loss  exceeds 
the  insurance  the  underwriters  cannot  insist  upon  an  enforcement 
of  their  right  of  subrogation  against  the  tort  feasor  without  first 
fully  indemnifying  the  insured.^  The  doctrine  will  be  better  illus- 
trated by  assuming  that,  after  a  judgment  for  full  damages  has  been 
obtained  in  proper  form  of  action  against  the  wrongdoer  responsible 


because  the  insurance  company  has 
failed  to  comply  with  statutory  re- 
quirements, St.  L.,  A.  &  T.  R.  Co.  V. 
Fire  Assn.,  60  Ark.  325,  30  S.  W.  350, 
28  L.  R.  A.  83;  Phmnix  Ins.  Co.  v. 
Penn.  Co,  134  Ind.  215,  33  N.  E.  970; 
nor  because  insurer  was  negligent  in 
assuming  the  risk,  U.  S.  Cas.  Co.  v. 
Bac/le:/,  129  Mich.  70,  87  N.  W.  1044, 
55  L.  R.  A.  616,  95  Am.  St.  R.  424. 

1  King  V.  Victoria  Ins.  Co.  (1896), 
App.  Cas.  250,  74  L.  R.  A.  206. 

^  Freed  v.  Am.  F.  Ins.  Co.  (Miss., 
1907),  43  So.  947. 

3  Cumberland  Telegraph  &  Tel.  Co. 
V.  Dooley,  110  Tenn.  104,  72  S.  W.  457; 
The  Livingston,  130  Fed.  746,  65  C.  C. 
A.  610;  liolbrook  v.  United  States, ;21 
C.  CI.  434;  and  interest,  Railroad  Co.  v. 
Hartford  F.  Ins.  Co.,  17  Tex.  Civ.  App. 
498,  44  S.  W.  533;  Hotne  Ins.  Co.  v. 
Railroad  Co.,  11  Hun,  182.  As  to 
marine  rule  where  there  has  been  aban- 
donment or  payment  as  for  total  loss, 
compare  Mobile  &  M.  R.  Co.  v.  Jurey, 
111  U.  S.  684,  4  S.  Ct.  566,  28  L.  Ed. 
527,  with  The  Livingston,  130  Fed.  746, 
65  C.  C.  A.  610.  Where  an  insurer  pays 
more  than  his  proper  share  of  the  loss 
under  usual  fire  policy  he  cannot,  under 
the  doctrine  of  subrogation,  claim  con- 
tribution from  the  other  insurers  as  to 
the  excess,  Hanover  F.  Ins.  Co.  v. 
Brown,  77  Md.  64,  25  Atl.  989,  27  Atl. 
314,  39  Am.  St.  R.  386. 

*  Farmers',    etc.,   Mut.    Ins.    Co.    v. 


Vallie,  83  Pac.  962  (Colo.,  Dec,  1905), 
35  Ins.  L.  J.  278;  Phoenix  Ins.  Co.  v. 
First  Nat.  Bank,  85  Va.  767,  8  S.  E.  720, 
2L.  R.  A.  667,  17Am.  St.  R.  102.  And 
see  Ins.  Co.  v.  Stinson,  103  U.  S.  25, 
28,  26  L.  Ed.  473;  Commercial  Union 
Assur.  Co.  V.  Lister,  L.  R.  9  Ch.  App. 
483,  43  L.  J.  Ch.  601;  Parry  v.  Smith 
(1879),  4  C.  P.  D.  325;  Washington 
F.  Ins.  Co.  V.  Kelly,  32  Md.  421,  444, 
3  Am.  Rep.  149,  holding,  "the  equita- 
ble principle  of  subrogation  cannot  be 
appliel  where  it  conflicts  with  that  of 
indemnity."  But  in  case  of  under 
insurance  in  marine,  the  insured  is 
treated  as  a  coinsurer  for  amount  of 
tlie  deficiency  and  simply  shares  pro 
rata  in  any  salvage,  see  §  .")0,  and  thus 
may  fail  of  full  indemnity.  Natchez, 
etc.,  Co.  V.  Louisville  Underwriters,  44 
La.  Ann.  714,  11  So.  54;  The  Welsh 
Girl  (1907),  K.  B.,  affirming  22  Times 
L.  R.  475. 

^  Home  Mut.  Ins.  Co.  v.  Oregon  R., 
etc.,  20  Greg.  569,  26  Pac.  857,  23  Am. 
St.  R.  151.  Contra,  Farmers',  etc.,  Mut. 
Lis.  Co.  V.  Vallie,  83  Pac.  962  (Colo., 
Dec,  1905),  35  Ins.  L.  J.  278;  Phoenix 
Ins.  Co.  V.  First  Nat.  Bk.,  85  Va.  767, 
supra.  If  underwriters  pay  loss  in  full 
they  may  sue  the  tort  feasor  in  their 
own  name  in  most  jurisdictions,  Fair- 
grieve  V.  Marine  Ins.  Co.,  94  Fed.  686, 
37  C.  C.  A.  190,  112  Fed.  364,  50  C.  C. 
A.  286. 


SUBROGATION— MORTGAGES  65 

for  the  fire,  he  is  only  able  to  pay  a  part  by  virtue  of  insolvency. 
Appl}  ing  the  principle  here  presented,  in  the  absence  of  qualifying 
stipulation,  the  insured  first  receives  out  of  the  actual  collection 
enough  to  meet  the  shortage  of  insurance  and  the  underwriters  take 
the  balance,  but  not  exceeding  what  they  have  paid.^ 

Two  reasons  may  be  assigned  to  explain  why  the  life  insurance 
company,  upon  making  pa3^ment  under  its  policy,  is  not  subrogated 
to  any  right  of  action  against  the  wrongdoer,  responsible  for  the 
death  of  the  insured.  First,  because  at  common  law  a  personal 
action  died  with  the  person.  The  statutes  creating  a  right  of  action 
for  death  by  wrongful  act  bestow  the  right  not  upon  the  deceased 
but  upon  his  representatives.  It  is  only  rights  of  the  insured  that 
are  the  subject  of  subrogation.^  Second,  the  value  of  the  life  in- 
sured being  indeterminate,  the  insurance  money  and  the  damages 
recovered  from  the  tort  feasor  combined  may  amount  to  no  more 
than  a  full  indemnity.^ 

§  53.  Subrogation — Mortgagee. — Where  a  mortgagee  has  taken 
out  a  policy  for  his  own  benefit,  and  not  for  the  benefit  of  the  mort- 
gagor, upon  the  property  of  the  mortgagor  covered  by  the  mort- 
gage, it  is  held  by  the  weight  of  authority,  that,  even  in  the  absence 
of  an  express  provision  to  that  effect  in  the  polic}^,  the  insurer,  upon 
paying  the  mortgagee  the  insurance  money,  becomes  subrogated  pro 
tanto  to  the  mortgage  security  as  against  the  mortgagor,  but  not  so 
as  to  impair  the  right  of  the  mortgagee  to  collect  his  debt  in  full,'* 

But  where  the  mortgagor  has  any  interest  in  the  policy,  either 
by  payment  of  premiums  or  by  agreement  with  the  mortgagee,  then 

^  Atch.,  etc.,  R.  Co.  v.  Neet,  7  Kan.  ingtoti  Ins.  Co.,  16  Pet.  (U.  S.)  495,  10 

App.  495,  54  Pac.  134.  L.  Ed.  1044;  Excelsior  Ins.  Co.  v.  Koijal 

2  Ins.   Co.  V.   Brame,  95  U.   S.   754,  Ins.   Co.,  55  N.  Y.  343,  359,  14  Am. 

24  L.  Ed.  58;  Conn.  Mut.  Life  Ins.  Co.  Rep.  271;  Thomas  v.  Montauk  Ins.  Co., 

V.  .V.  Y.  &  N.  H.  R.  Co.,  25  Conn.  265,  43  Him  (N.  Y.),  218;  Noruich  F.  Ins. 

65   Am.    Dec.    571;    Ran  in   v.   Potter  Co.  v.  Boomer,  52  111.  442,  4  Am.  Rep. 

(1873),  L.  R.  6  H.  L.  118,  119.     No  618.    But  the  Virginia  court  held  that 

subrogation     in     accident     insurance,  the  insurance   company  cannot  avail 

/Etna  L.  Ins.   Co.  v.  Parler,  96  Tex.  itself  of  its  common-law  right  of  subro- 

287,  72"  S.  W.  168,  621.    See  also  Brad-  gation  without  paying  the  debt  in  full, 

burn  V.  Railway  Co.,  L.  R.  10  Exch.  1,  Phoenix  Ins.  Co.  v.  First  Nat.  Bank,  85 

but  compare  Harding  v.    Townshend,  Va.  765,  8  S.  E.  719,  2  L.  R.  A.  667,  17 

43  Vt.  536,  5  Am.  Rep.  304.  Am.  St,  R.  102.     And  see  Ins.  Co.  v. 

a  mna  L.  Ins.  Co.  v.  ParJer,  30  Tex.  Stinson,  103  U.  S.  25  28,  26  L.  Ed.  473. 

Cv\  App.  521,  725  W.  621    (accident  Coiitra,  in  Massachusetts,  International 

policy  "may  not  be  full  indemnity."  Troris.  Co.  v.  5oarc?won,  149  Mass.  158; 

The   court   also   concluded   that   dam-  21  N.  E.  239;  King  v.  State  Mid.  F.  Ins. 

ages  under  policy  and  damages  recov-  Co.,  7  Cush.  1,  54  Am.  Dec.  683;  un- 

ered  from  tort  feasor  are  not  identical  less  mortgagee  has  so  stipulated,  Allen 

in  character).  v.  Ins.  Co.,  132  Mass.  480. 

^  Carpenter  v.  The  Providence  Wash- 


66  GENERAL   PRINCIPLES   OF   INSURANCE    LAW 

there  will  be  no  subrogation  in  favor  of  the  insurers,  for  the  latter 
take  only  such  rights  as  the  assured  can  give.^ 

§  54.  Subrogation — Other  Contract  Rights. — The  doctrine  of 
subrogation  in  favor  of  an  insurer  is  easily  applied  where  the  claim 
for  ultimate  liability  is  directed  against  a  tort  feasor  who  ought 
equitably  to  be  held  responsible  for  a  loss  which  he  has  caused,  but 
where  the  underwriter,  without  express  stipulation  in  the  policy, 
asks  to  be  subrogated  to  contract  rights  belonging  to  the  insured 
against  third  parties,  the  questions  presented  are  more  embarrassing. 

For  instance,  the  insured  has  two  contracts  both  for  value  paid, 
both  intended  to  protect  from  the  same  loss,  or  tending  to  accom- 
plish that  result,  one  of  these  contracts  with  an  insurance  company, 
the  other  with  a  third  party.  Why,  under  the  doctrine  of  subroga- 
tion, should  the  loss  fall  upon  the  third  party,  while  the  insurance 
company,  though  retaining  its  premiums,  goes  free?  Why  should 
the  insurance  company  be  subrogated  to  rights  against  the  third 
party  rather  than  the  third  party  to  the  insurance? 

In  meeting  this  inquiry  the  English  courts,  largely  out  of  defer- 
ence to  considerations  of  public  policy,-  have  been  disposed  to  con- 
strue the  fire  and  marine  contracts  strictly  as  contracts  of  indemnity, 
and  have  regarded  the  underwriters,  after  payment  or  tender  to  the 
insured,  as  standing  in  the  attitude  of  sureties  with  respect  to  all 
sorts  of  rights  and  remedies  belonging  to  the  assured  and  tending  in 
any  way  to  diminish  the  loss.^ 

Thus,  in  an  English  case  a  landlord  held  insurance  covering  injury 
by  explosion,  but  he  also  had  the  benefit  of  a  covenant  by  his  tenant 
to  make  repairs.  Loss  by  explosion  occurred.  The  insurance  com- 
pany paid  to  the  landlord  £750,  the  amount  of  loss.  Subsequently 
the  tenant  reinstated  the  premises.  The  insurance  company  then 
sued  the  insured  to  recover  back  the  £750  and  obtained  judgment 
for  that  amount."* 

i  Pear  man  V.  Gould,  42  N,  J.  Eq.  4,  can    gain    double    indemnity,  he    is 

,5  Atl.  811;  Kernochan  v.  N.  Y.  Bowery  tempted  to  bring  about  the  peril  in- 

Fire  Ins.  Co.,  17  N.  Y.  441;  Louden  v.  sured  against. 

Waddle,  98  Pa.  St.  242.    So  also  if  the  a  West  of  Eng.  F.  Ins.  Co.  v.  Isaacs, 

mortgagee  is  merely  a  payee  in   the  66  L.  J.  Q.  B.  IST.  S.  36  (1897),  1  Q.  B. 

mortgagor's    policy,  Cone    v.    Niagara  226,  right  to  all  remedies  on  contract 

Ins.  Co.,  60  N.  Y.  619.     Sureties  on  a  against  third   partie^;    Mar.   Ins.   Act 

note  secured  by  mortgage  on  paying  (1906),  §  79. 

the    same    are    subrogated    to    mort-  *  Darrell  v.  Tihhitts,  L.  R.  5  Q.  B. 

gagee's  ri^ht  to  insurance,  Mna  Ins.  D   560,  42  L.  T.  N.  S.  797,  50  L.  J.  Q. 

Co.  V.  Thompson,  68  N   H.  20,  40  Atl.  B.  33.     But  take  the  familiar  instance 

396.  where  a  tenant  rents  a  furnished  house 

-iThe   premium    ;_;  small   compared  for    the    summer   or   winter   months, 

with  the  face  of  the  policy.    If  assured  stipulating  to  make  good  any  loss  or 


SUBROGATION — OTHER   CONTRACT   RIGHTS 


67 


Again,  in  a  later  English  case,  the  insured  made  an  executory 
contract  to  sell  the  insured  premises  without  referring  to  insurance. 
Pending  this  contract,  a  loss  by  fire  occurred  for  which  the  vendor 
was  compensated  by  his  insurers.  Subsequently  the  vendee  com- 
pleted the  purchase,  as  he  was  obligated  to  do  by  English  law,  pay- 
ing the  full  purchase  price  to  the  vendor.  The  insurance  company 
thereafter  claimed  the  right  to  open  its  settlement  with  the  insured 
and  recover  back  from  him  the  whole  amount  of  insurance  paid. 
This  it  was  allowed  to  do  under  the  doctrine  of  subrogation  or  upon 
the  theory  that  the  fire  insurance  contract  is  one  of  strict  indemnity.-^ 


injury  to  the  property.  If  the  house 
burns  down  without  his  fault,  must  he 
pay  the  entire  loss,  and  the  owner's  in- 
surers go  free,  subject  not  even  to  Ha- 
bility  to  contribute  pro  rata  with  the 
tenant  to  the  payment  of  the  loss? 
Such  a  rule  is  harsh. 

1  Castellain  v.  Preston,  L.  R.  11 
Q.  B.  Div.  380,  52  L.  J.  Q.  B.  366,  49 
L.  T.  N.  S.  29  (see  elaborate  and  inter- 
esting opinions).  Substantially  same 
holding  in  Phoenix  Assur.  Co.  v. 
Spooner  (1905),  2  K.  B.  753,  in  which 
Bigham,  J.,  says  in  an  analogous  case: 
"The  contract  being  one  of  mere  in- 
demnity, the  plaintiffs,  the  assurers, 
upon  payment  of  the  loss  became  en- 
titled to  all  the  rights  then  vested  in 
Mrs.  Spooner  in  respect  of  the  de- 
stroyed property,"  to  wit,  purchase 
price  or  value  under  condemnation. 
But  compare  American  cases.  Wash- 
ington Fire  Ins.  Co.  v.  Kelly,  32  Md. 
421,  3  Am.  Rep.  149;  Ins.  Co.  v. 
Updegraff,  21  Pa.  St.  513;  Skimmer  & 
Sons  Co.  V.  Houghton,  92  Md.  68,  48 
Atl.  85,  84  Am.  St.  R.  485,  and  cases 
infra.  Assume,  however,  that  contract 
of  sale  is  disadvantageous  to  vendor, 
why  should  value  of  property  be  meas- 
ured for  insurance  by  purchase  price  in 
pending  contract  of  sale?  Suppose 
both  vendor  and  vendee  are  willing  to 
call  off  their  pending  contract  and  take 
a  fresh  start,  may  they  not  do  so?  If 
they  may,  then  tlie  company's  right  cf 
subrogation  would  seem  to  be  value- 
less and  wholly  subject  to  defeat  by 
joint  action  of  vendor  and  vendee. 
The  United  States  Supreme  Court 
adopting  the  language  of  the  English 
judges  has  apparently  given  its  high 
sanction  to  the  same  doctrine,  "the 
general  rule  of  law  (and  it  is  obvious 
justice)  is,  that  where  there  is  a  con- 
tract of  indemnity  (it  matters  not 
whether   it   is   a   marine   policy   or   a 


policy  against  fire  on  land  or  any  other 
contract    of    indemnity)    and    a    loss 
happens,   anything    which   reduces  or 
diminishes    that     loss    reduces    or    di- 
minishes  the    amount    which    the   in- 
denmifier  is  bound  to  pay;  and  if  the 
indemnifier  has  already  paid  it,  then, 
if  anything  which  diminishes  the  loss 
comes  into  the  hands  of  the  person  to 
whom  he  has  paid  it,  it  becomes  an 
equity  that  the  person  who  has  already 
paid  the  full  indemnity  is  entitled  to 
be  recouped,  by  having  that  amount 
back,"  Chi.,  etc.,  R.  Co.  v.  Pullman  Car 
Co.,  139  U.  S.  79,  88,  11  S.  Ct.  490,  cit- 
ing Burnand  v.   Rodocanachi,  7  App. 
Cas.  333,  339;  Weber  v.  M.  &  E.  R.  Co., 
35  N.  J.  L.  409,  and  other  cases.     See 
to  same  effect  Packham  v.  German  F. 
Ins.  Co.,  91  Md.  515,  523,  46  Atl.  1066. 
If  fire  gives  vendee  the  right  to  cancel 
the  executory  contract  of  sale,  it  would 
seem  that  the  insurer  takes  no  right  of 
subrogation,  Phinizii  v.  Guernsey,  111 
Ga.  346,  36  S.  E.  796,  78  Am.  St.  R. 
207,  50  L.  R.  A.  680;  Clinton  v.  Hope 
Ins.  Co.,  45  N.  Y.  454.    Or  if  insurance 
exists  in  whole  or  in  part  for  benefit  of 
vendee,    Nelson    v.  Bound  Brook  Ins. 
Co.,  43  N.  J.  Eq.  256,  11  Atl.  681.    As 
to    whether    substantial    loss    by    fire 
pending  conveyance  does  give  vendee 
option  to  cancel  executory  contract  of 
sale  in  absence  of  specific  provision, 
authorities  do  not  agree.    English  rule 
followed   by  some  other  courts  is  in 
general  that  vendee  is  to  be  regarded 
as  equitable  owner  liable  meanwhile  to 
all   losses,  Raffety    v.  Scho field  (1897), 
1  Ch.  937;  Shaw  v.  Foster,  L.  R.  5  H.  L. 
321,  338;  Marion  v.  Wolcott  (N.  J.  Eq.), 
59  Atl.  242;  Pelton  v.  Westchester  Ins. 
Co.,  77  N.  Y.  605;  Wicks  v.  Bowman,  5 
Daly   (N.  Y.),  225,  and  to  increments, 
also  if  not  in  default  under  the  terms  of 
the  executory  contract,  Ridout  v.  Fowler 
(1904),  1  Ch.  658  (1904),  2  Ch.  93   and 


68 


GENERAL   PRINX'IPLES   UF   INSURANCE    LAW 


If  an  insurer  after  loss  is  a  inere  surety  for  some  obligor  ])rimaril.v 
liable,  this  rule  would  seem  to  be  indubitably  sound/  l)ut  other 
courts  in  this  country  do  not  seem  disposed  to  ))ress  to  such  an 
extreme  either  the  doctrine  of  indemnity  or  that  of  subrogation 
when  applied  to  the  law  of  insurance.  They  seem  rather  inclined 
to  look  upon  a  contract  of  insurance  upon  property,  if  valid  and 
unol)jectionable  when  made,  as  an  absolute  promise  by  the  insurer, 
subject  to  all  the  terms  of  the  policy,  to  pay  the  damage  sustained 
by  the  property  as  measured  by  its  cash  or  market  value'  (of 
course,  however,  not  exceeding  the  amount  of  insurance),  and  they 
declare  that  inasmuch  as  premiums  are  estimated  upon  tliat  measure 
of  liability  any  other  basis  of  indemnity  is  inequital^le  in  principle 
besides  being  inconvenient  in  practice.^ 

Thus,  where  the  assured,  a  grain  elevating  company,  joined  with 
other  elevators  in  a  pooling  arrangement  whereby  in  spite  of  a  fire 
totally  incapacitating  the  elevator,  it  was  to  have  its  full  percentage 
of  the  earnings  of  the  pool,  it  has  been  held  that  the  insurers  of  use 
and  occupancy  upon  paying  the  loss  are  not  subrogated  to  the 
rights  of  the  assured  against  the  pool,  or  to  the  money  actually  re- 
ceived from  the  pool  during  the  period  required  for  reinstatement.^ 


that  destruction  of  building  by  fire 
meanwhile  is  no  bar  to  action  for  spe- 
cific performance  of  contract  of  sale, 
Paine  v.  Meier,  6  Ves.  349;  Harford  v. 
Furrier,  1  Madd.  532.  But  the  tend- 
ency of  other  decisions  lends  support 
to  the  rule  that  the  executory  contract 
falls  at  vendee's  option,  if  vendor  can- 
not deliver  the  premises  in  substan- 
tially as  good  a  condition  as  when 
contract  was  made,  Phinizy  v.  Guern- 
sey, 111  Ga.  346,  36  S.  E.  796,  78  Am. 
St.  R.  207,  50  L.  R.  A.  680,  and  cases 
cited;  Wells  v.  Calnan,  107  Mass.  514; 
Thompson  v.  Gould,  20  Pick.  (Mass) 
134;  Goldman  v.  Rosenberg,  116  N.  Y. 
78,  22  N.  E.  259,  and  cases  cited,  ap- 
proved in  Edwards  v.  McLean,  122 
N  Y.  302,  307,  25  N.  E.  483;  Clinton  v. 
Hope  Ins.  Co.,  45  N.  Y.  454,  465.  As  to 
judicial  sale  before  date  fixed  for  deed, 
see  Ylarrigan  v.  Golden,  41  App.  Div. 
423,  58  N.  Y.  S.  726.  Vendee  clearly 
need  not  fulfill  if  subject  is  a  chattel 
injured  by  fire  meanwhile,  Tabbut  v. 
Am.  Ins.  Co.,  185  Mass.  419,  420,  70 
N.  E.  430. 

.  1  Chi.  &  Al.R.  Co.  V.  Glenny,  175  111. 
238,  51  N.  E.  896;  Darrall  v.  Tibbitts, 
L.  R.  5  Q.  B.  560,  42  L.  T.  N.  S.  797,  50 
L.  J.  Q.  B.  33. 


2  Or  agreed  value  in  a  valued  policy. 

3  King  v.  State  Ins.  Co.,  7  Gush. 
(Mass.)  1,  54  Am.  Dec.  683  (insurance 
an  independent  contract);  Interna- 
tional Trust  Co.  V.  Boardman,  149  Mass. 
158,  161,  21  N.  E.  239;  Wall  v.  Pkitt, 
169  Mass.  398,  405,  citing  Foley  and 
other  cases;  Farmers'  Fire  Ins.  Co.  v. 
Johnston,  113  Mich.  426,  71  N.  W.  1074 
(subrogation  only  against  a  party 
primarily  liable  for  the  loss);  Foley  v. 
Ins.  Co.,  152  N.  Y.  131,  134,  46  N.  E. 
318,  43  L.  R.  A.  664  ("damage  to  be 
ascertained  according  to  the  actual 
cash  value;"  "the  measure  of  the  in- 
surer's liabiHty",  though  double  in- 
demnity result);  Cont.  Ins.  Co.  v.  .^E'/no 
Ins.  Co.,  138  N.  Y.  16,  24,  33  N.  E.  724 
("contract  cannot  be  construed  one 
way  for  collecting  premiums  and  an- 
other way  for  determining  liability"). 
Compare  Heller  v.  Royal  Ins  Co.,  177 
Pa.  St.  262,  35  Atl.  726,  34  L.  R.  A.  600. 

*  Michael  v.  Prus.  Nat.  Ins.  Co.,  171 
N.  Y.  25,  63  N.  E.  810,  but  "use  and 
occupancy"  was  there  held  not  to  be 
synonymous  with  "earnings"  or  "prof- 
its;" and  total  value  of  subject  did  not 
clearly  appear.  As  to  further  descrip- 
tion of  this  pool,  see  Kellogg  v.  Sowerby 
93  App.  Div.  124,  87  N.  Y.  S.  412. 


STIPITLATION    IN    BILL   OF   LADIXG    FOR    BENEFIT   OF   INSURANCE     69 

And  in  another  case  in  the  same  court  the  owner  insured  certain 
dwelHng  houses  in  course  of  construction,  which  were  destroyed  by 
fire  before  completion.  The  contractors  were  obhgated  to  com- 
plete the  work  before  becoming  entitled  to  any  pay.  No  issue  of 
subrogation  was  expressly  raised,  but  the  court  said  in  substance 
that  the  insurance  company  was  not  concerned  with  the  contract 
relations  between  the  plaintiff  and  the  contractors,  though  the 
result  might  be  a  double  compensation  to  the  plaintiff.^ 

The  doctrine  of  subrogation  received  consideration  by  the  United 
States  Supreme  Court  under  the  following  circumstances:  The 
American  Tobacco  Company  had  been  paid  by  its  insurers  for  a 
large  loss  by  fire.  Among  the  items  of  total  loss  as  adjusted  with 
the  companies  were  several  thousand  dollars  worth  of  unused  in- 
ternal revenue  stamps,  the  full  value  of  which,  under  the  provisions' 
of  the  United  States  Revised  Statutes,  was  recoverable  or  redeem- 
able from  the  United  States  authorities.  The  underwriters  having 
paid  the  loss  claimed  that  they  were  subrogated  to  the  remedy  of 
the  insured  for  reimbursement  from  the  Government  under  the 
terms  of  the  statute.  To  enforce  this  claim  action  was  instituted, 
in  the  name  of  the  insured,  and  a  judgment  of  recovery  was  ob- 
tained in  the  Court  of  Claims,  which,  on  appeal,  was  affirmed.^ 

§  55.  Same  Subject — Stipulation  in  Bill  of  Lading  for  Benefit  of 
Insurance. — Inasmuch  as  the  insurers  are  only  entitled  to  such 
rights  as  are  vested  in  the  insured  at  the  time  of  loss,^  there 
will  be  no  subrogation  in  case  the  insured  has  stipulated  in  a  bill 
of  lading  from  the  common  carrier  that  the  latter  shall  have  the 
benefit  of  insurance.'* 

1  Foley  V.  Mjrs.  Fire  Ins.  Co.,  1.52  3  Hartford  F.  Ins.  Co.  v.  Chi.,  etc.,  R. 
N.  Y.  131,  46  N.  E.  318,  43  L.  R.  A.  Co.,  175  U.  S.  91,  96,  20  S.  Ct.  33,  44 
664  (and  see  171  N.  Y.  39),  "the  fact      L.  Ed.  84. 

that  improvements  on  land  may  have  4  Liverpool  &  Gt.  West.  Steamer  Co. 

cost  the  owner  nothing  or  that  if  de-  v.  Phoenix  Co.,  129  U.  S.  397,  9  S.  Ct. 

stroyed  by  fire  he  may  compel  another  469;   Phoenix  Ins.   Co.   v.   Erie   &   W. 

person   to   replace   them   without   ex-  Transp.  Co.,  117  U.  S.  312,  6  S.  Ct.  750; 

pense  to  him,  or  that  he  may  recoup  Penn.  R.  Co.  v.  Burr,  130  Fed.  847,  65 

his  loss  by  resort  to  a  contract  liability  C.  C.  A.  331;  Piatt  v.  Richmond,  etc.,  R. 

of  a  third  person,  in  no  way  affects  the  Co.,  108  N.  Y.  358,  15  N.  E.  393,  13 

liability  of  an  insurer  in  the  absence  of  N.  Y.  St.  R.  660;  IVorth  Brit.  &  M.  Ins. 

any  exemption  in  the  policy."     This  Co.  v.  Cent.  Vt.  R.  Co.,  9  App.  Div.  4, 

case   was   without   doubt   rightly   de-  75  N.  Y.  St.  R.  427,  40  N.  Y.  Supp. 

cided  on  its  facts,  since  no  claim  of  1115,  afT'd   158   N.   Y.    726;   Roos   v. 

subrogation  was  presented,  nor  did  it  Phila.,  etc.,  R.  Co.,  13  Pa.  Super.  563; 

appear  that  the  contractors  had  yet  Brit.  F.  &  M.  Ins.  Co.  v.  Gid),  etc.,  R. 

rebuilt.     And  see  Clover  v.  Greenwich  Co.,  63  Tex.  475,  51  Am.  Rep.  661. 

Ins.  Co.,  101  N.  Y.  277,  4  N.  E.  724.  Such  a  stipulation  is  not  void  as  against 

2  United  States  v.  Am.  Tobacco  Co.,  public  policy  in  relieving  a  common 
166  U.  S.  468,  17  S.  Ct.  619.  carrier   from   the   results  of   its   negli- 


70  GENERAL    PRINCIPLES   OF    INSURANCE   LAW 

§  56.  Special  Clause  in  Policy  to  Preserve  Subrogation. — To 
meet  tlie  doctrine  set  forth  in  the  last  section,  the  insurer  sometimes 
inserts  a  special  clause  in  his  policy  to  the  effect  that  any  act  or 
agreement  by  the  assured  tending  to  defeat  subrogation  shall  avoid 
the  insurance. 

Under  such  a  policy  it  is  held  that  in  case  the  insured  has  been 
so  imprudent  as  to  agree  to  give  the  insurers  the  benefit  of  sub- 
rogation and  has  also  made  an  inconsistent  stipulation  with  the 
common  carrier,  he  will  forfeit  his  insurance.^ 

But  the  United  States  Supreme  Court  has  also  adopted  the  fol- 
lowing equitable  doctrine:  if  the  shipper  in  accepting  from  the 
carrier  its  bill  of  lading,  with  provision  that  the  carrier  shall  have 
benefit  of  insurance,  thereby  violates  the  policy  clause  which  war- 
rants that  any  act  ^v  agreement  by  assured  tending  to  defeat 
subrogation  shall  fc  rlt  the  insurance,  the  carrier  nevertheless  can- 
not successfully  plead  for  defense  in  the  shipper's  action  against  it 
such  provision  in  the  bill  of  lading,  since  at  the  time  of  loss  there  is 
no  valid  insurance  of  which  the  carrier  can  have  the  benefit.  Under 
this  view,  though  the  assured  may  lose  his  insurance,  he  retains  his 
right  of  action  against  the  carrier.^ 

In  another  case,  where  under  similar  facts  the  shipper's  insurance 
had  become  forfeited  for  the  same  reason,  the  insurers  nevertheless 
voluntarily  made  payment  to  the  insured,  but  upon  express  con- 
dition that  they  should  have  an  unqualified  absolute  right  of  resort 
over  against  the  carrier,  and  the  Minnesota  court  held  that  the  car- 
rier could  not  in  defense  avail  itself  of  the  clause  in  the  bill  of  lading 
inasmuch  as  the  insured  had  •  invalidated  the  policy  in  accepting 
the  bill  of  lading.^  Hence  there  was  no  insurance  existing  upon 
which  the  clause  in  the  bill  of  lading  could  operate. 

gence,  Hartford  F.  Ins.  Co.  v.  Railroad  bound  by  limit  of  time  specified  in  bill 

Co.  (at  p.  99),  supra.;  Wager  v.  Prov.  of  lading  within  which  to  bring  suit, 

Washington  Ins.  Co.,  150  U.  S.  99,  1-i  No.  Brit.   &  M.  Ins.  Co.  v.  Cent.   Vt. 

S.  Ct.  55.    And  amounts  to  an  assign-  R.  Co.,  9  App.  Div.  4,  40  N.  Y.  Supp. 

ment    of    claims    under    policy,    Dun-  1113,  aff'd  158  X.  Y.  726. 

dee    Chemical    Works    v     \.    Y .    Mid.  i  Foyerweather  v.   Phoenix  Ins.   Co., 

Ins.  Co.,  67  N.  Y.  St.  R.  333.  3.35.  33  118  N.Y.  324,  28  N.  Y.  St.  R.  689,  23 

X.  Y.  Supp.  629,  12  Misc.  353,  but  does  X.  E.  192;  Kennedy  Bros.  v.  Iowa  State 

not    violate    a    clause    in    the    policy  Ins.    Co.,    119   Iowa,    29,    91    X^.    W. 

against  transferring  or  pledging  the  in-  831. 

terest   of   the  insured,  Jackson  Co.  v.  -  Inman  v.  So.  Carolina  R.  Co.,  129 

Boylston  Mut.  Ins.  Co.,  139  Mass.  508,  U.  S.  128,  9  S.  Ct.  249.     Moreover,  it 

52  Am.  Rep.  728,  2  X.  E.   103.     To  was  held  unlawful  for  common  carrier 

omit,  without  fraud,  to  disclose  such  a  to  decline  to  discharge  its  duty  except 

stipulation  is   not   fatal   concealment,  upon  condition  of  being  furnished  by 

Phoenix  Ins.  Co.  v.  Erie  &  W.  Transp.  shipper  with  indemnity  against  negli- 

Co.,  117  U.  S.  312,  326,  6  S.  Ct.  750,  gence. 

1176.     Insurance  company  being  re-  '-^Southard  v.  Minn.,  etc.;  R.  Co.,  60 

stricted    to    rights    of    the"  insured    is  Minn.  382,  62  X.  W.  442. 


RIGHT    01'    SUJiKOGATlOX  —  HOW    rUO!SECLTfc;i)  /i 

§  57.  Release  of  Party  Primarily  Liable. — The  insurer's  right 
of  subrogation  does  not  accrue  until  after  loss  has  occurred/  but 
from  that  date  any  act  of  the  insured  in  releasing  the  party  primarily 
liable,  if  without  the  insurer's  consent,  ^^•ill  discharge  the  insurer 
pro  tanto.' 

In  like  manner  the  party  primarily  liable  must  not  knowingly  do 
anything  to  defeat  the  insurer's  right  of  subrogation.  A  release  by 
the  assured  obtained  by  the  tort  feasor  under  such  circumstances 
will  furnish  no  defense  against  the  insurer/^  But  if  the  insurers 
voluntarily  pay  the  policy  with  full  knowledge  that  the  assured  has 
also  been  indemnified  by  the  wrongdoer  they  cannot  maintain  an 
action  against  the  wrongdoer;  and  if  the  assured  receive  his  dam- 
ages from  the  part}'  primaril}^  liable  before  collecting  his  insurance, 
the  amount  so  received  will  be  applied  pro  tanto  in  discharge  of  the 
policy.'* 

§  58.  Right  of  Subrogation—How  Prosecuted. — In  general,  the 
law  contemplates  that  there  shall  be  but  one  action  and  one 
recovery  for  a  single  wrong. ^  Therefore  in  those  jurisdictions  where 
the  real  parties  in  interest  may  sue  in  their  own  names,  all  the  in- 
surance companies  entitled  to  right  of  subrogation  should  unite  in 
one  suit,  and  if  the  assured  also  has  an  interest  he  should  be  joined 
as  a  party. ^     And  if  the  insured  brings  the  action  in  such  jurisdic- 

1  Sussex  Co.  Mut.  Ins.  Co.  v.  Wood-  ^  Omaha  &  R.  V.  R.  Co.  v.  Granite 
ruff,  26  N.  J.  L.  541.  Stale  Ins.  Co.,  53  Neb.  514,  73  N.  W. 

2  Hall  V.  Railroad  Co.,  13  Wall.  367,  950;  Conn.  Fire  Ins.  Co.  v.  Erie  R.  Co., 
20  L.  Ed.  594;  Packham  v.  German  F.  73  N.  Y.  399,  29  Am.  Rep.  171;  Hart 
Ins.  Co.,  91  Md.  515,  46  Atl.  1066,  50  v.  Railroad  Co.,  13  Mete.  (Mass.)  99, 
L.  R.  A.  828,  80  Am.  St.  R.  461;  46  Am.  Dec.  719;  West  of  Eng.  Fire 
Phoenix  Ins.  Co.  v.  Parsons,  129  N.  Y.  Ins.  Co.  v.  Isaacs,  66  L.  J.  Q.  B.  N.  S. 
86,  94,  29  N.  E.  87;  Dilling  v.  Draemel,  36  (1897),  1  Q.  B.  226. 

16  Daly  (N.  Y.),  104;  Xewcomh  v.  Ins.  ■*  Con?}..  Fire  Ins.  Co.  v.  Erie  R.  Co., 

Co.,  22  Ohio  St.  382,  10  Am.  Rep.  746;  73  N.  Y.  399,  29  Am.  Rep.  171,  but 

Carpenter  v.  Ins.  Co.,  16  Pet.  495,  10  payment  of  insurance  is  no  defense  to 

L.  Ed.    1044,    mortgagee's    insurance  wrongdoer. 

(but  see  Mass.  rule,  §  53,  as  to  mort-  ^  Fairgrieve  v.  Marine  Ins.   Co.,  94 

gagee);  Lett   v.  Guardian  Ins.  Co.,  52  Fed.  686.  37  C.  C.  A.  190,  112  Fed.  364; 

Hun,  570,  aff'd  125  N.  Y.  82  (mort-  Miinson  v.  A  .  Y.  Cent.  &  H.  R.  R  Co., 

gagee).     Insured  cannot  repudiate  the  .32  Misc.  282,  285;  Rockingham  Ins.  Co. 

release  for  fraud  while  retaining  the  v.    Bosher,   39    Me.   253,  63  Am.  Dec. 

proceeds    of    settlement.  Highland  v.  618. 

Ins.  Co.,  203  Pa.  St.  134,  52  Atl.  130.  ^Norwich    Union    F.    Ins.    Soc.    v. 

But  the  insured  is  not  bound  to  take  Stmidard  Oil  Co.,  59  Fed.  984,  19  V.  S. 

affirmative   action   for    benefit    of   in-  App.  460,  8  C.  C.  A.  433,  citing  many 

surers,   Ro"al   his.  Co.  v.  Stinson,  103  cases,    federal    and    state;    Continental 

U.  S.  25.  26  L.  Ed.  473;  Excelsior  Fire  Ins.  Co.  v.  Loud  Lumber  Co..  93  Mich. 

Ins.  Co.  V.  Ro"al  Ins.  Co.,  55  N.  Y.  343.  139,  ,53  N.  W.  394,  ,32  Am.  St.  R.  494 

14  Am.  Rep.  271;  Glover  v.  Greemvich  (approved    138    Mich.    55);    Jacobs   v. 

Ins.  Co.,  101  N.  Y.  277,  4  N.  E.  724;  X.  Y.  C.  &  H.  R.  R.  Co.,  107  App.  Div. 

Foleii  V.  Ins.  Co..  152  N.  Y.  131.  46  1.34,  94    N.  Y.  Supp.  9.54,  and    cases 

N.  E.  318.  43  L.  R.  A.  664.  cited;  Mobile  Ins.  Co.  v.  Railroad  Co., 


72 


(JExXtKM-    l'iaX<Ji'LI.S    ()!■     LN8UKANCE   LAW 


tion  for  his  own  benefit  he  should  join  such  insurers  as  parties.* 
In  other  jurisdictions  the  one  action  should  be  prosecuted  in  the 
name  of  the  insured,  but  for  the  benefit  of  all  those  in  interest;  ^  the 
insured,  if  already  indemnified  by  the  insurance,  holding  the  re- 
covery as  trustee  for  the  insurer.'"' 


§  59.  Insurable  Interest  as  Related  to  Measure  of  Indem- 
nity  Fire.  In  the  law  of  fire  insurance,  the  doctrine  govern- 
ing the  amount,  if  any,  to  be  recovered  under  the  policy  may  be 
summed  up  generally,  though  not  in  all  instances  accurately,  by  the 
phrase,  "indemnity  to  the  insured,  commensurate  with  his  insurable 
interest  as  existing  at  the  time  of  loss,"  ^  and  limited  by  the  amount 
as  well  as  by  the  terms  of  the  policy. 

If  the  insured  is  the  owner  of  the  property  destroyed,  he  is  entitled 
to  recover  its  cash  or  market  value  ^  at  the  time  of  loss,  without 
making  any  deduction  for  the  amount  of  mortgage  or  other  incum- 
brances upon  it,  for  these  incumbrances  are  held  to  be  of  no  con- 
cern to  the  insurers.*^ 


41  S  C.  408,  19  S.  E.  858;  WunderUch 
V.  Chi.  &  N.  W.  R.  Co.,  93  Wis.  132, 
66  N  W.  1144.  And  see  Whittemore  v. 
Judd  L.  &  S.  Oil  Co.,  124  N.  Y.  565, 
27  N.  E.  244,  21  Am.  St.  R.  70S.  Rail- 
road company  cannot  object  to  split- 
ting of  cause  of  action  if  it  has  settled 
with  insured  and  taken  a  release  ex- 
cepting the  insurance,  Atch.,  etc.,  R. 
Co.  V.  Home  Ins.  Co.,  59  Kan.  432,  53 
Pac    4.59 

1  'Jacobs  V.  A'.  Y.  Cent.  &  H.  R.  R. 
Co.,  107  App.  Div.  134,  137,  94  N.  Y. 
Supp.  954;  Munson  v.  N.  Y.  Cent.  & 
H.  R.  R.  Co.,  32  Misc.  282;  Firemen's 
Fund  his.  Co.  v.  Oreg.  R.  &  A'av.  Co., 
45  Oreg.  53,  76  Pac.  1075;  Home  Mnt. 
Ins.  Co.  V.  Oreg.  R.  &  Nov.  Co.,  20 
Oreg.  569,  26  Pac.  857,  23  Am.  St.  R. 
151;  Marine  Ins.  Co.  v.  Railroad  Co., 
41  Fed.  645.  If  not  made  a  party 
interested  company  may  intervene, 
Lake  Erie,  etc.,  R.  Co.  v.  Folk,  62  Ohio 
St.  297,  56  N.  E.  1020.  Insured 
should  not  bring  suit  in  his  own  name 
if  he  has  been  fully  indemnified  by 
the  insurance,  Sims  v.  Mid.  Fire  Ins. 
Co.,  101  Wis.  .586,  77  N.  W.  908,  the 
whole  interest  being  vested  in  under- 
writers who  may  sue  in  their  own  name. 

2  United  States  v.  Am.  Tobacco  Co., 
166  U.  S.  468,  17  S.  Ct.  619,41  L.  Ed. 
1081;  Egan  v.  Brit.  &  F.  Mar.  Ins.  Co., 
193  111.  295,  61  N.  W.  1081,  86  Am. 
St.  R.  342.    But  a  company  that  neg- 


lects to  take  any  part  or  to  share  the 
expense  may  be  bound  by  a  settlement 
made  in  good  faith,  Svea  A.'isur.  Co.  v. 
Pacuham.,  92  Md.  464,  48  Atl.  359,  52 
L.  R.  A.  95.  Suit  may  be  brought  in 
name  of  assured  without  his  consent, 
Monmouth  Co.  Mid.  Ins.  Co.  v. 
Hutchinson,  21  N.  J.  Eq.  107. 

3  Xorwich  Union  F.  Ins.  Co.  v. 
Standard  Oil  Co.,  59  Fed.  984,  8  C.  C.  A. 
433,  19  U.  S.  App.  460;  Weber  v.  M.  & 
E.  R.  Co.,  35  N.  J.  L.  409,  10  Am.  Rep. 
253;  Anderson  v.  Miller,  96  Tenn.  35, 
33  S.  W.  615,  31  L.  R.  A.  604,  54  Am. 
St.  R.  812. 

4  Monroe  v.  Southern  Mut.  Ins.  Co., 
63  Ga.  669;  Tabbut  v.  Am.  Ins.  Co.,  185 
Mass.  419,  70  N.  E.  430,  102  Am.  St.  R. 
353.  There  are  many  exceptions  and 
qualifications  including  statutory  and 
contract  provisions  and  modifying  rules 
of  law.  As  to  measure  of  indemnity  in 
marine  insurance,  see  ch.  IX,  infra. 

5  But  in  valued  policy  value  is 
agreed  upon.  For  this  purpose  a  life 
insurance  policy  is  considered  valued, 
see  §  24,  .supra. 

0  Columbian  Ins.  Co.  v.  Lawrence,  10 
Pet.  (U.  S.)  507.  But  he  cannot  re- 
cover loss  of  rent,  Baroness  of  Pon- 
talba  V.  Phcenix  Assur.  Co.,  2  Rob. 
(La.)  131,  38  Am.  Dec.  205,  or  use  or 
profits  unless  specifically  insured, 
Niblo  V.  A^  A.  Fire  Ins.  Co.,  3  N.  Y. 
Super.  Ct.  551;  Farmers'  Mut.  Ins.  Co. 


INSURABLE   INTEREST   AS   RELATED   TO    INDEMNITY 


73 


A  mortgagee  insuring  his  own  interest  recovers  the  amount  of  the 
mortgage  debt  existing  at  the  time  of  the  loss  without  regard  to  the 
value  of  the  mortgage  or  other  security  which  he  may  hold  on  ac- 
count of  the  same  debt.^ 

In  the  absence  of  agreement  the  mortgagee  has  no  interest  in  a 
policy  taken  out  by  the  mortgagor  upon  his  own  interest  unless  it 
is  assigned  or  made  payable  to  the  mortgagee.' 

Where  a  common  carrier,^  warehouseman,"*  or  other  bailee,^  or 
a  commission  merchant  ^  or  factor/  insures  for  his  own  benefit, 
he  recovers  the  value  of  his  interest  as  described  in  the  policy,* 
whatever  it  may  be,  ownership,  liability,  commissions,  advances,  or 
other  interest.  If  he  has  insured  against  his  liability  as  bailee  for 
the  loss  of  the  property,  he  will  be  entitled  to  recover  its  cash  or 
market  value  at  the  time  of  loss,  but  measured  b}^  his  liability;  *  and 
so,  also,  if  he  insures  for  the  benefit  of  the  owners  of  the  goods  in- 
trusted to  him  as  well  as  for  his  own  benefit,  he  will  be  entitled  to 
recover  the  full  value  of  the  property  insured,  to  the  extent  of  the 
insurance,  holding  any  balance,  above  his  own  interest,  as  trustee 
for  the  owners. ^'^ 


V.  New  Holland  Turnpike  Co.,  122  Pa. 
St.  37,  15  Atl.  563;  §  25,  supra. 

1  .-Etna  Ins.  Co.  v.  Baker,  71  Ind. 
102  (that  mortgagor  restores  the  build- 
ing is  immaterial);  Sussex  Co.  Mid. 
Ins.  Co.  V.  Woodruff,  26  N.  J.  L.  541; 
Kernochan  v.  N.  Y.  Bowery  Fire  Ins. 
Co.,  5  Duer  (N.  Y.),  1;  Cone  v.  Niagara 
F.  Ins.  Co.,  60  N.  Y.  619;  Rex  v.  Mer- 
chants' Ins.  Co.,  2  Phila.  (Pa.)  357. 
The  insurer  must  pay,  no  matter  Avhat 
the  land  or  other  collateral  is  worth, 
Uhlf elder  v.  Palatine  Ins.  Co.,  44  Misc. 
(N.  Y.)  153,  S9  N.  Y.  Supp.  792.  This 
is  true  though  mortgagee  has  foreclosed 
after  partial  loss,  Sun  Ins.  Office  v. 
Bencke  (Tex.  Civ.  App.),  53  S.  W.  98. 

'^Carpenter  v.  Prov.  Wash.  Ins.  Co., 
16  Pet.  495, 10  L.  Ed.  1044.  In  absence 
of  agreement  a  lienor  has  no  claim  to 
insurance  taken  out  for  principal  es- 
tate, Rackley  v.  Scott,  61  N.  H.  140 
(mechanic's  lien).  Whitehouse  v.  Car- 
gill.  88  Me.  479,  34  Atl.  276  (legacy  of 
legatee  charged  on  real  estate).  Lind- 
ley  V.  Orr,  83  111.  App.  70  (execution 
creditor).  McLaughlin  v.  Park  City 
Bi:.,  22  Utah,  473,  63  Pac.  589,  54  L.  R. 
A.   .343. 

•^  Home  Ins.  Co.  v.  Railroad  Co.,  71 
Minn.  296,  74  N.  W.  140. 

■t  Boyd  V.  McKee,  99  Va.  72,  37  S.  E. 
810. 


5  Snow  V.  Carr,  61  Ala.  363,  32  Am. 
Rep.  3. 

6  Johnson  v.  Campbell,  120  Mass. 
449;  Ferguson  v.  Plow  Co.,  141  Mo.  161, 
42  S.  W.  711. 

T  Fish  V.  Seeberger,  154  111.  30,  39 
N.  E.  982. 

8  Home  Ins.  Co.  v.  Gwathmey,  82  Va. 
923,  1  S.  E.  209. 

9  Home  Ins.  Co.  v.  Railroad  Co.,  71 
Minn.  296,  74  N.  W.  140;  Allen  v. 
Royal  Ins.  Co.  (Tex.  Civ.  App.),  49 
S.  'W.  931. 

10  Home  Ins.  Co.  v.  Baltimore  Ware- 
house Co.,  93  U.  S.  527,  23  L.  Ed.  868; 
Souls  V.  Lowenthal,  81  N.  Y.  Supp. 
622,  40  Misc.  186.  And  see  many 
cases  cited  on  this  subject,  §§  29,  39. 
Where  the  carrier  insures  the  goods  in 
a  representative  capacity  and  not 
simply  his  own  interest  or  liability,  he 
may  recover  in  full  without  first  show- 
ing that  his  liability  is  established, 
Munich  Assur.  Co.  v.  Dodwell,  128  Fed. 
412,  63  C.  C.  A.  152.  But  if  only  lia- 
bility to  the  owners  is  insured  it  is 
essential  to  establish  its  existence. 
Savage  v.  Exch.  F.,  etc.,  Ins.  Co..  4 
Bosw.  (N.  Y.)  1;  Burl  e  v.  Continental 
Ins.  Co.,  184  N.  Y.  77,  76  N.  E.  1086 
(though  words  "in  trust,"  etc.,  "sold 
but- not  delivered,"  were  used).  Thus 
tower's    liability    policy    covers    only 


74 


GENERAL    I'KINCU'LES   OF   INSURANCE   LAW 


A  lessee  ^  or  life  tenant  is  entitled  to  recover  only  for  the  value 
of  his  term.2 

A  lessor  under  a  rent  policy  is  entitled  to  recover  the  value  of 
his  rent,  which  is  generally  agreed  upon  in  advance  by  a  valued 
policy,  and  such  value  in  the  absence  of  fraud  is  conclusive.^ 

A  vendee  under  an  executory  contract  of  i)urchas(!  is  entitled  to 
recover  the  full  value  of  the  property  insured  by  him,  if  still  obligated 
to  pay  tlie  purchase  price  or  if  he  takes  title.'' 

A  vendor  under  such  a  pending  contract  has  a  right  to  recover  the 
full  value  of  the  property  insured  by  him  unless  the  policy  limits 
his    interest.^     But  the  rule  differs  in  different  jurisdictions  as  to 


liability  and  not  costs  of  a  successful 
defense  by  the  tower  in  action  against 
him,  MuriRon  v.  Standard  M.  Ins.  Co., 
145  Fed.  957;  and  see  Joijce  v.  Kennard 
(1871),  L.  R.  7  Q.  B.  78.  And  where 
policy  is  "to  indemnify,"  against  em- 
ployer's liability,  assured  must  first 
show  that  he  has  actually  paid  the 
judgment,  AlleJi  v.  Ins.  Co.,  145  Fed. 
881,  76  C.  C.  A.  265.  If  broker  or  com- 
mission merchant  insures  only  his  own 
interest,  or  without  specifying  other 
interests,  his  recovery  is  limited  to  his 
advances  and  charges,  but  otherwise 
if  on  goods  of  his  own,  or  held  in  trust, 
Ehsworth  v.  Alliance  Mar.  Ins.  Co. 
(1873),  8  C.  P.  596,  42  L.  J.  C.  P.  305. 

1  Niblo  v.,  iVori/i  A7ner.  Ins.  Co.,  1 
Sandf.  (N.  Y.)  551  (not  the  whole 
value  of  the  property).  Carey  v.  Prov- 
incial Fire  Ins.  Co.,  33  Hun  (N.  Y.), 
315;  and  see  §  37. 

2  Beekman  v.  Ins.  Assn.,  66  App. 
Div.  72,  73  N.  Y.  Supp.  110  (value  of 
life  interest  as  shown  by  tables) .  Agri- 
cult.  Ins.  Co.  V.  Yates,  10  Ky.  L.  R.  984 
(not  full  value  of  property).  Sampson 
V.  Grogan,  21  R.  I.'l74,  42  Atl.  712,  44 
L.  R.  A.  711;  Green  v.  Green,  .56  S.  C. 
193,  34  S.  E.  249,  46  L.  R.  A.  525; 
Chjburn  v.  Reynolds,  31  S.  C.  91,  9 
S.  E.  973.  Contra,  Andes  Ins.  Co.  v. 
Fish,  71  111.  624;  Merrett  v.  Farmers' 
Ins.  Co.,  42  Iowa,  11  (life  tenant  al- 
lowed full  value) .  Convis  v.  Ins.  Co. ,  127 
Mich.  616,  86  N.  W.  994;  Home  Ins. 
Co.  V.  Gibson,  72  Miss.  58,  17  So.  13; 
and  see  Schaefer  v.  Anchor  Mitt.  Ins. 
Co.  (Iowa),  100  N.  W.  857;  §37. 
As  to  dower  interest  see  Hartford  F. 
Ins.  Co.  V.  Haas,  87  Ky.  531,  9  S.  W. 
720,  2  L.  R.  A.  64.  In  the  absence  of 
agreement  lessee  can  claim  no  benefit 
in  lessor's  insurance,  Roesch  v.  John- 
son, 69  Ark.  30,  62  S.  W.  416.     Nor 


lessor  or  remainder-man  in  lessee's  in- 
surance, for  which  the  lessee  pays  the 
whole  premium,  Harrison  v.  Pepper, 
166  Mass.  288,  44  N.  E.  222,  33  L.  R.  A. 
239,  55  Am.  St.  R.  404;  Addis  v.  Addis, 
14  N.  Y.  Supp.  657,  60  Hun,  581; 
Hubbard  v.  Austin,  6  Ohio  N.  P.  249; 
8  Ohio  Dec.  Ill;  Welsh  v.  London 
Assur.  Corp.,  151  Pa.  St.  607,  25  Atl. 
142;  Bennett  v.  Featherstone,  110  Tenn. 
27,  71  S.  W.  589.  But  other  courts 
have  held  that  life  tenant  or  lessee  may 
recover  the  value  of  the  fee  but  must 
either  rebuild  or  will  be  held  trustee 
for  remainder-man  or  lessor  for  balance 
above  his  own  interest.  Home  Ins.  Co. 
V.  Gibson,  72  Miss.  58,  17  So.  13; 
Sampson  v.  Grogan,  21  R.  I.  174,  42 
Atl.  712,  44  L.  R.  A.  711;  Green  v. 
Green,  56  S.  C.  193,  34  S.  E.  249,  46 
L.  R.  A.  525;  and  see  Convis  v.  Ins. 
Co.,  127  Mich.  616,  86  N.  W.  994; 
Brough  v.  Higgins,  2  Gratt.  (Va.)  408 
(policy  here  was  taken  out  before  estate 
was  divided).  Burden  is  on  remainder- 
man to  show  what  the  excess  is, 
Gra7it  V.  Buchanan,  36  Tex.  Civ.  App. 
334,  81  S.  W.  820. 

3  Cushman  v.  Northwestern  Ins.  Co., 
34  Me.  487;  Carey  v.  London  Prov.  Fire 
Ins.  Co.,  33  Hun  (N.  Y.),  315;  Kane  v. 
Commercial  Ins.  Co.,  8  Johns.  (N.  Y.) 
229.  Tenant  may  insure  for  loss  for 
paying  rent  witliout  use.  Heller  v. 
Royal  Ins.  Co.,  177  Pa.  St.  262,  35  Atl. 
726,  34  L.  R.  A.  600.  Inchoate  right 
of  curtesy,  Dovle  v.  Am.  Fire  Ins. 
Co.,  181  Mass.  139,  63  N.  E.  394. 

i  Marion  v.  Wolcott,  68  N.  J.  Eq. 
20,  59  Atl.  242;  Bartlett  v.  Looney,  3 
Vict.  L.  R.  Eq.  15.  If  not  so  obligated 
he  may  be  limited  to  actual  loss.  Tab- 
but  V.  Am.  Ins.  Co.,  185  Mass.  419,  70 
N.  E.  430,  102  Am.  St.  R.  353. 

5  Grant  v.  Insurance  Co.,  76  Me.  514 


INSURABLE   INTEREST   AS    RELATED   TO    INDEMNITY 


75 


whether  he  can  retain  the  insurance  money  after  collecting  the 
purchase  price  from  the  vendee,  and  if  not,  to  whom  he  must  pay  it. 
In  England  and  elsewhere  on  fulfillment  of  the  executory  contract 
of  sale  the  vendor  must  account  to  his  insurers,  applying  strictly  the 
doctrine  of  indemnity.^  In  other  jurisdictions  he  must  hold  the 
insurance  money  as  trustee  for  the  vendee,  and  by  other  courts  ap- 
parently the  insurance  contract  is  looked  upon  as  altogether  inde- 
pendent of  the  executor}"  contract  of  sale.^ 

A  reinsured  is  entitled  to  recover  in  proportion  to  the  amount 
which  he  is  obligated  to  pay  by  the  original  insurance,  and  this  he 
may  recover  b}^  reason  of  his  liability  before  he  has  actually  made 
payment  thereof  to  the  insured.^  The  measure  of  indemnity  re- 
coverable bv  an  insured  creditor  is  elsewhere  dealt  with.^ 


(real  estate).  Boston,  etc.,  Ice  Co.  v. 
Royal  Ins.  Co.,  12  Allen  (Mass.),  381, 
90  Am.  Dec.  951  (personalty).  But 
this  case  was  decided  upon  the  ground 
that  contract  of  sale  was  annulled  by 
the  fire,  Tiemann  v.  Citizens'  Ins.  Co., 
78  N.  Y.  Supp.  620,  76  App.  Div.  5 
(real  estate).  Insurance  Co.  v.  Upde- 
(/raff,  21  Pa.  St.  513;  Rayner  v.  Preston 
■(1881),  18  Ch.  D.  1;  Pha:nix  Assur.  Co. 
V.  Spooner  (1905),  2  K.  B.  753.  At  all 
events  he  may  recover  to  the  extent 
of  the  unpaid  purchase  price  and  in- 
terest, Shotwell  V.  Jefferson  Ins.  Co., 
18  N.  Y.  Super.  Ct.  247. 

1  See  cases,  §54.  English  courts 
hold  more  strictly  to  the  doctrine  that 
recoveries  by  different  interests  must 
not  in  the  aggregate  exceed  the  value 
of  the  whole  fee.  North  Brit.  Ins.  Co. 
V.  London  &  G.  Ins.  Co.  (1877),  5  Ch. 
D.  583. 

2  See  cases,  §  54.  Held,  no  trust  for 
vendee,  the  insurance  contract  being 
personal,  Rayner  v.  Preston,  L.  R.  18 
Ch.  D.  1  (leading  case  real  estate). 
Pool  V.  Adams,  33  Law.  Jour.  Ch.  63  ); 
Phoenix  Assur.  Co.  v.  Spooner  (1905), 
2  K.  B.  753;  Kortlander  v.  Elston,  52 
Fed.  180,  2  C.  C.  A.  657,  6  U.  S.  App. 
283  (personal  property).  Phinizy  v. 
Guernsey,  111  Ga.  346,  36  S.  E.  796,  78 
Am.  St.  R.  207,  50  L.  R.  A.  680,  but 
decided  on  the  ground  that  the  fire 
loss  is  on  the  vendor  and  that  vendee 
is  not  obliged  to  complete  purchase 
(compare  Wright  v.  Continental  Ins. 
Co.,  Ill  Ga.  499,  43  S.  E.  700).  King 
V.  Preston,  11  La  Ann.  95;  Clinton  v. 
Hope  Ins.  Co.,  45  N.  Y.  454,  465  (it 
seems  that  executory  vendee  is  not 
entitled    to    insurance    obtained    by 


vendor  for  his  own  benefit).  Shotwell 
V.  Jefferson  Ins.  Co.,  5  Bosw.  (N.  Y.) 
247,  261;  Gilbert  v.  Port,  28  Ohio  St. 
276,  297  (insurance  contract  purely 
personal).  McDonald  v.  Admr.  of 
Black,  20  Ohio  St.  192,  55  Am.  Dec. 
448;  Plimpton  v.  Farmers'  Mid.  Fire 
Ins.  Co.,  43  Vt.  497,  499,  5  Am.  Rep. 
297,  dictum.;  and  see  Naquin  v.  Texas 
S.  &  R.  Est.  Assn.,  95  Tex.  313,  67 
S.  W.  85,  58  L.  R.  A.  711,  93  Am.  St. 
R.  855.  Contra,  held  a  trust  for  ven- 
dee. Skinner  &  Sons  Dry  Dock  Co.  v. 
Houghton,  92  Md.  68,  48  Atl.  85,  84 
Am.  St.  R.  485  (but  also  held  that 
policy  was  avoided  for  change  of  in- 
terest). Ins.  Co.  V.  Updegraff,  21  Pa. 
St.  513;  Reed  v.  Lid  ens,  44  Pa.  St.  200, 
84  Am.  Dec.  425.  However  equitable 
i't  may  appear  it  is  difficult  to  find  legal 
warrant  for  the  doctrine  that  without 
consent  of  the  company  an  executory 
vendee  may  become  the  real  party  in 
interest  to  insurance  taken  out  by  the 
vendor  on  his  own  account  as  absolute 
owner,  since  the  rule  is  well  settled 
that  a  contract  of  fire  insurance  is 
strictly  personal.  A  new  party  in 
interest  must  not  be  substituted  with- 
out consent  of  the  insurers.  If  the 
executory  vendee  becomes  a  party  in 
interest  the  insurance  is  altogether 
avoided  by  reason  of  the  alienation 
clause  of  the  standard  policy.  Skinner 
&  Sons  Dry  Dock  Co.  v.  Houghton,  92 
Md.  68,  48 'Atl.  85,  84  Am.  St.  R.  485; 
Germania  F.  Ins.  Co.  v.  Home  Ins.  Co., 
144  N.  Y.  195,  39  N.  E.  77,  26  L.  R.  A. 
591,  43  Am.  St.  R.  749. 

^  Hone  V.  Mutual  Safety  Ins.  Co.,  1 
Sandf.  (N.  Y.)  137. 

M§37,  73. 


76  OENEHAl.    I'HIN'CII'LE.S   OF    INyUUANCE    LAW 

Under  a  policy  for  loss  of  use  and  occupation  of  a  mill  or  other 
building,  while  undergoing  repairs  or  while  being  rebuilt  after  the 
fire,  the  amount  of  recovery  is  usually  defined  by  the  policy  as  so 
much  per  day;  and  provision  is  often  made  for  ascertaining  by 
appraisal  the  amount  of  probable  loss  of  time.^ 

§  60.  Personal  Contract. — A  contract  of  fire  insurance  is  strictly 
personal;  that  is,  it  does  not  pass  to  the  new  owner  by  virtue  of 
a  transfer  of  the  title  of  the  property.-  Hence,  upon  closing  a  sale 
or  conveyance,  it  is  of  consequence  to  the  vendee  to  see  that  new 
policies  are  taken  out,  or  that  the  proper  indorsements  consent- 
ing to  the  transfer  are  made  by  the  insurers  upon  the  old  policies.* 

This  rule  is  reasonable;  for,  as  was  explained  in  the  introductory 
chapter,  the  moral  risk  assumed  by  the  insurers  depends  upon  the 
character  and  circumstances  of  the  insured.  They  have  a  rght  to 
know  with  whom  they  are  contracting,  and  no  new  party  can  be 
thrust  upon  them  without  their  consent.'*  However  important  the 
policy  of  insurance  may  be  to  the  owner,  for  the  time  being,  of  the 
property,  it  in  no  respects  runs  with  the  title  to  the  buildings  or 
contents  specified  in  the  policy.^ 

While,  as  shown  hereafter,  a  marine  policy  is,  in  general,  assign- 
able without  the  insurer's  consent,^  nevertheless,  where  the  insured 
sells  or  parts  with  his  interest  in  the  subject-matter  insured,  his 
rights  under  the  policy  do  not,  by  virtue  of  such  transfer  alone,  rnd 
without  express  or  implied  assignment  of  the  policy,  pass  to  the 
vendee  or  assignee  of  the  property." 

§  61.   Premium  when   Returnable. — Where  the  consideration  for 

the  payment  of  the  premium  totally  fails,  and  there  has  been  no 
fraud  or  illegality  on  the  part  of  the  assured  or  his  agents,  the  pre- 

i  Michael   v.   Prussian  National  F.  18  Ch.  D.  1;  Powles  v.  Innes,  11  M.  & 

Ins.  Co.,  171  N.  Y.  25,  63  N.  E.  810;  W.  10. 

Chatfield  v.  ^tna  Ins.  Co.,  75  N.  Y.  ^  gee  last  section  and  note. 

Supp.  620,  71   App.    Div.    164   (hotel).  *  Germama  F.  Ins.  Co.  v.  Home  Ins. 

See  Appendix,  Forms.  Co.,  144  N.  Y.   195,  39  N.  E.  77,  26 

^-Hunt  V.  Springfield  F.  &  M.  Ins.  L.  R.  A.  591,  43  Am.  St.  R.  749. 

Co.,  196  U.  S.  47,  50,  25  S.  Ct.   179;  '^  King  v.  Preston,  11   La.  Ann.  95; 

City  of  Norwich,  118  V.  S.  468,  494,  Lahiff  v.  Ins.  Co.,  60  N.  H.  75.     As  to 

6  S.  Ct.   1150;  Shadgett  v.  Phillips  &  the   assignabiUty    of   marine   and    Hfe 

Crew  Co.,  131  Ala.  478,  483,  56  L.  R.  pohcies,  see  §63. 

A.  461,  90  Am.  St.  R.  95,  31  So.  20;  6  See  §63. 

Kase  V.  Hartford  Iiis.  Co.,  58  N.  J.  L.  '^  North  of  Eng.,  etc.,   Co.   v.   Arch- 

34.  32  Atl.   1057;  Lett  v.  Guard.  Fire  angel  Mar.  Ins.  Co.   (1875),  10  Q.   B. 

Ins.  Co.,  125  N.  Y.  82,  34  N.  Y.  St.  R.  249;  Poirles  v.  Innes  (1843),  11  M.  & 

411,  25  N.  E.  1088;  Raynor  v.  Preston,  W.  10. 


PREMIUM   WHEN   APPORTIONABLE — MARINE 


77 


mium  is  thereupon  returnable  to  the  assured/  but  if  the  risk  has 
once  attached  it  may  be  said  in  general  that  the  premium  is  not 
apportionable  or  returnable  except  by  agreement.'  A  modification 
of  the  last  proposition,  however,  is  stated  in  the  next  section,  ap- 
plicable more  especially  to  marine  insurance. 


§  62.  Premium  when  Apportionable — Marine. — In  marine  insur- 
ance where  the  consideration  for  the  payment  of  the  premium  is 
apportionable  and  there  is  a  total  failure  of  any  apportionable  part 
of  the  consideration,  a  proportionate  part  of  the  premium  is  there- 
upon returnable  to  the  assured  provided  there  has  been  no  fraud  or 
illegality  on  his  part.^ 

The  values  of  buildings  and  contents  are  so  uncertain,  and  contents 
are  so  fluctuating  both  in  amount  and  in  value,  that  rarely  has 
this  doctrine  been  recognized  in  fire  insurance.^  Indeed,  such  a 
rule,  applicable  as  it  is  upon  termination  of  every  insurance  regard- 
less of  whether  a  loss  has  happened,  would  be  fruitful  in  disagree- 


^  Dodge  v.  Boston  Mar.  Ins.  Co.,  85 
Me.  215,  27  Atl.  105  (unseaworthiness). 
7ns.  Co.  V.  Pyle,  44  Ohio  St.  19,  4  N.  E. 
465,  58  Am.  Rep.  781  (innocent 
breach).  Jones  v.  Ins.  Co.,  90  Tenn. 
604,  18  S.  W.  260  (breach  of  clear- 
space  clause  without  fraud).  Mut.  L. 
Ins.  Co.  V.  Elliott,  93  Tex.  144,  53  S.  W. 
1014  (risk  never  attached).  Summers 
V.  Mut.  L.  Ins.  Co.,  12  Wyo.  369,  75 
Pac.  937,  66  L.  R.  A.  812  (policy  never 
delivered).  Gorsedd  S.  Co.  v.  Forbes 
(1900),  5  Com.  Cas.  413.  So  also  if 
contract  is  rescinded  for  fraud  or 
misrepresentation  of  insurer,  McKay 
V.  N.   Y.  Life  Ins.  Co.,  124  Cal.  270, 

56  Pac.  1112;  Armstrong  v.  Mut.  L. 
Ins.  Co.,  121  Iowa,  362,  96  N.  W.  954; 
McCann  v.  Met.  L.  Ins.  Co.,  Ill  Mass. 
280,  58  N.  E.  1026;  Amierson  v.  N.  Y. 
Life  Ins.  Co.,  34  Wash.  616,  76  Pac. 
109;  or  by  infant  on  coming  of  age, 
Sim.pson  v.  Prudential  Ins.  Co.,  184 
Mass.  348,  68  N.  E.  673;  Johnson  v. 
Northwestern,  etc.,  Co.,  56  Minn.  365, 

57  N.  W.  934.  If  contract  is  tainted 
by  fraud  of  insured,  premium  is  not 
returnable  except  by  special  agree- 
ment, though  policy  is  avoided  from 
inception,  Georgia  Home  Ins.  Co.  v. 
Rosenfield,  95  Fed.  358,  37  C.  C.  A. 
96;  Prince  of  Wales,  etc.,  Co.  v.  Palmer, 
25  Beav.  605.  If  contract  is  illegal 
premium  is  not  returnable,  e.  g.,  Avager 
policies,  Wheeler  v.  Mut.  R.  F.  L. 
Assn.,  102  111.  App.  48;  Harse  v.  Pearl 
L.  Ins.  Co.  (1904),  1  K.  B.  558;  but 


see  Am,.  Mut.  L.  Ins.  Co.  v.  Bertram, 
163  Ind.  51,  70  N.  E.  258,  64  L.  R.  A. 
935,  innocent  assignee. 

2  Joshua  Handy  \Vorks  v.  Am.  Steam 
B.  Ins.  Co.,  86  Cal.  248,  252,  24  Pac. 
1018,  21  Am.  St.  R.  33;  McElwain  v. 
Met.  Life  Ins.  Co.,  33  App.  Div.  60,  53 
N.  Y.  Supp.  253;  Heyidricks  v.  Com- 
mercial Ins.  Co.,  8  Johns.  (N.  Y.)  1; 
Steinback  v.  Rhinelander,  3  Johns.  Cas. 
269;  Tyrie  v.  Fletcher  (1777),  2  Cowp. 
666.  Thus,  where  the  assured  has 
a  defeasible  interest  which  is  termi- 
nated during  currency  of  the  risk, 
Boihm  V.  Bell,  8  T.  R.  154.  But  see 
rule  in  marine,  §  62.  Or  where  the 
pending  contract  is  ended  by  breach 
of  warranty,  Hearne  v.  his.  Co.,  20 
Wall.  488,  22  L.  Ed.  395  (deviation); 
Home  Fire  his.  Co.  v.  Kuhlman,  58 
Neb.    488,    78    N.  W.  936    (vacancy). 

3Eng.  Mar.  Ins.  Act  (1906),  §84. 
Holmes  v.  United  Ins.  Co.,  2  Johns. 
Cas.  329.  Apportioned  because  one  of 
the  insured  had  no  interest,  Finney  v. 
Warren  Ins.  Co.,  1  Mete.  (Mass.)  16, 
35  Am.  Dec.  343;  Foster  v.  U.  S.  Ins. 
Co.,  11  Pick.  (Mass.)  85.  Thus,  where 
the  policy  is  on  a  cargo  of  1,000 
barrels  of  sugar  and  only  500  barrels 
are  shipped,  one-half  the  premium  is 
returnable. 

4  A  bill  embodying  in  part  this 
principle  in  a  clause  of  a  new  fire 
olicy  was  unsuccessfully  proposed  to 
Y.  Legislature  in  1907. 


&' 


78  GENERAL    PRINCIPLES    OF    LNSLKAXCE    LAW 

ment  and  friction  between  fire  insurance  companies  and  their  cus- 
tomers.^ In  most  instances,  the  companies,  although  possessing 
Httle  knowledge  of  the  value  of  properties  insured,  freel}'  and  gra- 
tuitously, upon  request,  grant  the  privilege  of  other  insurance, 
without  limit  of  amount.  Under  such  circumstances  the  duty  rests 
plainly  with  the  insured  to  keep  the  aggregate  of  his  insurance  within 
proper  bounds.^ 

§  63.  Assignment  of  Policies. — Before  loss  a  fire  policy  is  not 
assignable  without  the  consent  of  the  insurer,^  and  after  loss  only  to 
the  extent  of  the  claim  therefor,  since  the  contract  is  peculiarly 
personal,  but  unless  expressly  prohibited  by  the  terms  of  the  con- 
tract a  marine  or  life  policy  may  be  assigned  without  permission  of 
the  underwriters.'*  Often,  however,  in  the  policy  of  life  insurance 
an  assignment  is  made  ineffectual  until  after  written  notice  thereof 
is  given  to  the  company. 

The  assignability  of  the  marine  policy  was  early  established  by 
custom,  and  grew  out  of  the  demands  of  mercantile  business,  which 
overrode  the  theory  that  the  contract  is  strictly  personal.^  The 
value  of  a  life  policy,  too,  would  often  be  seriously  diminished  un- 
less the  owner  of  it  were  able  to  make  it  the  source  of  immediate 
l)enefit.  Inasmuch  as  it  is  in  general  payable  upon  an  event  which 
sooner  or  later  is  certain  to  occur,  it  resembles  in  certain  respects  an 
ordinary  chose  in  action,^  and  in  most  cases  no  sufhcient  reason  can 
be  given  why  it  should  not  be  assignable,  provided  vested  rights  of 
beneficiaries  are  not  thereby  disturbed.'''     It  has  been  held,  how- 

1  Moreover,  the  pernicious  practice  of  upon  the  law  of  the  state  where  the 
overinsuring  should  not  be  fostered,  assignment  is  made,  Spencer  v. 
but  discouraged.  Myers,  150  N.  Y.  269,  44  N.  E.  942, 

2  A  few  states,  however,  have  statu-  34  L.  R.  A.  175,  55  Am.  St.  R.  675. 
tory  provision,  not  expressly  confined  Claims  for  losses  under  a  fire  policy  are 
to  marine  insurance,  that  the  premium  assignable  like  other  choses  in  action, 
is  apportionable  and  returnable  pro  Roger  Williams  Ins.  Co.  v.  Carrington, 
rata,  where  there  is  overinsurance  by  43  Mich.  252,  5  N.  W.  303;  Nease  v. 
several  insurers,  Cal.  Civ.  Code,  §  2620;  Insurance  Co.,  32  W.  Va.  283,  9  S.  E. 
Montana  Civ.  Code,  §  3494;  No.  Dak.  283.  As  soon  as  loss  occurs  and  even 
Civ.  Code,  §  5967;  So.  Dak.  Civ.  Code,  before  adjustment  the  claim  is  assign- 
§  1865.  able,  Greenwich  Ins.  Co.  v.  Columbian 

■i  Traders'  Ins.  Co.  v.  Newman,  120  Mfg.  Co.,  73  111.  App.  560. 

Ind.  54,  22  N.  E.  428;  L^iford  v.  Conn.  '=  Sparks    v.    Marshall,    2    Bingham 

F.  his.  Co.,  99  Me.  273,  58  Atl.  916.  N.  C.  761;  Earl  v.  Shaw,  1  Johns.  Cas. 

4  Earl  V.  ,S7u7(r,  1  Johns.  Cas.  (N.  Y.)  (N.  Y)  314,  1  Am.  Dec.  i:'7. 

314,  1  Am.  Dec.  117  (marine).    Palmer  «M  t.   Life  his.    C.   v.   Allen,   138 

V.  Milt.  Life  Ins.  Co  ,  77  N.  Y.  Supp.  Mass.  24,  52  Am.  Rep.  245. 

869,  38  Misc.  318;  A'    Y.  Mut.  Life  Ins.  7  Robinson  v.  Duvall,  79  Ky.  83,  42 

Co.  v.  Armstrong,  117  U.  S.  591,  6  S.  Ct.  Am.  .lep.  208;  Grisicold  v.  Sawyer,  125 

877,  29  L.  Ed.  997   (life).     Robinson  v.  N.  Y.  411,  416. 1.6  N.  E.  464,   n  which 

Cator,  78  Md.   72,  26  Atl.   959.     The  the  court  said:  "It  is  elementary  law 

validity    of    the    assignment    depends  that  where  a  policy  is  for  the  benefit 


VESTING   OF   RIGHTS   IN    BENEFICIARIES  79 

ever,  that  the  executor  or  administrator  of  the  insured  may  im- 
peach the  vahdity  of  an  assignment  of  the  poUcy,  if  founded  upon 
an  immoral  and  illegal  consideration.^ 

§  64.  Vesting  of  Rights  in  Beneficiaries — Regular  Life  Policy.     If 

a  person,  having  an  insurable  interest  in  the  life  of  another,  takes  out 
a  valid  policy  on  that  life,  but  for  his  own  benefit,  and  pays  the  pre- 
miums, it  is  evident  that  the  policy  is  his  own  property.^  The  per- 
son whose  life  is  insured  has  no  right  to  the  policy,  nor  has  he  any 
control  over  it,  but  ^•ery  frequently  it  happens,  that  the  insured  in 
procuring  a  policy  upon  his  own  life  has  it  made  payable  to  others, 
for  example, -his  wife  and  children,  or  near  relatives  or  dependents, 
often  without  their  knowledge  and  in  most  instances  without  any 
consideration  moving  from  them.  The  ciuestion  then  arises,  when 
and  to  what  extent  the  interest  of  such  beneficiaries  or  payees 
becomes  a  vested  right .^  Actual  payment  of  insurance  money,  of 
course,  must  await  the  maturity  of  the  policy  and  must  also  be  sub- 
ject to  the  continued  observance  on  the  part  of  the  insured  of  all  its 
conditions  precedent,  and  warranties."*  But  when  does  the  interest 
of  the  beneficiary  thus  gratuitously  designated  become  so  far  a 
property  right  that  neither  the  insured  nor  his  creditors  can  destroy 
or  impair  it?  The  arrangement,  though  in  certain  of  its  aspects  a 
chose  in  action,^  in  others  is  obviously  in  the  nature  of  a  gift  or 
voluntary  trust  for  the  benefit  of  the  person  or  persons  named  as 
payees,^  and,  as  in  the  case  of  all  gifts,  the  court  will  strive  primarily 
to  effectuate  the  probable   intent  of   the  donor.'^     It  is  a  laudable 

of  persons  named   therein,   to   whom  577,  66  N.  W.  697,  47  L.  R.  A.    681 

the  simi  insured  is  payable,  it  cannot  (warranty  against  suicide).    Behling  v. 

be  assigned  without  the  consent  of  the  iV.   W.  L.  Ins.   Co.,  117  Wis.  24,  93 

persons  named  and  all  of  them.     The  N.  W.  800   (default  in    paying  a    pre- 

insured    may    destroy   the    policy    by  mium) ;  compare  Union  Cent.  Life  Ins. 

omitting  to  pay  the  premiums  and  thus  Co.  v.  Buxer,  62  Ohio  St.  385,  391,  57 

failing  to  keep  it  in  life,  but  he  cannot  N.  E.  66,  49  L.  R.  A.  737.  ^ 

impair    the    interests    of    the    persons  5  Olmsted  v.  Keyes,  85  N.  Y.  598. 

named  as  beneficiaries  by  a  surrender  6  Small  v.  Jose,  86  Me.  120,  29  Atl. 

or  a&signment  thereof;  "  Opitz  v.  Knrcl,  976;  Preston  v.  Conn.  Mut.  Life  Ins. 

118  Wis.  527.  95  N.  W.  948,  62  L.  R.  A.  Co.,  95  Md.  101,  51  Atl.  838;  Ryan  v. 

982,  99  Am.  St.  R.  1004.  Rothweiler,  50  Ohio  St.  595,  35  N.  E. 

i^  Harrison  v.  Northwestern,  etc.,  Co.  681;  Cleaver  v.  Mid.  Reserve  Fund,  1 

(Vt.),  66  Atl.   787   (married  man  as-  (1892),  Q.  B.  153,  61  L.  J.  Q.  B.  128, 

signed  the  policy  to   his   mistress   in  66  L.  T.  220. 

consideration  of  illicit  relations).  ^  Farleigh  v.  Cadman,  159  N.  Y.  169, 

^Ravls  V.  Am.  Mut.  L.  Ins.  Co.,  27  173,  53  N.  E.  808  ("a  gift,  whether  in 

N.  Y.  282,  84  Am.  Dec.  280.  the  form  of  a  trust,  or  otherwise,  al- 

3  "An   interesting    question,"    Mid.  ways    involves    the    intention    of    the 

Life  Ins.  Co.  v.  Hill,  178  U.  S.  347,  donor").      If   a   husband   insures    his 

20  S.  Ct.  914,  44  L.  Ed.  1097.  life  for  his  wife,  and  pays  all  the  pre- 

*  McCoy   v.   Relief  Assoc,   92   Wis.  miums    with   money   embezzled    fronj 


80 


GENERAL   PRINCIPLES   OF   INSURANCE   LAW 


thing  for  a  person  when  solvent  to  make  secure  provision  for  the 
future  necessities  and  comfort  of  those  who  are  naturally  and  properly 
dependent  upon  him,  and  to  obtain  this  result  it  would  seem  proba- 
ble, that  the  donor  would  intend  to  relieve  the  objects  of  his  bounty 
from  any  danger  of  interference  by  his  possible  future  creditors. 

It  may  be  stated  as  the  general  rule  that  if  no  phraseology  in  the 
contract  indicates  a  different  intent,  the  right  of  the  beneficiary 
becomes  vested  as  soon  as  the  contract  is  made,'  though  the  policy 


liis  firm,  the  proceeds  of  the  poHcy 
will  belong  to  it;  but  if  the  first  pre- 
mium is  honestly  paid  by  him,  and 
subsequent  premiums  witli  money 
stolen  from  his  firm,  the  proceeds  of 
the  policy  will  belong  to  the  wife, 
churged  with  a  lien  to  the  firm  for  the 
amount  of  its  money  used  for  pre- 
miums. Holmes  v.  Gilman,  138  N.  Y. 
36),  34  N.  E.  205,  20  L.  R.  A.  566,  34 
Am.  St.  R.  463. 

1  Chief  Justice  Fuller  says:  "It  is 
indeed  the  general  rule  that  a  policy, 
and  the  money  to  become  due  under 
it,  belong  the  moment  it  is  issued,  to 
the  person,  or  persons  named  in  it  as 
the  beneficiarj'  or  beneficiaries,  and 
that  there  is  no  power  in  the  person 
procuring  the  insurance,  by  any  act  of 
his,  by  deed  or  by  will  to  transfer  to 
any  other  person  the  interest  of  the 
person  named."  Central  Nat.  Bank  v. 
Hume,  128  U.  S.  195,  206,  9  S.  Ct. 
41,  44,  32  L.  Ed.  370;  Franklin  L. 
Ins.  Co.  V.  Galligan,  71  Ark.  295, 
301,  73  S.  W.  102,  100  Am.  St. 
R.  73;  Lemon  v.  Phoenix  Life  Ins. 
Co.,  38  Conn.  294;  Glanz  v.  Gloeckler, 
104  111.  573,  44  Am.  Rep.  94;  Weather- 
bee  V.  N.  Y.  Life  Ins.  Co.,  182  Mass. 
342,  65  N.  E.  383;  Laughlin  v.  Nor- 
cross,  97  Me.  33,  53  Atl.  834;  Preston  v. 
Connecticut  Mut.  L.  Ins.  Co.,  95  Md. 
101,  51  Atl.  838;  Ricker  v.  Charter  Oak 
Life  Ins.  Co.,  27  Minn.  193,  6  N.  W. 
771,  38  Am.  Rep.  289;  United  States 
Casualty  Co.  v.  Kacer.  169  Mo.  301, 
69  S.  W.  370,  55  Cent.  L.  J.  127,  58 
L.  R.  A.  436;  Shipman  v.  Home  Circle, 
174  N.  Y.  398,  67  N.  E.  85,  63  L.  R.  A. 
347;  Garner  v.  Germania  Life  Ins.  Co., 
110  N.  Y.  266,  18  N.  E.  130,  1  L. 
R.  A.  256;  Butler  v.  State  Mut.  Life 
Assur.  Co.,  55  Hun  (N.  Y.),  296,  28 
N.  Y.  St.  R.  491,  8  N.  Y.  Supp.  411, 
aff'd  125  N.  Y.  769,  36  N.  Y.  St.  R. 
1011,  27  N.  E.  409;  Entwistle  v.  Trav- 
elers' Ins.  Co.,  202  Pa.  St.  141,  51  Atl. 
759;    D'Arcy    v.    Connmticvt    Mut     L. 


Ins.  Co..  108  Tenn.  567,  576,  69  S.  W. 
768;  Wasliington  L.  Ins.  Co.  v.  Ber- 
u-uld,  97  Tex.  Ill,  115,  76  S.  W.  442; 
Martin  v.  McAllister,  94  Tex.  567,  63 
8.  W.  624,  56  L.  R.  A.  585  (not  com- 
munity but  separate  property);  and  see 
Mih's  V.  Connecticut  Mid.  Life  Ins.  Co., 
147  U.  S.  177,  13  S.  Ct.  275,  37  L.  Ed. 
128.  The  general  rule  as  to  vested 
rights  in  third  parties  applies  equally 
to  endowment  policies,  Pingrey  v. 
Ins.  Co.,  144  Mass.  374,  382,  11  N.  E. 
562;  Lockwood  v.  Ins.  Co.,  108  Mich. 
334,  66  N.  W.  229;  McGlynn  v.  Curry, 
81  N.  Y.  Supp.  855,  82  App.  Div.  431, 
433;  but  see  Talcott  v.  Field,  34  Neb. 
611,  52  N.  W.  400,  33  Am.  St.  R.  662. 
Thus,  the  rights  of  the  beneficiary  will 
not  be  affected  by  the  suicide  of  the 
insured  in  the  absence  of  a  warranty 
against  suicide,  and  provided  the  policy 
was  not  procured  with  the  intent  to 
commit  suicide.  See  §  34.  Nor  will 
the  divorce  of  a  wife  disturb  her  rights 
as  beneficiary  under  such  a  policy, 
Overhiser's  Adm'x  v.  Overhiser,  63 
Ohio  St.  77,  57  N.  E.  965,  50  L.  R.  A. 
552,  81  Am.  St.  R.  612.  The  interest 
of  the  beneficiary  being  vested  is  also 
assignable,  N.  Y.  Mid.  Life  Ins.  Co.  v. 
Armstrong,  117  U.  S.  591,  6  S.  Ct.  877, 
29  L.  Ed.  997;  Hewlett  v.  Home  for  In- 
curables, 74  Md.  350,  24  Atl.  324,  17 
L.  R.  A.  445;  Wirgman  v.  Miller,  98 
Ky.  620,  33  S.  W.'  937.  But  he  can 
assign  only  his  interest  and  if  that  be 
contingent  or  conditional  until  it  is 
perfected  he  cannot  assign  the  policy 
itself  or  its  surrender  cash  value, 
Rathborne  v.  Hatch,  90  App.  Div. 
(N.  Y.)  161,  85  N.  Y.  Supp.  775,  aff'd 
181  N.  Y.  584,  73  N.  E.  1131.  By 
statute  in  New  York  L.  1896,  c.  272, 
§  22,  "a  policy  of  insurance  on  the  life 
of  any  person  for  the  benefit  of  a  mar- 
ried woman  is  also  assignable  .  .  . 
with  the  written  consent  of  the  as- 
sured." This  Act  known  as  the  Do- 
mestic Relations  Law  supersedes  prior 


VESTING   OF  RIGHTS   IN   BENEFICIARIES  81 

may  not  come  into  his  possession  and  he  may  have  no  knowledge 
of  its  existence.  The  courts  of  England  and  Wisconsin,  however, 
have  not  given  their  approval  to  this  broad  principle,  and  notably 
the  Wisconsin  court  regards  such  a  gift  as  revocable  during  the 
lifetime  of  the  donor,  or  shorter  pendenc}^  of  the  policy.^ 

It  need  hardly  be  stated  that  the  beneficiary  will  not  be  permitted 
to  recover  if  he  intentionally  brings  about  the  death  of  the  insured.^ 
But  in  such  an  event,  if  the  insured  has  committed  no  breach  of 
contract,  a  resulting  trust  in  the  insurance  money  is  inferred  in 
favor  of  his  estate,  since  it  would  be  harsh  indeed  to  adjudge  the 
contract  void  when  the  contracting  party  himself  has  violated  none 
of  its  terms. ^ 

It  is  a  familiar  principle,  however,  that  the  insured  is  under  an 
implied  obligation  to  do  nothing  to  wrongfully  accelerate  the  ma- 
turity of  the  policy.  Thus  in  a  recent  Massachusetts  case,  a  mem- 
ber of  a  mutual  benefit  association  had  named  the  plaintiff,  who 
was  his  wife,  beneficiary  in  a  certificate  which  was  silent  regarding 
suicide.  As  the  appointment  was  revocable,  she  had  no  vested 
rights  in  the  insurance.  The  insured  committed  suicide  by  shooting 
himself  while  he  was  of  sound  mind.  The  court  declared  it  to  be 
settled,  upon  sound  principles,  and  by  a  great  weight  of  authority, 
that,  although  a  policy  contains  no  suicide  clause,  there  is  no  lia- 

acts  and  applies  to  insurance  existing  so)i  v.  Gutterson,  50  Minn.  278;  52 
before  passage  of  the  act,  Matter  of  N.  W.  530;  Tompkins  v.  Levy,  87  Ala. 
Thompson,  184  N.  Y.  36;  Kittel  v.  263,  268,  6  So.  346,  "to  wife,  her  heirs, 
Domeyer,  175  N.  Y.  205,  67  N.  E.  433;  executors  or  assigns,"  held,  that  her 
but  the  clause  of  §  22  of  said  act  au-  interest  ceased  on  her  death, 
thorizing  a  married  woman  by  will  or  2  js,'  y  Mut.  Life  Ins.  Co.  v.  Arm- 
written  acknowledged  assignment  to  strong,  117  U.  S.  591,  6  S.  Ct.  877,  29 
dispose  of  a  policy  on  her  husband's  L.  ed.  997;  Schmidt  v.  Life  Assn.,  112 
life  for  her  benefit,  refers  to  a  policy  Iowa,  41,  83  N.  W.  800,  51  L.  R.  A. 
taken  out  by  herself  in  her  own  name  141,  84  Am.  St.  R.  323;  Cleaver  v. 
or  in  the  name  of  a  trustee.  It  does  Mut.  Reserve  Fund  Assn.  (1892),  1 
not  refer  to  a  policy  taken  out  by  the  Q.  B.  147  (case  of  Mrs.  Maybrick); 
husband  in  her  favor  in  which  she  had  Prince  of  Wales,  etc.,  Assoc,  v.  Palmer, 
only  a  contingent  interest,  Bradshaw  25  Beav.  605;  Quebec  Official  Rep.,  9 
V.  Mut.  L.  Ins.  Co.,  187  N.  Y.  347,  80  Q.  B.  499;  and  see  Conn.  Mut.  L.  Ins. 
N.  E.  203.  As  to  what  is  husband's  Co.  v.  Hillmon,  188  U.  S.  208,  23  S.  Ct. 
consent,  see  Sherman  v.  Allison,  77  294.  But  rights  of  beneficiary  will  not 
App.  Div.  49,  80  N.  Y.  Supp.  148.  As  be  defeated  by  such  acts  if  he  was 
to  when  rights  of  beneficiary  are  liable  insane,  Holdom  v.  Ancient  Order,  159 
for  debts  of  beneficiary  see  Amberg  v.  111.  619,  43  N.  E.  772,  31  L.  R.  A.  67, 
Ins.  Co.,  171  N.  Y.  314,  63  N.  E.  1111;  50  Am.  St.  R.  183. 
Ellison  V.  Straw,  116  Wis.  207,  92  ^  Schmidt  v.  Life  Assn.,  112  Iowa, 
N.  W.  1094.  41,  83  N.  W.  800,  51  L.  R.  A.  141,  84 
1  Estate  of  Breitung,  78  Wis.  33,  46  Am.  St.  R.  323;  Ri/an  v.  Rothweiler,  50 
N.  W.  891,  47  N.  W.  17;  Ellison  v.  Ohio  St.  595,  35  N.  E.  681;  Walsh  v. 
Straw,  116  Wis.  207,  92  N.  W.  1094;  M.  L.  Ins.  Co.,  133  N.  Y.  408,  419; 
Foster  v.  Gile,  50  Wis.  603,  7  N.  W.  555;  31  N.  E.  228;  Cleaver  v.  Reserve  Fund 
Re  Policy  of  Scottish  Eq.  Life  Assur.  L.  Assn.  (1892),  1  Q.  B.  147, 
So.  (1902),  1  Ch.  282;  and  see  Gtitter- 

6 


82  GENERAL   PRINCIPLES   OF  INSURANCE   LAW 

bility  under  it  to  the  legal  representatives  of  the  insured,  if  his  death 
is  intentionally  caused  by  himself  when  of  sound  mind.  The  court 
further  concluded  that  the  same  result  must  follow  where  the  in- 
sured had  named  the  claimant  as  in  that  case  by  an  appointment 
which  was  revocable.^ 

On  the  other  hand,  about  three  months  earlier  in  the  same  year, 
the  Nebraska  court  adopted  the  opposite  view,  and  held  broadly 
that,  where  a  policy  or  certificate  of  life  insurance  is  taken  out  in 
good  faith,  suicide  will  not  defeat  recovery  by  a  third  party  bene- 
ficiary, unless  the  contract  so  provides  in  express  terms.^  The  high- 
est court  of  New  Jersey  also  had  previously  come  to  the  same  con- 
clusion, presenting  opinions  discussing  both  sides  of  the  question, 
but  holding  by  a  majority  vote,  that  it  is  immaterial  whether  the 
rights  of  the  beneficiary  are  vested  or  revocable.^  Indeed  the  opin- 
ions of  the  courts  in  the  last  two  cases  go  further  than  this,  and 
favor  the  view  that  a  policy,  payable  to  the  estate  of  the  insured, 
without  a  suicide  clause,  shall  not  be  defeated  by  his  intentional 
self-destruction,  unless  he  took  out  the  policy  with  the  purpose  of 
killing  himself,  since  the  proceeds  do  not  profit  the  wrongdoer  but 
pass  to  some  innocent  recipient.  This  view  is  opposed  to  the  funda- 
mental notion  that  insurance  is  a  contract  of  the  highest  good  faith, 
demanding  the  exercise  of  fair  dealing  between  the  parties  during 
its  continuance,  as  well  as  at  its  inception,  and  by  many  courts  is 
deemed  inconsistent  with  a  sound  regard  to  public  welfare. 

In  an  interesting  case  where  the  policy  by  its  terms  became  pay- 
able to  the  insured,  he  committed  the  crime  of  murder  for  which 
he  was  convicted  and  hanged.  After  the  commission  of  the  crime 
he  assigned  the  policy  to  the  plaintiffs.  The  judgment  of  conviction 
not  being  res  adjudicata  as  against  them,  they  offered  but  were  not 
allowed  to  prove  that  it  was  in  fact  unjust.  The  court  held  that 
the  evidence  was  not  admissible  and  that  they  could  not  recover, 
since  it  would  be  contrary  to  public  policy  to  uphold  an  insurance 
indemnifying  for  loss  occasioned  by  miscarriage  of  justice  in  the 
courts.'* 

§  65.  If  all  the  Donee  Beneficiaries  Die  Before  Insured.— Where 

by  extraneous  evidence  it  is  shown  that  the  beneficiary  has  a  prior 

1  Davis  V.  Supreme  Council  (Mass.,  N.  J.  L.  274,  49  Atl.  550,  54  L.  R.  A. 
1907),  81   N.   E.   294    (citing  federal,      576. 

state,  and  English  cases).  <  Burt  v.  Union  Cent.  Life  Ins.  Co.,  187 

2  Lange  v.  Royal  Highlanders  (Neb.,  U.  S.  362,  23  S.  Ct.  139,  47  L.  Ed.  216. 
1907),  110  N.  W.  1110.  Compare    Box  v.    Lanier,    112    Tenn. 

3  Campbell  v.  Supreme  Conclave,  00  393,  79  S.  W.  1042,  64  L.  R.  A.  458. 


IF  ALL   THE    DONEE    BENEFICIARIES    DIE    BEFORE    INSURED      83 


binding  agreement  with  the  insured  to  the  effect  that  the  policy  shall 
be  procured,  the  rights  of  the  beneficiary  under  the  policy  are 
vested  and  will  pass  to  his  representatives  if  he  dies  before  the 
insured.^  Or  where  the  beneficiary  aids  in  maintaining  the  in- 
surance or  otherwise  parts  with  value  in  connection  with  the  trans- 
action, it  may  the  more  easily  be  inferred  that  the  intention  was 
to  give  him  a  vested  right  as  of  the  time  of  the  issuance  of  the  policy.^ 
But  usually  beneficiaries  are  appointed  gratuitously.  If  in  that 
event  the  sole  beneficiaries  named  in  the  policy  die  before  the  in- 
sured, their  would-be  donor,  is  it  within  his  power  in  the  absence  of 
other  evidence  of  intent  and  with  the  consent  of  the  company  to 
make  a  fresh  appointment?  Upon  this  point  the  courts  are  divided 
in  their  opinions.  By  the  better  reason  as  well  as  by  the  weight 
of  authorit}^  he  must  be  allowed  to  do  so,  on  the  ground  that  his 
proposed  settlement  or  trust  having  failed  his  policy  is  still  within 
reach  of  his  power  of  disposal.'  The  fact  that  he  originally  planned 
to  make  provision  for  his  wife  or  children,  if  surviving  him,  affords 
slender  reason  for  the  inference  that  he  intended  to  deprive  himself 
of  control  over  his  property  in  the  event  that  he  should  himself  be 
sole  survivor.^ 


1  Cade  V.  Head  Camp  P.  J.  W.  of  W., 
27  Wash.  218,  67  Pac.  603;  Pingrey  v. 
Nat.  Life  Ins.  Co.,  144  Mass.  374,  11 
N.  E.  562;  Smith  v.  National  Ben.  Soc, 
123  N.  Y.  85,  25  N.  E.  197,  9  L.  R.  A. 
616. 

2  Spengler  v.  Spengler,  65  N.  J.  Eq. 
176,  55  Atl.  285. 

3  Especially  if  policy  is  still  in  his 
possession.  The  difficulty  has  been 
met  in  New  York  by  the  following 
clause  contained  in  its  standard  life 
policies.  Ins.  L.  §101,  "Whenever 
the  right  of  revocation  has  been  re- 
served, or  in  case  of  the  death  of  the 
beneficiary  under  either  a  revocable 
or  irrevocable  designation,  the  insured, 
if  there  be  no  existing  assignment  of 
the  policy  made  as  herein  provided, 
may  designate  a  new  beneficiary  with 
or  without  reserving  right  of  revoca- 
tion, by  filing  written  notice  thereof 
at  the  home  office  of  the  company, 
accompanied  by  the  policy  for  suitable 
endorsement  thereon,  and  if  no  bene- 
ficiary shall  survive  the  insured  the 
policy  shall  be  payable  to  the  legal 
representatives  of  the  insured."  The 
N.  Y.  Standard  forms  of  life  insurance 
policies  are  not  applicable  to  indus- 
trial policies. 

*  Tompkins   v.    Levy,   87   Ala.    263, 


268,  6  So.  346  (interest  of  wife  ceased 
on  her  death).  Ryan  v.  Rothueiler, 
50  Ohio  St.  595,  35  N.  E.  679;  Shields 
v.  Sharp,  35  Mo.  App.  178,  182;  Loco- 
motive Eng.  Ins.  Assn.  v.  Winterstein, 
58  N.  J.  Eq.  189,  196,  44  Atl.  199  (in- 
terest reverts  to  insured).  Bickerton 
V.  Jaques,  28  Hun  (N.  Y.),  119, 12  Abb. 
N.  C.  25;  Mut.  Ben.  Life  his.  Co.  v. 
Ativood,  24  Grat.  (Va.)  497,  18  Am. 
Rep.  652;  Foster  v.  Gile,  50  Wis.  603, 
7  N.  AV.  555,  8  N.  W.  217  (a  gift  rev- 
ocable until  death  of  insured).  Ker- 
man  v.  Howard,  23  Wis.  108  (same  as 
last).  Re  Policy  Scottish  Eq.  Life  As- 
sur.  Soc.  (1902),  1  Ch.  282  (all  interest 
reverts  to  insured  who  has  paid  the 
premiums).  Godsal  v.  Webb,  2  Keen 
(Eng.  Ch.),  100.  Contra,  Franklin 
Life  Ins.  Co.  v.  Galligan,  71  Ark.  295, 
73  S.  W.  102,  100  Am.  St.  R.  73: 
Harley  v.  Hci.'<t,  86  Ind.  196,  45  Am. 
Rep.  285;  Preston  v.  Connecticut  Mnt. 
Life  Ins.  Co.,  95  Md.  101,  51  Atl.  838 
(insured  wrote  letter  to  company  stat- 
ing that  he  had  no  intent  that  interest 
should  vest  if  the  beneficiary,  his 
mother,  died;  nevertheless  by  a  mere 
legal  fiction  he  was  deprived  of  his 
policy  and  the  money  on  his  death 
was  given  to  his  mother's  estate).  The 
Massachusette   court  noticed   but   did 


g4  GENERAL  I'UINC'II'LKS  OF    INSURANCE  LAW 

Any  rule  depriving  the  insured  of  the  right  of  disposal,  in  such  a 
case,  over  a  poUcy  taken  out  and  kept  aUve  by  him,  would  not  only 
be  inequitable  but  also  in  many  cases  ineffective,  for  when  tiie  next 
premium  became  due  he  might  allow  the  policy  to  lapse. ^  While 
this  doctrine  may  be  open  to  criticism  on  the  score  of  uncertainl> 
in  holding  the  title  in  abeyance  for  a  time,  it  tends  to  the  accom- 
plishment of  essential  justice,  and  is,  therefore,  sounder  than  a  rule 
which  is  likely  to  defeat  the  probable  purpose  of  the  donor.  Nor 
is  any  satisfactory  solution  of  the  difficulty  furnished  by  the  Indiana 
court  in  its  suggestion  that  if  the  insured  desires  to  avoid  the  transfer 
of  his  money  to  a  stranger,  he  can  so  expressly  provide  in  the  policy.^ 
The  insured  has  little  opportunity  to  shape  the  phraseology  of  the 
policy  and  usually  takes  what  the  company  gives  him  without 
thought  of  remote  contingencies.  If,  however,  the  language  of  the 
policy  or  charter  of  the  company  or  statute  clearly  indicates  that  the 
policy  must  be  issued  for  the  sole  use  of  the  beneficiary  named  and 
his  representatives,  such  language  will  be  taken  as  evidence  of  the 
intent  of  the  parties.^  But  in  case  a  new  appointment  is  not  made 
by  the  insured,  the  representatives  of  the  deceased  appointees  and 
not  the  representatives  of  the  insured,  will  be  entitled  to  the  pro- 
ceeds of  the  insurance,^  though  not  so,  if  the  interest  of  the  bene- 
ficiary is  expressly  conditioned  upon  survivorship.^ 

§  66.  If   Some   of   Donee   Beneficiaries   Die   Before  Insured. — If 

without  any  condition  of  survivorship  the  policy  is  simply  made 
payable  to  several  beneficiaries,  for  example,  to  "wife  and  children" 

not   decide    the   point   in    Millard   v.  pletes  the  gift  in  his  lifetime  by  some 

Brauton,  177  Mass.  533,  542,  59  N.  E.  unequivocal  act  or  declaration").     P. 

436,  .52  L.  R.  A.  117,  83  Am.  St.  R.  294.  S.  Bank  v.  Webb,  21  R.  I.  218,  42  Atl. 

1  Clark    V.    Durand,    12    Wis.    223.  874;    Sherman   v.    Savings   Bank,    138 

The  doctrine  of  the  text  finds  strong  Mass.    581. 

confirmation    in    those    cases    already  -  Harleij  v.   Heist,  86   Ind.    196,  45 

cited  which  hold  that  where  the  inter-  Am.  Rep.  285. 

est  of  the  beneficiary  is  defeated  by  his  ^  Pha;nix  Mut.  Life  Ins.  Co.  v.  Dun- 
own  fraudulent  conduct  the  right  to  ham,  46  Conn.  79,  33  Am.  Rep.  14, 
recover  on  the  pohcy  shall  revert  to  the  Robinson  v.  Duvall,  79  Ky.  83,  42  Am. 
insured;  also  in  the' many  saving  bank  Rep.  208;  Brown  v.  Grand  Lodge  A.  O. 
trust  deposit  cases  which  hold  that  the  U.  W.,  208  Pa.  St.  101,  57  Atl.  176; 
trust  heading  alone  unaccompanied  by  Waldum  v.  Homstad,  119  Wis.  312, 
a  delivery  of  the  pass  book  to  the  bene-  96  N.  W.  806. 

ficiary  fa'ils  to  establish  an  irrevocable  ■«  Geojfroy  v.  Gilbert,  5  App.  Uiv.  98, 

trust,  provided  the  depositor  has  fur-  .38  N.  Y.  Supp.  643,  aff'd  154  N.  Y. 

nished  evidence  of  original  purpose  by  741,  49  N.  E.  1097,  and  cases  supra  ; 

subsequently   withdrawing  or  dealing  Robinson  v.  Duvall,  79  Ky.  83,  42  Am, 

with  the  fund  as  though  it  were  his  Rep.   208. 

own.     For  example,  Matter  of  Totten,  5  Raskins  v.  Kendall,  158  Mjiss.  224, 

179  N.  Y.  112,  125,  71  N.  E.  748  (a  227,  33  N.  E.  495;  Bradshaw  v.  Mut. 

tentative   trust'  merely,   revocable   at  L.  Ins.  Co.,  187  N.  Y.  347,  80  N,  E. 

will  until  the  depositor  dies  or  com-  203. 


BENEFICIARIES     INTERESTS 


85 


or  "to  children/'  how  shall  the  interests  vest  in  the  event  that  one 
or  more  beneficiaries  survive  the  insured  while  one  or  more  do  not 
survive  him?  Shall  the  gift  be  regarded  as  made  to  a  class  of  bene- 
ficiaries jointly,  only  those  taking  who  are  alive  at  the  death  of  the 
insured  and  they  taking  the  whole,  or  shall  the  interests  be  con- 
strued to  vest  separately  so  as  to  pass  to  the  representatives  or  as- 
signs or  creditors  of  those  dying  before  the  insured?  Here  again  the 
views  of  the  courts  are  irreconcilable.^ 


§  67.  Beneficiaries'  Interests — Conditionally  Vested  or  Contin- 
gent.— By  a  common  phrase  in  the  ordinary  life  policy  or  certificate 
the  money  is  made  pavable  to  "the  wife  of  the  insured,  if  living, 
otherwise  to  their  children."  Here  the  children's  interest  is  purely 
contingent,^  but  where  the  contingency  occurs,  that  is,  where  the 
wife  dies  before  the  insured,  in  what  children  does  the  interest  vest? 
In  those  alive  at  the  time  the  policy  issues  or  solely  in  those  surviv- 
ing their  mother?     Here  again  the  courts  divide.^     The  insured 


1  Some  courts  consider  it  more 
equitable  and  more  in  accordance  with 
the  probable  intent  of  the  donor  to 
hold  that  the  entire  interest  passes  to 
the  surviving  beneficiary  or  benefici- 
iaries,  In  re  Seyton,  34  Ch.  Div.  511; 
Continental  Life  Ins.  Co.  v.  Webb,  54 
Ala.  689;  Doty  v.  Dickey  (Ky.),  96 
S.  W.  544;  Bell  v.  Kinneer.  101  Ky. 
271,  40  S.  W.  686,  72  Am.  St.  R.  410; 
Fish  v.  Massachusetts  L.  Ins.  Co.,  186 
Mass.  358,  71  N.  E.  786,  in  which  the 
point  was  alluded  to  but  not  definitely 
decided.  Andrus  v.  Iiis.  Assn.,  168 
Mo.  151,  167,  67  S.  W.  582  (but  the 
point  was  not  passed  upon).  Farr  v. 
Grand  Lodge,  83  Wis.  446,  454,  53  N. 
W.  738,  35  Am.  St.  R.  73,  18  L.  R.  A. 
249.  Especially  where  the  deceased 
child  leaves  no  issue,  Robinson  v.  Du- 
vall,  79  Ky.  83,  42  Am.  Rep.  208;  and 
see  Amherg  v.  Manhattan  Life  Ins.  Co., 
171  N.  Y.  314,  63  N.  E.  1111,  as  to 
creditors  of  beneficiary  before  maturity 
of  policy.  See  also  the  second  or  alter- 
native decision  of  the  New  York  court 
at  page  158  in  U.  S.  Trust  Co.  v.  Mut. 
Ben.  Life  Ins.  Co.,  115  N.  Y.  152,  21 
N.  E.  1025.  Other  courts,  perhaps  un- 
necessarily assuming  that  the  general 
rule  as  to  vested  interests  must  apply, 
have  taken  the  opposing  view,  Small 
V.  Jose,  86  Me.  120,  29  Atl.  976  (but 
cases  cited  are  not  in  point).  Hooker 
V.  Sugg,  102  N.  C.  115,  8  S.  E.  919,  11 
Am.  St.  R.  717,  3  L.  R.  A.  217;  Conig- 
land.  v.  Smith,  79  N.  C.  303;  Conv.  Mvt. 


Life  Ins.  Co.  v.  Baldwin,  15  R.  I.  106, 
23  Atl.  105;  and  see  Fidelity  Trust  Co. 
V.  Marshall,  178  N.  Y.  468,  71  N.  E. 
1130,  in  which  judges  stood  four  to 
three  on  an  analogous  point. 

2  Chapin  v.  Felloives,  36  Conn.  132, 
4  Am.  Rep.  49.  The  wife's  interest 
also  is  contingent  and  wholly  depend- 
ent upon  her  survivorship,  Bradshaw 
V.  Mid.  L.  Ins.  Co.,  187  N.  Y.  347,  80 
N.  E.  203;  Herr  v.  Reinoehl,  209  Pa. 
St.  483,  58  Atl.  862. 

3  The  New  York  rule :  Some  courts 
hold  that  the  children  alive  when  their 
mother  dies  take  vested  several  inter- 
ests in  the  whole,  Mich.  Mut.  L.  Ins. 
Co.  V.  Easier,  140  Mich.  233,  103  N.  W. 
596,  citing  cases  pro  and  con;  Smith  v. 
yEt7ia  Life  Ins.  Co.,  68  N.  H.  405,  44 
Atl.  531,  citing  Walsh  case  below; 
Bradshaiv  v.  Mid.  L.  Ins.  Co.,  187 
N.  Y.  347,  80  N.  E.  203;  Fidelity  Trust 
Co.  v.  Marshall,  178  N.  Y.  468,  71  N.  E. 
8;  Walsh  v.  Mut.  Life  Ins.  Co.,  133 
N.  Y.  408,  31  N.  E.  228,  28  Am.  St.  R. 
651  (the  court,  however,  concludes 
that  the  rule  is  sustained  by  precedent 
rather  than  principle).  U.  S.  Trust  Co. 
V.  Mut.  Ben.  Life  Ins.  Co.,  115  N.  Y. 
152,  21  N.  E.  1025;  Braddock  v.  Man- 
hattan L.  Ins.  Co.  (Pa.  Com.  Pleas),  36 
Ins.  L.  J.  372;  and  see  Helmken  v. 
Meyer,  118  Ga.  657,  45  S.  E.  450 
(1903);  Continental  Life  Ins.  Co.  v. 
Webb,  54  Ala.  688.  Both  husband  and 
wife  cannot  join  in  defeating  the 
children's   contingent   right,  Erdwistle 


86 


GENERAL   FKIX<IPLES   OF   INSURANCE    LAW 


cannot   make  himself  the  beneficial  "survivor"  by  murdering  hi& 
wife  in  whom  all  interest  was  vested,  provided  she  survived  him.^ 

§  68.  Right  to  Change  Beneficiary  Expressly  Reserved.— The  in- 
terest of  a  beneficiary  under  a  certificate  or  policy  of  a  fraternal 
order  or  mutual  benefit  or  similar  association  is  ordinarily  revocable 
and  not  vested,  the  right  to  make  a  new  appointment  being  ex- 
pressly reserved  by  the  constitution  or  by-laws  to  which  each  mem- 
ber is  amenable.-  But  any  restrictions  as  to  the  classes  of  permitted 
beneficiaries  contained  in  the  certificate,  charter,  or  by-laws  of  the 


V.  Ins.  Co.,  202  Pa.  St.  141,  51  Atl.  759. 
Except  as  statutes  permit,  for  instance, 
N.  Y.  Law,  1896,  ch.  272,  §  22.     The 
Connecticut   rule:    Other    courts   hold 
that  all   the  children   alive  when  the 
policy   issues   take   vested   rights   and 
the   representatives  take   the    interest 
of   those   dying   before    their   mother, 
Continental' Life  Ins.  Co.  v.  Palmer,  42 
Conn.  60.  19  Am.  Rep.  530;  Estate  of 
Conrad,  89  Iowa,  396,  56  N.  W.  535, 
48  Am.  St.  R.  396;  Voss  v.  Conn.  Mat. 
L    Ins.  Co.,  119  Mich.  161,  77  N.  W. 
697;  Glenn  v.   Burns,  100  Tenn.  295, 
45  S.  W.  784.     A  child  born  after  issu- 
ance of  the  policy  comes  in  for  a  share, 
Roquemore  v.   Dent,   135  Ala.   292,  33 
So.  178;  Scull  v.  .Etna  L.  Ins.  Co.,  132 
N.  C.  30,  43  S.  E.  504.    As  to  the  bur- 
den of  proof   where   the   insured   and 
the  primary  beneficiary  die  in  a  com- 
mon disaster  see  Fuller  \.  Linzee,  135 
Mass.   468,   holding  that   fact   of  sur- 
vivorship   is    a    condition    precedent 
for    representative    of    beneficiary    to 
prove.     But  see  following  cases  hold- 
ing that  the    interest  is  conditionally 
vested  in  beneficiary  and  that  burden 
is  upon  the  representative  of  the  in- 
sured to  divest  it,  U.  S.  Casualty  Co. 
v    Kacer,  169  Mo.  301 ,  69  S.  W.  370, 
58  L.  R.  A.  436,  92  Am.  St.  R.  641; 
Cowman  v.  Rogers,  73  Md.  403,  21  Atl. 
64,   10  L.  R.  A.  550.     Last  case  cited 
in  Young  Women's  Christ.  Home,  187 
U.  S.  401,  23  S.  Ct.  184.     But  under 
the  certificate  of  fraternal  and  bene- 
ficiary associations   the   interest  ordi- 
narily is  not  vested  vmtil  the  death  of 
the  assured.  Supreme  Council  v.  Kacer, 
96  Mo.  App.  93,  69  S.  W.  671;  Males 
V.  Sovereign  Oamp,  30  Tex.  Civ.  App. 
184    70  S.  W.   108;  Screwmen's  Ben. 
Assn.   V.   Whitridge,  95  Tex.   539,  68 
S.  W.  501.     Where  policy  is  payable 
lo  wife  and  child  but  if  not  living  to 
the  execulor  of  in.surcd,  executor  takes 


nothing  if  either  wife  or  child  survives, 
Fish  V.  Mass.  Life  Ins.  Co.,  186  Mass. 
358,  71  N.  E.  786. 

1  Box  V.  Lanier.  112  Tenn.  393,  79 
S.  W.  1042,  64  L.  R.  A.  458,  the  repre- 
sentatives of  the  wife  were  allowed  to 
recover  under  an  oral  assignment. 

'^  Hoe  ft  V.  Supreme  Lodge,  113  Cal. 
91,  45  Pac.  185,  33  L.  R.  A.  174  (inter- 
est styled  a  mere  expectancy).  Wood- 
men's Ace.  Assn.  V.  Hamilton,  70  Neb. 
24,  97  N.  W.  1017  (statute  allowed 
change).  McGrew  v.  McGrew,  190  111. 
604,  607,  60  N.  E.  861;  Martin  v.  Stub- 
bings,  126  111.  387,  IS  N.  E.  657,  9  Am. 
St.  R.  620;  Bum/an  v.  Reed.  34  Ind. 
App.  295,  70  N.  E.  1002;  Schoenun  v. 
Grand  Lodge  A.  O.  U.  W..  85  Minn. 
349,  88  N.  W.  999;  Spengler  v.  Spen^ler, 
65  N.  J.  Eq.  176,  55  Atl.  285;  Supreme 
Council  V.  Adams,  68  N.  H.  236,  44 
Atl  380;  Shipman  v.  Protected  Home 
Circle,  174  N.  Y.  398,  67  N.  E.  83,  63 
L.  R.  A.  347  (future  by-laws  are 
retroactive  if  contract  .so  provides). 
Sabin  v.  Phinney,  134  N.  Y.  428,  31 
N.  E.  1088,  30  Am.  St.  R.  681;  Fan- 
ninq  v.  Supreme  Council,  84  App.  Div. 
205,  82  N.  Y.  Supp.  733,  aff'd  178  N.  Y. 
629,  71  N.  E.  1130  (first  beneficiary 
no'  allowed  to  recover  though  she  still 
held  the  certificate).  Leftwich  v.  Wells, 
101  Va.  255,  43  S.  E.  364;  Stoll  v.  Mut. 
Ben.  L.  Ins.  Co.,  115  Wis.  558,  92  N.  W. 
277  (subject  to  change  of  appointment 
by  last  will  and  testament).  In  the 
ordinary  life  policy  also  a  right  to 
change  beneficiary  may  be  expressly 
reserved,  Mente  v.  Toumsend,  68  Ark. 
391,  398,  59  S.  W.  41;  .Atlantic  Mut. 
L.  Ins.  Co.  v.  Gannon.  179  Mass.  291, 
294,  GO  N.  E.  933;  Cellery  v.  John  Han- 
cock Mut.  L.  Ins.  Co.,  68  N.  Y.  Supp. 
128,  57  App.  Div.  227;  Canavan  v. 
John  Hancock  Mut.  L.  Ins.  Co.,  39 
Misc.  782,  81  N.  Y.  Supp.  304  (pre- 
scribed methods  of  substitution  must 


MODE    OF   CHANGING    BENEFICIARY 


87 


association,  ^  or  in  any  statute,^  must  be  observed.  And  it  has 
been  held  that  the  widow  properly  designated  might  contest  a  sub- 
sequent unlawful  appointment.^  Nor  will  the  insured  be  allowed  to 
designate  a  new  beneficiary  where  the  first  appointment  is  made  in 
pursuance  of  a  binding  contract  with  the  first  aj^pointee.^  Nor  by 
the  weight  of  reason  and  authority  can  he  do  so  where  no  right  is 
reserved  by  statute  or  by  the  contract  or  rules  of  the  association, 
for  there  the  general  rule  relating  to  vested  interests  should  be 
applied.^  It  is  often  asserted  that  a  third  party  named  as  bene- 
ficiar}^  in  the  certificate  or  policy  of  a  fraternal  or  beneficiary  asso- 
ciation has  nothing  in  the  nature  of  a  property  right,  contingent  or 
otherwise,  until  the  death  of  the  insured,  but  a  mere  expectancy  of 
benefit.  This  proposition,  however,  is  of  very  doubtful  accuracy. 
Authority  and  reason  oppose  it.^ 

§  69.  Mode  of  Changing  Beneficiary. — The  appointment  of  a  new 
beneficiary  can  be  accomplished  only  in  compliance  with  any  pre- 
scribed formalities.  The  association  may  rely  upon  its  regulations 
regardless  of  the  intent  of  the  insured.^     But  if  it  choose,  the  society 


be  observed  unless  waived).  For  stat- 
utes allowing  change  of  beneficiary 
see  Appendix,  ch.  I. 

1  Alexander  v.  Parker,  144  111.  355, 
33  N.  E.  183,  19  L.  R.  A.  187,  "de- 
pendents;" Re  Globe  Mid.  Ben.  Assn., 
135  N.  Y.  280,  32  N.  E.  122,  17  L.  R.  A. 
547,  only  adults  (compare  Chi.  Mid.  L. 
Indeynnity  Ass'n  v.  Hunt,  127  111.  257, 
20  N.  E.  55,  2  L.  R.  A.  .549);  Tepper  v. 
Supreme  Council,  59  N.  J.  Eq.  321,  45 
Atl.  Ill;  Brown  v.  Grand  Lodge,  208 
Pa.  St.  101,  57  Atl.  176. 

2  Waldum  v.  Homslad,  119  Wis.  312, 
96  N.  W.  806. 

3  Grand  Lodge  v.  Connelly,  58  N.  J. 
Eq.  180,  43  Atl.  286. 

iGrimbley  v.  Harrold,  125  Cal.  24, 
57  Pac.  558.  73  Am.  St.  R.  19;  Jory  v. 
Supreme  Council,  105  Cal.  20,  38  Pac. 
524,  26  L.  R.  A.  733,  45  Am.  St.  R.  17; 
Leaf  v.  Leaf,  92  Ky.  166,  17  S.  W.  354; 
Smith  v.  Ben.  Soc,  123  N.  Y.  85,  25 
N.  E.  197,  9  L.  R.  A.  616;  Cade  v.  Head 
Camp,  27  Wash.  218,  67  Pac.  603.  But 
voluntary  payment  of  dues  by  the  first 
beneficiary  will  not  necessarily  estop 
the  insured  froni  m.^king  a  new  ap- 
pointment ,  SprnqUr  v.  Spengler,  65 
N.  J.  Eq.  176,  55  Atl.  285. 

5  Franklin  L.  Ins.  Co.  v.  Galligan,  71 
Ark.  295,  301,  73  S.  W.  102,  100  Am. 
St.  R.  73;  Hill  v.  Groesbeck,  29  Colo. 


161,  67  Pac.  167;  Pittinger  v.  Pittinger, 
28  Colo.  308,  64  Pac.  195,  89  Am.  St. 
R.  193;  Manning  v.  Ancient  Order,  86 
Ky.  136,  5  S.  W.  385,  9  Am.  St.  R.  270; 
Weisert  v.  Muehl,  81  Ky.  336;  Loco- 
motive Engineer.'^'  Ins.  Ass.  v.  Winter - 
stein,  58  N.  J.  Eq.  189,  44  Atl.  199; 
Martin  v.  Mfrs.  Ace.  Co.,  60  Hun,  535, 
40  N.  Y.  St.  R.  17,  15  N.  Y.  Supp.  309. 
Contra,  Carpenter  v.  Knapp,  101  Iowa, 
712,  70  N.  W.  764.  38  L.  R.  A.  128. 

^Jarvis  v.  Binkley,  206  111.  541,  69 
N.  E.  582,  holding  the  interest  to  be 
contingent  and  assignable  in  equity. 
Supreme  Council  v.  Tracy,  169  111.  123, 
48  N.  E.  401;  Hopkins  v.  Hopkins,  92 
Ky.  324,  327,  17  S.  W.  864  (interest  is 
vested  conditionally);  and  see  Grand 
Lodge  v.  Connelly,  58  N.  J.  Eq.  180,  43 
Atl.  286  (first  appointee  may  contest 
second  appointment  if  unlawful).  So 
also  Brown  v.  Grand  Lodge,  208  Pa.  St. 
101,57  Atl.  176. 

7  Conway  v.  Supreme  Council  C.  K. 
A.,  131  Cal.  437,  63  Pac.  727;  Masonic 
Mut.  Ben.  Soc.  v.  Burkhart,  110  Ind. 
189,  10  N.  E.  79,  11  N.  E.  449;  Modern 
Woodmen  of  Amcr.  v.  Little,  114  Iowa, 
109,  86  N.  W.  216;  McCarthy  v.  Su- 
preme  Lodge,  153  Mass.  314,  26  N.  E. 
866,  11  L.  R.  A.  144,  25  Am.  St.  R.  637; 
Grand  Lodge  A .  O.  U.  W.  v.  Gandy,  63 
N.  J.  692,  53  Atl.  142  (otherwise  it  will 


88 


GENEKAL   J'KI-N'C1J']>K.S    <  >!     INSLKANCE    LAW 


may  waive  its  regulations  and  the  original  beneficiary  cannot  com- 
plain of  the  lack  of  formality  or  regularity.^  Statutory  provisions 
permitting  the  insured  to  make  a  new  appointment  are  not  applicable 
where  the  interest  of  the  first-named  beneficiary  has  become  vested 
for  value  paid.' 

§  70.  Relations  between  Insurer  and  Insured — Life. — The    policy 

holder  is  not  a  ccsfui  que  trust  of  the  company  and  hence,  in  the 
absence  of  fraud,  cannot  call  upon  the  company  to  disclose  to  him 
their  affairs  in  general,  or  to  render  an  account  for  his  share  of  divi- 
dends or  profits;  ^   and  he  is  not  a  partner  in  the  company.^     As 

N.  Y.  146,  66  N.  E.  670,  95  Am.  St.  R. 
554  (insured  ('ould  not  .surrender  cer- 
tificate for  .substitution  for  first  bene- 
ficiary held  it).  The  court  will,  so  far  as 
possible,  give  effect  to  the  intention  of 
the  parties,  and  will  consider  an  at- 
tempted change  of  beneficiary  com- 
plete without  undue  regard  to  techni- 
calities, Luhrs  V.  Liihrs,  123  N.  Y. 
367,  33  N.  Y.  St.  R.  688,  25  N.  E.  388. 
The  change  of  appointment  may  be 
sustained  without  the  issuance  of  a 
new  certificate  of  insurance.  Bishop 
V.  Grand  Lodge,  112  N.  Y.  627,  21 
N.  Y.  St.  R.  811,  20  N.  E.  562.  But 
not  "SO  if  the  contract  makes  the  issu- 
ance of  the  new  certificate  an  essential 
to  validity  of  the  appointment,  Kem- 
per V.  Modern  Woodmen,  70  Kan.  119, 
78  Pac.  452.  Thougfi  beneficiary  has 
no  vested  interest  he  may  contest  in- 
sured's mental  capacity  to  make  new 
appointment,  but  gratuitous  payment 
of  part  of  assessment  by  beneficiary 
gives  no  vested  rights.  Grand  Lodge 
A.  O.  U.  W.  v.  McGrath,  133  .Alich.  626, 
95  N.  W.  739.  A  right  vested  by  death 
of  insured  cannot  subsequently  be 
divested  by  legislative  act  or  municipal 
charter,  Kavanagh  v.  Board  of  Police 
Pen.  Frtnd,  134  Cal.  50,  66  Pac.  36. 
Amendment  to  laws  not  retroactive 
unless  contract  provides  for  it,  Roberts 
V.  Cohe7i,  60  App.  Div.  259,  70  N.  Y. 
Supp.  57,  aff'd  173  N.  Y.  580,  65  N.  E 
1112. 

"^  Smith  V.  National  Ben.  Soc,  123 
N.  Y.  85,  33  N.  Y.  St.  R.  67,  25  N.  E. 
197. 

3  Gadd  V.  Eq.  Life  Assur.  Soc,  97 
Fed.  834;  Everson  v.  Eq.  Life  Assur. 
Soc.,  71  Fed.  570,  18  C.  C.  A.  251; 
Greeff  v.  Eg.  L.  Ass.  Soc,  160  N.  Y. 
19,  30,  54  N.  E.  712,  46  L.  R.  A.  288, 


not  take  away  the  benefit  from  the 
beneficiary);  Fink  v.  Fink,  171  N.  Y. 
616,  625,  64  N.  E.  506;  Eagan  v.  Eagan, 
68  N.  Y.  Supp.  777,  58  App.  Div.  253, 
255,  256.  See  also  Brown  v.  Grnrul 
Lodge  U.  O.  U.  W.,  208  Pa.  St.  101, 
104,  57  Atl.  176.  So  also  any  method 
of  change  prescribed  in  a  regular  life 
policy  must  be  respected,  Leonard  v. 
Harneif,  173  N.  Y.  352,  66  N.  E.  202. 

1  Atlantic  Mut.  L.  Ins.  Co.  v.  Gannon, 
179  Mass.  231,  60  N.  E.  9.33  (as  to 
signature  of  the  designated  officer  of 
the  society).  Metropolitan  L.  Ins.  Co.  v. 
Anderson,  79  Md.  375,  29  Atl.  606; 
Supreme  Court  Order  of  Patricians  v. 
Davis,  129  Mich.  318,  88  N.  W.  874; 
Allgemeiner  Arbester  Bund  v.  Adam- 
son,  132  Mich.  86,  92  N.  W.  786;  Schoe- 
nau  V.  Grand  Lod/je,  85  Minn.  349,  88 
N.  W.  999;  Webster  v.  Wilco.r,  ol  App. 
Div.  (N.  Y.)  558  (estoppel  by  oral 
agreement).  Kimball  v.  Lester,  43 
App.  Div.  27,  59  N.  Y.  Supp.  540,  aff'd 
167  N.  Y.  570,  60  N.  E.  1113.  But 
waiver  must  be  made  before  rights 
attach  under  the  rules.  Smith  v.  Har- 
man,  28  Misc.  681,  59  N.  Y.  Supp. 
1044.  When  insured  has  done  all 
within  his  power  to  effectuate  substitu- 
tion, equity  may  grant  relief  in  proper 
cases.  Supreme  Council  v.  Cappella,  41 
Fed.  1  (stating  rules  for  granting  re- 
lief). Grand  Lodge  v.  Xoll,  90  Mich.  37, 
51  N.  W.  268,  15  L.  R.  A.  350.  30  Am. 
St.  R.  419  (certificate  was  lost  and 
could  not  be  surrendered  for  substitu- 
tion). Heydorf  v.  Conrack,  7  Kan. 
App.  202,  52  Pac.  700  (in.sured  died 
before  new  certificate  was  actually 
issued).  Marsh  v.  Am.  Legion  of 
Honor,  149  Mass.  512,  21  N.  E.  1070 
(first  beneficiary  acted  in  collusion  with 
officer  of  societj'^).    Laheij  v.  Laheij,  174 


4  People  V.  Security  Life  Ins.  etc,  Co.,  78  N.  Y.  114. 


CONTRACT    IS    A    I'HOl'KinV    KICHT — LIFE 


89 


soon  as  the  risk  attaches,  the  insured,  under  the  usual  form  of  policy, 
becomes  debtor  to  the  insurer  for  the  first  premium,  if  it  has  not 
been  paid.  But  as  to  any  future  premiums  payable  in  advance,  the 
relation  of  debtor  does  not  exist  until  the  risk  attaches  for  the  cor- 
responding period.  The  contract  usually  contains  no  promise  on 
the  part  of  the  insured  to  pay  the  premium,  but  its  payment  is  simply 
made  a  condition  of  the  continuance  of  the  contract.^  If  such 
premium  is  not  paid  the  contract  terminates. 


$  71.  The  Contract  is  a  Property  Right — Life. — A  life  insurance 
policy  taken  out  by  the  insured  upon  his  own  life  and  payable  to 
himself  or  his  estate  is  his  own  property,  subject  to  his  control,  and 
liable  to  the  payment  of  his  debts,  unless  exempt  by  statute.-  But 
prior  to  payment  of  the  insurance  money  the  policy  represents  merely 
a  chose  in  action,  and  is  not  subject  to  attachment  or  execution, 
except  as  in  New  York  by  statute.'''      It  may,  however,  be  reached 


73  Am.  St.  R.  659,  holding  that  assured 
was  only  entitled  to  a  sliare  of  such  por- 
tion of  the  surplus  as  the  directors  saw 
fit  to  distribute,  and  construing  N.  Y. 
Law,  1892,  c.  690,  §  56,  which  hmited 
to  attorney  general  the  right  to  bring 
proceedings  for  accounting  or  injunc- 
tion; but  see  Pierce  v.  Eq.  Assrir.  Soc, 
145  Mass.  56, 12  N.  E.  858, 1  Am.  St.  R. 
433.  Same  law  applied  to  co-operative 
or  assessment  life  insurance  associa- 
tions, Suan  V.  Mid.  Res.  Fund  L. 
As.m.,  155  N.  Y.  9,  49  N.  E.  258.  This 
law  was  repealed  in  the  interest  of 
policyholders  by  L.  1906,  c.  326,  pro- 
viding poHcyholders  may  have  right 
to  attach  a  special  fund,  Babcock  P.  P. 
Mjg.  Co.  X.  Ranovs,  164  N.  Y.  440,  58 
N.  E.  529.  Unless  directors  abuse  their 
discretion  policyholders  cannot  de- 
mand a  discovery  and  a  decree  for  a 
dividend,  Hudson  v.  Knickerbocker 
Life  Ins.  Co.,  28  N.  J.  Eq.  167.  Under 
tontine  plan  the  company  need  not 
keep  the  funds  in  each  class  separately 
invested,  Bogardiis  v.  N.  Y.  Life  Ins. 
Co.,  101  N.  Y.  328,  4  N.  E.  522.  Only 
on  the  expiration  of  tontine  period 
does  the  relation  of  debtor  and  creditor 
arise  between  company  and  assured, 
-V.  Y.  Life  Ins.  Co.  v.  Miller,  22  Ky. 
L.  Rep.  230,  56  S.  W.  975;  Romer  v. 
Eq.  Life  Assvr.  Co..  102  111.  App.  621; 
Averii  v.  Eq.  Life  .4.s-.s»r.  Soc,  117  N.  Y. 
459,  23  N.  E.  3;  Columbia  Bk.  v.  Eq. 
Life  Assur.  Soc.  79  Aop.  Div.  601,  80 
N.  Y.  Supp.  428;  Elli.son  v.  Straw,  119 
Wis.  502.  97  N.  W.  168. 


1  Goodwin  v.  Mass.  Mut.  Life  Ins. 
Co.,  73  N.  Y.  480;  Worthington  v. 
Charter  Oak  Life  Ins.  Co.,  41  Conn. 
372,  19  Am.  Rep.  495. 

-  Washington  Central  Bk.  v.  Hume, 
128  U.  S.  195,  208,  9  S.  Ct.  41 ,  32  L.  Ed. 
370;  Kelley  v.  Mann,  56  Iowa,  625,  10 
N.  W.  211;  Coates  V.  Worthy,  72  Miss. 
575,  17  So.  606;  McCvtcheon's  Appeal, 
99  Pa.  St.  133,  137;  Thilaney  v.  Walsh 
(Tex.  Civ.  App.),  37  S.  W.  615,  aff'd 
90  Tex.  329,  38  S.  W.  748  (cannot  de- 
prive creditors  by  liis  bequest).  An 
assignment  by  way  of  gift  to  a  son 
is  in  fraud  of  existing  creditors. 
Friedman  Bros.  v.  Fennell,  94  Ala. 
570,  10  So.  649. 

3  Code  Civ.  Pro.  §  648;  Trepagnier 
v.  Rose,  18  N.  Y.  App.  Div.  393,  aff'd 
155  N.  Y.  937,  49  N.  E.  1105.  Where 
policy  is  not  matured  it  represents  onlj' 
a  contingent  obligation  and  cannot  be 
reached  by  writ  of  fi.  fa.,  Boisseau  v. 
Bass,  100  Va.  207,  40  S.  E.  647,  57 
L.  R.  A.  380.  The  interests  of  third 
parties  as  beneficiaries  are  not  in  gene- 
ral subject  to  claims  of  creditors  of  the 
insured  unless  the  policy  was  taken 
out  in  fraud  of  creuitors,  Central  Bk. 
v.  Htime,  128  U.  S.  195,  9  S.  Ct.  41,  32 
L.  Ed.  370;  Hendrie  Mfg.  Co.  v.  Piatt, 
13  Colo.  App.  15,  56  Pac.  20^;  Schae- 
jer's  Est.,  194  Pa.  St.  420,  45  Atl.  311. 
A  third  party  paying  premiums  upon 
bankrupt's  policy  is  entitled  to  get 
back  premiums  from  receiver,  Re  Tyler 
(1907),  1  K.  B.  865. 


JO 


(^KNKKAL    IMil.NCll'l.lvS    OK    INSUHAXCK    LAW 


l)y  ])r()i)er  proceedings  in  equity,  unless  it  is  by  statute  exempted 
tiom  fhc  claims  of  creditors.^  After  the  insurance  money  is  paid 
lo  a  l)eneficiary  it  l^ecomes  liable  to  levy  and  attachment  for  his 
(If'bis  like  liis  other  money. - 

s^  72.  Rights  of  Creditors  to  Life  Insurance  Premiums  Paid  by  In- 
solvent Debtors.— Some  of  tl>e  courts  hold  that  in  the  absence  of 
actual  frau<l  it  is  not  jjresumptively  in  fraud  of  creditors  even  at 
common  law  for  an  insolvent,  charged  with  the  duty  of  supporting 
wife  and  children,  to  make  moderate  provision  for  their  future  by 
taking   out  or  keeping  up  insurance  in  their  favor  as  beneficiaries.'' 

policy,  as  lior  separate  properly,  and 
free  from  any  claim  of  a  creditor  or 
representa<^ive  of  her  husband,  except, 
that  where  the  premium  actually  paid 
annually  out  of  the  husband's  property 
exceeds  five  hundred  dollars,  that  poi- 
tion  of  the  insurance  money  which  is 
purchased  by  excess  of  premium  above 
five  hundred  dollars,  is  primarily  liable 
for  the  husband's  debts."  This  clause 
refers  not  to  insurance  taken  out  by 
the  husband  in  favor  of  his  wife,  but 
to  insurance^  procured  by  her  in  the 
manner  described,  Bradnhaw  v.  Mut. 
Life  his.  Co.,  187  N.  Y.  347,  80  N.  E. 
203.  The  clause  provides  not  that  pre- 
miums shall  be  apportioned  and  part 
thereof  turned  over  to  the  creditors 
of  the  insured,  but  that  if  there  is  the 
specified  excess  of  insurance  money 
above  that  purchased  for  $500,  annu- 
ally, that  excess  shall  go  to  the  credit- 
ors regardless  of  whether  the  premiums 
therefor  were  paid  during  solvency  or 
insolvency  of  the  insured.  The  ex- 
emption from  claims  of  creditors  rests 
not  on  contract,  but  upon  legislative 
grant,  affecting  a  remedy,  and  there- 
fore is  held  to  apply  to  proceeds  of 
policies  issued  before  the  enactment, 
Matter  of  Thompson,  184  N.  Y.  36,  40, 
76  N.  E.  870;  185  N.  Y.  .574,  78  N.  E. 
1113.  The  burden  rests  upon  the 
creditors  of  the  insured  to  establish 
the  existence  of  such  excess  insurance 
over  and  above  that  purchased  by 
.fSOO,  annually,  Kittel  v.  Domeyer,  175 
N.  Y.  205,  67  N.  E.  433.  The  proceeds 
of  the  insurance  are  not  general  assets 
of  the  estate  of  the  insured,  but  con- 
stitute a  special  fund  created  by 
statute  for  a  special  purpose,  to  be 
applied  on  the  claims  of  creditors  only 
after  decree  obtained,  establishing 
their  right,  Matter  of  Thompson,  185 
N.  Y.  574.  78  N.  E  1113.     And  see 


1  Basnett  v.  Parsons^,  140  Mass.  169, 
3  N.  E.  547. 

:;  Martin  v.  MaHin,  187  111.  200,  58 
N.  E.  2.30;  Bull  v.  Case,  165  N.  Y.  578, 
59  N.  E.  .301.  Thus,  money  due  upon  a 
m.'itured  policy  upon  the  life  of  a  hus- 
l)and  payable  to  his  wif(>  is  subject  to 
levy  for  wife's  debt.  Amherg  v.  Man. 
Life  Ins.  Co.,  171  N.  Y.  314,  63  N.  E. 
1111.  And  where  tontine  accumula- 
tions have  become  payable  to  the  in- 
sured they  are  subject  to  his  debts 
though  his  wife  is  the  ultimate  bene- 
ficiary under  the  policy,  Ellison  v. 
Straw,  119  Wis.  .502,  97  N.  W.  168. 
Until  assured  elects  which  option  un- 
der tontine  policy  he  will  select  there 
is  no  debt  from  the  company  and 
nothing  for  creditor  to  attach,  Colum- 
bia Bk.  v.  Eq.  L.  Assvr.  Soc,  79  N.  Y. 
App.  Div.  601,  80  N.  Y.  Supp.  428; 
but  see  Troy  v.  Sargent,  132  Mass.  408. 

3  Central  Nat.  Bk.  v.  Hume,  128 
IT.  S.  195,  9  S.  Ct.  41,  32  L.  Ed.  370; 
Masonic  Mut.  Life  As.sn.  v.  Paisley,  111 
Fed.  32;  Hendrie,  etc.,  Mfg.  Co.  v. 
Piatt,  13  Colo.  App.  15,  56  Pac.  211; 
State  V.  Tomlinson,  16  Ind.  App.  662, 
677,  45  N.  E.  1116,  59  Am.  St.  R.  335; 
.Johnson  v.  Alexander,  125  Ind.  575, 
25  N.  E.  706,  9  L.  R.  A.  660.  Statutes 
in  some  states  define  a  limit  of  insur- 
ance exempt  as  against  creditors  (for 
instance,  see,  Cooley,  Ins.,  p.  379.5, 
note),  restricting  annual  premiums  to 
$500.  N.  Y.  Domestic  Relations  Law, 
1896,  e.  272,  §22,  provides,  "A  mar- 
ried woman  may,  in  her  own  name,  or 
in  the  name  of  a  third  person,  with  his 
consent,  as  her  trustee,  cause  the  life 
of  her  husband  to  be  insured  for  a 
definite  period,  or  for  the  term  of  his 
natural  life.  Where  a  married  woman 
4urvives  such  period  or  term  she  is 
entitled  to  receive  the  insurance 
Tuoney,  payable  by  the  terms  of  the 


RIGHTS    OF    CRKDITOUS    T(J    LIFE    INSURANCE    PREMIUMS 


91 


Other  authorities  take  the  opposite  view.^  Some  of  these  holding 
that  the  creditors  are  entitled  to  receive  from  the  insurance  money 
an  amount  equal  to  the  premiums  paid  subsequent  to  insolvency.^ 
Others  less  satisfactorily  holding  that  the  creditors  are  entitled  to 
share  in  the  insurance  money  in  the  ratio  which  the  amount  of 
premiums  paid  after  insolvency  bears  to  the  total  premiums. '"* 


Heilbron's  Est.,  14  Wash.  536,  45  Pac. 
153;  Fcar7i  v.  Ward,  SO  Ala.  555,  2  So. 
114;  Kind  V.  Domeycr,  175  N.  Y.  205, 
67  N.  E.  433  (administrator  must  hold 
fund  until  it  is  ascertained  whether 
other  assets  will  pay  creditors).  Stokes 
V.  Amermtm.,  121  N.  Y.  337,  24  N.  E. 
819  (the  excess  is  in  fraud  of  creditors 
and  it  seems  creditor  may  preserve 
insurance  from  forfeiture  by  paying 
future  premiums).  Wyman  v.  Gay, 
90  Me.  36,  37  Atl.  325  (limit  of  annual 
premium  $150).  Mahoney  v.  James, 
94  Va.  176,  26  3.  E.  385  (premiums 
paid  out  of  exempted  earnings).  Held, 
under  California  statute,  that  no  part 
is  exempt  from  creditors  if  annual 
premium  exceed  .$500,  Estate  of  Brown, 
123  Cal.  399,  55  Pac.  1055,  69  Am.  St. 
R.  74.  Mississippi  statute  construed, 
Cozine  v.  Grimes,  76  Miss.  294,  24  So. 
197  (hmit  $5,000  of  insurance).  Other 
decisions  under  exemption  laws,  Cook 
V.  Allen,  119  Iowa,  226,  93  N.  W.  93; 
Donaldson's  Estate,  126  Iowa,  174,  101 
N.  W.  870;  O'Melia  v.  Hoffmci/er,  119 
Iowa,  444,  93  N.  W.  497;  Murdy  v. 
S.:yles,  101  Iowa,  549,  70  N.  W.  714,  63 
Am.  St.  R.  411;  Larrabee  v.  Palmer, 
101  Iowa,  132,  70  N.  W.  100;  Cooper  v. 
Wright,  110  Tenn.  214,  75  S.  W.  1049: 
Roberts  v.  Winton,  100  Tenn.  484,  45 
S.  W.  673,  41  L.  R.  A.  275;  Rose  v. 
Worthnn,  95  Tenn.  505,  32  S.  W.  45S, 
30  L.  R.  A.  609;  Ilarvei/  v.  Harrison,  89 
Tenn.  470,  14  S.  W.  108P.  Right  to' 
exemption  rmder  constitution  of  the 
insurance  company,  Carson  v.  Vicks- 
burg  Bank,  75  Miss.  167,  22  So.  1,  37 
L.  R.  A.  559;  Fisher  v.  Donovan,  57 
Neb.  361,  77  N.  W.  778,  44  L.  R.  A. 
383;  Bishop  v.  Grand  Lodge,  112  N.  Y. 
627,  21  N.  Y.  St.  R.  811,  20  N.  E.  562, 
cited  and  explained  in  Sulz  v.  Mutual 
Res.  Fund  L.  Ass7i.,  145  N.  Y.  563,  575, 
40  N.  E.  242,  65  N.  Y.  St.  R.  513,  28 
L.  R.  A.  379;  Johnston  v.  Catholic  Mut. 
Ben.  Assoc.,  24  Ont.  App.  88.  But 
compare  Jones  v.  Patty,  73  Miss.  179, 
18  So.  794  (rights  of  creditors  not  con- 
eluded  by  charter  or  contract  of  com- 
pany). If  statute  does  not  allow 
designation  of  creditor  as  beneficiary 


he  cannot  recover,  Clarke  v.  Schwar- 
zenberg,  162  Mass.  98,  38  N.  E.  17. 

1  Prof.  Williston's  review  in  25  Am. 
Law  Review,  185. 

2  Bartram  v.  HopJdns,  71  Conn.  505, 
42  Atl.  645,  also  construing  Connecti- 
cut statutes;  Houston  v.  Maddux,  179 
111.  377,  53  N.  E.  599,  also  construing 
Illinois  Statutes;  Stoices  v.  Coffey,  8 
Bush.  (Ky.)  533;  Kicly  v.  Hickox,  70 
Mo.  App.  617,  also  construing  Missouri 
Statutes;  Shaver  v.  Shaver,  35  App. 
Div.  (N.  Y.)  4  (intimation).  Stigler's 
Ex'x  V.  Stigler,  11  Va.  163.  But  if  wife 
pays  premiums  out  of  her  separate  es- 
state  creditors  of  insui'ed  can  claim 
nothing,  Estate  of  Goss,  71  Hun,  120, 
24  N.  Y.  Supp.  623;  Weber,  Loper  & 
Co.  V.  Paxton,  48  Ohio  St.  266,  26  N.  E. 
1051. 

^  Fearn  v.  Ward,  80  Ala.  555,  2  So. 
114;  Pullis  V.  Robison,  73  Mo.  201,  39 
Am.  Rep.  437;  Merchants',  etc..  Trans. 
Co.  V.  Borl:L..d,  53  N.  J.  Eq.  282,  31 
Atl.  272,  and  Enjlish  cases  cited.  The 
application  of  the  last  rule  to  the  case 
where  th  insured  was  solvent  at  the 
date  of  the  contract  and  pays  later 
premiums  to  keep  policy  from  lapsing 
is  clearly  unsound.  Re  Harrison 
(1900),  2  Q  B.  710;  Holmes  v.  Gilman, 
138  N.  Y.  309,  383,  34  N.  E.  205,  20 
L.  R  A.  572,  34  Am.  St.  R.  470.  U.  S. 
bankruptcy  act  allows  bankrupt  to 
own  and  carry  a  policy  free  of  creditor's 
claims  after  turning  over  to  the  trustee 
its  surrender  cash  value,  R.  S.  §§  4745, 
4747.  If  the  policy  really  has  a  sur- 
render value  payable  to  the  bankrupt 
and  enforceable  by  him  the  rule  applies, 
though  no  surrender  value  be  expressed 
m  the  pol'cy,  Hiscock  v.  Mcrtc7is,  205 
U.  S.  202.  27  S.  Ct.  488.  .  So  also  if  the 
policy  in  fact  has  a  cash  value  though 
technically  no  surrender  value,  Gould 
V.  .V.  Y.  Life  Ins.  Co.,  132  Fed.  927. 
So  also  a  contingent  interest  passes  ^  - 
the  trustee.  In  re  Coleman,  V3'6  Vezl 
818.  But  to  give  the  trustee  any  ^-at, 
the  surrender  value  must  be  by  *he 
contract,  not  by  mere  act  of  gras  or 
indulgence  on  the  company's  part, 
Pulsifer  v.  Hussey,  97  Me.  434,  54  Atl. 


92 


GENERAL    J'Hl.XC'I  I'l.KS    oV    IXSURANCE    LAAV 


§  73.  Rights  of  Creditors  as  the  Assured.— To  secure  his  debt,  the 

creditor  sometimes  takes  out  insurance,  payable  to  himself,  upon 

the  life  of  his  debtor.     As  before  remarked,  under  the  subject  of 

insurable    interest,^  different    views    prevail  regarding  the  amount 

of  insurance  money  that  he  may  be  permitted  to  recover.     Some 

courts,  regarding  the  contract  of  insurance  solely  as  an  engagement 

between  the  insured  and  the  insurer,  enforce  it  according  to  its  terms. 

If  the  contract  is  valid  when  entered  into  and  its  conditions  have 

been  complied  with  by  the  insured,  they  allow  to  him  on  its  maturity 

the  entire  amount  of  insurance  money,  no  matter  how  largely  the 

fund  may  exceed  the  indebtedness  then  subsisting,  no  matter  though 

the  debt  may  be  altogether  paid,  or  satisfied,'  or   barred  by  the 

statute  of  limitations. =*     Other  courts,  adhering  more  closely  to  the 

doctrine  that  the  insurance  contract  must  not  needlessly  be  made  a 

source  of  profit,  limit   the  creditor  to  the  debt,  including  interest 

thereon,  together  with  all  expenses  of  keeping  up  the  insurance.     As 

to  any  balance  of  insurance  money,  since  the  insurance  company 

ought  not  to  retain  it,  they  hold    that    the   creditor  is  trustee   for 

the  debtor  or  his  estate.'* 

.518,  60  Am.  Rep.  722;  Ferguson  v. 
Ins.  Co.,  32  Hun,  305,  aff'd  102  N.  Y. 
647;  Shaffer  v.  Spangler,  144  Pa.  St. 
223,  22  Atl.  865. 

3  Townsend  v.  Tyndale,  165  Mass. 
293,  43  N.  E.  107,  .52  Am.  St.  R.  513; 
Rawls  V.  /n.s.  Co.,  27  N.  Y.  282,  84 
Am.  Dec.  280;  Conn.  Mid.  Life  Ins.  Co. 
V.  Dunscomb,  108  Tenn.  724,  69  S.  W. 
345,  58  L.  R.  A.  694, 91  Am.  St.  R.  769. 

■i  Goldbaum  v.  Blion,  79  Tex.  638,  15 
S.  W.  564,  there  was  an  assignment 
of  the  pohcy  to  creditor.  E.rch.  Bank 
V.  Loh.  104  Ga.  146,  31  S.  E.  459,  44 
L.  R.  A.  372,  there  was  an  as.signment 
•  of  the  policy  to  the  creditor.  Tate  v. 
Commercial  Bldg.  Assn.,  97  Va.  74,  33 
S.  E.  382,  45  L.  R.  A.  243,  75  Am.  St. 
R.  770,  here  also  there  was  an  assign- 
ment. And  see  dictum  in  W a  mock  v. 
Davis,  104  U.  S.  775,  26  L.  Ed.  924. 
If  a  policy  is  assigned  conditionally 
by  the  debtor  to  the  creditor  as  col- 
lateral, or  maintained  by  the  debtor 
with  like  purpose,  by  all  the  authorities 
the  creditor  can  only  retain  enough  of 
the  proceeds  to  indemnify  himsel'. 
Amick  V.  Butler,  111  Ind.  578.  12  N.  E. 
518;  Met.  L.  Ins.  Co.  v.  O'Brien,  92 
Mich.  .584,  .52  N.  W.  1012;  Coon  v. 
Swan,  30  Vt.  6.  And  if  assigned  for 
existing  debts  it  will  not  cover  sub- 
sequent debts,  Levy  v.  Taylor,  66  Tex. 
652,  1  S.  W.  900. 


1076.  The  bankrupt  may  retain  the 
policy  if  it  has  no  surrender  value,  In 
re  Josephson,  121  Fed.  142,  aff'd  124 
Fed.  734;  In  re  Wellim/,  113  Fed.  189 
(semi-tontine  held  to  have  no  surren- 
der vahie);  In  re  Buelow,  98  Fed.  86. 
Hence  trustee  must  allege  in  his  com- 
plaint a  cash  surrender  value,  Haskell 
v.  Equitable  Life  Ins.  Soc,  181  Mass. 
341,  63  N.  E.  899.  But  the  trustee 
takes  nothing  if  the  proceeds  of  in- 
surance are  exempt  by  state  statute, 
Holden  v.  Stratton,  198  U.  S.  202,  49 
L.  Ed.  1018;  or  if  the  bankrupt  is  a 
third  party  beneficiary  not  entitled  to 
the  surrender  value,  In  re  McDonnell, 
101  Fed.  239.  Nor  can  the  trustee 
disturb  the  contingent  interest  of  a 
third  party  in  the  bankrupt's  policy, 
Haskell  v.  Equitable  Life  Ins.  Soc,  181 
Mass.  341,  63  N.  E.  899.  Premiums 
paid  by  wife,  In  re  Diack,  100  Fed.  770. 
A  fire  policy  does  not  pass  to  trustee 
without  consent  of  insurance  company, 
but  claim  for  fire  loss  occurring  before 
appointment  of  trustee  passes  to  trus- 
tee, Fuller  V.  .V.  Y.  Fire  Ins.  Co.,  184 
Mass.  12;  Fidler  v.  Jameson,  184  N.  Y. 
605,  186  N.  Y.  60. 

1  §  37,  and  cases  cited. 

'  Dalbij  V.  Assurance  Co.,  15  C.  B. 
365;  Central  Nat.  Bk.  v.  Ihme,  128 
U.  S.  195,  9  S.  Ct.  41,  32  L.  Ed.  370; 
Amick  V.  Butler,  111  Ind.  578,  12  N.  E. 


CHAPTER  III 

Genera  >  Principles — Continued 

Closing  of  Cont  act — General  Rules  of  Construction 

§  74.  Introductory. — The  course  of  business  in  closing  insurance 
contracts  is  in  a  measure  sui  generis.  Many  important  classes  of 
contracts  have  no  valid  ty  at  all  unless  evidenced  by  writing;  and 
whenever  parties  see  fit  to  reduce  their  engagements  to  the  form 
of  a  written  instrument  whether  required  by  law  to  do  so  or  not, 
it  is  in  general  to  be  pre  .umed  that  the  contents  of  the  formal  docu- 
ment correctly  and  coi  elusively  record  the  final  results  of  their 
negotiations,  and  that  tts  execution  and  delivery  precisely  define 
the  time  when  the  agreiiment  is  to  go  into  operation.  But,  in  the 
actual  conduct  of  their  affairs,  men  do  not  always  take  the  trouble 
to  conform  to  any  such  legal  presumptions  when  convenience  or 
exigencies  of  business  suggest  a  different  course.  Often  a  man 
wants  to  insure  his  house,  or  goods,  or  ship  without  delay.  In  most 
of  the  states  of  the  Union  there  is  no  laAv  preventing  a  valid  oral 
contract  of  insurance,  or  contract  by  written  binding  slip,  and  thus 
it  frequently  happens  that  an  insurance  is  closed  before  the  insured 
has  seen  his  policy,  or  has  become  familiar  with  its  conditions.  In 
fact,  the  policy  may  never  be  delivered  to  him  at  all,  or  not  until 
after  the  loss  has  occurred,  for  which  it  is  intended  to  grant  in- 
demnity.^ 

1  Thompson    v.    Adams,    L.    R.    23  measure   of   damages   for   breach   see 

Q.  B.  D.  361  (1889).     A  contract  of  in-  City  of  Detroit  v.  Grummond,  121  Fed. 

surance  must  be  distinguished  from  a  963,   58   C.    C.    A.    301;    Landusky   v. 

contract  to  procure  insurance  as  by  a  Beirne,  80  App.   Div.   272,  80  N.   Y. 

broker.     For  breach  of  the  latter  en-  Supp.   238,   aff'd    178   N.   Y.   551,   70 

gagement  an  action  for  damages  will  N.  E.   1101;  Miner  v.   Tagert,  3  Bin. 

lie,     Jacksonville,     etc.,     Nav.    Co.    v.  (Pa.)  204;   Wunderlich  v.  Palatine  F. 

Hooper,  160  U.  S.  514,  16  S.  Ct.  379,  7ns.  Co.,  104  Wis.  395,  80  N.  W.  471; 

40  L.  Ed.  515;  Brant  v.  Gallup,  111  111.  Mc Alpine  v.   Trustees,   101  Wis.  468, 

487,  53  Am.  Rep.  638;  Bacius  v.  Ames,  78   N.  W.   173.     If  the  agreement  to 

79  Minn.   145,  81   N.  W.  766  (if  such  procure  insurance  is  absolute  the  party 

insurance  cannot  be  procured,  owner  neglecting  to  fulfill  becomes  liable  him- 

should  be  promptly  notified  so  as  to  self    as    insurer,  De    Tastett   v.   Cron- 

have  opportunity  to  effect  insurance  sillat,  7  Fed.  Cas.  542,  2  Wash.  C.  C. 

himself);  Threshing  Mach.  Co.  v.  Dar-  132;    Soide   v.    Union   Bk.,   45    Barb. 

nail,  13  S.  D.  279,  83  N.  W.  266.    As  to  (N.  Y.)  111.    So  also  party  refusing  to 

93 


94 


GENERAL    I'KlXCirLES   Ol"    INSURANCE    LAW 


§  75.  Fire  Insurance  Contract — How  Closed. — Important  fire 
risks,  whether  on  mercantile  or  other  properties,  and  whether  h)- 
cated  in  city  or  country,  are  apt  to  be  put  in  charge  of  city  brokers.^ 


take  the  insuranrc  is  liable  in  dam- 
ages, Tancnbaum  v.  Grecnwald,  G7 
App.  Div.  473,  73  N.  Y.  Siipp.  873, 
See  also  SI  N.  Y.  Supp.  292,  82  N.  Y. 
Supp.  IIIG;  Tancnbaum  v.  Federal 
Match  Co.,  ISO  N.  Y.  75. 

1  An  insurance  broker  as  such  is 
agent  for  the  insured,  Sellers  v.  Ins. 
Co.,  105  Ala.  282,  16  So.  798;  Parhh 
V.  Rosebvd  M.  &  M.  Co.,  140  Cal.  635, 
74  Pac.  312;  Commonwealth  Mid.  Fire 
Ins.  Co.  V.  Knabc,  171  Mass.  265,  50 
N.  E.  516;  Am.  Fire  Ins.  Co.,  v  Brooks. 
83  Md.  22,  34  Atl.  373;  Northrop  v. 
Piza,  43  App.  Div.  284,  60  N.  Y.  Supp. 
363,  aff'd  167  N.  Y.  578,  60  N.  E. 
1117;  Allen  v.  German  Am.  Ins.  Co., 
123  N.  Y.  6,  25  N.  E.  309;  Crown 
Point  Iron  Co.  v.  jEtna  Ins.  Co.,  127 
N.  Y.  608,  28  N.  E.  653,  14  L.  R.  A. 
147;  Fire  Assn.  v.  Hog  wood,  82  Va.  342, 
4  S.  E.  617;  Davis  Lumber  Co.  v.  Hart- 
ford Fire  Ins.  Co.,  95  Wis.  226,  70 
N.  W.  84;  37  L.  R.  A.  131  (construing 
Wisconsin  statutes);  United  Firemen's 
Ins.  Co.  V.  Thomas,  92  Fed.  127,  34 
C.  C.  A.  240,  47  L.  R.  A.  450.  But  see 
Indiana  Ins.  Co.  v.  Hartwell,  123  Ind. 
177,  24  N.  E.  100.  He  is,  however,  a 
middleman  between  the  insured  and 
the  company,  Arff  v.  Ins.  Co.,  125 
N.  Y.  57,  25  N.  E.  1073,  10  L.  R.  A. 
609,  21  Am.  St.  R.  721.  Payment  of 
premium  to  broker  is  not  payment  to 
the  company,  Pottsville  Muf.  Fire  Ins. 
Co.  V.  Improvement  Co.,  100  Pa.  St.  137; 
unless  made  so  by  statute  or  custom 
(§  76),  and  whether  the  broker  is  also 
agent  for  the  company  may  be  a  ques- 
tion of  fact.  Sun  Mut.  Ins.  Co.  v. 
Saginaw  Barrel  Co.,  114  111.  99,  29 
N.  E.  477.  Many  states  have  statutes 
affecting  this  cjuestion,  for  example, 
see  Welch  v.  Fire  Assn.  of  Phila.,  120 
Wis.  456,  98  N.  W.  227,  and  appendix 
of  statutes.  The  broker  receives  a 
commission  in  the  shape  of  a  per- 
centage out  of  the  premium,  Dcvens  v. 
Mechanics'  &  Traders'  Ins.  Co.,  83  N.  Y. 
171;  McGrath  v.  Home  his.  Co.,  88 
App.  Div.  153.  84  N.  Y.  Supp.  374.  He 
earns  full  commission  though  policy 
be  canceled  before  expiration.  Am. 
Steam  Boiler  Co.  v.  Anderson,  130  N.  Y. 
134,  29  N.  E.  231.  Contra,  dictum, 
Devereux  v.  7ns.  Co.,  98  N.  C.  6,  3  S.  E. 
639.     But  by  custom  in  order  to  keep 


on  good  terms  with  the  company  the 
broker  makes  return  of  his  commission 
to  the  company  pro  rata,  inasmuch  as 
the  company  is  obliged  on  cancellation 
to  pay  back  to  the  insured  the  un- 
earned premium  without  credit  for  its 
payment  to  broker.  Tlie  broker  may 
l)e  generally  in  charge  of  his  customer's 
insurance  with  continued  authority. 
Standard  Oil  Co.  v.  Ins.  Co.,  64  N.  Y. 
85.  Or  he  may  be  employed  to  hll  a 
.specific  order,  his  authority  then  ter- 
minating on  procuring  and  transmit- 
ting the  policies,  Hermann  v.  Ins.  Co., 
100  N.  Y.  411,  3  N.  E.  341,  53  Am. 
Rep.  197;  Greeyi  v.  Star  Fire  Ins.  Co., 
190  Mass.  586,  77  N.  E.  649.  If  in 
charge,  generally,  he  keeps  track  of  the 
policies  with  the  aid  of  his  expiration 
sheets  w-hich  are  checked  every  day. 
If  he  undertakes  to  procure  insurance 
or  to  renew  on  expiration  and  does  not, 
he  is  personally  responsible  for  the 
omission,  and  is  entitled  to  the  pre- 
mium as  an  insurer,  De  Tastett  v.  Crou- 
sillat,  7  Fed.  Gas.  542,  2  W^ash.  C.  C. 
132.  He  owes  to  the  insured,  his  prin- 
cipal, the  duty  of  an  expert,  Milliken 
V.  Woodward,  64  N.  J.  L.  444,  450,  45 
Atl.  796,  and  must  furnish  insurance 
in  authorized  and  solvent  companies, 
Landnsky  v.  Beirne,  80  App.  Div.  272, 
80  N.  Y.'Supp.  238,  aff'd  178  N.  Y.  551, 
70  N.  E.  1101;  Burges  v.  Jackson,  18 
App.  Div.  296,  46  N.  Y.  Supp.  326, 
aff'd  162  N.  Y.  632,  57  N.  E.  1105; 
Shepard  v.  Davis,  42  App.  Div.  462, 
59  N.  Y.  Supp.  456,  but  is  not  respon- 
sible for  subsequent  insolvency,  Minne- 
apolis, etc.,  V.  Home  Iris.  Co.,  55  Minn. 
236,  56  N.  W.  815,  22  L.  R.  A.  390. 
But  often  at  the  same  time  the  broker 
is  also  local  agent  for  one  or  more  com- 
panies and  then  it  frequently  happens 
that  as  broker  he  will  place  the  in- 
surance with  his  own  companies  and 
as  underwriter  will  execute  the  policies, 
thus  representing  both  parties  to  the 
transaction.  This  anomalous  situation 
has  not  yet  been  very  thoroughly  de- 
fined and  sifted  by  the  courts  in  con 
nection  with  insurance  contracts.  The 
general  rule  is  that  an  agent  acting  for 
both  parties  cannot  make  a  valid  con- 
tract. Phoenix  Ins.  Co.  v.  Hamilton,  110 
Ga.  14,  35  S.  E.  305;  Manchester  F. 
Assur.  Co.  V.  Ins.  Co.,  91  111.  App.  609; 


FIRE    INSURANCE    CONTRACT — HOW   CLOSED 


95 


To  procure  insurance  the  broker  or  a  clerk  from  his  placing  depart- 
ment, having  prepared  a  binder/  presents  it  to  the  application  clerk 
of  an  insurance  company  together  with  a  brief  application  slip, 
which  the  broker  fills  up  in  pencil  at  the  counter  of  the  company, 
giving  certain  essentials  of  the  contract,  name  of  the  insured,  loca- 
tion of  the  property,  amount  of  insurance  wanted,  and  indicating 
whether  the  property  is  building,  or  contents,-  or  other  insurable 
interest. 

The  counter  clerk  turns  to  his  insurance  map,  and,  if  lie  accepts 


Empire  State  Ins.  Co.  v.  Am.  Cent.  Ins. 
Co.,  138  N.  Y.  446,  34  N.  E.  200;  A'.  Y. 
Cent.  Ins.  Co.  v.  Xat.  Protection  Ins. 
Co.,  14  N.  Y.  85;  Utica  Ins.  Co.  v.  Toledo 
Ins.  Co.,  17  Barb.  (N.  Y.)  132,  except 
with  their  consent,  Xo.  Brit.  &  M.  hhs. 
Co.  V.  Lambert,  26  Ore.  199,  37  Pac: 
909,  or  by  ratification,  Huygins,  etc., 
Co.  V.  People's  Ins.  Co.,  41  Mo  App. 
530.  He  cannot  issue  a  valid  policy  to 
himself,  Wildberger  v.  Hartford  Fire 
Ins.  Co.,  72  Miss.  338,  17  So.  282,  28 
L.  R.  A.  220,  48  Am.  St.  R.  558,  but  for 
one  purpose  he  may  be  agent  for  the 
insured,  for  another  purpose  he  may 
represent  the  company,  Wood  v.  Fire- 
men's Ins.  Co.,  126  Mass.  316,  319; 
Gaysville  Mfg.  Co.  v.  Ins.  Co.,  67  N.  H. 
457,  36  Atl.  367;  Xorthrup  v.  Germania 
Ins.  Co.,  48  Wis.  420,  4  N.  ^V.  350,  33 
Am.  Rep.  815,  19  Am.  L.  Reg.  N.  S. 
291,  note.  And  see  FisUe  v.  Royal 
Exch.  Assur.  Co.,  100  Mo.  App.  545,  75 
S.  W.  382;  East  Texas  Fire  Ins.  Co.  v. 
Blum,  76  Tex.  653,  13  S.  W.  572;  East 
Tccas  Fire  Ins.  Co.  v.  Brawn,  82  Tex. 
631,  18  S.  W.  713.  So  also  as  to  one  of 
the  companies  on  the  risk,  he  may  be 
agent  for  it  and  as  to  other  companies 
he  may  be  agent  for  the  assured.  Smith 
\.  Prussian  Xat.  Ins.  Co.,  68  N.  J.  L. 
674,  54  Atl.  458.  Policies  and  permits 
proposed  by  brokers  are  so  far  in  stere- 
otyped printed  forms,  and  rates  of  pre- 
mium are  likewise  so  far  fixed  either  by 
tariff  associations  or  by  practice  that 
the  courts  would  doubtless  be  reluctant 
u)  hold  the  insurance  void  because  the 
agent  in  good  faith  represented  both 
parties  in  the  same  transaction,  unless 
it  appeared  that  lie  could  not  be  loyal 
to  both.  See  Schuesslcr  v.  Ins.  Co.  of 
the  Co.  of  Phila.,  103  App.  Div.  12,  15, 
92  N.  Y.  Supp.  649,  atf'd,  185  N.  Y. 
578,  78  N.  E.  1112,  in  which  the 
brokerage  and  underwriting  depart- 
ments of  a  prominent  insurance  office 
closed  a  contract  lield  enforceable,  but 


the  dual  relationship  was  not  pleaded 
as  a  defense.  If,  however,  an  exercise 
of  discretion  is  called  for  so  that  fulfill- 
ment of  duty  towards  one  principal  is 
incompatible  with  full  loyalty  towards 
the  other  the  contract  made  for  both 
may  be  avoided  by  either  non-assenting 
party,  Brit.-Am.  Assur.  Co.  v.  Cooper, 
6  Colo.  App.  25,  40  Pac.  147;  Empire 
State  Ins.  Co.  v.  Am.  Cent.  Ins.  Co.,  138 
N.  Y.  446,  34  N.  E.  200.  If  either 
principal  has  prior  knowledge  of  the 
dual  relationship  in  the  agent,  he  is 
estopped  from  objecting  to  a  contract 
which  he  has  tacitly  permitted  to  be 
made,  Xo.  Brit.  &  M.  Ins.  Co.  v. 
Lambert,  26  Ore.  199,  37  Pac.  909. 
The  insured  should  be  advised  to  em- 
ploy a  broker  to  take  charge  of  any 
important  risk.  In  preparing ''forms," 
maneuvering  for  lower  premiums, 
Avatching  for  expirations,  and  in  gen- 
eral supervision  a  broker's  services  and 
advice  are  valuable  and  cost  the  in- 
sured nothing,  since  his  commission 
comes  out  of  premium.  If  the  broker 
is  negligent  in  preparing  the  "forms," 
or  in  accepting  policies  with  inappro- 
priate clauses,  he  is  personally  liable. 
Walker  v.  Block  (Pa.  St.,  1907),  65  Atl. 
799. 

1  See  Appendix,  ch.  II,  Forms. 

-Sometimes  "the  forms,"  a  printed 
or  typewritten  rider,  containing  the 
description  of  the  property,  and  special 
clauses,  e.  g.,  privileges  for  other  in- 
surance, unoccupancy,  lightning  clause, 
etc.,  prepared  by  the  broker  to  be 
pasted  on  the  policy,  are  delivered  at 
the  same  time.  Appendi.x,  ch.  II, 
Forms.  If  the  broker  does  not  furnish 
his  "forms"  until  after  the  contract 
has  been  closed  by  the  binder,  it  leaves 
the  matter  of  special  clauses  in  unsat- 
isfactory and  indefinite  shape,  unless 
the  contract  is  a  renewal.  Unfortu- 
nately this  indefinite  situation  fre- 
quently exists  for  several  days. 


96  GENERAL   PRINCIPLES   OF   INSURANCE   LAW 

the  application,  he  adds  to  the  binder  the  name  of  his  company  and 
the  amount  accepted  and  signs  the  binder  with  his  name  or  initials 
under  the  printed  word  "accepted."  If  nothing  is  written  or  said 
about  premium  or  term,  market  or  reasonable  rate  ^  and  one  year  ^ 
are  by  usage  of  the  trade  understood.^ 

The  broker  usually  hastens  off  with  his  binder  leaving  the  applica- 
tion slip."*  There  are  no  copies  exchanged  or  book  entries  made  and 
there  is  no  time  for  making  them.  The  broker  continues  the  rounds 
of  the  insurance  ofHces  until  the  gross  amount  at  the  head  of  his 
binder  is  covered.^  Credit  for  premium  is  given  by  the  company.* 
The  policies  may  not  be  prepared  and  issued  for  weeks.'  Though 
they  all  cover  in  identical  terms  the  one  risk,  they  may  be  delivered 
at  different  times  and  just  as  the  convenience  of  the  underwriters 
may  dictate.  If  the  insurance  is  taken  at  a  local  agency  the  agent, 
after  filling  out  and  executing  the  policy,  sends  to  the  head  office  of 
the  company  an  exact  transcript  *  of  the  written  part ,  including  the 
description  and  special  clauses. 

This  transaction,  so  familiar  to  the  insurance  world,  bears  little 
resemblance  to  a  conveyance  of  real  estate  or  to  ordinary  commercial 
bargains,  and  certain  of  its  peculiar  characteristics  challenge  atten- 
tion: (1)  The  act  and  time  of  delivery  of  the  policy  itself  are  of 
comparatively  trifling  significance;  ^   (2)   the  contract  is  complete 

1  Machine  Co.  v.  Ins.  Co.,  50  Ohio  St.  454,  24  N.  E.  699.    Usually  the  broker 

549.  35  N.  E.  1060,  22  L.  R.  A.  768.  is  not  liable  to  the  company  for  the 

^Concordia  Fire  Ins.  Co.  y.  Heffron,  premium    even    though    the    insured 

84  III.  App.  610.  fail  to  pay,  Touro  v.  Cassin,  1  Nott. 

3  See  §  79.  If  he  accepts  only  tern-  &  McC.  (S.  C.)  173,  9  Am.  Dec.  680, 
porarily  or  conditionally,  he  stamps  unless  there  is  a  trade  usage  or  statute 
or  wTites  the  qualification  upon  the  to  the  contrary  as  in  marine  insurance 
binder;  for  example,  "subject  to  sur-  in  England,  Mar.  Ins.  Act  (1906),  §  53; 
vey  and  immediate  cancellation,"  or  Universal  Ins.  Co.  v.  Merchants'  Mar. 
"for  two  days  only,"  etc.  The  vast  Ins.  Co.  (1897),  2  Q.  B.  97;  Mannheim. 
majority  of  policies  on  mercantile  his.  Co.  v.  Hollander,  112  Fed.  549. 
risks  run  for  the  term  of  a  year.  Where  the  broker  is  liable  for  the  pre- 

4  By  aid  of  the  slip  and  the  "forms"  mium  as  principal  he  may  svie  the  in- 
or  description  furnished  by  the  broker  sured  for  it  though  he  has  not  actually 
the  policy  clerk  subsequently  prepares  paid  it.  Ward  v.  Tucker.  7  Wash.  399, 
a  formal  policy  which  is  executed  by  a  35  Pac.  1086.  As  to  broker's  lien  upon 
higher  officer.                                         '  a  marine   policy  see  Fisher  v.   Smith 

5  A  company  is  willing  to  ATOte  only  (1878),  4  App."^  Cas.  1;  Westwood  v. 
a  limited  line  on  one  risk,  but  a  less  valu-  Bell.  4  Camp.  349;  McKenzie  v.  Nevins, 
able  property,  whether  mercantile  or  22  Me.  138,  38  Am.  Dec.  291.  In  Eng- 
dwelling,  is  often  covered  by  one  policy,  land  fire  insurance  is  done  more  on  a 

6  This  is  a  mere  act  "of  courtesy  cash  basis,  premiums  usually  being 
towards    the    broker.      The    insured  paid  in  advance. 

usually  is  still  liable  for  the  premium,  ^  Thompson    v.    Adams,    L.    R.    23 

and  the  company  may  sue  him  for  its  Q.  B.  D.  361. 

recovery  immediately,  in  spite  of  its  «  Called  a  daily  report,  Clemments  v. 

customary     indulgence,     Karelsen     v.  German  Ins.   Co.    (U.   S.  Cir.  Ct.),  36 

Sun  Fire  Office,  122  N.  Y.  545,  25  N.  E.  Ins.  L.  J.   114. 

921;  Lipman  v.  Ins.   Co.,  121   N.  Y.  "  Thompson    v.    Adams,    L.    R.    23 


MARINE — HOW    CLOSED 


97 


and  closed  when  the  appHcation  clerk  signs  and  delivers  the  regular 
binder;  ^  (3)  the  regular  binder  is  the  same  thing  in  effect  as  the 
usual  policy,  for  which  it  stands  as  a  convenient,  temporary  substi- 
tute, and,  whether  it  so  states  or  not,  embraces  by  inference  all  the 
clauses  of  the  policy;  -  (4)  important  provisions  of  the  contract, 
especially  rate  and  term,  are  often  understood  by  usage  although 
nothing  may  be  said  or  written  respecting  them  until  the  policy  is 
issued ;  ^  (5)  the  officers  and  managers  of  the  insurance  company 
have  no  knowledge  of  the  contract  except  from  the  written  evi- 
dence coupled  with  trade  usage..  There  is  no  machinery  for  report- 
ing to  them  any  extraneous  conversations  or  alleged  understandings 
at  variance  with  the  terms  of  the  policy. 


§  76.  Marine — How  Closed.— Both  in  England  and  in  this  country 
marine  insurances  arc  usualh'  closed  by  binding  slips,  or  covering 
notes,  through  the  intervention  of  agents  or  brokers  for  the  assured."* 
But  in  dealing  with  certain  insurance  companies  of -high  repute  in 
this  country,  it  has  become  the  custom  for  the  marine  broker  to 
use  a  memorandum  which  is  at  once  an  application,  and,  after 
signature  by  the  underwriter,  a  binder.  This  slip,  temporcixily  the 
sole  written  evidence  of  the  contract,  is  confidingly  left  with  the 
underwriter,  who  has  signed  or  initialed  it,  and  with  its  aid  the 


Q.  B.  D.  361;  Xenos  v.  Wickhctm,  L.  K. 
2  H.  L.  296. 

1  Vati  Tassel  v.  Greenwich  Ins.  Co., 
151  N.  Y.  130,  45  N.  E.  365,  28  App. 
Div.  163,  161  N.  Y.  413,  54  App.  Div. 
386,  66  App.  Div.  531,  184  N.  Y.  607. 
The  trials  (6)  and  hearings  on  appeal 
(10)  in  this  remarkable  case  numbered 
sixteen.  The  binder  was  finally  sus- 
tained as  equivalent  to  a  standard 
one-year  policy  and  subject  to  the 
standard  five-day  cancellation  clause, 
though  the  binder  specified  no  rate  and 
though  no  policy  was  ever  delivered 
or  premium  paid. 

2  Hicks  V.  Brit. -Am.  Ins.  Co.,  162 
N.  Y.  284,  56  N.  E.  743.  48  L.  R.  A. 
424;  Lipman  v.  Ins.  Co.,  121  N.  Y.  454, 
24  N.  E.  699,8  L.  R.  A.  719,  and  §  81. 

^  Smith,  etc.,  Co.  v.  Prussian  A^at. 
Ins.  Co.,  68  N.  J.  L.  674,  54  Atl.  458 
(reasonable  rate  inferred);  Machine 
Co.  v.  Ins.  Co.,  50  Ohio  St.  549,  35 
N.  E.  1060,  22  L.  R.  A.  768  (custom- 
ary rate  and  terms  inferred) ;  Con- 
cordia Fire  Ins.  Co.  v.  Hefjron,  84  111. 
App.  610  (one-year  term  understood). 
And  see  Brit. -Am.  Ins.  Co.  v.  Wilson, 
77  Conn.  559  (rate  not  fixed). 


^  In  England  insiit-ed  is  liable  to  the 
Ijroker  for  the  premium  and  the  broker 
to  the  company,  Mar.  Ins.  Act  (1906), 
§  53;  Universal  Ins.  Co.  v.  Merchants', 
etc.,  Ins.  Co.  (1897),  2  Q.  B.  93;  Power 
v.  Butcher,  10  B.  &  Cr.  340.  The  broker 
is  not  agent  for  the  insurer.  Em- 
press Ass.  Corp.  v.  Bowring  (1905),  11 
Com.  Cas.  107.  By  British  revenue  law 
unless  the  slip  is  stamped  and  contains 
particulars  required  for  a  policy  it  is 
not  admissible  in  evidence  as  a  con- 
tract, Home  Mar.  Ins.  Co.  v.  Smith 
(1898),  2  Q.  B.  351.  But  is  legal  evi- 
dence to  clear  up  ambiguity  after  policy 
issues,  Mar.  Ins.  Act  (1906).  §§21, 
22,  89,  lonides  v.  Pac.  Mar.  Iris.  Co. 
(1872),  L.  R.  7  Q.  B.  517.  Said  Act, 
§  21,  provides,  "a  contract  of  marine 
insurance  is  deemed  to  be  concluded 
Avhen  the  proposal  of  the  assured  is  ac- 
cepted by  the  insurer,  whether  the 
policy  be  then  issued  or  not,"  etc.  If 
no  revenue  law  applies,  binder  may  be 
sued  on  in  England  as  in  this  country, 
Bhugwa-ndass  v.  7ns.  Co.  (1888),  14 
App.  Cas.  83. 


98  GENERAL   PRINCIPLES   OF   INSURANCE   LAW 

policy   is  subsequently  written  up   and   delivered   to   the  broker, 
though  meanwhile  a  loss  may  have  occurred.^ 

§  77.  Life  Insurance — How  Closed. — Before  issuing  a  policy  a  life 
company  usually  requires  the  insured  to  submit  to  a  medical  exami- 
nation and  to  respond  to  numerous  questions  detailed  on  a  printed 
application  blank,^  the  answers  to  which  are  written  in  by  the  com- 
pany's agents.  The  application,  including  the  physician's  report,  is 
filed  with  the  company.  Except  as  statutory  provisions  have  in- 
tervened,^ it  has  not  been  customary  to  furnish  the  insured  with  a 
copy  of  the  application,  or  afford  him  any  opportunity  of  comparing 
his  answers  with  the  terms  of  his  policy  subsequently  delivered. 

Usually  the  contract  is  not  complete  until  the  first  premium  is 
paid  and  the  policy  delivered,^  because  of  express  provisions  to  that 
effect  in  the  policy,  which  must  be  respected;  ^  but,  not  infrequently, 
the  local  agent  of  the  life  insurance  company  collects  the  first  pre- 
mium from  th'e  applicant  i^rovisionally,  and  gives  him  in  return  a 
conditional  binding  receipt  subject  to  approval  of  the  application 
by  the  home  office  and  issuance  of  the  policy.  Upon  exercising  such 
approval,  and  signing  the  policy,  it  has  been  held,  the  company 
becomes  Hable,  although  its  action  has  not  been  made  known  to 
the  insured,  and  although  the  policy  remains  with  the  agent  un- 
delivered until  after  the  death  of  the  insured.^  It  is  evident  also 
that  an  application  for  insurance  may  be  accepted  and  the  contract 
closed  by  letter  as  well  as  by  binder  or  delivery  of  the  policy.'^ 

§  78.  Requisites  of  Complete  Contract. — The  essential  terms 
which  must  be  agreed  upon  to  make  a  valid  policy  are  said  to  be 
these:  The  names  or  description  of  the  parties,  the  rate  of  premium,** 
the  property  or  life  insured,  the  risk  insured  against,  the  term  or 

1  See  Appendix,  ch.  II,  Forms.  dinary  litigations  in  which  the  plain- 

2  See  forms,  Appendix,  ch.  II.  Some  tiff  was  at  first  defeated  on  the  ground 
times  provisional  insurance  is  given  to  that  the  contract  was  not  closed,  N.  Y. 
cover  until  decision  of  main  office.  Life  Itis.  Co.  v.  Mcintosh,  86  Miss.  236, 

3  See  Appendix,  ch.  I  and  N.  Y.  Ins.  38  So.  775,  but  subsequently  suc- 
L.   §  58.  ceeded,  on  the  ground  that  the  com- 

*  Eq.  Life  Assur.  Soc.  v.  Pettus,  140  pany,  by  a  letter  sent  to  tlie  insured, 

U.   S.   226,   lis.   Ct.   822;   Busher  v.  was  estopped  to  deny  the  insurance  of 

N.  Y.  Life  Ins.  Co.,  72  N.  H.  551,  58  the    policy,   N.    Y.    Life   Ins.    Co.    v. 

Atl.  41.     But  see  §  78.  Mcintosh  (1906),  41  So.  381. 

^  N.  Y.  Life  Ins.  Co.  v.  Babcock,  104  ^  Waters  v.  Security  L.  &  Ann.  Co. 

Ga.   67,   30   S.   E.   273;   but   compare  (N.    C,    1907),   57   S.    E.    437    (citing 

Starr  v.  Mut.  L.  Ins.  Co.,  41  Wash.  228,  many  cases). 

83  Pac.  116.  8Eng.   Mar.   Ins.   Act    (1906),    §23, 

8  Starr  v.  Mut.  L.  Ins.  Co.,  41  Wash,  omits  rate  as  an  essential;  "reasonable 

228,  S3  Pac.  116.    Compare  the  cxtraor-  rate"  being  presumed,  §  31  of  the  Act. 


REQUISITES  OF  COMPLETE  CONTRACT 


99 


duration  of  the  insurance,  and  the  sum  or  sums  insured;^  and  to 
constitute  a  contract  of  insurance  there  must  be,  as  in  other  cases,^ 
a  meeting  of  the  minds  of  the  parties — that  is,  a  mutual  assent, 
either  express  or  impUed,  to  all  the  provisions  of  the  contract.' 
Thus,  if  both  parties  intend  that  the  insurance  shall  cover  a  cer- 
tain ship  or  a  certain  house,  the  contract  will  not  necessarily  be  in- 
validated because  by  mutual  mistake  they  misname  it  in  the  policy; 
but  if  one  party  has  in  mind  one  ship,  and  the  other  party  has  in 


1  Fames  v.  Ins.  Co.,  94  U.  S.  621,  629, 
24  L.  Ed.  298;  Commercial  F.  Ins.  Co.  v. 
Morris,  105  Ala.  498,  18  So.  34; 
Trustees  of  Church  v.  Brooklyn  Fire  Ins. 
Co.,  28  N.  Y.  161;  Bradley  v.  Stand.  L. 
&  A.  Ins.  Co.,  112  App.  Div.  536,  541. 
98  N.  Y.  Supp.  797.  See  Hartford  F.  I. 
Co.  V.  Trimble,  25  Ky.  Law  R.  1497, 
78  S.  W.  462.  Whether  contract  is 
written  or  parol,  same  rule  applies, 
Cleveland  Oil  Co.  v.  Norwich  Ins.  Co., 
34  Ore.  228,  55  Pac.  435.  It  is  also 
essential  that  there  should  be  mutu- 
ality of  obligation,  Reynolds  v.  Mut. 
F.  Ins.  Co.,  34  Md.  280,  6  Am.  Rep. 
337.  Closing  of  contract  or  delivery 
of  policy  and  liability  for  premiums 
are  concurrent,  Hardwick  v.  State 
Ins.  Co.,  20  Ore.  547,  26  Pac.  840, 
but  time  of  payment  of  premium 
may  be  postponed  without  disturb- 
ing the  binding  effect  of  the  contract, 
King  V.  Co.v,  63  Ark.  204,  37  S.  W. 
877;  Jones  v.  A".  Y.  Life  Ins.  Co., 
168  Mass.  245,  47  N.  E.  92;  Pac.  Mid. 
Ins.  Co.  V.  Shaffer,  30  Tex.  Civ.  App. 
313, 70  S.  W.  566.  Court  refused  specific 
performance  where  insured  would  not 
have  been  bound  for  premium  except 
for  ratification  after  loss  of  his  agent's 
unauthorized  act  in  taking  insurance, 
Ins.  Co.  V.  Sclwll,  96  Md.  225,  53  Atl. 
925,  61  L.  R.  A.  300.  As  to  general 
rule  that  the  person  for  whose  benefit 
the  insurance  is  taken  may  adopt  and 
ratify  it  even  after  loss,  see  Waring  v. 
Ind.  F.  Ins.  Co..  45  N,  G.  606,  6  Am. 
Rep.  146;  Herkimer  v.  Rice,  27  N.  Y. 
163,  179,  but  in  these  and  other  similar 
cases  the  person  taking  out  the  in- 
surance was  liable  for  the  premium 
and  no  question  of  lack  of  mutuality 
of  obligation  arose.  The  English  act 
provides:  "Where  a  contract  of  marine 
insurance  is  in  good  faith  effected  by 
one  person  on  behalf  of  another,  the 
person  on  whose  behalf  it  is  effected 
may  ratify  the  contract  even  after  he 
is  aware  of  a  loss,"  Mar.  Ins.  Act 
(1906),    §86;    Williams    v.    Ins.    Co. 


(1876),  1  C.  P.  D.  757,  764;  Boston 
Fruit  Co.  v.  Brit.,  etc.,  Co.  (1906), 
App.  Cas.  336.  But  compare  Keighley 
v.  Duraid  (1901),  App.  Cas.  240. 

2  Michigan  Pipe  Co.  v.  Mich.  F.  & 
M.  Ins.  Co.,  92  Mich.  482,  52  N.  W. 
1070,  20  L.  R.  A.  277. 

3  Clark  V.  7ns.  Co.  89  Me.  26,  35  Atl. 
1008,  35  L.  R.  A.  276;  Goddard  v.  Ins. 
Co.,  108  Mass.  56,  11  Am.  Rep.  307 
(building  not  agreed  upon);  Zimmer- 
mann  v.  Dwelling  House  Ins.  Co.,  110 
Mich.  399,  68  N.  W.  215,  33  L.  R.  A. 
698;  Prescott  v.  Jones,  69  N.  H.  305, 
41  Atl.  352;  Bell  v.  Peabody  Ins.  Co., 
49  W.  Va.  437,  38  S.  E.  541;  Sheldon  v. 
Hechla  Fire  Ins.  Co.,  65  Wis.  436,  27 
N.  W.  315  (the  companies  not  agreed 
upon).  Thus,  the  court  says:  "An  un- 
evinced  mental  determination  to  accept 
a  proposition  to  enter  into  a  contract 
is  not  sufficient  to  establish  tlie  con- 
tract," Bradley  v.  Stand.  L.  &  A.  Ins. 
Co.,  112  App.  Div.  536,  541.  There  is 
no  contract,  where,  after  a  proposition 
submitted,  a  new  condition  is  an- 
nexed and  the  former  proposition  is 
subsequently  accepted,  but  without  the 
added  condition,  Travis  v.  Kederland 
Life  Ins.  Co.,  104  Fed.  486,  43  C.  C.  A. 
653;  Stephens  v.  Capital  Ins.  Co.,  87 
Iowa,  283,  54  N.  W.  139.  A  contract  is 
closed  when  unconditional  acceptance 
of  offer  is  duly  mailed,  Tayloe  v. 
Merchants'  Fire  Ins.  Co.,  9  How.  390, 
13  L.  Ed.  187;  Busherv.  New  York  Life 
Ins.  Co.,  72  N.  H.  551,  58  Atl.  41; 
Hartford  Steam  B.  Insp.  Co.  v.  Lasher 
Stocking  Co.,  66  Vt.  439,  29  Atl.  629, 
44  Am.  St.  R.  859;  and  see  Fames  v. 
Ins.  Co.,  94  U.  S.  621,  24  L.  Ed.  298. 
Execution  and  delivery  of  the  policy  in 
accordance  with  application  evidence  a 
completed  transaction,  and  constitute 
a  contract,  Travelers'  Ins.  Co.  v.  Jones 
(Tex.  Civ.  App.),  73  S.  W.  978;  and 
see  Grier  v.  Mut.  Life  Ins.  Co.,  132 
N.  C.  542,  44  S.  E.  28.  So  also  when 
such  a  policy  is  duly  deposited  in 
post    office,    postage    prepaid,    Triple 


100 


GENERAL    PRINCIPLES   OF   INSURANCE    LAW 


mind  another  ship,  although    the    two    ships  may  have  the  same 
name,  there  is,  speaking  generally,  no  contract.' 

Whatever  may  be  the  rule  in  the  case  of  other  classes  of  contracts, 
it  is  apparent  that  time  is  of  the  essence  of  the  insurance  contract, 
even  to  the  very  instant  agreed  upon  for  the  commencement  and 
the  termination  of  the  risk. 


Link,  etc.,  Assn.  v.  Williams,  121  Ala. 
138,  26  So.  19,  77  Am.  St.  R.  34,  but 
not  if  the  delivery  of  the  policy  is  con- 
ditional, Hartford  Fire  his.  Co.  v. 
Wilson,  187  U.  S.  467,  23  S.  CJt.  189, 
47  L.  Ed.  261;  Harnic:  ell  v.  A'.  1'.  Life 
Ins.  Co.,  Ill  N.  Y.  390,  18  N.  E.  632, 
2  L.  R.  A.  150.  Neglect  to  reply  to  an 
application  raises  no  presumption  of 
acceptance,  More  v.  N.  Y.  Bowery  F. 
Ins.  Co.,  130  N.  Y.  537,  29  N.  E.  757; 
Ross  V.  iV.  Y.  Life  Ins.  Co.,  124  N.  C. 
395,  32  S.  E.  733;  Ro"al  Ins.  Co.  v. 
Beatt'i,  119  Pa.  St.  6,  12  Atl.  607,  4  Am. 
St.  R.  622.  Nor  does  unreasonable 
delay,  Ala.  Gold.  L.  Ins.  Co.  v.  Ma^es, 
61  Ala.  163;  Winchell  v.  lo-a  State  Ins. 
Co.,  103  Iowa,  189,  72  N.  W.  503; 
Brink  v.  Merchants'  &  F.  Mid.  Ins. 
Co.,  17  S.  D.  235,  95  N.  W.  929;  Conn. 
Mut.  L.  Ins.  Co.  V.  Rudolph,  45  Tex. 
454;  but  see  Phcenix  Ins.  Co.  v.  Hale, 
67  Ark.  433,  55  S.  W.  486;  Pic' ett  v. 
German  F.  Ins.  Co.,  39  Kan.  697,  18 
Pac.  903;  Mallette  v.  Brit.-Am.  Assiir. 
Co.,  91  Md.  471,  46  Atl.  1005;  Robinson 
V.  U.  S.  Ben.  Soc,  132  Mich.  695,  C4 
N.  W.  211.  Retention  of  premium  by 
insurance  company  is  some  evidence 
that  contract  was  closed,  TucLer  v. 
Dairy  Mut.  Ins.  Co.,  116  Iowa,  37,  89 
N.  W.  37;  Moulton  v.  Masonic  Mid. 
Ben.  Assn.,  64  Kan.  56,  67  Pac.  533, 
and  see  Keen  v.  Mut.  L.  Ins.  Co.,  131 
Fed.  559.  If  premium  has  been  paid  or 
acknowledged  and  policy  has  been 
signed  in  accordance  with  application 
and  held  or  transmitted  to  company's 
agent  for  delivery,  it  has  been  held  by 
several  courts  that  the  contract  is  com- 
plete though  agent  has  failed  to  deliver 
it,  he  being  regarded  as  agent  or  trus- 
tee for  the  insured,  Harrigan  v.  Home 
Life  Ins.  Co.,  128  Cal.  531,  58  Pac.  180; 
.V.  Y.  Life  Ins.  Co.  v.  Babcock,  104  Ga. 
67,  30  S.  E.  273,  42  L.  R.  A.  88,  69  Am. 
St.  R.  134;  Mut.  Life  Ins.  Co.  v.  Thom- 
son, 94  Ky.  253,  22  S.  W.  87;  Hallock  v. 
Commercial  Ins.  Co.,  26  N.  J.  L.  268; 
Porter  v.  Mut.  Life  Ins.  Co.,  70  Vt.  504, 
41  Atl.  970;  Xenos  v.  Wiclham  (1867), 
L.  R.  2  H.  L.  296  (marine  policy  to  be 
kept  until  assured  called  for  it);  Rob- 


erts V.  Security  Co.  (1897),  1  Q.  B.  111. 
(burglary  policy);  and  see  Wagner  v. 
Supreme  Lodge,  128  Mich.  660,  87 
N.  W.  903;  Supreme  Court  v.  Davis,  129 
Mich.  318,  88  N.  W.  874;  but  com- 
pare Heiman  v.  Phoenix  Mut.  L.  Ins. 
Co.,  17  Minn.  153,  10  Am.  Rep.  154; 
Hamblet  v.  City  Ins.  Co.,  36  Fed.  118. 
1  Hughes  v.  Mercantile  Mut  Ins.  Co., 
55  N.  Y.  265,  14  Am.  Rep.  254;  and  see 
Sanders  v.  Cooper,  115  N.  Y.  279,  22 
N.  E.  212,  5  L.  R.  A.  638,  12  Am.  St.  R. 
801.  But  if  the  contract  as  written  is 
without  ambiguity,  until  reformed  it  is 
conclusively  presinned  to  express  the 
intent  of  the  parties.  See  §  8.5.  Policy 
to  be  binding  on  company  must,  of 
course,  be  executed  by  one  having  real. 
Planters'  &  Peoples'  Mut.  Fire  Assn.  v. 
De  Loach,  113  Ga.  802,  39  S.  E.  466,  or 
apparent.  Continental  Ins.  Co.  v.  Ruck- 
man,  127  111.  364,  20  N.  E.  77,  11  Am. 
St.  R.  121;  Wester7i  Home  Ins.  Co.  v. 
Hague,  41  Kan.  524,  21  Pac.  641,  au- 
thority, Miller  v.  Northuestern  Li;e 
Ins.  Co.,  Ill  Fed.  465,  49  C.  C.  A.  3LJ; 
Gillespie,  etc.,  Mut.  F.  Ins.  Co.  v. 
Prather,  105  111.  App.  123.  Or  his  un- 
authorized act  must  be  ratified  by  it, 
Mohr  Distilling  Co.  v.  Ohio  Ins.  Co.,  13 
Fed.  74;  Glens  Falls  Ins.  Co.  v.  Hop- 
kins, 16  111.  App.  220.  His  authority 
is  apparent  if  he  is  furnished  with 
blank  policies,  signed  by  proper  officers. 
Am.  Emplogers'  L.  Ins.  Co.  v.  Barr,  68 
Fed.  873,  16  C.  C.  A.  51,  32  U.  S.  App. 
444.  Insured  is  not  bound  by  secret 
instructions  to  agent,  of  which  he  is 
ignorant,  Commercial  Fire  Ins.  Co.  v. 
Morris,  105  Ala.  498,  18  So.  34;  Brown 
v.  Franklin  Fire  Ins.  Co.,  165  Mass. 
565,  43  N.  E.  512,  52  Am.  St.  R.  534; 
Ruggles  v.  Am.  Cent.  Ins.  Co.,  114 
N.  Y.  415,  21  N.  E.  1000,  11  Am.  St.  R. 
674  (apparently  .general  agent).  A 
solicitor  of  a  life  company  has  no  ap- 
parent authority  to  conclude  a  contract 
of  insurance.  Cotton  States  Life  Ins. 
Co.  V.  Scurry,  50  Ga.  48;  Miller  v. 
Northwestern  Mut.  L.  Ins.  Co.,  Ill  Fed. 
465,  49  C.  C.  A.  330.  As  to  territorial 
jurisdiction  of  agent  compare  Light- 
body  v.  No.  Am,  Ins.  Co.,  23  Wend. 


THE    PARTK'UI-AKS   SOMETIMES   UNDERSTOOD 


101 


§  79.  The  Particulars  Sometimes  Understood. — It  is  not  neces- 
sary in  order  to  close  the  contract  that  all  the  particulars  should  be 
made  the  subject  of  express  negotiation  between  the  parties;  for  it 
may  well  be  understood,  in  the  absence  of  any  express  declaration 
to  the  contrary,  that  the  usual  form  of  policy/  or  statutory  form,  if 
there  be  one,^  is  intended,  or  that  the  market  rate  ^  or  a  reasonable 
rate  "*  of  premium  is  to  apply,^  or  the  same  rate  ^  or  the  same  terms 
as  before.^ 


(N.  Y.)  18,  and  Hahn  v.  Guardian 
Assur.  Co.,  23  Ore.  576,  32  Pac.  683, 
37  Am.  St.  R.  709,  with  Inf>.  Co.  v. 
Thornton,  130  Ala.  222,  30  So.  614,  5.5 
L.  R.  A.  547,  89  Am.  St.  R.  30.  A 
mere  solicitor,  or  agent,  employed  to 
receive  and  forward  applications  can- 
not conclude  a  contract,  Greenicich 
Ins.  Co.  V.  Waterman,  54  Fed.  839, 
4  C.  C.  A.  600,  6  U.  S.  App.  549; 
O'Brien  v.  Neiv  Zealand  Ins.  Co.,  108 
Cal.  227,  41  Pac.  298;  Sun  Fire  Office  v. 
Wich,  6  Colo.  App.  103,  39  Pac.  587; 
but  the  agent  exceeding  his  authority 
might  become  personally  liable  to  the 
insured  in  damages  for  his  misrepre- 
sentations or  deceit,  Gilmore  v.  Brad- 
ford, 82  Me.  547,  20  Atl.  92  (deceit); 
Montross  v.  Rojer  Williams  Ins.  Co., 

49  Mich.  477,  13  N.  W.  823  (agency 
revoked);  Kroeger  v.  Pitcairn,  101  Pa. 
St.  311,  47  Am.  Rep.  718  (misrepresen- 
tations). An  agent  issuing  policy  of  an 
unauthorized  company  is  personally 
liable  to  insured,  Noble  v.  Mitchell, 
100  Ala.  519,  14  So.  581,  25  L.  R.  A. 
238  (statute);  McBride  v.  Rinard,  172 
Pa.  St.  542,  33  Atl.  750  (statute). 
See  N.  Y.  Ins.  L.  §  50,  reciuiring  certifi- 
cate. Such  statutes  are  constitutional, 
Noble  V.  Mitchell,  164  U.  S.  367,  11  S. 
Ct.  110,  41  L.  Ed.  472.  Agent  held 
liable  where  company  was  insolvent, 
Morton  v.  Hart,  88  Tenn.  427,  12  S.  W. 
1026.  Agent  of  insurance  company 
with  power  to  insure  has  apparent 
power  to  renew  policy.  International 
Tr.  Co.  v.  Norwich  U.'^F.  Ins.  Soc,  71 
Fed.  81,  17  C.  C.  A.  60S,  36  U.  S.  App. 
277.  Payment  of  premium  is  some- 
times expressly  made  essential  to  the 
completion  of  the  contract.  Ea.  Life 
Assur.  Soc.  V.  Pettus,  140  U.  S.  226,  11 
S.  Ct.  822,  35  L.  Ed.  497;  Russell  v. 
Prudential  Ins.  Co.,  176  N.  Y.  178,  68 
N.  E.  252,  98  Am.  St.  R.  656;  Roberts 
V.  mna  Life  Ins.  Co.,  101  111.  App.  313. 

50  also  approval  by  the  home  office 
may  be  made    a    prerequisite  though 


premium  has  been  paid  to  agent  of  the 
company,  Pace  v.  Provident  Sav.  Life 
Assur.  Soc,  113  Fed.  13,  51  C.  C.  A. 
32;  >S7.  Paul  Fire  &  M.  his.  Co.  v. 
Kelley  (Neb.  Apl.  1902),  89  N.  W.  997; 
Pickett  V.  German  Fire  /?i.s\  Co.,  39 
Kan.  697,  18  Pac.  903.  So  also  de- 
livery of  policy  sometimes  made  es- 
sential, Ray  y.  Security  T.  &  L.  Ins. 
Co.,  126  N.  C.  166,  35  S.  E.  246; 
especially  in  life  insurance,  Paine  v. 
Pac.  Mut.  Life  Iiis.  Co.,  51  Fed.  689; 
2  C.  C.  A.  459;  Langstaff  v.  Met.  Life 
Ins.  Co.,  69  N.  J.  L.  54,  54  Atl.  518. 

iDe  Grove  v.  Met.  Ins.  Co.,  61  N.  Y. 
602,  19  Am.  Rep.  305;  Newark  Mach. 
Co.  v.  Kenton  Lis.  Co.,  50  Ohio  St.  549, 
35  N.  E.  1060,  22  L.  R.  A.  708. 

2  Hicks  V.  Brit.-Am.  Assur.  Co.,  162 
N.  Y.  284,  56  N.  E.  743,  48  L.  R.  A. 
424. 

3  Train  v.  Holland  Purchase  Ins.  Co. , 
62  N.  Y.  598;  Cleveland  Oil  Co.  v. 
Norwich  Ins.  Co.,  34  Ore.  228,  55  Pac. 
435. 

4  Brit.-Am.  Ins.  Co.  v.  Wilson,  77 
Conn.  559;  Newark  Mach.  Co.  v.  Ken- 
ton Ins.  Co.,  50  Ohio  St.  549,  supra; 
Smith  &  Wallace  Co.  v.  Prussian  N^at. 
Ins.  Co.,  68  N.  J.  L.  674,  54  Atl.  4.58. 

5  Cooke  V.  Ins.  Co.,  7  Daly  (N.  Y.), 
555;  Audubon  y.  Ins.  Co.,  27  N.  Y. 
216. 

^Baldwin  \.  Phoenix  Ins.  Co.,  107 
Ky.  356,  54  S.  W.  13,  92  Am.  St.  R. 
362;  Post  v.  .^tna  Ins.  Co.,  43  Barb. 
351;  but  compare  where  company  had 
various  forms  of  policies  at  different 
rates.  Cotton  v.  Soidhtiestern  Mut.  L. 
Ins.  Co.,  115  Iowa,  729,  87  N.  W.  075. 

^Ames-Brooks  Co.  v.  ..Etna  Ins.  Co., 
83  Minn.  346,  86  N.  W.  344.  Contract 
may  be  closed  and  yet  certain  particu- 
lars be  left  open  to  be  agreed  upon 
when  information  is  obtained.  "Rea- 
sonable rate"  may  then  be  understood, 
Scammell  v.  China  Mid.  Ins.  Co.,  164 
Mass.  341,  41  N.  E.  649,  49  Am.  St.  R. 
462;  Eng.  Mar.  Ins.  Act   (1906),  §  31 


102 


GENERAL   PRINCIPLES   OF   INSURANCE   LAW 


Even  the  essentials  of  the  contract  may  often  be  agreed  upon, 
inferentially,  by  reference  to  a  prior  course  of  dealing  between  the 
parties.* 

Thus,  if  A,  whose  fire  insurance  policy  is  about  to  expire,  goes  to 
the  office  of  the  insurer,  and  requests  a  renewal  for  a  year,  and  re- 
ceives the  answer  from  the  proper  representative  of  the  company 
that  he  may  consider  his  policy  as  renewed,  and  that  the  policy  or 
renewal  receipt  will  be  sent  in  the  course  of  a  few  days,  and  that  he 
may  then  pay  the  premium,  the  contract  of  renewal  is  complete  and 
binding,  whether  the  new  policy  or  renewal  receipt  may  chance  to 
be  delivered  before  a  fire  or  not.- 


§  80.  Contract  Closed  by  Parol.— An  oral  contract  of  insurance  or 
an  oral  contract  to  issue  a  policy  in  future  is  valid,  unless  prohibited 
by  statute,  and  will  ])e  binding  from  the  time  the  oral  contract  is 
complete,  although  the  loss  occur  before  a  policy  is  issued.'* 

The  statute  of  frauds  is  not  applicable  to  a  contract  of  insurance, 
reinsurance,  or  renewal.^ 


1  Ruggles  v.  Am.  Central  Ins.  Co.,  114 
N  Y.  418,  21  N.  E.  1000;  Winne  v. 
Niagara  Fire  Ins.  Co.,  91  N.  Y.  190; 
Boice  V.  Thames  &  M.  Marine  Ins.  Co., 
38  Hun  (N.  Y.),  246.  The  court  will 
infer  the  intention  of  the  parties  if  it 
can  from  the  circumstances,  Concordia 
F.  Ins.  Co.  V.  Heffron,  84  111.  App.  610 
(no  express  agreement  as  to  term,  or 
premium,  term  of  one  year  assumed). 

2  Fames  v.  Home  Ins.  Co.,  94  U.  S. 
621,  24  L.  Ed.  298;  Wiebeler  v.  Mil. 
Mach.  Mut.  Ins.  Co.,  30  Minn.  464,  16 
N.  W.  363;  Angell  v.  Hartford  Fire  Ins. 
Co.,  59  N.  Y.  171,  17  Am.  Rep.  322. 
A  promise  by  the  local  commissioned 
agent  to  renew,  with  credit  for  the 
premium  is  sufficient,  Squier  v.  Han- 
over F.  Ins.  Co.,  162  N.  Y.  552,  57  N.  E. 
93,  76  Am.  St.  R.  349.  An  agreement 
to  renew  means  upon  same  terms  as 
before  if  no  change  mentioned,  Ins. 
Co  V.  Walsh,  54  111.  164;  MaUettc  v. 
Brit.-Am.  Assur.  Co.,  91  Md.  471,  46 
Atl.  1005. 

a  Relief  Fire  his.  Co.  v.  Shaw,  94 
U.  S.  574,  24  L.  Ed.  291;  Ins.  Co.  v. 
Colt,  20  Wall.  (U.  S.)  560,  22  L.  Ed. 
423;  Hovmrd  Ins.  Co.  v.  Oiren's  Admx., 
94  Ky.  197,  21  S.  W.  1037;  Mallette  v. 
Brit.-Am.  Assur.  Co.,  91  Md.  471,  46 
Atl.  1005;  Hicks  v.  Brit.-Am.  Assur. 
Co.,  162  N.  Y.  284,  56  N.  E.  743,  48 
L.  R.  A.  424;  Fish  v.  Cottenet,  44  N.  Y. 
538;  4  Am.  Rep.  715;  Ellis  v.  Albany 


City  Fire  Ins.  Co.,  50  N.  Y.  402,  10  Am. 
Rep.  495;  Van  Loan  v.  Farmers'  Mut. 
Fire  Ins.  Co.,  90  N.  Y.  280;  Lenox  v. 
Greenwich  Ins.  Co.,  165  Pa.  St.  575,  30 
Atl.  940.  Contra,  Bishop  v.  Ins.  Co.,  49 
Conn.  167;  Bell  v.  Ins.  Co.,  5  Rob. 
(La.)  423,  39  Am.  Dec.  542;  but  all 
terms  must  be  expressly  or  impliedly 
agreed  upon,  §  78.  The  oral  contract 
becomes  merged  in  the  policy  when  the 
latter  is  accepted,  Merchants'  Mut. 
Ins.  Co.  V.  Lyman,  15  Wall.  664; 
Roberts  v.  Security  Co.  (1897),  1  Q.  B. 
Ill  (protection  note).  A  renewal  may 
be  by  parol,  Squier  v.  Hanover  Fire 
Ins.  Co.,  162  N.  Y.  552,  57  N.  E.  93,  76 
Am.  St.  R.  349.  So  also  reinsurance. 
Merchants'  Ins.  Co.  v.  Union  Ins.  Co., 
58  111.  App.  611.  Application  may  ex- 
pressly provide  that  no  liability  shall 
attach  until  delivery  of  policy,  Mc- 
Culhi  V.  Plmnix  Mut.  Life  Ins.  Co.,  18 
W.  Va.  782. 

i  None  of  the  clauses  of  the  statute 
applies,  Springfield  F.  &  M.  Ins.  Co. 
V.  De  Jarnett,  111  Ala.  248,  19  So.  995; 
Phoenix  Ins.  Co.  v.  Spiers,  87  Ky.  286, 
8  S.  W.  453;  Sanford  v.  Orient  Ins.  Co., 
174  Mass.  416,  75  Am.  St.  R.  358,  54 
N.  E.  883;  Wiebeler  v.  Milwaukee,  etc., 
Ins.  Co.,  30  Minn.  464,  16  N.  W.  363; 
but  see  Klein  v.  L.  &  L.  &  G.  Ins.  Co., 
22  Ky.  L.  R.  301,  57  S.  W.  250.  Stat- 
ute of  Frauds  i.s  not  applicable  even  tc 
reinsuiance,    Merchants'    Ins.    Co.    v. 


CONTRACT   GOVKHM^U    BY     IKliMS   OF    USUAL    POLICY 


103 


§  81.  Contract  Closed  by  Binding  Slip. — The  regular  binder  is 
present  insurance,  like  a  policy.^  It  is  a  temporary,  convenient  sub- 
stitute or  equivalent  for  the  policy  or  renewal  receipt  pending  the 
execution  of  the  formal  instrument.-  It  becomes  merged  in  the 
policy  after  the  policy  is  delivered.^ 

^^  82.  Contract  Governed  by  Terms  of  Usual  Policy. — Whether  the 
contract  of  insvu'ance  is  closed  orally  or  by  a  binding  slip,  if  there  is 
no  express  agreement  to  the  contrary  the  legal  presumption  is  that 
the  usual  form  of  policy  is  to  follow. "*  Hence  the  stipulations  and 
conditions   of  the   policy   are  binding  upon   the   insured   from   the 


Union  Ins.  Co.,  58  111.  App.  611;  Se- 
curity F.  Ins.  Co.  V.  Keritvcky,  etc., 
Co.,  7  Bush  (Ky.),  81,  3  Am.  Rep.  301 
{contra,  Egan  v.  Firemen's  Ins.  Co., 
27  La.  Ann.  368);  or  to  a  fidelity  or 
guaranty  policy  as  answering  for  the 
debt  or  default  of  another,  Fideliti/  & 
Cas.  Co.  V.  Ballard,  20  Kv.  L.  R.  1169, 
48  S.  W.  1074.  The  usi'ial  individual 
contract  of  suretyship  is  apt  to  be 
gratuitous;  not  so  with  an  insurance 
contract,  Tebbets  v.  Mercantile,  etc., 
Co.,  73  Fed.  95.  19  C.  C.  A.  281;  Bank 
of  Tarboro  v.  Fid.  &  Dep.  Co.,  128 
N.  C.  366,  38  S.  E.  90S.  jNIoreover,  an 
insurance  company  is  fairly  well  pro- 
tected by  its  records  and  usual  course 
of  business.  Although  the  charter  of  a 
company  provides  that  the  contract  of 
insurance  must  be  in  writing,  this  re- 
quirement is  by  most  courts  held  to  be 
a  direction  to  the  company,  and  not 
•binding  upon  an  innocent  party  who 
has  parted  with  value  to  the  company 
in  good  faith  or  relied  upon  protection 
under  an  oral  contract,  Franklin  Fire 
Ins.  Co.  V.  Colt,  20  Wall.  560,  22  L.  Ed. 
423;  Palmer  v.  Hartford  Fire  Ins.  Co., 
54  Conn.  488,  9  Atl.  248;  Phoenix  Ins. 
Co.  V.  Ireland,  9  Kan.  App.  644,  58 
Pac.  1024;  Parish  v.  Wheeler,  22  N.  Y. 
494;  Lloyd  v.  West  Branch  Batik,  15  Pa. 
St.  172;  and  see  Goodhue  v.  Hartford 
Fire  his.  Co.,  175  Mass.  187,  55  N.  E. 
1039.  A  preliminary  oral  contract  is 
valid,  San  ford  v.  Orient  his.  Co.,  174 
Mass.  416,  75  Am.  St.  R.  358,  54  N.  E. 
883.  Same  rule  applies  to  mutuals, 
Brown  v.  Franklin  Mid.  Fire  Ins.  Co., 
165  Mass.  565,  43  N.  E.  512,  52  Am.  St. 
R.  534;  Zell  v.  Herman  Farmers'  Mut. 
Ins.  Co.,  75  Wis.  521,  44  N.  W.  828;  but 
under  the  rules  of  a  fraternal  associa- 
tion the  issuance  of  a  certificate  may  be 
essential  to  the  completion  of  the  con- 


tract, Wagner  v.  Supreme  Lodge,  128 
Mich.  660,  87  N.  W.  903.  But  the 
representative  of  the  company  to  bind 
it,  by  parol  or  otherwise,  must  be  one 
having  actual  or  apparent  authority, 
and  stipulations  in  the  application  or 
policy  in  restriction  of  his  authority 
will,  if  true  in  fact,  be  binding  upon  the 
instired,  at  all  events  after  notice  of 
them  is  received.  Ins.  Co.  v.  A'orton,  96 
U.  S.  240,  24  L.  Ed.  689;  Walsh  v.  Hart- 
ford Fire  Ins.  Co.,  73  N.Y.  5,  §  78,  note. 

1  Belt  V.  Am.  Cent.  Ins.  Co.,  29  App. 
Div.  546,  53  N.  Y.  Supp.  316,  aff'd  163 
N.  Y.  555.  For  course  of  business  in 
use  of,  see  §§  75,  76.  As  to  English 
law,  see   §  76,  note. 

2  Van  Tassel  v.  Greenwich  Ins.  Co., 
151  N.  Y.  130,  45  N.  E.  365,  subse- 
quent appeal,  28  App.  Div.  163,  51 
N.  Y.  Supp.  79.  After  trials  and  hear- 
ings on  appeals,  sixteen  in  number, 
this  binder,  which  had  an  exceptional 
phrase  upon  it,  was  finally  and  without 
dissent  sustained  as  equivalent  to  the 
usual  policy,  184  N.  Y.  607;  Lipman 
V.  Niagara  Fire  Ins.  Co.,  121  N.  Y. 
454,  24  N.  E.  699,  8  L.  R.  A.  719; 
Karelsen  v.  Sun  F.  Office,  122  N.  Y. 
545,  25  N.  E.  921;  and  see  Hicks  v. 
Brit.-Am.  Assur.  Co.,  162  N.  Y.  284, 
56  N.  E.  743,  48  L.  R.  A.  424;  Smith, 
etc.,  Co.  V.  Prussian  Nat.  Ins.  C^.,  68 
N.  J.  L.  674,54  Atl.  458.^ 

^Lipman  case,  121  N.  Y.  454.  supra; 
Roberts  v.  Security  Co.  (1897),  1  Q.  B. 
111. 

*  Vining  v.  Franklin  Fire  Ins.  Co.,  89 
Mo.  App.  311;  Agricultural  his.  Co.  v. 
Fritz,  61  N.  J.  L.  211,  39  Atl.  910; 
Neirark  Machine  Co.  v.  Kenton  Ins. 
Co. .  50  Ohio  St.  549.  556,  35  N.  E.  1060, 
22  L.  R.  A.  768  Same  rule  in  marine 
insurance,  Ruger  v.  Firemen's  Fund 
Ins.  Co.,  90  Fed.  310. 


Ill  I  t;h.\hi;.\i.   ii;i\(  iri.i.s  oi'   iNsi  itANc  i;   law 

moment  of  closinj;  the  contract,  although  the  poHcy  may  not  be 
received  until  after  the  loss,  and  althou^'h,  through  ignorance  of  its 
conditions,  he  may  have  forfeited  his  rights  thereunder.'  For 
exani[)le.  the  insured,  tliough  suing  on  the  hinder  f)r  i)rermiinary  oral 
contract,  must  oh.serve  the  provisions  of  the  fire  insurance  policy  re- 
lating to  i)roofs  of  loss  and  limitation  of  time  h.r  bringing  action.' 
And  in  like  manner  the  terms  of  the  usual  policy  are  binding  upon 
the  company.  Thus,  it  can  cancel  the  binder  during  its  life  only  by 
complying  with  the  provisions  of  the  standard  hve-day  cancellation 
clause. •"* 


§83.  Same  Subject- Form  of  Action.— Where  the  agreement  is 
for  i^rescnt  insurance  and  loss  occurs  l)efore  the  policy  is  issued,  the 
action  may  be  brought  as  at  connnon  law  upon  the  binder  or  oral 
contract,  including  in  it  i)y  inference  the  terms  of  the  standard 
or  usual  policy.^ 


I /)(■  Grorc  v.  Mctrop,  Ins.  Co.,  61 
N.  Y.  602,  19  Am.  Hep.  30");  Lipmnn 
v.  Xiaqara  Fire  In.s.  Co..  121  \.  ^'. 
454,  24  N.  K.  69'.);  Sonhorti  v.  Firemrin's 
Inn.  Co.,  16  Gray  (Mas.s.),  44S. 

-  IIic':.<(  V.  Brit.-Am.  AsNur.  Co.,  162 
N.  Y.  284,  .'J6  N.  E.  743,  48  L.  R.  A. 
824.  Cojilra,  for  example,  Xcbraska 
Ins.  Co.  V.  Seivcrs,  27  Neb  541,  43 
N.  W.  351;  Hanhcick  v.  State  Ins.  Co., 
23  Orcg.  290,  31  Pac.  6.")6.  I?ut  if  llie 
company  repudiate  brtbilify  and  re- 
fuse to  issue  a  policy,  no  proofs  of  loss 
need  be  served,  Campbell  v.  Ins.  Co., 
73  Wis.  100,  40  N.  W.  661. 

3  Van  Tassel  v.  Greenn-ich  Ins.  Co., 
151  N.  Y.  130,  45  N.  K.  365,  finally 
after  many  trials  and  appeals  alfirmud, 
184  N.  Y.  607;  but  the  fifteen-day 
binder  expires  at  the  end  of  the  period 
specified,  Undenrood  v.  Greenwich 
Ins.  Co.,  161  N.  Y.  413,  55  N.  E.  936. 
(the  adoption  of  the  N.  Y.  city  fifteen- 
day  binder  followed  this  litigation). 
After  de-liverj^  of  policy  the  insured  is 
conclusively  presumed  to  be  ac- 
quainted with  its  terms  and  is  boinid 
by  them,  whether  he  has  read  the  policy 
or  not,  Fletcher  case,  117  I'.  S.  519, 
6  S.  Ct.  837,  29  L.  Ld.  934;  Monitor 
Mut.  Fire  Ins.  Co.  v.  Ihifjnm,  115  Mass. 
343;  Allen  v.  German-Am.  Ins.  Co.,  123 
N.  V.  6,  25  N    E.  309. 

^  Van  Tassel  v.  Greenuich  Ins.  Co., 
151  N.  Y.  1.30,  15  N.  E.  365,  184  N.  Y. 
607,  28  App.  Div.  163,  51  N.  Y.  Supp. 
79;  Hicks  v.  Brit.-Am.  Assur.  Co.,  162 
N.  Y.  284,  56  N.  E.  743,  48  L.  R.  A. 


424;  Belt  v.  Am.  Cent.  Ins.  Co.,  29  App. 
Div.  .546.  53  N.  Y.  Supp.  316,  aff'd  163 
X.  Y.  .5.55.  57  N.  E.  1104;  Kerr  v. 
Union  Mar.  Ins.  Co.,  124  P^ed.  835; 
but  see  Xebraska  Ins.  Co.  v.  Seivers, 
27  Neb.  541.  43  N.  W.  351;  Hardwick 
V.  Slate  Ins.  Co.,  23  Oreg.  290,  31  Pac. 
656;  Campbell  v.  Ins.  Co.,  73  Wis.  100, 
40  N.  W.  661  (contract  to  insure). 
After  policy  has  been  accepted  the 
prior  agreement  becomes  merged  in  it, 
Merchants'  Mut.  Ins.  Co.  v.  Lipnan,  15 
Wall.  664.  21  L.  Ed.  246;  ^ Kleis  v. 
Xiaqara  Fire  Ins.  Co.,  117  Mich.  469, 
76  N.  W.  155;  Roberts  v.  Security  Co., 
(1897),  1  Q.  B.  HI.  A  present  con- 
tract of  insurance  must  be  distin- 
guished from  a  promise  to  grant  or 
renew  insurance  in  future,  M isselhorn 
V.  Mut.  Res.  Fund  Life  Assn.,  30  Mo. 
App.  589;  Consumers'  Match  Co.  v. 
German  Ins.  Co.,  70  N.  J.  L.  226,  57 
Atl.  440;  Taylor  v.  Phoenix  Ins.  Co.,  47 
Wis.  365,  2  N.  W.  559,  3  N.  W.  584. 
The  latter  contracts  also  in  most  juris- 
dictions may  be  made  by  parol,  and 
unless  the  loss  occur  before  the  speci- 
fied future  date  when  risk  is  to  attach 
are  enforceable,  Ellis  v.  Albany  City 
Fire  Ins.  Co.,  .50  N.  Y".  402,  10  Am. 
Rep.  495;  McCabe  v.  ,Ftna  his.  Co.,  9 
N.  D.  19,  81  N.  W.  426,  47  L.  R.  A.  641; 
Baldwin  v.  Phcenix  Ins.  Co.,  107  Ky 
356,  54  S.  W.  13,  92  Am.  St.  R.  .362; 
1  y  suit  for  specific  performance  before 
loss,  Tayloe  v.  Merchants'  Fire  Ins. 
Co.,  9  How.  390,  13  L.  Ed.  187;  or 
after  loss  either  by  suit  for  specific  per- 


POLICY    J3EST     KV11>E.\CE 


105 


§  84.  Construction  of  Contract.— The  general  rules  of  law  must 
be  invoked  to  arrive  at  a  proper  construction  of  the  insurance  con- 
tract.^ But  the  more  important  of  these  rules  in  their  relation  to 
insurance  law  demand  special  notice. 


§  85.  The  Same — Policy  best  Evidence. — In  the  absence  of  fraud 
or  mutual  mistake  the  written  contract,  if  there  be  one,  is  the  best 
and  only  admissible  evidence  of  what  the  contract  is  as  to  all  mat- 
ters which  it  purports  to  cover." 


formance  or  for  damages  for  breach  of 
agreement,  Sproul  v.  Western  Assur. 
Co.,  33  Ore.  98,  54  Pac.  180.  If  no 
policy  has  been  deHvered  before  loss 
suit  may  be  upon  the  agreement,  Fire 
Ins.  Co.  V.  Sinsabaugh,  101  111.  App. 
.55;  Preferred  Ace.  Ins.  Co.  v.  Stone,  61 
Kan.  48,  58  Pac.  986;  Sanford  v. 
Orient  Ins.  Co.,  174  Mass.  416,  54  N.  E. 
884,  75  Am.  St.  R.  358;  Campbell  v. 
Am.  Fire  Ins.  Co.,  73  Wi.s.  100,  40 
N.  \V.  661.  As  to  Avhether  in  action  for 
breach  of  promise  to  issue  policy,  the 
provisions  and  limitations  contained  in 
policy  are  applicable,  compare  Hicks  v, 
Brit.-Am.  As.'^ur.  Co.,  162  N.  Y.  284, 
56  N.  E.  743,  48  L.  R.  A.  424.  with 
Hardwick  v.  State  Ins.  Co.,  23  Ore.  290, 
31  Pac.  656;  Sanford  v.  Orient  Ins.  Co., 
174  Mass.  416,  54  N.  E.  883,  75  Am.  St. 
R.  358;  Campbell  v.  Ins.  Co.,  73  Wis. 
100,  40  N.  W.  661.  So  also  the  assured 
may  maintain  action  in  equity  to  com- 
jiel  the  issuance  of  a  new  paid-up  life 
policy,  Wilcox  v.  Eq.  Assur.  Soc,  173 
N.  Y.  50.  65  N.  E.  857,  93  Am.  St.  R. 
579;  or  to  require  the  insurer  to  live  up 
to  a  policy  already  issued,  Langan  v. 
Supreme  Council,  'l74  N.  Y.  266,  66 
N.  E.  932. 

1  Liverpool  &  London  &  Globe  Ins. 
Co.  v.  Kearnei/,  180  V.  S.  132,  21  S.  Ct. 
326,  45  L.  Ed.  460;  Hart  v.  StajuJard 
his.  Co.,  L.  R.  22  Q.  B.  D.  499. 

2  Ins.  Co.  V.  Mown/,  96  U.  S.  544, 
24  L.  Ed.  674;  Ins.  Co.  v.  Lymaji,  15 
Wall.  (U.  S.)  664,  21  L.  Ed.  246; 
Mich.  Shingle  Co.  v.  London  &  Lan. 
Ins.  Co.,  91  Mich.  441,  51  N.  W.  1111; 
Thurston  v.  Burnett  &  B.  Dam  Ins.  Co., 
98  Wis.  476,  74  N.  W.  131.  All  parts  of 
the  written  contract  must  if  possible  be 
harmonized,  Gunther  v.  L.  &  L.  &  G. 
Ins.  Co.,  134  U.  S.  110,  10  S.  Ct.  448; 
Griffin  Iron  Co.  v.  L.  &  L.  &  G.  Ins. 
Co.,  68  N.  J.  L.  368,  54  Atl.  409;  Ger- 
man his.  Co.  V.  Roost,  55  Ohio  St.  581, 
45  N.  E.  1097,  36  L.  R.  A.  2.36.  A  con- 
temporaneous parol  promise  in  regard 


to    the    premium    cannot    be    shown, 
Thompson  v.  Ins.  Co.,  104  U.  S.  252, 
26  L.  Ed.  765.     In  a  leading  case  the 
court  says:  "It  is  a  fundamental  rule, 
in  courts  both  of  law  and  equity,  that 
parol  contemporaneous  evidence  is  in- 
admissible to  contradict  or  vary  the 
terms  of  a  valid  written  instrument," 
Northern   Assur.    Co.    v.    Grand    View 
Bldg.   Assn.,   183  U.   S.   308,  318,  22 
S.  Ct.   133,  46  L.  Ed.  213,  reviewing 
many  decisions.     That  is  still  osten- 
sibly the  rule,  but  under  the  doctrine 
of  waiver  and  estoppel  as  applied  to 
insurance    contracts    in    many    juris- 
dictions it  may  be  questioned  whether 
it  should  not  be  called  the  exception 
rather  than  the  rule.    See  Chapters  VI- 
VIII.    An  application  made  part  of  the 
contract    is    admissible,    Northwesteryi 
Life  Assur.  Co.  v.  Tietze,  16  Colo.  App. 
205,  64  Pac.   773,  or  any  clause  at- 
tached   to    policy    and    incorporated, 
Hartford  Fire  Ins.  Co.  v.  Post,  z5  Tex. 
Civ.  App.  428,  62  S.  W.  140.     As  to 
life   insurance   policy,   see   N.   Y.   Ins. 
L.  §  58.    Some  of  the  terms  may  be  in- 
dorsed upon  the  back  of  the  policy  and 
signed  by  the  proper  officers  or  agents, 
Bushnell  v.  Farmers'  Mid.  Ins.  Co.,  91 
Mo.   App.   523.      The   binding  slip,   if 
there  be  one,  has  been  held  admissible 
to  explain  ambiguity  in  policy,  Saun- 
ders v.  Agricultural  Ins.  Co.,  167  N.  Y. 
261,  60  N.  E.  635;  Phanix  F.  Ins.  Co. 
V.  Gurnee,  1  Paige  Ch.  278;  lonides  v. 
Pac.  Fire  Ins.  Co.,  L.  R.  6  Q.  B.  674, 
7  Q.  B.  517;  Eng.  Mar.  Ins.  Act  (1906), 
§  89.     Compare  Empress  Assur.  Corp. 
V.  Bowring  (1905),  11  Com.  Cas.  107. 
Evidence   is   not   admissible   to   show 
that  property  other  than  that  specified 
was  covered  by  the  policy,  Fran.Ain. 
Fire  Ins.  Co.  v.  Hellerick,  20  Ky.  Law 
R.    1703,  49   S.   W.    1066;   Sanders   v. 
Cooper,  115  N.  Y.  279,  22  N.  E.  212,  5 
L.  R.  A.  638,  12  Am.  St.  R.  801.     Or 
that  marine  risk  was  to  begin  at  a  place 
other  than  that  specified,  Robe.'ison  v. 


106 


ttENKKM.    IMtIM  II'M  S    <)K    ISSI!RANCK   LAW 


It  is  to  be  ohscrvrd  that  tl.o  h.n^ua^'o  ..f  the  l^olicy  is  not  in  all 
cases  conclusivclv  l.nulinji  and  ciTcrtivc:  for  f^n.unds  may  sometimes 
exist  for  relief  in  e<,uity.  Tl.us.  i..  a  dear  rase  of  mutual  mistake  of 
fact '-that  is.  where  it  plainly  api-ais  -  l.y  evidence  outside  the 
contract  that  the  real  ajireement  of  the  parties  is  other  than  that 
Pvidenre<l  l.y  the  poli<-y  "^-or  where  then-  is  a  mistake  on  one  side 

(IcscrilM-  il»'  siil)j<'ct-mattcr  of  tho  con- 
tract, Siniiuicrx  V.  Ai/rirutlurtd  Ins. 
Co..  1G7  N.  Y.  261.  00  N.  K.  l)3o;  A  •  >  • 
/n.s.  Co.  V.  Thomas,  '.i  Jolins.  ('as.  1. 
In  interpreting  the  meaning  and  legal 
clTect  of  the  policy  the  court  must 
apply  the  written  language  of  the  con- 
tract to  the  subject-matter  as  thus 
identified  and  described,  Moore  v. 
Fire  Ins.  Co.,  199  Pa.  St.  49,  52,  48 
Atl.  869,  So  Am.  St.  R.  771;  Lower 
Rhine  &  W .  Ins.  Assur.  v.  Sedgwick 
(1899),  1  Q.  B.  179,  190.  Court  is  en- 
titled to  look  at  situation  of  parties, 
subject-matter,  and  surrounding  cir- 
cumstances, Phetlcplace  v.  Brit.  & 
For.  Ins.  Co.,  23  R.  I.  26.  31,  49  Atl.  33, 
citing  many  cases.  A  conditional  de- 
livery maybe  proved  by  parol.  Under- 
wood V.  Grcemvich  Ins.  Co.,  161  N.  Y. 
413  5.5  N.  E.  936;  Hartford  Ins.  Co., 
Wilson.  187  U.  S.  467,  23  S.  Ct.  189,  47 
L.  Ed.  261.  To  establish  waiver  or  es- 
toppel in  those  jurisdictions  where 
permitted,  extrinsic  evidence  by  parol 
of  contemporaneous  knowledge  of  facts 
and  conversations  at  variance  with 
policy,  is  freely  admitted.  See  North- 
em  Assur.  Co.  v.  Grand  Vieu'  Bldg. 
Ass7i..  183  U.  S.  308,  22  S.  Ct.  133,  46 
L.  Ed.  213,  in  which,  by  a  divided 
court,  the  practice  is  disapproved,  and 
this  disapproval  is  reiterated  in  Hart- 
ford Fire  Ins.  Co.  v.  Wilson,  187  U.  S. 
467,  478,  23  S.  Ct.  189.  47  L.  Ed.  261. 
1  Dougherty  v.  Greenwich  Ins.  Co., 
(N.  J.)  33  Atl.  295. 

-  The  evidence  must  be  "  clear,  un- 
equivocal and  convincing,"  United 
Stntes  V.  Budd,  144  U.  S.  154,  12  S.  Ct. 
575;  Spalding  v.  Crocker  (1897),  2 
Com.  Cas.  189.  A  mere  preponderance 
of  evidence  is  not  sufficient,  Trustees 
V.  Delaware  his.  Co.,  93  Wis.  57,  66 
N.  W.  1140.  As  to  whether  case  must 
be  established  "beyond  a  reasonable 
doubt,"  compare  Wall  v.  Meilke  (Minn. 
1903),  94  N.  W.  688;  Southard  v. 
Curie]/,  134  N.  Y.  148,  with  Boyertown 
Xat.  Bank  v.  Hartman,  147  Pa.  St.  558; 
Highlands  v.  R.  R.  Co.,  209  Pa.  St.  286 
3  Dalton  v.  Mil.  Much.  Ins.  Co.,  126 
Iowa,  377, 102  N.  W.  120;  Slobodisky  v. 


French.  ■{  Ka.st .  130.  or  that   the  char- 
acter  of   occupancy    of    nroperty    wa.s 
intended    to    be   other    than    that    de- 
scribed in  policv.  .Irnnini/s  wChttunigo 
.Mut.  /h.s.  r<(..  2  Denio  (N.  Y.),  75.    And 
a  pamphlet.  (•ir<Milar,  or  prospectu.s  is- 
sued l)y  tin- insiira  nee  company  is  not  ad- 
missible in  evidence  to  (list  url)  the  terms 
of   the   policv,    although    the  insured 
may  have  incurred  a  forfeiture  in  con- 
sequence of  reliance  upon  its  rej.rcsen- 
tations.  Fowler  v.  .Metropolitan  Ins.  Co., 
116  N.  Y.  389.  22  X.  E.  .57(),  5  L.  R.  A. 
805;    since  all   prior  and   contempora- 
neous negotiations,  promises,  and  state- 
ments, whether  written  or  oral,  become 
merged    in    the   contract,  Ins.   Co.   v. 
Lipnan,  15  Wall.  (U.  S.)  664,  21  L.  Ed. 
246;  Douglas  v.  K7iickcrbocker  Life  Ins. 
Co.,  83  N.  Y.  492;  Liverpool  it  L.  &  G. 
Ins    Co.  v.  RicJiardson  Lumber  Co.,  11 
Okla.    585,    69    Pac.    938.      Anything 
printed,  written,  stamped,  or  attached 
as  riders,  appearing  in  the  body  of  the 
policy  or  on  the  margin  is  pai;t  of  the 
contract,    Wright    v.    A.'isociation,    118 
N  Y'  237,  23  N.  E.  186.  6  L.  R.  A.  731, 
16  Am.  St.  R.  749;  Ma.^colt  v.  Ins.  Co., 
68  Vt.  253,  35  Atl.  75;  but  mere  refer- 
ence in  the  policy  to  extrinsic  papers 
does  not  make  them  a  part  of  the  con- 
tract unless  the  policy  unequivocally 
so  states.  Mutual  Life  Ins.  Co.  v.  Cohen, 
179  U.  S.  262,  21  S.  Ct.  106,  45  L.  P:d. 
181;  Am.  Popular  Life  Ins.  Co.  v.  Day, 
39  N.  J.  L.  89,  23  Am.  Rep.  198;  Bur- 
ritt  V.  7ns.  Co.,  5  Hill  (\.  Y.).  188,  40 
Am.  Dec.  345;  Ky.  »fc  L.  Mut.  Ins.  Co. 
V.    Southard,    8    B.    Mon.    (Ky.)    634. 
Even     indorsements     on     the     back, 
though  referred  to,  are  no  part  of  the 
contract  unless  expressly  made  so.  The 
Majestic,  166  U.  S.  375,  17  S.  Ct.  597, 
41  L.  Ed.  1039;  Porter  v.  Ins.  Co.,  160 
Mass.  183,  35  N.  E.  678;  Harris  v.  Ins. 
Co.,  5  Johns.  (N.  Y.)  3()8     The  signifi- 
cance  of   the   distinction    is   that   ex- 
trinsic matters  are  not  warranties,  but 
at    most    only    representations,    and 
questions  of  materiality  and  good  faith 
in  respect  to  them  ordinarily  go  to  the 
jury.      Extraneous    evidence    whether 
written  or  oral  is  proper  to  identify  and 


POLICY    BEST    EVIDENCE 


107 


and  fraud  inducing  it  on  the  other,  the  written  contract  may  in  a 
propter  case  be  reformed  in  equity  to  correspond  with  the  real  agree- 
ment.^ 


Phanix  Ins.  Co.,  52  Neb.  395,  72  N.  W. 
483. 

^  Hearne  v.  Mar.  Ins.  Co.,  20  Wall. 
488,  490,  22  L.  Ed.  395;  Maker  v. 
Hibernia  Ins.  Co.,  67  N.  Y.  283;  Brvce 
V.  Lorillard  Ins.  Co.,  55  N.  Y.  240; 
Steinbach  v.  Prudential  Ins.  Co.,  62 
App.  Div.  (N.  Y.)  133,  70  N.  Y.  Supp. 
809;  Sche ussier  v.  Ins.  Co.  of  Co.  of 
Phila.,  103  App.  Div.  12,  92  N.  Y. 
Supp.  649,  aff'd  185  N.  Y.  578.  This 
case  is  an  extreme  one,  for  the  agent  of 
the  company  intended  to  insert  the 
warranty  complained  of.  There  was 
no  fraud  and  no  mutual  mistake  of 
fact.  The  plaintiffs  had  simply  omitted 
to  disclose  the  character  of  the  risk. 
Compare  Travelers'  Ins.  Co.  v.  Hender- 
son, 69  Fed.  762,  16  C.  C.  A.  390,  and 
Goddard  v.  his.  Co.,  108  Mass.  56,  11 
Am.  Rep.  307;  Harris  v.  Columbiana 
County  Mutual  Ins.  Co.,  18  Ohio  St. 
116,  51  Am.  Dec.  448.  See  Birnstein 
V.  Stuyvesant  Ins.  Co.,  83  N.  Y.  App. 
Div.  436.  82  N.  Y.  Supp.  140,  and 
Trenton  Potteries  Co.  v.  Title  Guar.  & 
Trust  Co.,  176  N.  Y.  65,  68  N.  E.  132. 
If  action  could  not  be  successfully 
maintained  after  reformation  such  re- 
lief will  not  be  granted,  Thompson  v. 
Phoenix  Ins.  Co..  136  U.  S.  299,  10  S. 
Ct.  1019,  34  L.  Ed.  408.  If  company 
promises  to  renew  and  changes  terms 
of  former  policy,  equity  will  reform, 
Palmer  v.  Hartford  Ins.  Co.,  54  Conn. 
488,  9  Atl.  248;  Thomason  v.  Capital 
Ins.  Co.,  92  Iowa,  72,  61  N.  W.  843; 
Hay  V.  Star  F.  Ins.  Co.,  77  N.  Y.  235, 
33  Am.  Rep.  607;  but  judgment  on 
insurance  contract  is  a  bar  to  an  action 
to  reform  it,  Washburn  v.  Great  West. 
Ins.  Co.,  114  Mass.  175;  Steinbach  v. 
Relief  Fire  Ins.  Co.,  77  N.  Y.  498,  33 
Am.  Rep.  655.  Contra,  Grand  Vieiv 
Bldg.  Assn.  v.  Northern  Assur.  Co. 
(Neb.),  102  N.  W.  246,  where  recovery 
was  allowed  after  defeat  in  United 
States  supreme  court,  183  U.  S.  308; 
and  see  same  case,  203  U.  S.  103,  in 
which  recovery  in  state  court  was  left 
undisturbed.  But  pendency  of  action 
on  policy  is  no  bar  to  action  by  de- 
fendant for  reformation,  Nat.  F.  Ins. 
Co.  V.  Hughes,  189  N.  Y.  84.  Mere 
knowledge  by  company's  agent  of  exist- 
ing facts  at  variance  with  terms  of 
policy  may  be  made  basis  of  reforma- 


tion, Fitchner  v.  Fidelity  Mid.  Fire 
Assn.,  103  Iowa,  276,  72  N.  W.  .530; 
Grand  View  Bldg.  Assn.  v.  Northern 
Assur.  Co.  (Neb.),  102  N.  W.  246. 
Mistake  of  only  one  party  is  no  ground 
for  reformation,  Moeller  v.  Am.  Ins. 
Co.,  52  Minn.  336,  .54  N.  W.  189;  Hart- 
ford Ins.  Co.  V.  Haas,  87  Ky.  531,  9 
S.  W.  720.  If  name  of  wrong  owner 
is  furnished  the  company,  reforma- 
tion cannot  be  granted  to  insert  the 
true  owner,  Schmid  v.  Virginia  F.  dc 
M.  Ins.  Co.  (Tenn.  Ch.  App.),  37 
S.  W.  1013;  Cushman  v.  New  Eng- 
land Ins.  Co.,  65  Vt.  569,  27  Atl.  426; 
but  reformation  will  be  granted  if 
mistake  as  to  owner  or  interest  is 
mutual,  Snell  v.  Ins.  Co.,  98  U.  S. 
85,  25  L.  Ed.  52,  or  as  to  description 
of  property.  Home  Ins.  &  B.  Co.  v. 
Lewis,  48  Tex.  622.  While  mistake  of 
law  is  in  general  said  to  present  no 
ground  for  reformation,  Westchester 
Fire  Ins.  Co.  v.  Wagner  (Tex.  Civ. 
App.),  38  S.  W.  214,  yet  mistake  of 
law,  especially  if  induced  by  com- 
pany's agent,  as  to  meaning  of  lan- 
guage employed  in  policy  has  often 
been  made  basis  of  reformation  where 
both  parties  intended  to  accomplish  a 
different  result,  Sias  v.  Roger  Williams 
Ins.  Co.,  8  Fed.  183;  Woodbury  Savings 
Bank  v.  Charter  Oak  Ins.  Co.,  31  Conn. 
517;  Longhurst  v.  Star  Ins.  Co.,  19 
Iowa,  364;  Esch  v.  Home  Ins.  Co.,  78 
Iowa,  334,  43  N.  W.  229,  16  Am.  St.  R. 
443;  Hartford  F.  Ins.  Co.  v.  McCarthy, 
69  Kan.  555,  77  Pac.  90;  Lansing  v. 
Commercial  Unio7i  Ins.  Co.  (Neb.), 
93  N.  W.  756;  Eastman  v.  Provident 
Mut.  R.  Assn.,  65  N.  H.  176,  18  Atl. 
745,  5  L.  R.  A.  712,  23  Am.  St.  R. 
29;  Maker  v.  Hibernia  Ins.  Co.,  67 
N.  Y.  283.  Reformation  and  recovery 
may  be  had  in  same  action,  German 
Ins.  Co.  V.  Davis,  6  Kan.  App.  268,  51 
Pac.  60;  Maryland.  Home  Ins.  Co.  v. 
Kimmell,  89  Md.  437,  43  Atl.  764; 
G^and  View  Bldg.  Assn.  v.  Northern 
Assur.  Co.  (Neb.),  102  N.  W.  246; 
A'^.  Y.  Ice  Co.  V.  Northwestern  Ins. 
Co.,  23  N.  Y.  357.  Where  similar  re- 
lief is  granted  at  law  under  the  doc- 
trine of  waiver  and  estoppel  no  refor- 
mation is  necessary,  German  Ins.  Co. 
V.  Miller,  39  111.  App.  633;  Am.  'Cent. 
Ins.  Co.  V.  McLanatkan,  11  Kan.  533; 


108 


(.KNKHAI,    I'KINCll'I.l.S    oF    INSIUANC  K    LAW 


Similarly,  oithor  party  m:iy  ohiiiiri  in  cciuily  a  rescission  of  the 
contrac'i  for  frau<l  oi-  nniinal  mistake  with  a  reinstatement  of  tlie 
parties.' 

Hut  it  is  inipDrtaiit  to  notice  tiiat  alter  a  fire  or  marine  loss,  or 
after  a  loss  under  a  life  pohcy.  unless  the  life  |)oli(\v  has  run  for  a 
large  part  of  its  atUicipated  duration,  this  form  of  relief  would  be 
unsatisfactory,  the  premium  being  so  much  less  than  the  face  of  the 
policy. 

§  86.  Court  Must  not  Make  New  Terms.— A  court  must  not  use 
its  iliscretion  to  modify  the  conditions  or  provisions  of  the  contract 
entered  into  l)y  tlie  parties  in  order  to  effectuate  what  it  might  con- 
sider a  more  equitable  arrangement  than  that  resulting  from  an 
enforcement  of  tlie  strict  terms  of  the  policy. - 

The  doctrine  of  waiver  and  estoppel,  especially  as  applied  in  some 
jurisdictions,  comes  into  sharp  conflict  with  this  elementary  proposi- 
tion of  law.'' 

§  87.  Special  Terms  Prevail  over  General  Form. — If  there  is  any 
inconsistency  between  the  written  and  the  printed  words  of  the 
policy,  the  former  prevail,  liecause  they  are  framed  and  inserted  with 
reference  to  the  particular  contract,  and  the  parties  do  not  generally 
take  the  trouble  to  revise  or  alter  the  formal  printed  conditions."* 


Smith  V.  Commomccallh  Ins.  Co.,  49 
Wis.  322,  5  N.  W.  8U4;  but  where  the 
mistake  goe.s  to  the  identity  of  the 
entire  subject-matter,  by  the  weight 
of  autliority,  the  only  remedy  is  by 
reformation,  (.'lulin.'^  v.  St.  Paul  F.  & 
M.  Ins.  Co..  44  Miiui.  440,  4G  N.  W. 
906;  Sandcr.'i  v.  Cooper.  11.5  X.  Y.  279, 
22  N.  E.  212,  5  L.  R.  A.  (j;iS,  12  Am.  St. 
R.  801.  Compare  Kun.'ias  F.  Fire  his. 
Co.  V.  Saimion,  52  Kan.  486,  35  Pac. 
15,  39  Am.  St.  R.  3.5(i;  State  Ins.  Co.  v. 
Schreck,  27  Neb.  527,  43  X.  W.  340,  6 
L.  R.  A.  524,  20  Am.  St.  R.  696. 

1  Union  Cent.  Lije  Ins.  Co.  v.  Potl- 
ker,  33  Ohio  St.  459,  31  Am.  Rep.  555. 
See  La  Marche  v.  Xew  York  Life  Ins. 
Co.,  126  Cal.  498,  58  Pac.  1053. 

2  The  contract  must  be  enforced  as 
written  unless  it  would  work  a  fraud, 
Rtissell  V.  Prudential  Ins.  Co.,  176  N.  Y. 
178,  68  X.  E.  2.52,  98  Am.  St.  R.  656; 
Stea-arl  v.  Union  Mid.  L.  Ins.  Co.,  155 
N.  Y.  257,  49  N.  E.  876,  42  L.  R.  A. 
147;  Peabodii  v.  Satterlee,  166  N.  Y. 
174,  59  N.  iE.  818,  52  L.  R.  A.  956; 
Allen  V.   German  Atn.   Ins.   Co.,   123 


X.  Y.  6,  25  N.  E.  309.  "The  courts  may 
not  make  a  contract  for  the  parties," 
Imperial  F.  Ins.  Co.  v.  Coos  Co.,^  151 
r.  S.  452,  462,  14  S.  Ct.  379,  38  L.  Ed. 
231.  "We  cannot  make  a  new  con- 
tract for  them  nor  refuse  to  enforce 
the  contract  they  made  for  them- 
selves," Elliott  V.  Farmers'  Ins.  Co., 
114  Iowa,  153,  155,  86  N.  W.  224. 

•■•See  ch.  VI,  injra.  Plaia,  ordinary 
and  popular  sense  to  be  given,  Im- 
perial Fire  Ins.  Co.  v.  Coos  Co.,  151 
U.  S.  452,  463,  38  L.  Ed.  231;  Hoover 
v.  Mercantile  Town  Mut.  Ins.  Co.,  93 
Mo.  App.  Ill;  Stone  v.  Granite  State 
Fire  Ins.  Co.,  69  N.  H.  438,  45  Atl. 
235;  Robertson  v.  French,  4  East,  135; 
Hart  V.  Standard  Mar.  Ins.  Co  22 
Q.  B.  D.  499. 

<  Hagan  v.  Scottish  Union  Net.  Ins 
Co.,  186  U.  S.  423,  46  L.  Ed.  1229,  22  S. 
Ct.  862;  Ph'Enix  Ins.  Co.  v.  Flemminq, 
65  Ark.  54,  39  L.  R.  A.  789,  67  Am  St 
R.  900,  44  S.  W.  464;  Nicollet  v.  /n,s. 
Co.,  3  La.  366,  23  Am.  Dec.  458;  Harper 
v.  .V.  Y.  City  Fire  Ins.  Co.,  22  N.  Y. 
443;  Sullivan  v.  Spring  Garden  Ins.  Co., 


TRADi:    CUSTOM 


109 


C>n  the  same  principle,  it  is  held  that  the  special  clauses  or  riders 
stamped  on  the  policy,  or  printed  and  attached  to  it,  prevail  over  the 
more  general  terms  of  the  usual  printed  form.^ 

§  88.  Parol  to  Explain  Ambiguity. — If  the  language  of  the  policy- 
is  ambiguous  and  fairly  open  to  doubt,  of  which  the  court  is  to  judge, 
parol  evidence  is  admissible  to  explain  the  real  meaning  of  the 
parties.- 


§  89.  Trade  Custom. — In  seeking  to  arrive  at  the  meaning  of  the 
contract,  usage  may  be  resorted  to,  in  order  to  make  definite  what  is 


34  App.  Div.  128,  54  N.  Y.  Supp.  629; 
Favst  V.  Ins.  Co.,  91  Wis.  158,  64 
N.  \V.  883,  30  L.  R.  A.  783,  51  Am.  St. 
R.  876;  Robertson  v.  French,  4  East, 
130.  This  doctrine  is  frequently  in- 
voked by  the  assured  to  justify  an 
apparent  violation  of  the  memoran- 
dum clause  of  the  fire  insurance  policj- 
prohibiting  the  use  of  certain  articles 
or  uses.  In  the  same  way,  insurance 
"as  a  manufacturer  of  brass  clock 
works"  permits  the  use  of  all  such  arti- 
cles as  are  ordinarily  employed  in  that 
manufacture,  and  the  making  of  them 
for  that  purpose,  if  such  be  the  ordi- 
nary course  of  the  business,  although 
the  use  of  such  articles  be  prohibited  as 
extra  hazardous  by  the  printed  terms 
of  the  policy,  Bri;ant  v.  Poughheepsie 
Mut.  Ins.  Co.,  17  N.  Y.  200.  And  see 
Haley  v.  Dorchester  Fire  Ins.  Co.,  12 
Gray  (Mass.),  545.  So  as  to  general 
printed  clauses  applicable  to  a  voyage 
policy  left  in  an  English  Lloyd's  policy 
filled  up  and  intended  as  a  time  policy, 
Dudgeon  v.  Pembroke,  2  App.  Cas.  284. 
Similarly  as  to  controlling  effect  of 
words  written  in  the  margin  or  at  the 
foot  of  policies,  and  especially  marine 
policies,  Chadsejj  v.  Guion,  97  N.  Y. 
333;  Swinnerton  v.  Im.  Co.,  37  N.  Y. 
174,  93  Am.  Dec.  560;  Bruce  v.  Ins. 
Co.,  58  Vt.  253,  2  Atl.  710.  So  it  has 
been  held  that  the  words  restricting 
the  liability  of  the  insurers  "against 
actual  total  loss  onlj-,"  written  upon 
the  margin,  prevail  over  any  incon- 
sistent printed  provisions  in  the  body 
of  the  policy,  Burt  v.  Brewers  and 
Maltsters  Ins.  Co.,  9  Hun  (N.  Y.),  383, 
aff'd  78  N.  Y.  400.  Written  indorse- 
ment on  face  of  policy  "covering  lo.ss 
by  lightning"  prevails  over  printed 
clause  exempting  company  from  lia- 
bility, Haws  V.  Ins.  Co.,  130  Pa.  St. 
113,  15  Atl.  915,  2  L.  R.  A.  52. 


1  St.  Paid  F.  &  M.  Ins.  Co.  v.  Kidd, 
55  Fed.  238,  5  C.  C.  A.  88,  14  U.  S. 
App.  201;  Gunther  v.  L.  &  L.  &  Globe 
Ins.  Co.,  34  Fed.  501;  Jackson  v.  Brit.- 
A7n.  Assur.  Co.,  106  Mich.  47.  63  N.  W. 
899,  30  L.  R.  A.  636;  Benedict  v.  Ocean 
Ins.  Co.,  31  N.  Y.  389;  Mascott  v. 
Granite  State  Ins.  Co.,  68  Vt.  253,  35 
Atl.  75.  A  specific  stipulation  governs 
the  more  general.  Northwestern  L.  his. 
Co.  V.  Hazeleft,  105  Ind.  212,  4  N.  E. 
582,  55  Am.  Rep.  192.  A  rider  pasted 
or  attached  to  face  of  policy  is  part  of 
contract  and  need  not  be  referred  to, 
Washburn  &  Moen  Mfg.  Co.  v.  Reliance 
Mar.  Ins.  Co.,  106  Fed.  116;  Hardii  v. 
Ins.  Co.,  166  Mass.  210,  44  N.  E.  209, 
33  L.  R.  A.  241,  55  Am.  St.  R.  395; 
Quinn  v.  Fire  Assn.,  180  Mass.  560, 
62  N.  E.  980;  Shakman  v.  U.  S.  Credit 
S.  Co.,  92  Wis.  366,  66  N.  W.  528,  32 
L.  R.  A.  383,  53  Am.  St.  R.  920  (an 
indorsement  on  the  contract). 

^Orient  Mut.  Ins.  Co.  v.  Wright,  1 
Wall.  456,  17  L.  Ed.  505;  Richerson  v. 
Hartford  Fire  Ins.  Co.,  149  N.  Y.  307, 
43  N.  E.  856,  but  holding  also  that  a 
party  cannot  be  asked  what  his  intent 
was,  RickersQii  v.  German-Am.  Ins. 
Co.,  6  App.  Div.  550,  39  N.  Y.  Supp. 
517;  Daniels  v.  Hudson  River  Fire 
Ins.  Co.,  12  Gush.  (Mass.)  416,  59  Am. 
Dec.  192.  So  circumstances  in  connec- 
tion with  the  execution  of  the  policy 
may  be  considered  in  determining  the 
intention  of  the  parties,  Pietri  v.  Segue- 
not,  96  Mo.  App.  258,  69  S.  W.  1055. 
In  case  of  doubt  may  show  the  cir- 
cumstances surrounding  the  parties  at 
time  of  execution,  Borigui  v.  Spring- 
field F.  &  M.  Ins.  Co.,  34  Minn.  352,  25 
N.  W.  796;  Boyd  v.  Mississippi  Homt 
Ins.  Co.,  75  Miss.  47,  21  So.  70S;  Bole  v. 
.V.  //.  Ins.^  Co.,  159  Pa.  St.  53,  28  Atl. 
205;  McKeesport  Mach.  Co.  v.  Ben 
Franklin  Ins.  Co.,  173  Pa.  St.  53,  34 


no 


GENERAL    PUIN'CIPLES   UF    INSURANCE    LAW 


uncertain,  clear  up  what  is  doubtful,  or  annex  incidents,  but  not  to 
varv  or  contradict  its  terms.' 

Trade  usa^e  may  be  shown  to  explain  the  meaning  of  technical 
words  or  phrases. - 


All.  1(1;  Ciirr  v.  Montefiorc,  X\  L.  J. 
(I  H.  ■_'")(■).  Thi.s  i.s  not  to  disniitt'  the 
\vrit(fii  contract   hut   to  put  tlic  court 


94,  99,  G2  N.  E.  lOGG.  The  actual  in- 
tent of  only  one  party  is  not  to  be 
.shown  by  extrinsic  testimony  nor  are 


.  I  he  position  of  the  parties  in  inter-      customs  known   only  to  underwriters 


preiuii;  Its  probable  meaniuK.  Only 
rircuniKtances  known  or  presumed  to 
be  known  by  both  parties  are  relevant 
fur  such  a  pin|io.s(>,  Rickcrson  v. 
Ihivtjord  F.  Itis.  Co.,  149  N.  Y.  307, 
4;?  N.  K.  S.")();  lliid'inug  S.  Co.  v.  Ind. 
.MhI  .   clc.   Co.    llS{)r-,),    1    Q.    H.    500. 


competent  against  the  assured,  Rick- 
rr.so«  V.  Ilnrtjord  F.  Ins.  Co.,  149  N.  Y. 
307,  43  N.  E.  85G.  Custom  admissible 
as  to  time  of  attaching  of  the  risk, 
Chvdmul  Oil  Co.  v.  Norwich  Inn.  Co., 
34  Ore.  22S,  55  Par.  435.  It  is  not 
competent   to  show  custom  to  accept 


in    ca.se    of   doubt    the    interpretation  applications   from    persons   who   have 

.subsequently    put    upon    the   con'.ract  attempted     suicide,    Louts     v.    Conn 

bv  the  parties  in  its  performance  may  Miit.  L.  I.  Co.,  5S  App.  Div.  137,  68 

be  evidence  of  their  intent.  Manhattan  N.  Y.  Supp.  GS3,  alY'd  172  N.  \.  G59, 


Life  Ins.  Co.  V.  Wriifht,  12G  Fed.  82, 
01  C  C.  A.  138;  lirookli/n  In.f.  Co.  v. 
Dutcher,  95  V.  S.  2G9,  273,  24  I..  Ed. 
410,  "the  practical  interpretation  of 
an  agreement  by  a  party  to  it  is  always 
a  consideration  of  great  weight."  The 
New  York  court  says:  "The  practical 


G5  N.  E.  1119.  Nor  to  show  that  a  life 
company  has  .sometimes  accepted  past- 
due  premiums,  Easier/  v.  Ins.  Co.,  91 
Va.  IGl,  21  S.  E.  235.  Nor  to  show 
the  universal  understanding  and  prac- 
tice of  the  trade  in  respect  to  the  pro 
rata   phra.se  of  the   reinsurance  rider, 


construction  put  upon  a  contract  by  Home  In.H.  Co.  v.  Continental  Ins.  Co., 

the  parties  to  it  is  sometimes  almost  180  N.  Y.  389,  73  N.  E.  65.    And  where 

conclusive  as  to  the  meaning,"  Nicoll  term   of  reinsurance   is  definitely   de- 

V.  Satuls,  131  N.  Y.  24,  29  N.  E.  818.  scribed,  custom  to  i.ssue  for  same  term 

And  see  Woolscy  v.  Funke,  121  N.  Y.  as  direct  insurance  cannot  be  shown, 

9''  24  N   E   191 ;  Phetleplace  v.  Brit.  &  Milwaukee    Mechanics'    Irus.     Co.     v. 

For.  Ins.  Co.,  23  R.  I.  26,  49  Atl.  33.  Palatine  Ins.  Co.,  128  Cal.  71,  60  Pac. 

An  admission  by  the  insured  as  to  what  518.     Opinion  cannot  be  received  as 

property  was  intended  to  be  covered  proof  of  usage,  Greenwich  Ins.  Co.  v. 

was  received  against  him  in  Leftwich  Waterman,  54  Fed.  839,  4  C.  C.  A.  600. 


V.  Roi/al  Ins.  Co.,  91  Md.  .596,  46  Atl. 
1010.' 

'»  Moore  v.  United  States,  196  l'.  S. 
157,  166,  25  S.  Ct.  202;  Lillard  v. 
Kentucky,  etc.,  Co.,  134  Fed.  168; 
Grace  v.  Ins.  Co.,  109  V.  S.  283,  3 
S.  Ct.  207,  27  L.  Ed.  932;  Connelly 
v.  Assn.,  58  Conn.  552,  20  Atl.  G71, 
9  L.  R.  A.  428,  18  Am.  St.  R.  296; 
Glendale  Woolen  Co.  v.  Ins.  Co.,  21 
Conn.  19,  54  Am.  Dec.  309;  Bornzewski 
V.  Middlesex  .Usnr.  Co.,  186  Mass.  589, 
72  N.  E.  2.50;  Mooney  v.  Howard  Ins. 
Co.,  138  Ma.ss.  375,  .52  Am.  Rep.  277. 
The  New  York  court  says:  "Custom  or 


I'njust  and  unreasonable  custom 
though  general  will  not  be  enforced, 
Seccomb  v.  Provincial  Ins.  Co.,  10 
Allen  (Mass.),  305. 

2  Western  Assur.  Co.  v.  Altheimer 
Bros.,  58  Ark.  565,  573,  25  S.  W.  1067; 
his.  Co.  V.  McMillan,  31  Ala.  711; 
Union  Ins.  Co.  v.  Am.  Ins.  Co.,  107 
Cal.  327,  40  Pac.  431,  28  L.  R.  A.  692, 
48  Am.  St.  R.  140;  Houghton  v.  Water- 
toivn  Ins.  Co.,  131  Mass.  300;  Phcenix 
Ins.  Co.  V.  Ryland,  69  Md.  437,  16  Atl. 
109,  1  L.  R.  A.  548.^  But  Alabama 
company  reinsuring  New  York  com- 
pany is  not  presumed  to  know  New 


asage  is  presumed  to  enter  into  the  in-  York  customs,  German  Am.  Ins.  Co.  v 
tention  when  it  is  found  as  a  fact,  not 
only  that  it  existed,  Init  was  uniform, 
rea.sonable  and  well  settled,  and  either 
known  to  the  parties  when  the  con- 
tract was  made  or  so  generally  known 
as  to  raise  a  presumption  that  they  had 
ii  in  mind  at  the  time,"  London 
Assur.  Corp.  v.  Thompson,  170  N.  Y. 


Commercial  Ins.  Co.,  95  Ala.  469, 11  So, 
117,  16  L.  R.  A.  291.  Every  under- 
WTiter  is  presumed  to  know  the  usages 
of  the  trade  he  insures.  If  he  does  not 
he' ought  to  inform  himself,  Hearne  v. 
Mar.  Ins.  Co.,  20  Wall.  488,  492,  22 
L.  Ed.  395;  Parsons  v.  Mass.,  etc.,  Co., 
6  Mass.   *197,    *204;   McCall  v.  Sun 


CONSTRUCTION   LIBERAL  TO   INSURED 


111 


Trade  usage  has  always  played  a  particularly  important  part  in 
the  law  of  marine  insurance.^ 


§  90.  Construction  Liberal  to  Insured. — The  contract  of  insurance 
being  a  unilateral  contract  framed  mainly  in  the  interest  of  insurers, 
and  the  insured  being  compelled  to  accept  the  form  offered,  in  order 
to  secure  insurance,  any  ambiguity  as  to  the  purpose  or  meaning 
of  its  terms,  or  what  property  was  intended  to  be  covered,  wall  be 
construed  in  favor  of  the  insured.^ 


Mut.  Ins.  Co.,  66  N.  Y.  505,  513;  Mer- 
chants &  Mfrs.  his.  Co.  V.  ShiU'ito,  15 
Ohio  St.  559,  566,  Mey  v.  South  Car. 
Ins.  Co.,  3  Brev.  (S.  C.)  *329,  *331; 
Noble  V.  Kennoicaif,  2  Dougl.  513, 
Mansfield,  J.;  Da  Costa  v.  Edmunds, 
4  Camp.  143,  Ellenborough,  J.;  whether 
such  practice  is  recently  established 
or  not,  Macy  v.  Ins.  Co.,  9  Mete. 
(Mass.)  354.  Usage  of  trade  is  equiva- 
lent to  notice  to  underwriter,  Mount 
V.  Larkins,  8  Bing.  108,  122.  "He 
took  the  risk  on  the  supposition  that 
what  was  usual  and  necessary  should 
be  done,"  Eyre  v.  Mar.  his.  Co.,  5 
Watts.  &  S.  (Pa.)  116.  "It  is  absurd 
to  suppose  that  when  the  end  is  in- 
sured the  usual  means  of  attaining  , 
it  are  to  be  excluded,"  McCall  v.  Sun 
Mut.  Ins.  Co.,  66  N.  Y.  505,  513. 

1  Mason  v.  Skurray,  1  Marsh.  226, 
Lord  Mansfield;  Preston  v.  Greenwood, 
4  Dougl.  28,  Lord  Mansfield;  Long  v. 
Allan,  4  Dougl.  276,  Buller,  J.  Lord 
Mansfield  says:  "What  is  usually  done 
by  such  a  ship,  or  such  a  cargo,  in  such 
a  voyage  is  understood  to  be  referred 
to  in  every  policy  and  to  make  a  part 
of  it  as  much  as  if  it  was  expressed," 
Pelly  X.  Royal  Exch.  Ass.  Co.,  1  Burr. 
341.  This  does  not  vary  the  terms  of 
the  policy;  it  "introduces  matter  upon 
which  the  policy  is  silent,"  Blackett  v. 
Rowl  Exch.  Ass.  Co.,  2  Cr.  &  Jer.  249; 
Hull  V.  Janson,  4  E.  &  B.  504,  24  L.  J. 
Q.  B.  101.  The  marine  policy  was 
largely  founded  upon  usage,  Ocean 
S.  Co.  V.  .Etna  Ins.  Co.,  121  Fed.  882. 
And  see  §  10.  General  and  known 
usages  of  trade  determined  by  a  course 
of  judicial  decision  form  part  of  the 
law  merchant  and  as  such  are  thence- 
forward judicially  noticed  by  the 
courts,  Barnett  v.  Brandao,  6  M.  & 
Gr.  630;  but  a  particular  or  local  cus- 
tom must  be  affirmatively  established 
by  evidence  and  shown  to  have  been 
known  to  both  parties,  Walls  v. 
Bailey,  49  N.  Y.  464;  Pelly  v.  Royal 


Exch.  Ass.  Co.,  1  Burr.  341;  Gabay  v. 
Lloyd,  3  B.  &  Cr.  793;  Bartlett  v.  Pent- 
land,  10  B.  &  Cr.  760. 

2  Liverpool  cfc  London  &  G.  Ins.  Co. 
V.  Kearney,  180  U.  S.  132,  45  L.  Ed. 
460;  American  Surety  Co.  v.  Pauly,  170 
U.  S.  133,  144,  18  S.  Ct.  552;  Thompson 
V.  Ins.  Co.,  136  U.  S.  287,  10  S.  Ct. 
1019;  American  S.  S.  Co.  v.  Indemnity 
Mut.  Mar.  Ins.  Co.,  108  Fed.  42f; 
Forest  City  Ins.  Co.  v.  Hardesty,  182 
111.  39.  74  Am.  St.  R.  161,  55  N.  E. 
139;  Janneck  v.  Met.  Life  Ins.  Co., 
162  N.  Y.  574,  57  N.  E.  182;  Kratzen- 
stein  V.  Western  Assurance  Co.,  116 
N.  Y.  54,  22  N.  E.  221;  Foot  v.  Mna 
Fire  Ins.  Co.,  61  N.  Y.  571;  Hoffman 
V.  .Etna  Fire  Ins.  Co.,  32  N.  Y.  405,  88 
Am.  Dec.  339;  but  see  Kirk  v.  Home 
Ins.  Co.,  92  N.  Y.  App.  Div.  26,  86 
N.  Y.  Supp.  980.  And  where  the 
assured  furnishes  the  description  of 
the  property,  as  to  that  the  rule  may 
be  modified,  London  Assur.  Corp.  v. 
Thompson,  170  N.  Y.  94,  62  N.  E. 
1066;  but  the  description  of  the 
property  which  is  often  compara- 
tively Drief  and  general  should  be 
held  to  be  inclusive  rather  than  ex- 
clusive, no  matter  who  prepares  it, 
Rickerson  v.  Hartford  F.  Ins.  Co.,  149 
N.  Y.  307,  43  N.  E.  856.  And  compare, 
for  general  rule,  Nostrand  v.  Knight, 
123  N.  Y.  614.  As  to  location  of 
movable  property  in  a  business  plant, 
see  McKeesport  Machine  Co.  v.  Ben 
Franklin  Ins.  Co.,  173  Pa.  St.  53,  34 
Atl.  16.  In  Lite  v.  Firemen's  Ins.  Co., 
104  N.  Y.  Supp.  434,  landlord's  policy 
on  profits  was  construed  as  open  and 
not  valued  on  partial  loss.  Compare 
construction  of  valued  policy  on  freight 
in  N.  Y.,  etc.,  S.  Co.  v.  Royal  Exch. 
Assur.,  145  Fed.  713.  Conditions  are 
construed  strictly  against  the  insurer, 
Robinson  v.  Ji!tna  Ins.  Co.,  128  Ala. 
477,  30  So.  665.  The  New  York  court 
says:  "The  words  of  the  policy  should 
not  be  taken  in  any  technical  or  nar- 


112 


GENERAL    I'lnXCIPLKS   OF    INSURANCE   LAW 


§91.  Forfeitures  not  Favored.— The  same  principle  is  para- 
phrased  in  tlic  niaxim  ihat  forfeitures  are  not  favored,'  and,  there- 
fore, eq\iiv()cal  wcrds,  or  provisions  repugnant  to  one  another,  will 
he  so  corjstrued  as  to  give  effect  to  the  instrument  rather  than  to 
avoid  it.=  liut  the  fair  and  reasonable  intendment  of  a  condition, 
though  technical,  must  not  be  frustrated  by  such  rules  of  interpreta- 
tion. Thus,  a  deed  of  trust  was  held  to  be  in  effect  a  chattel  mort- 
gage and  to  forfeit  a  fire  ])olicy  prohibiting  stich  incumbrance  with- 
out written  permit/' 

Tlie  atloption  of  a  standard  form  of  Hre  policy  has  not  changed 
the  rules  of  construction  previously  ))revailin.u-  in  this  regard.^ 


row  souse.  'I'lioy  need  not  be  Uiken  in 
tiie  sense  in  which  they  may  have  been 
understood  by  underwriters,  l)Ut  they 
must  be  takeii  in  their  orihnary  sen.se 
as  commonly  u.sed  and  understood. 
We  must  endeavor  to  ascertain  how  tlie 
insured  understood  and  could  properly 
understand  them,"  Hcrnnan  v.  Me- 
chanics' I  Hi:.  Co.,  81  N.  Y.  184;  //o//- 
man  v.  .Etna  Fire  Ins.  Co.,  32  X.  \. 
405.  And  the  rule  applies  to  mutual 
companies  though  members  are  charged 
with  a  knowledge  of  by-laws,  Brock  v. 
Brotherhood  Ace.  Co.  (Vt.,  1903),  54  ' 
Atl.  17().  So  also  beneficiary  associa- 
tion. .Matthc.'i  v.  Imperial  Ace.  Assn., 
110  Iowa.  222,  81  N.  W.  484. 

1  The  court  says:  "Courts  have 
ahvay.s  set  their  faces  against  an  in- 
surance company,  which,  having  re- 
ceived its  premiums,  has  sought  by  a 
technical  aefense  to  avoid  payment," 
Mut.  L.  Ins.  Co.  V.  /////.  193  V.  S.  551. 
.559.  24  S.  Ct.  538. 

'  McMaster  v.  Xew  'i'ork  Life  Ins. 
Co.,  183  U.  S.  25,  46L.  Kd.  64;  Hart- 
ford F.  Ins.  Co.  V.  Unsell,  144  U.  S. 
439,  12  S.  Ct.  671;  Sni/der  v.  Ins.  Co., 
59  N.  J.  L.  544,  37  Atl.  I(r22;  Phoenix 
Ins.  Co.  V.  Tomlinson.  125  Ind.  84, 
21  Am.  St.  R.  203;  Woodmen's  Acci- 
detil  Assn.  v.  Byers,  62  Neb.  673,  87 
N.  \V.  546.  55  L.  R.  A.  291;  Baleif 
V.  Homestead  Fire  Ins.  Co.,  80  N.  Y. 
21,  36  Am.  Rep.  570.  In  Rickerson  v. 
Hartford  Fire  Ins.  Co.,  149  N.  Y.  307, 
313,  43  X.  E.  856,  the  court  adopts 
Mr.  May's  rule  and  says:  "No  rule  in 
the  interpretation  of  a  policy  is  more 
fully  established  or  more  imperative 
and  controlling  than  that  which  de- 
clares that  in  all  cases  it  must  be  liber- 
ally construed  in  favor  of  the  insured, 
so  as  not  to  defeat  without  a  plain 
necessity  his  claim  to  tlie  indenmity, 


which  in  making  the  insurance  it  wls 
his  object  to  secure.  When  the  words 
are  susceptible  of  two  interpretations 
that  which  will  sustain  his  claim  and 
cover  the  loss,  must  in  preference  be 
adopted."  So  no  intendment  in  favor 
of  forfeiture  should  be  indulged  in, 
Xorthwestern  Mid.  Life  Assn.  v.  Schulz, 
94  111.  App.  156.  Nevertheless  the 
United  States  Supreme  Court  said: 
"Forfeitures  are  necessary  and  should 
be  fairly  enforced,"  Xederland  L.  Ins. 
Co.  V.  Meinert,199  U.S.  1m. 

3  Hunt  v.  Springfield  F.  &  M.  Ins. 
Co.,  196  U.  S.  47,  25  S.  Ct.  179,  49 
L.  Ed.  381.  A  conspicuous  illustration 
of  the  principal  rule  and  far  distant 
from  the  last  case  stands,  Michael  v. 
Prussian  Nat.  Ins.  Co.,  171  N.  Y.  25, 
63  N.  E.  810,  in  which  it  was  held  that 
transfer  of  gross  earnings  to  a  pool 
was  no  change  of  interest  whatsoever 
under  use  and  occupancy  insurance, 
though  pool  agreement  provided  that 
despite  fire  assured  should  continue  to 
receive  full  percentage  of  pool  earn- 
ings. "Loss  payable  as  their  interest 
may  appear,"  held,  not  equivalent  to 
permit  for  chattel  mortgage  in  Atlas 
Reduct.  Co.  V.  New  Zealand  Ins.  Co., 
138  Fed.  497.  To  avoid  forfeiture  vio- 
lence must  not  be  done  to  the  lan- 
guage of  the  instrument,  Behling  v. 
Northwestern  Nat.  L.  I.  Co.,  117  Wis. 
24,  93  N.  W.  800;  Peabodij  v.  Satterlee, 
166  N.  Y.  174,  179,  59  N.  E.  818,  52 
L.  R.  A.  956. 

*  Matthews  v.  Am.  Cent.  Ins.  Co.,  154 
N.  Y.  449,  456,  48  N.  E.  751.  The 
object  of  the  New  Y'ork  statute  is  de- 
clared to  be  to  provide  a  uniform  con- 
tract or  policy  of  fire  insur;... :e — not 
to  prescribe  terms  which  s'lculd  seem 
to  the  legislature  reasonable,  Walradt 
V.  Phf£ni.t  Ins.  Co.,  136  N.  Y.  382,  3? 


WHAT  LAW  GOVERNS  CONSTRUCTION  OF  CONTRACT 


113 


§  92.  What  Law  Governs  Construction  of  Contract. — Ordinarily 

the  laws  and  usages  of  the  place  where  the  contract  of  insurance  is 
made  are  to  be  applied  in  its  interpretation  and  construction.^ 

This  rule  is  peculiarly  appropriate  to  this  branch  of  the  law  be- 
cause in  insurance  there  may  be  several  places  where  the  contract  is 
operative — one  place  for  the  payment  of  premiums,  another  for  the 
payment  of  loss,  and  a  third  for  the  location  of  the  subject  of  insur- 
ance. But  if  the  policy  provides  that  the  premiums  and  loss  are  to 
be  paj'able  at  the  home  office,  the  latter  place  would  seem  to  be  the 
place  of  performance,  and  there  w^ould  in  that  case  be  cogent  reason 
for  holding,  in  analogy  to  the  general  rule,^  that  its  law  is  to  prevail 
in  the  construction  of  the  policy.^ 

It  is  often  important  to  determine  by  what  law  the  validity  and 


N.  E.  1063.  When  the  original  act 
was  passed,  the  form  of  poHey  had 
not  yet  been  adopted.  Its  preparation 
was  left  to  insurance  men,  and  by  sec- 
tion 3  of  the  act  it  was  pro^■ided  that 
any  pohcy  made  in  terms  inconsistent 
with  the  provisions  of  the  act  should 
nevertheless  be  binding  upon  the  com- 
pany, L.  1886,  c.  488;  L.  1892,  c.  690, 
§  121. 

1  Mut^  Life  Ins.  Co.  v.  Hill,  193  U.  S. 
551,  24  S.  Ct.  538;  Mut.  Life  Lis.  Co. 
v.  Cohen,  179  U.  S.  262,  21  S.  Ct.  106, 
45  L.  Ed.  181;  Equitable  Life  Asstir. 
Society  v.  Clements,  140  U.  S.  226,  11 
S.  Ct.  822,  35  L.  Ed.  497.  The  Federal 
Supreme  Court  says:  "Contracts  are 
to  be  governed  as  to  their  nature, 
their  validity  and  their  interpreta- 
tion, by  the  law  of  the  place  where 
they  were  made  unless  the  contract- 
ing parties  clearly  appear  to  have 
had  some  other  law  in  view,"  Liver- 
pool, etc.,  S.  Co.  V.  Phoenix  Ins.  Co.,  129 
IT.  S.  397;  Washington  Life  Ins.  Co.  v. 
Glover,  78  S.  W.  146  (Ky.,  1904);  Su- 
preme Conncil  of  American  Legion  of 
Honor  v.  Getz,  112  Fed.  119,  50  C.  C.  A. 
153;  Carrollton  Furniture  Mfg.  Co.  v. 
Am.  Credit  Indemnity  Co:,  124  Fed. 
25,  27,  59  C.  C.  A.  545.  The  place  of 
the  contract  is  usually  where  the 
policy  is  delivered  and  the  first  pre- 
mium paid,  City  of  Lale  Charles  v. 
Ins.  Co.,  114  La.  836,  38  So.  578;  but 
if  possible  the  intent  of  the  parties  as 
to  what  law  governs  is  to  be  ascer- 
tained, Bottomley  v.  Met.  Life  Ins.  Co., 
170  Mass.  274,  49  N.  E.  438;  Union 
Cent.  Life  Ins.  Co.  v.  Pollard,  94  Va. 
146,  26  S.  E.  421,  36  L.  R.  A.  272,  64 
Am.  St.  R.  715,  but  see  Dolan  v.  Mut. 

8 


Res.  Fund  L.  Assn.,  173  Mass.  197,  53 
N.  E.  398.  Considerations  based  on 
justice  and  public  policy  may  deter- 
mine what  law  shall  applv,  N.  Y. 
Life  Ins.  Co.  v.  Cravens,  178  U.  S. 
389,  20  S.  Ct.  962,  44  L.  Ed.  1116; 
Sei/k  V.  Millers'  Nat.  Ins.  Co.,  74 
Wis.  67,  41  N.  W.  443,  3  L.  R.  A.  523. 
When  the  contract  is  completed  by 
mailing  the  policy  to  the  assured  in 
another  state,  the  place  of  mailing  is 
the  place  of  the  contract  and  its  law 
prevails,  Hartford  S.  B.  I.  &  Ins.  Co. 
v.  Lasher  Stocking  Co.,  66  Vt.  439,  29 
Atl.  629.  In  the  absence  of  evidence 
to  the  contrary  the  presumption  is 
that  the  laws  of  the  other  state  are 
the  same  as  those  of  the  forum,  Stewart 
V.  Union  Mut.  L.  Ins.  Co.,  155  N.  Y. 
257,  264. 

2  London  Assur.  Co.  v.  Companhia 
de  Moagens,  167  U.  S.  149,  17  S.  Ct. 
785,  42  L.  Ed.  113. 

3  Mid.  Life  Ins.  Co.  v.  Phinney,  178 
U.  S.  327,  338,  20  S.  Ct.  903;  Summit 
V.  U.  S.  Life  Ins.  Co.,  123  Iowa,  681, 
99  N.  W.  563;  Mut.  Life  Ins.  Co.  v. 
Bradley  (Tex.  Civ.  App.),  79  S.  W.  367; 
but  where  the  contract  was  closed  and 
the  first  premium  paid  in  Massachu- 
setts the  court  concluded  that  the  law 
of  that  state  must  apply  though  the 
policy  provided  that  premiums  and 
loss  should  be  paid  in  New  York. 
Millard  v.  Brayton,  177  Mass.  533,  537, 
59  N.  E.  436.  See  recent  case  in  which 
Wisconsin  court  refused  to  enforce 
contract,  though  made  in  Philadelphia, 
because  it  violated  a  Wisconsin  stat- 
ute, Presbyterian  M .  Fund  v.  Thomas, 
123  Wis.  281,  105  N.  W.  801. 


114 


GENERAL   PRINCIPLES   OF   INSURANCE   LAW 


effect  of  the  policy  are  to  be  governed,  because  the  statutory  pro- 
visions, as  well  as  usages  and  decisions,'  relating  to  the  insurance 
contract  vary  greatly  in  different  states,  and  such  statutes  generally 
have  no  extraterritorial  effect.^ 

If  the  policy  provides  that  it  will  not  be  binding  until  counter- 
signed at  a  certain  agency,  the  agency  is  ordinarily  the  place  of 
contract;^  so  if  the  policy  is  sent  to  the  agent  for  delivery  on 
receipt  of  the  premium;*'  but  if  the  application  is  accepted  at  the 
home  office,  and  the  policy  mailed  from  there  to  the  applicant  in 
another  state,  the  home  office  will  be  the  place  of  contract.^  As 
a  general  thing  the  contract  is  considered  made  where  the  last  act 
necessary  to  complete  it  is  done.^ 

§  93.  Who  Construes  the  Contract,  Court  or  Jury.— The  question 
whether  judge  or  jury  is  to  pass  upon  the  validity  and  effect  of  the 
contract  is  intensely  practical,  because  a  court  tries  to  construe  the 
agreement  according  to  its  legal  meaning  and  intent,  whereas  a  jury 


1  Thwing  v.  Gt.  West.  Ins.  Co.,  Ill 
Mass.  93. 

2  Prov.  Sav.  Life  Ass.  Soc.  v.  Bailei/, 

118  Ky.  36,  80  S.  W.  452;  Mut.  Life 
Ins.  Co.  V.  Hill,  193  U.  S.  551,  24  S.  Ct. 
538,  48  L.  Ld.  788,  which  also  holds 
that  parties  contracting  outside  of  a 
state  may  incorporate  into  the  con- 
tract the  law  of  that  state  and  make  its 
provisions  controlling.  The  same  court 
lield  that  where  the  policy  provided 
"claims  to  be  adjusted  according  to 
the  usages  of  Lloyds"  it  was  to  be 
interpreted  according  to  English  law, 
London  Assur.  v.  Companhia  de  Moa- 
gens,  167  U.  S.  149;  but  parties  mak- 
ing a  contract  in  a  certain  state  nmst 
not  by  that  method  be  allowed  to 
evade  a  statutory  rule  of  public  policy; 
for  example,  the  Massachusetts  stat- 
ute requiring  attachment  of  correct 
copy  of  application  to  life  insurance 
policy,  Albro  v.    Man.    Life  Ins.  Co., 

119  Ked.  629.    See  ch.  VI,  infra. 

3  Continental  Life  Ins.  Co.  v.  Webb, 
54  Ala.  6S8;  Antes  v.  Slate  Ins.  Co.. 
61  Neb.  55,  84  X.  W.  412. 

i  Thwing  v.  Great  Western  Ins.  Co., 
Ill  Mass.  93. 

^Commonwealth,  etc.,  Ins.  Co.  v. 
Knahe  Co.,  171  Mass.  265,  50  N.  E. 
516;  Daniels  v.  his.  Co.,  12  Cush. 
(Mass.)  416;  59  Am.  Dec.  192;  Cook 
V.  Johnson,  3  Dutch.  (N.  J.)  645,  72 
Am.  Dec.  379. 

» Xorthampton    Live    Stock    Co.     v. 


Tuttle,  40  N.  J.  L.  476;  or  where  the 
acquiescence  of  the  minds  of  the  parties 
is  completed.  Fidelity  Mut.  Assn.  v. 
Harris,  94  Tex.  25,  57  S.  W.  635,  86 
Am.  St.  R.  813.  The  act  of  final  assent 
fixes  the  place  of  the  contract,  Meyer 
V.  Supreme  Lodge,  178  N.  Y.  63,  70 
N.  E.  Ill,  64  L.  R.  A.  839;  Coverdale  v. 
Royal  Arcanum,  193  111.  91,  61  N.  E. 
915;  Born  v.  Home  Ins.  Co.,  120  Iowa, 
299,  94  N.  W.  849.  The  court,  how- 
ever, must  always  endeavor  to  give 
effect  to  the  intention  of  the  parties  as 
disclosed  by  the  terms  of  the  contract 
or  by  other  competent  evidence,  and 
in  one  case  though  the  contract  was 
made  in  New  Hampshire  the  court 
concluded  that  the  parties  intended 
the  law  of  another  state  to  apply 
largely  because  the  New  Hampshire 
standard  statutory  form  of  policy  had 
not  been  employed,  Davis  v.  ^tna 
Mid.  F.  Ins.  Co.,  67  N.  H.  218,  34  Atl. 
464,  67  N.  H.  335,  39  Atl.  902.  And 
in  another  case  the  court  went  so  far 
as  to  conclude  that  the  parties  in- 
tended that  the  laws  of  Missouri  should 
apply  though  the  contract  declared 
that  it  should  be  construed  according 
to  the  laws  of  New  York,  Pietri  v. 
Leguenot,  96  Mo.  App.  268,  69  S.  W. 
1055.  The  last  act  done  to  complete 
contract  is  significant.  Supreme  Lodge 
V.  Meyer  (U.  S.),  25  S.  Ct.  754;  Equi- 
table L.  Assur.  Soc.  v.  Perkins  (Ind. 
App.),  80  N.  E.  682. 


WHO   CONSTRUES  THE   CONTRACT,   COURT  OR   JURY  115 

is  too  apt  to  consider  an  insurance  an  absolute  contract  of  indemnity 
regardless  of  warranties,  and  is  prone  to  find  for  the  insured  unless 
his  claim  is  characterized  by  some  element  of  dishonesty  or  bad 
faith. 

The  general  rule  is  that  the  interpretation  of  the  meaning  of  the 
policy  falls  within  the  province  of  the  court.  It  is,  therefore,  for  the 
court  to  determine  whether  a  given  statement  or  stipulation  amounts 
to  a  warranty.^  And  if  a  warranty,  as  hereinafter  shown,  a  state- 
ment must  be  exactly  true,  and  a  stipulation  must  be  strictly  fulfilled 
regardless  of  its  materiality;  '  but  when  the  language  employed  to 
describe  the  thing  warranted  is  not  free  from  ambiguity,  or  when  it 
is  equivocal  and  its  interpretation  depends  upon  the  sense  in  which 
the  words  are  used  in  view  of  the  subject  to  which  they  relate,  the 
relation  of  the  parties,  and  the  surrounding  circumstances  properly 
applicable  to  it,  the  intent  of  the  parties  becomes  a  matter  of  inquiry, 
and  the  interpretation  of  the  language  used  by  them  is  a  mixed 
question  of  law  and  fact.  Such  a  question  is  to  be  submitted  to  the 
jury  under  appropriate  instructions.'"*  Whether  the  statement  or 
stipulation  warranted  has  or  has  not  been  comphed  with  is  in  its 
essence  a  question  of  fact.  Such  an  issue  if  really  amounting  to  a 
controversy  belongs  exclusively  to  the  jury."*     But  if  the  testimony 

1  But  in  most  of  our  state  courts  the  Orient  Ins.  Co.  v.  McKnight,  197  111. 
meaning  and  effect  of  the  policy  are  190,  64  N.  E.  339;  Long  v.  Beeher,  106 
largely  turned  over  to  the  determina-  Pa.  St.  466,  51  Am.  Rep.  532;  or  under 
tion  of  the  jury  by  application  of  the  the  standard  fire  policy  whether  it  has 
doctrine  of  waiver  and  estoppel.  Not  been  increased  by  any  means  within 
so  in  the  federal  and  English  courts,  the  knowledge  or  control  of  the  in- 
Ch.  VI-VIII.  sured,  Alston  v.  Greenwich  Ins.  Co.,  100 

2  Dwight  V.  Germania  Life  Ins.  Co.,  Ga.  282,  29  S.  E.  268;  or  whether  the 
103  N.  Y.  341,  8  N.  E.  654,  57  Am.  applicant  for  a  life  policy  was  in  sound 
Rep.  729,  Held,  error  to  leave  it  to  health,  Packard  v.  Metropolitan  Ins. 
jury  to  say  whether  insured  was  en-  Co.,  72  N.  H.  1,  54  Atl.  287;  Plumb  v. 
gaged  in  sale  of  liquor.  Penn.  Mut.  Life  Ins.  Co.,  108  Mich.  94, 

'■^Kenyan   v.    Knight    Templars,    122  65  N.  W.  611;  or  whether  a  vessel  was 

N.  Y.  247,  25  N.  E.  299  (warranty  re-  seaworthy,  iStorbwcA;  v.  Phoenix  Ins.  Co., 

garding  occupation  as  liquor  dealer).  47  App.   Div.    (N.  Y.)  621,  aff'd  166 

And  see  Northwestern  Life  Ins.  Co.  v.  N.  Y.  593,  59  N.  E.  1130.     Indeed  an 

Muskegon  Bank,  122  \j.  S.  501,7  S.  Ct.  issue  of  fact  must  not  be  withdraw7i 

1221,  30  L.  Ed.  1100  (warranty  as  to  from  the  jury  by  the  court  if  there  be 

temperate  habits).  any  rational  doubt  as  to  the  falsity  of 

<  Thus,  the  court  says:    "AVhether  a  the  statements,  Henn  v.  Met.  L.  Ins. 

given    state    of    admitted    or    proved  Co.,  67  N.  J.  L.  310,  51  Atl.  689; //^oWe^t 

facts  works  a  forfeiture  or  lapse  of  a  v.  Met.  Life  Ins.  Co.,  165  N.  Y.  13,  58 

policy  is  a  question  of  law  for  the  de-  N.  E.  771   (warranty  that  no  brother 

cision  of  the  court.    When  there  is  an  had  died  of  consumption).    If  the  facts 

issue  about  the  facts,  the  matter  should  or  inferences  deducible  from  them  are 

be  submitted  to  the  jury  under  proper  in  dispute  the  issue  is  for  the  jury,  Mc- 

instructions,"    Mass.  Ben.  L.  Assn.  v.  Farland  v.  U.  S.  Mut.  Ace.  Assn.,  124 

Robinson,  104  Ga.  256,  30  S.  E.  918,  Mo.  204,  27  S.  W.  436;  Foster  v.  Fidel. 

42  L.  R.  A.  261.    Thus,  whether  in  fact  ct  Cas.  Co.,  99  Wis.  447,  75  N.  W.  69, 

the   risk   of   fire   has   been   increased,  40  L.  R,  A,  833.    "If  reasonable  minds 


110 


CJENKRAL    I'KlNCirLKS    (»K    INSlUANri':    LAW 


bearing  upon  sucli  :in  issue  is  without  dispute,  there  remains  no 
controvert 0(1  (luestion  of  fact.'  in  general  it  may  be  stated  that  if 
the  facts  are  such  that  to  the  average  mind  only  one  inference  is 
(leducible  from  them,  tlie  court  nmst  make  a  decision  as  matter  of 
law.-' 


riiiglit  rciich  diffpront  ronclusioiis  as  to 
tho  ultiinalo  fsict  the  (|Ucslion  was  one 
for  tlic  jurj',"'  I'aunf  v.  FrnU-rnnl  Ace. 
.•l.s.fMr.  r«.',  119  lowii,  842.  345,  93 
N.  W.  3(11. 

I  rii<li.sp>iled  (I'.stiinony  showed  a.s- 
Hured  kepi  proliil)ited  artielcs,  carbon 
oil  in  bulk,  dunther  v.  L.  &  L.  &  G. 
Ins.  Co.,  134  r.  S.  110,  10  8.  Ct.  448, 
33  L.  Ed.  857.  So  also  alcohol,  etc., 
Appleby  V.  Astor  Fire  /n.v.  Co.,  54 
N.  Y.  253.  So  also  under  standard 
fire  policy  it  appearing  that  insured 
knew  tliat  risk  was  beint;  increased, 
Alston  V.  (irccnn-ich  Ins.  Co.,  100  (ia. 
2S2,  29  S.  E.  208.  So  where  facts  re- 
lating to  physical  condition  were  un- 
disputed, court  directed  judgment  for 
company  under  life  policy,  Folei/  v. 
Roi/al  Arcanum,  151  N.  Y.  196,  45 
N.E.  456.  56  Am.  St.  R.  621.  And 
where  statements  relating  to  catarrh 
and  sound  health  were  palpably  un- 
true, Lippincntt  v.  Supreme  Council, 
64  N.  J.  L.  309,  45  Atl.  774.  So  also 
if  a  portion  of  goods  insured  by  a 
marine  policy  reach  destination  un- 
injured the  jury  maj''  not  be  permitted 
to  find  an  actual  total  less,  Washburn 
&  M.  Mfg.  Co.  V.  Reliance  Mar.  Ins. 
Co.,  179  r.  S.  1,  21  S.  Ct.  1,45  L.  Ed. 
49.  And  see  as  to  similar  issue  under 
fire  policy,  Corbett  v.  Sprin/f  Garden  Ins. 
Co.,  155  N.  Y.  389.  50  N.  E.  282,  41 
L.  R.  A.  318  (new  trial),  40  App.  Div. 
628,  58  N.  Y.  Supp.  148,  aff'd  167  N.  Y. 
596.  Compare  cases  where  issue  of 
total  or  partial  loss  is  sent  to  jury, 
Liverpool  &  L.  &  G.  Ins.  Co.  v.  Heck- 
man,  64  Kan.  388,  67  Pac.  879; 
Thuriivjia  Ins.  Co.  v.  Malolt,  111  Kv. 
917,  64  S.  W.  991,  55  L.  R.  A.  277; 
Poppitz  V.  German  Ins.  Co.,  85  Minn. 
118,88N.  W.  438. 

^Donahue  v.  Ins.  Co.,  56  Vt.  380. 
And  see  Taylor  v.  Security  Mat.  F.  Im. 


Co.,  88  Minn.  231,  92  N.  W.  952.  The 
Connecticut  court  says:  "Extreme 
cases  either  way  may  be  easily  deter- 
mined. Hetween  them  tiiere  is  a  wide 
belt  of  deljatable  ground,  and  ca.ses 
falling  witiiin  it  are  governed  so  mucli 
by  the  peculiar  circumstances  of  each 
case  that  it  is  much  better  to  deter- 
mine the  matter  as  a  question  of  fact,'" 
Lock  wood  V.  Ins.  Co.,  47  Conn.  553. 
It  is  often  difficult  to  determine 
whether  the  meaning  and  scope  of  the 
description  of  the  property  insured  is 
for  court  or  jury,  thus  two  recent  cases 
before  the  same  court  involved  the 
question  whether  the  building  de- 
stroyed, a  separate  building  in  each 
case,  could  be  included  under  the  writ- 
ten description  "additions."  In  Rick- 
erson  v.  Hartford  F.  Ins.  Co.,  149  N.  Y. 
307,  43  N.  E.  856,  the  court  held  that 
the  question  should  have  been  left  to 
the  jury.  In  Arlimjton  Co.  v.  Colonial 
Assn.  Co.,  ISO  N.  Y.  337,  the  court 
held  as  matter  of  law  that  the  building 
was  covered.  The  federal  circuit  court, 
however,  in  applying  the  same  form  of 
policy  to  the  same  facts  had  arrived 
at  an  opposite  conclusion  and  had 
held  as  matter  of  law  that  the  building 
was  not  covered,  Arlinrjlon  Mfg.  Co.  v. 
Ins.  Co.,  107  Fed.  602,  46  C.  C.  A.  542. 
In  all  these  cases  the  facts  were  with- 
out dispute.  It  was  the  inferences 
only  that  differed.  In  another  recent 
decision  the  court  below  held  that  a 
separate  boiler  house  was  not  an  "  addi- 
tion," but  supreme  court  reversed  and 
held  that  it  was,  Guthrie  Laundry  Co. 
V.  Northern  Assur.  Co.,  87  Pac.  649, 
citing  many  cases.  If  there  is  doubt 
as  to  whether  certain  buildings  or 
property  are  covered  by  the  language 
of  the  policy  the  issue  is  for  jury, 
Wolverine  Lumber  Co.  v.  Phoenix  Ins. 
Co.,  145  Mich.  558,  108  N.  W.  1088. 


CHAPTER  IV 

General  Principles — Continued 

Representations  and  Concealments 

§  94.  Introductory. — The  peculiar  character  and  conduct  of  the 
transaction  have  given  rise  to  appropriately  exceptional  rules  of  law, 
applicable  to  the  contract  of  insurance.  Many  of  these  rules  became 
formulated  in  connection  with  marine  insurance,  the  earliest  branch, 
at  a  time  when  modern  means  of  rapid  transmission  of  news  were 
unknown,  and  befors  underwriters  had  attained  to  their  present 
thorough  methods  of  obtaining,  and  conveniently  recording,  mainly 
through  the  services  of  their  own  expert  suiweyors,  general  descrip- 
tions of  insurable  properties  of  all  kinds. ^  Nevertheless  the  essential 
nature,  and  also  the  conventional  mode  of  consummating  contracts  of 
insurance  upon  propert}',  especially  when  closed  in  the  larger  cities,^ 
are  much  the  same  as  they  were  of  old,  and  are  commonly  affected 
by  much  the  same  sort  of  environment.  At  the  present  day,  with 
the  enormous  increase  and  concentration  of  values  both  in  ships  and 
in  buildings,  perhaps  more  than  ever  before,  the  public  demand,  and 
in  response  should  receive,  immediate  protection  against  the  con- 
tingency of  future  disaster  from  the  operation  of  multiplied  perils, 
some  of  them  of  intensified  gravity.^    Now,  as  heretofore,  the  under- 

1  As    to    fire    insurance    see     §  15.  The   following  cases   refer  to  Lloyd's 

Lloyd's   Lists   are   now   amalgamated  Lists  and  discuss  the  question,  how  far 

with  the  Shipping  Gazette,  De  Hart  &  underwriters    are    presumed   to   kiiow 

Simey,  Ins.   (1907),  p.  25.     They  con-  their  contents,  Morrison  v.    Universal 

tain  reports  of  departures  of  ships  from  Mar.  Ins.  Co.  (1873),  L.  R.  8  Exch.  40, 

and  their  arrivals  at  ports,  also  casual-  197;  Xicholson  v.  Power  (1869),  L.  T. 

ties  and  other  useful  shipping  news,  N.  S.  580;  MacKintosh  v.  Marshall,  11 

which  is  classified  and  posted  for  the  M.    &  W.    116;   Fri'ere  v.    Wooahouse, 

benefit   of  members   and   subscribers,  Holt  N.  P.  572;  and  see  2  Duer,  Mar. 

and     afterwards     recorded.       Lloyd's  Ins.   555. 
Register  of  British  and  Foreign  Ship-  2  gee  §§74-76. 

ping    gives    full    details    as    to    ships.  ^  The     enormous     influx     into     this 

"A  1"  is  the  symbol  for  the  highest  country  of  degraded  foreigners  greatly 

class  of  wooden  vessels;  "100  A  1"  for  increases    the    moral    hazard    of    fire, 

the    highest     class     of    iron     vessels.  The   wiring   of   buildings    for   various 

Lloyd's  Captains' Register  is  a  biograph-  purposes,   the  multiplication  of  lofty 

ical   dictionary  of  the   certified   mas-  structures,   the  multiplied  keeping  of 

ters  of  the  British  mercantile  marine,  automobiles  and  gasolene,  ana  other 

[117] 


118  GENERAL  FRlNCirLES   OF   INSURANCE   LAW 

writer  is  asked  to  assume  the  ])urden  of  an  unknown  risk  or  specula- 
tion, and,  as  sho\vn  in  the  last  chapter,  he  is  asked  to  assume  it 
forthwith!  and  in  return  for  a  premium  comparatively  trifling  in 
amount.  Nor  is  an  applicant  for  insurance  willing  now,  any  more 
than  formerly,  to  brook  the  delay  involved  in  awaiting  a  present  and 
special  examination  of  his  risk  when  proffered  by  him  to  his  insurers. 
Nor,  in  most  instances,  is  he  willing  to  pay  the  increased  cost  neces- 
sitated by  revising  to  date  earlier  reports  or  surveys  of  his  property 
on  file  with  the  companies. 

And  what  is  the  subject  of  this  engagement  between  the  parties, 
proposed  in  the  manner  just  described?  In  the  answer  to  this  ques- 
tion lies  a  crucial  point,  too  often  ignored  or  misunderstood.  It  is 
not  the  visible  and  tangible  property  at  risk  that  directly  constitutes 
the  subject-matter  of  the  underwriter's  promise  to  grant  indemnity 
for  a  possible  loss.  He  is  not  asked  to  take  over,  or  to  give  up,  a 
property  or  any  right  in  it,  or  to  use  or  improve,  or  even  to  guard  the 
property  itself.  The  real  subject  of  the  contract  is  a  mere  risk  of 
injury.  It  is  a  chance,  and  a  chance  only,  that  the  underwriter  is 
requested  to  carry,  and  in  return  for  which  he  is  to  be  paid  a  cor- 
responding price.  Material  facts  unknown  to  the  proposer  and  to  his 
agents,  however  influential  they  may  be,  are  part  of  this  hazard  or 
chance  of  which  he  is  to  be  relieved,  and  therefore  what  he  does  not 
know  he  need  not  ascertain  and  disclose  to  his  underwriters;  ^  but, 
by  parity  of  reasoning,  facts  at  present  known  to  a  party,  as  to 
him,  form  no  legitimate  part  of  the  contemplated  chance.  And  if, 
at  the  time  of  closing  the  contract,  the  one  party  has  knowledge  of 
facts  material  to  the  risk  which,  with  or  without  design,  he  fails  to 
disclose  to  the  other  party,  then  the  parties  are  not  contracting  with 
reference  to  the  same  chance.  There  is  no  meeting  of  the  minds  upon 
the  same  essential  subject-matter  of  their  contract.  It  is  as  though 
the  one  party  were  undertaking  with  reference  to  one  ship  or  one 
stock  of  goods,  and  the  other  party  with  reference  to  a  different  ship 
or  a  different  stock  of  goods.  Speaking  generally,  under  such  cir- 
cumstances there  can  be  no  valid  contract. - 

causes,  increase  the  physical  risk,  llie  elusive  even  of  the  stupendous  con- 
growing  efficiency  of  fire  departments  flagration  in  San  Francisco,  the  total 
and  insurance  patrols,  the  adoption  of  fire  loss  in  this  country  for  1906  was 
fire-proof  materials  and  methods  of  much  above  normal, 
construction  for  ships  and  buildings,  ^  Aho-p  v.  Commercial  Ins.  Co.,  1 
and     the     installation     of     automatic  Fed.  Cas.  564. 

sprinkler  equipment,  hand  extinguish-  2  See  §  78.  Long  ago,  in  a  leading 
ITS,  and  other  useful  contrivances,  in  case,  Lord  Mansfield,  with  sure  pre- 
business  establishments,  mills  and  science,  announced  the  general  doc- 
factories,    tend   to   diminish   it      Ex-  trine   for   all   time   to   come   in   these 


INTRODUCTORY  119 

Nor  is  the  agreement  of  insurance  fair  and  equitable,  if  entered 
into  without  a  frank  and  free  disclosure  by  each  party  of  all  material 
facts  within  his  knowledge  and  unknown  to  the  other  prior  to  the 
adjustment  of  the  amount  of  premium.  With  reference  to  present 
knowledge  of  the  risk,  at  the  time  the  engagement  is  concluded,  the 
parties  must  stand  upon  the  same  plane;  they  must,  as  some  au- 
thorities express  it,  contract  pari  passu,  since,  as  shown  in  chapter 
first,  the  rate  of  premium  is  carefully  proportioned  to  the  character 
and  extent  of  the  hazard  contemplated.  The  owner  of  a  ship,  or 
cargo,  or  stock  of  merchandise,  or  even  of  a  building,  usually  has  a 
more  precise  knowledge  of  the  present  condition  of  his  property 
than  has  an  insurance  company.  His  material  concealment  and 
material  misrepresentation,  when  he  applies  for  insurance,  alike  go 
to  the  very  essence  of  the  proposed  contract,  and  alike  amount  to 
a  false  description  of  its  subject-matter.  Of  necessity,  either  results 
in  a  wrong  classification  or  estimate  of  the  risk,  and  the  assignment 
of  a  mistaken  rate  of  premium  by  the  underwriter,^  and  this  in- 
equitable result  follows  inevitably  and  with  equal  force,  although 
subsequently  it  may  be  shown  that  the  material  fact  concealed  or 
misrepresented  in  no  wise  contributed  to  the  loss.^ 

It  cannot  be  denied  that,  if  the  underwriter  has  received  private 
advices  of  the  safe  termination  of  a  distant  voyage,  it  would  be  a 
fraud  for  him  to  accept  pay  for  insuring  the  same  voyage  as  a  future 
contingency.^  He  is  aware  that  no  such  contingency  exists,  and 
that  consequently  no  subject-matter  for  the  contract  remains.  In 
like  manner,  if  the  owner  knows  that  his  ship  is  already  unsea- 

words:  "The  special  facts  upon  which  tracts  of  insurance  are  generally  mat- 
the  contingent  chance  is  to  be  com-  ters  of  speculation,  where  the  person 
puted  lie  most  commonly  in  the  knowl-  desiring  to  be  insured  has  means  of 
edge  of  the  insured  only.  The  under-  knowledge  as  to  the  risk,  and  the  in- 
MTiter  trusts. to  his  representation,  and  surer  has  not  the  means  or  not  the 
proceeds  upon  confidence  that  he  does  same  means.  The  insured  generally 
not  keep  back  any  circumstance  in  his  puts  the  risk  before  the  insurer  as  a 
knowledge  to  mislead  the  underwriter  business  transaction,  and  the  insurer, 
into  a  belief  that  the  circumstance  does  on  the  risk  stated,  fixes  a  proper  price 
not  exist,  and  to  induce  him  to  estimate  to  remunerate  him  for  the  risk  to  be 
the  risk  as  if  it  did  not  exist.  The  keep-  undertaken,"  Seaton  v.  Heath  (1899), 
ing  back  such  circumstance  is  a  fraud,  1  Q.  B.  782,  793,  Romer,  L.  J.  In  ma- 
and  therefore  the  policy  is  void.  Al-  rine  insurance  especially,  means  of  in- 
though  the  suppression  should  happen  formation  are  peculiarly,  and  some- 
through  mistake,  v.ithout  any  fraudu-  times  exclusively,  within  the  reach  of 
lent  intention,  yet  still  the  underwriter  the  applicant,  Clarkson  v.  Western 
is  deceived  and  the  policy  is  void,  be-  Assur.  Co.,  33  App.  Div.  23,  53  N.  Y. 
cause  the  risk  rnn  is  really  different  Supp.  508. 

from  the  risk  understood  and  intended  ^  Daniels  v.  Hudson  R.  F.  Ins.  Co., 

to  be  run  at  the  time  of  the  agree-  12  Cush.  (Mass.)  416,  59  Am.  Dec.  192. 

ment,"  Carter  v.  Boehm,  3  Burr.  1905.  s  Carter   v.    B(rhm    (1765),   3    Burr. 

1909.  1905;  Chalmers  &  Owen,  Ins.   (1907). 

1  Thus  the  English  court  says,  "con-  25. 


IJO  GKNEUAL    I'UIXCU'LKS    UK    IXaUUANCK    LAW 

worthy,  or  that  in  any  respect,  whether  of  condition,  or  location, 
or  surroundings,  it  falls  below  the  assumed  standard  of  a  ship  safe 
and  sound,  he  cannot  honestly  ask  anyone  to  guarantee  its  immunity 
from  harm.  Xo  such  risk  is  longer  possible.  The  mischief,  in  whole 
or  in  part,  has  already  ha|)pened,  or  is  more  seriously  impending 
than  is  represented.  In  legal  tlicory,  only  unknown  misfortunes, 
storcil  up  by  fate,  can  l)C  made  tiie  subject  of  legitimate  insurance. 
From  such  promises  and  course  of  reasoning  have  been  deduced 
the  common-law  rules  relating  to  concealment,  misrepresentation, 
and  warranty,  set  forth  in  this  and  the  next  chapter,  as  well  as  the 
more  general  rule  that  the  contract  of  insurance  in  all  its  branches 
is  one  requiring  good  faith  between  the  parties.^  It  is  a  contract 
iiberrinia'  fidei;-  and  if  the  utmost  good  faith  be  not  observed  by 
either  party  the  contract  may  be  avoided  by  the  other  party. ^ 

§  95.  Concealment :  Marine  Insurance. — In  marine  insurance  a 
concealment  of  a  material  circumstance  by  a  party  or  his  authorized 
agent,  whether  intentional  or  unintentional,  innocent  or  fraudulent, 
avoids  the  contract."*  Thus,  if  the  insured  when  applying  for  a 
policy  has  information  inducing  him  to  believe  that  his  ship  is  in 
distress  or  in  special  peril,  and  does  not  disclose  it,  the  contract  is 
vitiated.'"' 

Every  circumstance  is  material  which  would  influence  the  judg- 
ment of  a  prudent  insurer  in  fixing  the  premium  or  determining 

t  Seatonv.  Heath  (1899),  \  Q.B.  782  Lloyd,    10    Exch.    523;    Blackburn   v. 

(rule  is  not  confined  to  life,  fire,  and  Haslam,  L.  R.  21  Q.  B.  D.  144  (1888). 

marine,  but  applies  to  all  kinds  of  in-  ^  Vale  v.  Pha;nix  Ins.  Co.,  28  Fed. 

surance).  Cas.  867,  1  Wash.  C.  C.  283;  Hoyt  v. 

2  Sun  Mut.  Ins.  Co.  V.  Ocean  Ins.  Co.,  Oilman,  8  Ma.ss.  336;  Biays  v.   Union 

107  U.  S.  485,  509,  510,  1  S.  Ct.  582.  Ins.  Co.,  3  Fed.  Cas.  329,  lAVash.  C.  C. 

3Eng.    Mar.    Ins.    Act,    1906,    §17;  506;  Bulkley  v.  Protection  his.  Co.,  4 

Reliance  Mar.   his.   Co.   v.  Herbert,  3  Fed.  Cas.  614,  and  elaborate  note  re- 

App.  Div.  (N.  Y.)  593,  38  N.  Y.  Supp.  viewing  many  cases;  Kohne  v.  7ns.  Co. 

373.     In  construing  the  contract  the  of  N.  A.,  d  Bin,  (Pa.)  219;  Lynch  v. 

doctrine    that    the    contract    is    one  Hamilton,  3  Taunt.  37  (fatal  omission 

uberrima  fidei  may  also  be  applied  in  to    disclose   the    name   of   the   vessel, 

favor  of  the  insured,  Schoneman  v.  Ins.  which  had  been  reported  at  Lloyd's, 

Co.,  16  Neb.  404,  406,  20  N.  W.  284;  though  erroneously,   as  leaky.     Held, 

Merchants'    Ins.    Co.    v.    Edmond,    17  that  news  though  really  untrue  should 

Cirat.   (Va.)   138,  144;   Wolff  v.  Horn-  have  been  reported);  and  see  Smith  v. 

castle,  1  Bos.  &  P.  316.  Ins.   Co.,  60  Vt.   682,   15  Atl.   353,   1 

*  Sun  Mut.  Ins.  Co.  v.  Ocean  Ins.  Co.,  L.  R.  A.  216,  6  Am.  St.  R.  144.    As  to 

107  U.  S.  485,  510,  1  S.  Ct.  .582,  27  duty  even  after  loss  to  disclose  sliip's 

L.Ed.  337;  Livii{f.^tonv.  Maryland  Ins.  papers   see   Boulton  v.   Houlder  Bros. 

Co.,  6  Cranch  (F.  S.\  274,  3  L.  Ed.  222;  (1904),  1  K.  B.  784;  Harding  v.  BusseU 

Howe  Machine  Co.   v.   Farrinqton,  82  (1905),  2  K.  B.  83.     Under  no  obliga- 

N.  Y.  126;  The  Bedouin,  (1894)  Prob.  tion  to  disclose  facts  of  which  he  is 

1,  12;  Proudfoot  v.  Montefiore,  L.  R.  2  ignorant,  Alsop  v.  Commercial  Ins.  Co 

Q.  B.  511;  North  British  Ins.  Co.  v.  1  Fed.  Cas.  564. 


CONCEALMENT :  .MAUl.NK  INSURANCE  12i 

whether  he  will  take  the  risk.^  All  such  facts,  so  far  as  known  to  the 
applicant  for  insurance,  must  be  frankly  and  fully  disclosed  before 
the  negotiations  are  concluded.  The  principle  of  caveat  emptor  does 
not  apply.  There  must  be  no  silence  or  evasion  or  equivocation. 
It  is  not  enough  even  that  the  underwTiter  be  furnished  with  ma- 
terials from  which  he  might  by  a  course  of  reasoning  or  an  effort  of 
memory  succeed  in  ferreting  out  the  extent  of  the  risk.^ 

No  matter  whether  the  omission  to  disclose  the  rnaterial  fact  is  the 
result  of  intention,  indifference  or  mistake,  the  validity  of  the  marine 
policy  impliedly  is  conditioned  upon  the  completeness  and  accuracy 
of  the  description  of  the  character  of  the  risk  as  put  forth  by  the  ap- 
plicant.^ 

A  good  illustration  of  the  rule  is  furnished  by  an  early  American 
case  where  the  insured  had  neglected  to  disclose  the  imperfect  con- 
dition of  the  hull  of  a  boat  converted  into  a  steamboat,  used  for 
river  transit,  and  his  policy,  though  against  fire  only,  was  held 
avoided.^ 

So  also  in  an  English  case,  the  policy  covered  goods  including 
"risk  of  craft"  or  lighterage.  The  insured  omitted  to  disclose  that 
in  consideration  of  lower  rates  of  lighterage  the  common-law  lia- 
bility of  the  lighterman  as  a  carrier  had  been  limited.  This  circum- 
stance might  affect  the  insurer's  right  of  subrogation  and  the  policy 
was  held  avoided.''' 

1  Columbian  Ins.  Co.  v.  Lawrence,  10  lieved  to  be  unsuccessful,  was  not 
Pet.  (U.  S.)  507,  9  L.  Ed.  512;  iSeaton  V.  material  and  need  not  be  disclosed, 
Burnand  (1900),  App.  Cas.  135,  149;  Cutler  v.  Roi/al  Ins.  Co.,  70  Conn.  566, 
lonides  V.  Pender,  L.  R.  9  Q.  B.  531  40  Atl.  R.  .529,  41  L.  R.  A.  159.  The 
(gross  over-valuation  not  disclosed);  E^nglish  court  held  that  the  fact  of 
Clarkson  v.  West.  Assttr.  Co.,  33  App.  over- valuation  of  the  property  was 
Div.  23,  28.  53  N.  Y.  Supp.  508.  Thus  material,  lonides  v.  Pender,  L.  R.  9 
even  a  doubtful  rumor  of  capture.  Da  Q.  B.  531;  but  non-disclosure  of  edict 
Costa  V.  Scandret,  2  P.  Wms.  170;  or  of  Persian  Government  against  im- 
sliipwreck,  Nicholson  v.  Power  (1869),  port  at  ion  of  arms  believed  to  be  a  dead 
20  L.  T.  N.  S.  580;  or  rumor  of  prox-  letter  was  held  not  to  avoid  though 
imity  of  hostile  privateer,  Durrell  v.  confiscation  followed,  Francis  v.  Sea 
Bederley  (1816),  Holt  N.  P.  283;  must  Ins.  Co.,  79  L.  T.  (N.  S.)  28,  8  Asp.  418. 
be  disclosed  though  the  insured  does  l^nless  he  can  prove  fraud  it  is  not 
not  believe  the  information,  Morrison  enough  for  insurer  to  show  that  fact 
V.  Universal  Mar.  Ins.  Co.,  L.  R.  8  concealed  would  have  influenced  him. 
Exch.  40  (entry  of  stranding  on  He  must  show  that  it  would  have  in- 
Lloyd's  List  not  disclosed  because  fluenced  an  ordinarily  prudent  under- 
thought  to  apply  to  another  ship  of  writer,  Rivaz  v.  Gerussi  (1880),  6  Q.  B. 
same  name),  and  though  the  informa-  D.  222. 
tion  eventually  prove  to  be  untrue,  2  Kerr,  Fraud  (1902),  89. 
Seaman  v.  Fonn^reau,  2  Strange,  1183.  3  gun  Mid.  Ins.  Co.  v.  Ocean  Ins.  Co., 
Insured  bound  to  disclose  that  his  yes-  107  V.  S.  485,  1  S.  Ct.  582. 
sel  was  a  notorious  Confederate  cruiser,  *  Lexington,  etc.,  Ins.  Co.  v.  Paver, 
Bates  v.  Heuritl,  L.  R.  2  Q.    B.  .59.S.  16  Ohio, 324. 

The  Connecticut   court    lield  that     in  5  Tate  v.  Hyslop  (1885),  15  Q.  B.  D 

application   for   other    insurance,    be-  368.      The    materiality    of    the    non- 


i22 


(iKNKKAI.    I'KINCII'LKS    OK    IN'SIHANCH    LAW 


This  extreme  doctrine  in  the  law  of  marine  insurance,  it  may  be 
(.hsorvcd,  is  in  contrast  with  the  rule  applicable  to  the  ordinary  con- 
tract made  at  arm's  length,  by  virtue  of  which  a  concealment  or  a 
misrepresentation  of  :i  mntorial  fact  must  be  fraudulent  to  support. 
Mil  acti(m  for  deceit.' 

In  the  absence  of  in(|uiry  by  the  underwriter,  however,  the  follow- 
ing need  not  l)e  disclosed:  Any  circumstances  diminishing  the  risk;  - 
any  circumstance  known  or  presumed  to  be  known  to  the  insurer, 
for  instance,  matters  of  common  notoriety  or  knowledge,-"*  and  mat- 
ters which  in  the  ordinary  course  of  business  he  ought  to  know.'* 

To  render  the  agent's  concealment  fatal,  he  must  be  one  who  is 
so  connected  with  the  business  at  the  time  of  closing  the  contract 
that  his  concealment  can  fairly  be  said  to  be  the  act  of  the  principal, 
Avithin  the  scope  of  the  employment,  and  before  the  agency  is  termi- 
nated.^ 

The  doctrine  is  that  if  an  agent,  whose  duty  it  is  to  keep  his  em- 
j)loyer  informed  of  matters  affecting  the  subject-matter  insured,  has 
withheld  from  his  principal  information  of  a  material  fact  which  he 


disclosure  to  a  fire  insurance  company 
of  the  provision  in  a  lease  depriving  him 
of  the  right  of  subrogation,  raises  a 
question  for  the  jury,  Pelzer  Mfg.  Co. 
V.  St.  Paxil  F.  &  M.  Ins.  Co.,  41  Fed. 
271;  Pelzer  Mfg.  Co.  v.  Sxin  Fire  Office, 
3G  S.  C.  213,  15  S.  E.  562.  Where  a 
policy  is  on  chartered  freight,  if  the 
charter  contains  a  canceling  clause, 
the  fact  must  be  disclosed,  Mercantile 
S.  Co.  V.  Tyser  (1881),  7  Q.  B.  D.  73. 

1  Laidlaw  v.  Organ,  2  Wheat.  (U.  S.) 
178,  4  L.  Ed.  214  (a  sale;  intelligence 
need  not  be  volunteered).  Lord  Black- 
burn said:  "There  can  be  no  doubt 
that  the  plea  is  bad.  There  is  no  alle- 
gation of  fraud,  and  short  of  that,  the 
mere  concealment  of  a  material  fact, 
except  in  cases  of  policies  of  insurance, 
does  not  avoid  a  contract,"  Fletcher  v. 
Krell,  42  L.  J.  Q.  B.  55;  North  Brit. 
Im.  Co.  V.  Lloi/d,  10  Exch.  523;  Moens 
V.  Heyirorth,  10  M.  &  W.  147  (a  sale; 
held,  that  misrepresentation,  to  avoid, 
must  be  fraudulent).  Even  the  con- 
tract of  individual  suretyship  "is  one 
in  which  there  is  no  universal  obliga- 
tion to  make  disclosure,"  Railton  v. 
Matthews  (1844),  10  CI.  &  F.  934. 

2  Carter  v.  Boehm,  3  Burr.  1909. 

-  Buck  v.  Chesapeake  Ins.  Co. ,  1  Pet. 
(U.  S.)  151,  160,  7  L.  Ed.  90;  Tennant 
V.  Henderson  (1813),  1  Dow.  324.  It 
is  not  necessary  to  disclose  any  fact  of 


which  information  is  waived  by  the 
insurer,  Asfar  v.  Blundell  (1895),  2 
Q.  B.  D.  196,  202.  Nor,  according  to 
English  codification,  any  circumstance 
which  it  is  superfluous  to  disclose  be- 
cause of  any  express  or  implied  war- 
ranty, Mar.  Ins.  Act  (1906),  §  18; 
Haywood  v.  Eodgers  (1804),  4  East, 
590.  Past  knowledge,  not  present  to 
the  mind  of  the  insurer  at  the  time,  will 
not  excuse  a  concealment  by  the  in- 
sured. Bates  V.  Hewitt  (1867),  L.  R. 
2  Q.  B.  595. 

*  Carter  v.  Boehm,  3  Burr.  1909; 
Ruggles  v.  General  Int.  Ins.  Co.,  4 
Mason,  81;  Green  v.  Merchants'  Ins. 
Co.,  10  Pick.  (Mass.)  402.  But  the  in- 
surer is  not  presumed  to  know  the 
contents  of  Lloyd's  Lists,  Morrison  v. 
Universal  Marine  Ins.  Co.,  L.  R.  S 
Exch.  40.  As  to  general  information 
published  in  newspapers,  see  Folsom  v. 
Mercantile  Ins.  Co.,  9  Fed.  Cas.  349. 
aff'd  18  Wall.  237,  21  L.  Ed.  827;  Green 
V.  Merchants'  Ins.  Co.,  10  Pick.  (Mass.) 
402.  If  the  knowledge  of  the  insured 
is  more  complete  than  the  under- 
writers' the  former  is  bound  to  make 
disclosure.  Sun  Mut.  Ins.  Co.  v.  Ocean 
Ins.  Co.,  107  U.  S.  485,  1  S.  Ct. 
582. 

^Ruggles  v.  General  Ins.  Co.,  12 
Wheat.  (U.  S.)  408;  Blackburn  v 
Vigors,  L.  R.  12  App.  Cas.  531. 


concealment:  makine  insurance  123 

might  in  the  ordinary  course  have  communicated  to  the  latter  at 
the  time  when  the  insurance  was  effected,  the  contract  can  be 
avoided  by  the  underwriter  on  account  of  the  non-disclosure  of  this 
matter  which,  if  the  agent  had  done  his  duty,  the  principal  would 
have  been  able  to  disclose.^  The  master  of  a  ship  and  a  general 
agent  for  shipping  business  are  such  agents  of  a  ship-owner.^  A 
factor  employed  to  ship  a  cargo  and  the  general  agent  of  a  cargo- 
owner  at  a  foi'eign  port  are  such  agents  of  the  cargo-owner.^  But 
Lloyd's  agents  in  foreign  ports  are  not  the  agents  of  the  individual 
underwriters,  who  consequently  are  not  affected  with  their  knowl- 
edge of  casualties  abroad."* 

An  agent  effecting  marine  insurance  must  disclose  every  material 
circumstance  known  to  him;  ^  also  every  material  circumstance 
which  the  assured  is  bound  to  disclose,  unless  it  come  to  the  knowl- 
edge of  the  principal  too  late  to  communicate  it  to  the  agent  in  the 
exercise  of  reasonable  diligence.^ 

An  English  case,  often  cited,  illustrates  the  necessity,  laid  upon 
the  insured  and  upon  his  agents  acting  for  him,  of  promptly  and 
frankly  posting  the  underwriters  as  to  the  situation,  if  it  is  reason- 
ably practicable  to  do  so,  before  taking  out  insurance.  An  agent 
of  the  insured,  located  at  Smyrna,  learned  of  the  stranding  of  the 
vessel  which  contained  the  goods  of  his  principal.  Instead  of  tele- 
graphing his  principal  the  news  of  the  casualty  according  to  his 
custom,  he  advised  him  by  slower  course  of  mail  in  order  to  allow 
him  opportunity  to  insure  the  goods.  Before  receipt  of  the  letter, 
the  principal  took  out  a  policy  upon  the  goods  "lost  or  not  lost." 
The  court  held  that  it  was  avoided  because  of  concealment  by  the 
agent,  although  no  inkling  of  the  loss  had  as  yet  reached  the  principal.'^ 

iDe  Hart  &  Simey,  Ins.  (1907),  23;  ^Blackburn   v.    Haslam    (18S8),    21 

Blackburn  v.   Vigors   (1887),   12  App.  Q.  B.  D.  144;  Blackburn  v.  Vigors,  12 

Cas.  531.  App.  Cas.  531  (broker  omitted  to  dis- 

2  De  Hart  &  Simey,  Ins.  (1907),  23;  close  that  ship  was  being  repaired). 
Gladstone  v.  King  (1813),  1  M.  &  S.  35.  ^  Maclanahan  v.  Universal  Ins.  Co.,  1 

3  De  Hart  &  Simey,  Ins.  (1907),  23;  Pet.  (U.  S.)  170,  7  L.  Ed.  98;  Snow  v. 
Fitzherbert  v.  Mather  (1785),  1  T.  R.  12.  Ins.  Co.,  61  N.  Y.  164;  Andrews  v.  Ins. 
It  is  not  necessarily  the  duty  of  an  Co.,  9  Johns.  (N.  Y.)  32;  Proudjoot  v. 
insurance  broker  to  communicate  all  Montefiore,  L.  R.  2  Q.  B.  511. 

his     information     to     his     employer.  7  Proudfoot    v.    Montefiore,   L.    R.   2 

Therefore,  if  A  employs  a  broker,  B,  Q.  B.  511;  criticising  Ruggles  v.  Gen- 

to  effect  an  insurance,  but  the  insur-  eral  Ins.  Co.,  12  Wheat.  (U.  S.)  408, 

ance  is  afterwards  effected  independ-  in  which  the  court  sustained  the  policy, 

ently  by  another  broker,  C,  B's  knowl-  holding  that  the  casualty  terminated 

edge  is  not  relevant  to  the  validity  of  the  agency,  and  hence  ended  the  ob- 

the   policy,    De    Hart    &    Simey,   Ins.  ligation  to  send  report      "Where  the 

(1907)   23.  insurance  is  effected  through  a  broker 

*  De  Hart  &  Simey,  Ins.  (1907),  24;  the    underwriter    is    entitled    to    the 

Wilson  V.  Salamandra  Ins.  Co.  (1903),  knowledge  not  only  of  the  principal, 

8  Com.  Cas.  129.  but  also  of  that  broker  and  his  sub- 


124 


GENERAL    I'ltlNCll'l-KS   ni     IXSUKAN'CE    LAW 


§96.  Concealment:  Fire  and  Life.— In  regard  to  contracts  of 
life  and  fire  iiisiiraiu-e  it  is  general]}'  laid  down  as  the  law  in  this 
country  that  the  coucoalment  of  a  material  fact,  when  not  made  the 
subject  of  express  inquiry  by  the  insurers,  must  be  intentional  to 
avoid  the  policy;  and  this  is  partly  on  the  ground  that  insurers  have 
for  a  long  time  l)een  in  the  habit  of  propounding  questions  upon  all 
points  except  those  in  respect  to  which  they  are  content  to  rely 
upon  their  own  independent  means  of  information,  and  partly  be- 
cause fire  policies  and  often  life  policies  make  a  multitude  of  particu- 
lars material  by  virtue  of  express  warranties.^ 

By  way  of  explanation  for  this  distinction  between  the  law  of 
marine  insurance  and  that  of  fire  in  this  country,  it  is  often  stated 
that  inasmuch  as  buildings  and  their  contents  are  for  the  most  part 
near  at  hand  and  accessible  to  examination,  it  is  the  fault  of  the 
underwriter  if  he  does  not  make  himself  familiar  with  their  character.^ 


agents.  But  he  is  not  entitled  to  the 
knowledfje  of  anotlicr  broker,  who, 
though  originally  in.strueted  to  effect 
an  insurance,  did  nol  svicceed  in  doing 
so.  Nor  is  he  entitled  to  the  knowl- 
edge of  the  principal  luiless  the  latter 
received  the  information  in  sutiicient 
time,  before  the  conclusion  of  the  con- 
tract, for  the  principal  to  have  com- 
municated it  to  the  broker,"  De  Hart 
&Simey,  Ins.  (1907),  2G. 

1  German  American  Mut.  L.  Assn.  v. 
Farley,  102  Ga.  720,  29  S.  E.  Glfj; 
Washiwjton  Mills  Mfg.  Co.  v.  Weij- 
mouth  Ins.  Co.,  135  Ma-ss.  50.3;  Malloru 
V.  Travellers  Ins.  Co.,  47  N.  Y.  52; 
Hartford  Protection  Ins.  Co.  v.  Harmer, 
2  Ohio  St.  452.  59  Am.  Dec.  684.  Con- 
cealment is  said  to  be  the  designed 
withholding  of  any  fact  material  to  the 
risk,  which  the  insured  in  honesty  and 
good  faith  ought  to  communicate, 
Clark  V.  Union  Mut.  Ins.  Co.,  40  N.  H. 
333,  77  Am.  Dec.  721;  Daniels  v.  Hud- 
son River  F.  Ins.  Co.,  12  Cush.  (Mass.) 
416,  59  Am.  Dec.  192;  Mascott  v.  Nat. 
F.  Ins.  Co.,  69  Vt.  116,  37  Atl.  255. 
But  by  most  of  the  State  Civil  Codes 
it  is  provided  that  a  concealment, 
whether  intentional  or  unintentional, 
gives  to  the  other  party  a  right  of 
rescission,  Cal.  Civ.  Code  (1906), 
§2562;  Montana  Civ.  Code  (1895), 
§3421;  North  Dak.  Civ.  Code  (1905), 
§5914;  South  Dak.  Civ.  Code  (1903), 
§  1816.  The  same  codes  also  provide, 
however,  "an  intentional  and  fraudu- 
lent omission  to  commvmicate  in- 
formation of  matters  proving  or  tend- 


ing to  pro\'e  the  falsity  of  a  warranty 
entitles  the  instu-er  to  rescind." 

2  Thus  the  Ohio  court  says:  "The 
reason  of  the  nile,  and  the  policy  on 
A\hich  it  was  fotuided,  in  its  applica- 
tion to  marine  risks,  entirely  fail  when 
applied  to  fire  policies.  In  the  former 
the  subject  of  insurance  is  generally 
beyond  the  reach,  and  not  open  to  the 
inspection,  of  the  undei'writers,  often 
in  distant  parts  or  upon  the  high  seas, 
and  the  peculiar  perils  to  which  it  may- 
be exposed,  too  nimieroas  to  be  antici- 
pated or  inquired  about,  known  only 
to  the  owners  and  those  in  their  em- 
ploy; while  in  the  latter  it  is,  or  may 
be,  seen  and  inspected  before  the  risk 
is  assumed,  and  its  construction,  situa- 
tion, and  ordinary  hazards  as  well 
appreciated  by  the  underwriter  as  by 
the  owner.  In  marine  insurance  the 
underwriter,  from  the  very  necessities 
of  his  undertaking,  is  obliged  to  rely 
upon  the  assured,  and  has  therefore  the 
right  to  exact  a  full  disclosure  of  all  the 
facts  known  to  him  which  may  in  any 
way  affect  the  risk  to  be  assumed.  But 
in  fire  insurance  no  such  necessity  for 
reliance  exists,  and,  if  the  underwriter 
assumes  the  risk  without  taking  the 
trouble  to  either  examine  or  incjuire, 
he  cannot  very  well,  in  the  absence  of 
all  fraud,  complain  that  it  turns  out  to 
be  greater  than  he  anticipated.  And 
so  are  the  latest  and  best  authorities," 
Hartford  Protection  Ins.  Co.  v.  Harmer, 
2  Ohio  St.  452,  59  Am.  Dec.  684.  The 
New  York  court  concluded  that  the 
rule  in  fire  is  the  same  as  that  in  marine 


concealment:  fihe  and  life  126 

But  to  those  versed  in  the  practical  methods  of  closing  contracts  of 
insurance  as  already  detailed/  this  plausible  explanation  is  hardly 
satisfying,  and  the  reasons  given  in  the  text  are  more  accurate  and 
forcible.  In  comparison  with  the  facilities  of  the  insured  in  ac- 
quainting himself  with  the  character  of  his  own  stock  of  merchandise 
or  other  personal  property,  its  value  and  amount,  the  title,  chattel 
mortgages  upon  it,  precautions  in  management,  and  other  important 
particulars  relating  to  it  as  a  marketable  risk,  a  doubt  may  well  be 
entertained  whether  the  underwriter,  when  issuing  his  binder  upon 
it  in  usual  course,  holds  a  position  relatively  as  advantageous  as  when 
asked  to  insure,  upon  its  rating  and  official  description,  the  average 
ship,  though  at  the  time  harbored  in  a  foreign  port  or  out  upon  the 
high  sea;  and  many  a  ship  is  insured  at  home,  and  many  a  distant 
building  with  its  contents,  located  sometimes  in  a  foreign  land,  is 
insured  against  fire.^  Irdeed  for  the  underwriter,  before  issuing  his 
binder,  to  insist  upon  making  his  own  separate  and  independent 
examination  into  all  the  facts  fairly  bearing  upon  the  risk  of  loss  of 
personal  property,  would  cost  much  more  than  the  average  premium, 
and  would  be  regarded  by  the  public  as  intolerably  inconvenient. 
It  is,  therefore,  clear  that  some  measure  of  responsibility  must  re- 
main with  the  insured  to  see  to  it,  that,  through  faults  of  omission 
on  his  part,  the  fire  or  life  insurance  company  is  not  misled  into  an 
erroneous  estimate  of  the  risk. 

Indeed,  in  England  the  rule  is  made  applicable  to  all  kinds  of  in- 
surance, that  the  non-disclosure  of  a  material  fact,  whether  inten- 
tional or  unintentional,  will  avoid  the  contract.''' 

insurance,  where  the  subject-matter  is  St.  520,  36  Am.  Rep.  676;  Harroiver  v. 

located    at    a    distance,    Clarkson    v.  Hutchinson  (1870),  L.  R.  5  Q.  B.  590; 

Western  Ins.  Co.,  33  App.  Div.  23,  53  Laing   v.    Union   Ins.    Co.    (1895),    11 

N.  Y.  Supp.  508.  Times  L.  R.  359.    Each  party  is  bound 

1  See   §§  74-76,  94.  to  know  matters  of  general  intelligence 

2  Many  western  and  southern  rail-  or  of  public  notoriety,  including  general 
roads,  warehouses,  factories,  and  other  usages  of  trade  which  are  open  to  his 
properties,  have  been  insured  from  inquiry  equally  with  that  of  the  other, 
New  York  City  or  Chicago,  though  now  C-arter  v.  Bochm,  3  Burr.  1905;  Bnlkley 
resident  agency  laws  frequently  in-  v.  Protection  Ins.  Co.,  4  Fed.  Cas.  614; 
tervene  to  localize  the  business.  De  Longnemere  v.  A'.  Y.  Fire  Ins.  Co., 

3  London  Ass.  Co.  v.  Mansel,  L.  R.  10  Johns.  (N.  Y.)  120.  Matters  of 
11  Ch.  D.  363;  Moens  v.  Heyworth,  mere  opinion  or  belief  need  not  be 
10  M.  &  W.  155;  Carter  v.  Boehm,  1  stated  and  only  good  faith  is  required 
W.  Bl.  593;  s.  c,  Smith's  Lead.  Cas.  with  respect  to  them.  Chalaron  v. 
Neither  party  is  bound  to  volunteer  7ns.  Co.,  48  La.  Ann.  1582,  21  So.  267, 
information  of  matters  which  the  other  36  L.  R.  A.  742;  Smith  v.  The  Columbia 
knows,  or  which  in  the  exercise  of  ordi-  Ins.  Co.,  17  Pa.  St.  253,  55  Am.  Dec. 
nary  care  the  other  ought  to  know,  546.  But  a  fact  which  the  insured 
and  of  which  the  former  has  no  reason  ought  to  have  known  to  be  material, 
to  suppose  him  ignorant,  or  those  of  it  is  said,  must  be  disclosed,  Dennison 
which  the  other  waives  communica-  v.  Thomaston  Mut.  Ins.  Co.,  20  Me. 
tion,  Armenia  Ins.  Co.  v.  Paul,  91  Pa.  125,  37  Am.  Dec.  42. 


[2(\  GENERAL    I'lilNCll'LKS    OK    INSURANCE    LAW 

The  English  rule  doubtless  is  simpler  and  more  easily  applied,  and, 
from  the  underwriter's  point  of  view,  is  more  logical,  since,  as  already 
stated,  a  misdescription  of  the  risk  results  equally  from  a  non- 
disclosure, and  an  affirmative  misrepresentation  of  a  material  fact.^ 
The  American  rule,  however,  on  the  whole  seems  more  reasonable. 
To  the  insured  and  to  most  courts,  a  clear  distinction  is  obvious 
between  making  a  positive  misstatement,  however  innocent,  re- 
garding one's  own  property,  and  merely  keeping  silence  as  to  some 
particular  not  already  covered  by  the  express  stipulations  of  a  care- 
fully prepared  and  voluminous  instrument,  whether  application  or 

policy  .= 

But  when  it  comes  to  the  practical  application  of  the  American 
rule,  as  is  often  the  case  with  legal  doctrines  founded  upon  fraud, 
we  find  that  the  definitions  of  the  courts  lack  uniformity  and  pre- 
cision. A  New  York  court,  adopting  the  phraseology  of  a  text- 
writer,  has  defined  concealment  as  the  willful  withholding  of  some 
fact  material  to  the  risk,  which  the  insurer  had  a  right  to  know,  and 
which  the  insured  was  under  a  duty  to  disclose.^  The  Missouri  court 
has  met  the  question  more  squarely  in  holding,  that  to  unfavorably 
affect  his  policy  the  insured  must  know  the  fact  to  be  material,  and 
must  also  intentionally  neglect  to  communicate  it.  In  common  with 
many  other  courts  it  also  holds  that  when  a  detailed  application  is 
used,  fatal  concealment  cannot,  without  bad  faith  on  the  part  of  the 
insured,  be  predicated  on  an  omission  to  volunteer  facts  concerning 
which  no  express  inquiry  is  made.'* 

But  perhaps  the  most  satisfactory  and  workable  version  of  the 
American  rule  is  that  approved  by  a  Federal  Circuit  Court  and  by 
the  Supreme  Court  of  South  Carolina.  The  former  court  sustained 
a  submission  to  the  jury  of  two  questions:  (1)  was  the  fact  which 
the  plaintiff  omitted  to  disclose  material?  (2)  Was  it  known,  or 
should  it  have  been  known,  to  him  to  be  a  material  fact?  ^     The 


1  Thus  in  a  life  insurance  case,  Mr.  the  information  thought  it  material," 

Justice  Bayley  said:  "I  think  that  in  Lindenau  v.  Deshorough,  8  Barn.  &  0. 

all  cases  of  insurance,  whether  on  ships,  586. 

houses,  or  lives,  the  underwriter  should  ^  Danieh  v.  Hudson  R.  F.  Ins.  Co., 

be  informed  of  every  material  circum-  12  Cush.  (Mass.)  416,  59  Am.  Dec.  192 

stance   within    the    knowledge   of   the  (silence  as  to  matter  the  insured  docs 

assured;  and  that  the  proper  question  not  consider  important  is  not  fatal). 

is  whether  any  particular  circumstance  3  American  Artistic  Gold   S.    Co.   v. 

was  in  fact  material,  and  not  whether  Glens  Falls  Ins.  Co.,  1  Misc.  114,  118. 

the  party  belieA'ed  it  to  be  so.     The  *  Boggs    v.    American   Ins.    Co.,    30 

contrary  doctrine  would  lead  to  fre-  Mo.  63. 

quent  suppression  of  information,  and  6  Pelzer  Mfg.  Co.  v.  St.  Paul  F    & 

it  would  often  be  extremely  difficult  to  M.  Ins.  Co.,  41  Fed.  271. 
show  that  the  party  neglecting  to  give 


concealment:  fire  and  life  127 

other  court  by  its  Chief  Justice  sustained  as  correct  a  charge  to  the 
jury,  that  the  insured,  the  same  plaintiff  with  the  same  issue  as  in 
the  last  case,  was  bound  not  to  withhold  any  fact  which  he  knew, 
or  had  reason  to  believe,  would  be  likely  to  influence  the  insurer  in 
fixing  rates  or  rejecting  the  insurance.^  The  Maine  court  has  adopted 
the  same  view.-  And  a  similar  doctrine  in  West  Virginia,  in  refer- 
ence to  defective  answers  in  an  application  for  life  insurance,  is  in- 
dicated by  the  declaration  of  the  court  that,  "legal  fraud  may  exist 
when  there  is  no  intention  to  deceive."  ^ 

Where  the  insurer  makes  special  inquiries,  as  by  requiring  the 
execution  of  an  application,  it  may  generally  be  assumed  that  the 
information  asked  for  is  all  that  is  required.^  Other  incidental 
matters  relating  to  the  risk,  or  particulars  about  the  title,  or  nature 
and  extent  of  interest  not  asked  for,  need  not  be  volunteered,  unless 
believed  to  be  material.^  This,  in  practice,  constitutes  an  im- 
portant modification  of  the  general  rule  requiring  a  full  disclosure 
of  all  material  facts,  inasmuch  as  a  written  application  is  almost 
invariably  made  the  basis  of  a  life  policy,  and  the  fire  policy  by  its 
own  terms  provides  for  certain  disclosures;  ^  but  even  then  the 
applicant  must  evince  good  faith,  and  would  be  guilty  of  a  wrongful 
concealment  if  he  withheld  intelligence  which  would  clearly  affect 
the  judgment  of  the  insurer;  as,  for  example,  that  attempts  had 
lately  been  made  to  set  fire  to  his  house.''' 

1  Peher  Mfg.  Co.  v.  Sun  Fire  Office,  629,  13  S.  E.  77;  Johnson  v.  Scottish 

36  S.  C.  213,  15  S.  E.  562  (non-dis-  Union  &  Nat.  Ins.  Co.,  93  Wis.  223, 

closure  of  provision  in  lease  depriving  67  N.  W.  416  (here  based  on  statute); 

insurer  of  right  of  subrogation).  Roloff  v.  Farmers'  Home  Mid.  his.  Co. 

"i  Dennison  v.  Thomaston  Mut.  Ins.  (Wis.,  Jan.,  1907),  110  N.  W.  261  (con- 
Co.,  20  Me.  125,  37  Am.  Dec.  42.  tents  of  disclosed  lease);  but  this  rule 

^  Schu'arzback    v.     Ohio     Val.,    etc.,  offers  no  excuse  for  a  violation  of  the 

Union,  25  W.  Va.  655.  express  conditions  of  the  policy.    Cases 

■i  Clark  V.  Ins.  Co.,  8  How.   (U.  S.)  to  the  contrary  like  Dooly  v.  Hanover 

235,   240,    12   L.    Ed.    1061;    Cross   v.  i^. /n.s.  Co.,  16  Wash.  159,  47  Pac.  508, 

National  Fire  Ins.  Co.,  132  N.  Y.  133,  58  Am.  St.  R.  29,  cannot  be  considered 

30  N.  E.  390;  Browning  v.  Home  his.  sound. 

Co.,  71  N.  Y.  508;  Gates  v.  Madison,  ^  Parsojis  v.  Lane,  97  Minn.  98,  106 

etc.,  Ins.  Co.,  5  N.  Y.  469,  55  Am.  Dec.  X.   W.   485.     Thus   the   standard  fire 

360;  Pelzer  Mfg.  Co.  v.  Sun  Fire  Office,  policy  calls  for  special  permit  if  there 

36  S.  C.  213,  270,  15  S.  E.  562;  Union  be  a  chattel  mortgage,  but  real  estate 

Assnr.  Soc.  v.  Nails,  101   Va.  613,  44  mortgage  need  not  be  disclosed  imless 

S.  E.  896,  99  Am.  St.  R.  923.  inquiry  be  made.  Van  Kirk  v.  Citizens' 

^McClelland  v.  Greenwich  his.  Co.,  Ins.  Co.,  79  Wis.  627;  American  Artistic 

107  La.  124,  31  So.  691;  Seal  v.  Farm-  Gold  S.  Co.  v.  Glens  Falls  Ins.  Co.,  1 

ers',   etc.,   Ins.    Co.,   59   Neb.    253,   80  Misc.  (N.  Y.)  114. 
N.  W.  807;  Graham  v.  American  Fire  ^  Bebee  v.  Hartford  Co.  Mut.  Fire  Ins 

Ins.  Co.,  48  S.  C.  195,  26  S.  E.  323,  59  Co.,  25  Conn.  51,  65  Am.   Dec.  553 

Am.  St.  R.  707;  Southern  Ins.  Co.  v.  Walden  v.  Ins.  Co.,  12  La.  134,  32  Am, 

Estes,  106  Tenn.  472,  62  S.  W.  149,  52  Dec.  116;  Currn  v.  Commonwealth  Ins 

L.  R.  A.  915,  82  Am.  St.  R.  892  (liens);  Co.,  10  Pick.   (Mass.)  535;  North  Am 

WytheviUc  Ins.    Co.   v.   StvUz,   87   Vir.  Ins.    Co.    v.     Throop,    22    Mich.     146; 


128  GENERAL   PRINCIPLES   OF   INSURANCE    LAW 

In  failing  to  fill  out  a  statement  in  the  application  as  to  the  amount 
of  incuml;r;inces  on  the  property,  the  court  held  that  the  applicant 
was  not  guilty  of  a  fatal  concealnieut  of  a  material  fact ,  since  the 
company  had  notice  that  the  question  was  not  answered.^  If  the 
company  accepts  an  application  on  the  face  of  which  it  appears  that 
there  is  a  failure  to  answer  a  (luestion,  or  in  which  the  answers  are 
imperfect  or  incomplete  and  not  necessarily  false,  in  the  absence  of 
had  faith  the  company  cannot  claim  forfeiture  on  the  ground  of 
concealment. - 

In  fire  insurance,  questions  of  concealment  and  misrepresentation 
are  now  governed  by  the  express  warranty  on  that  subject  con- 
tained in  the  policy. 

§  97.  Representations. — A  representation  is  an  oral  or  written 
statement  of  facts  or  circumstances  made  at  the  time  of  or  before 
the  closing  of  the  contract  and  relating  to  the  proposed  adventure, 
upon  the  faith  of  which  the  agreement  is  made.^  The  circumstances 
represented  may  be  matter  of  fact  or  of  expectation  or  belief.  The 
term  "representations"  as  here  employed  does  not  refer  to  state- 
ments which  are  incorporated  into  the  contract  and  expressly  made 
warranties,  but  rather  to  collateral  matter  of  inducement.'*  It  is  a 
general  rule  in  the  law  of  insurance,  that  a  material  misrepresentation 

Campbell  v.  Victoria  Mut.  Ins.  Co.,  4.5  '^Phoenix    Mut.     Life    Ins.     Co.     v. 

U.   C.    (Q.    B.)   412.      Contra,  German  Raddin,  120  U.  S.  183,  7  S.  Ct.  500,  30 

Am.  Ins.  Co.  v.  Norris,  100  Ky.   29,  L.  Ed.  644;  Conn.  Mut.  Life  Ins.  Co.  v. 

37  S.  W.  267,  66  Am.  St.  R.  324.    Must  Luchs,  108  U.  S.  498,  2  S.  Ct.  949,  27 

disclose  that  at  time  of  application  a  L.  Ed.  800.    It  is  held  generally  in  this 

fire    was    raging    near    the    property,  country   that   concealment   cannot   be 

Orient  Ins.  Co.  v.  Peiser,  91  111.  App.  predicated  on  an  omission  to  answer  a 

278;  or  that  the  applicant  for  life  in-  question  propounded  by  the  insurer  in 

surance    was   about    to    fight   a   duel,  the  application,   Tiefenthal  v.  Citizens' 

Penn.  Mut.  Life  Ins.  Co.  v.  Mech.  S.  Mut.    F.   Ins.    Co.,   53   Mich.    306,    19 

Bank  &  Trust  Co.,  72  Fed.  413,  435,  N.  W.  9;  Carson  v.  Jersey  Citt/  F.  Ins. 

19  C.  C.  A.  286,  38  L.  R.  A.  33;  but  Co.,  43  N.  J.  L.  300,  39  Am.  Rep.  584; 

held   that    married   woman   need   not  Armenia  Ins.  Co.  v.  Paul,  91  Pa.  520, 

disclose  pregnancy,  Merriman  v.  Grand  36  Am.  Rep.  676;  or  on  a  partial  dis- 

Lodge  (Neb.),  110  N.  W.  302,  36  Ins.  L.  closure,  if  on  its  face  partial.  Phoenix 

J.  340.     Ignorance  on  the  part  of  the  Ins.  Co.  v.  Stocks,  149  111.  319,  36  N.  E. 

agent  of  the  insurer  that  the  insured  408;  Miotke  v.  Mil.  Mech.  Ins.  Co.,  113 

was  a  woman  does  not  show  fatal  con-  Mich.  166,  71  N.  W.  463. 

cealment,  Mechanics'   &   Traders'  Ins.  .    ^  Clark  v.  Ins.  Co.,  8  How.   (U.  S) 

Co.  V.  Flo- id,  20  Ky.  Law  Rep.  1538,  235,  12  L.  Ed.  1061. 
49  S.  W.  543.      Antecedent  threats  of         ^  Campbell  v.  Ins.  Co.,  98  Mass.  381. 

incendiarism  from  parties,  since  dead,  For   example    the   life    policy   usually 

need  not  be  disclosed,  Arkansas  Mut.  makes  the  application  a  part  of  the 

F.  Ins.  Co.  (Ark.  1907),  36  Ins.  L.  J.  contract  and  its  statements  or  answers 

607.  warranties.    These  again  by  statute  in 

^  Parker  \.  Otsego  Co.  F.  Ins.  Co.,  47  many  states  are   made  analogous  to 

App.  Div.  204,  62  N.  Y.  Supp.   199,  mere    representations,    see    Appendix, 

aff'd  168  N.  Y.  655,  61  N.  E.  1132.  ch.  1.  ly  > 


REPRESENTATIONS  129 

of  fact  by  either  party  or  his  authorized  agent,  whether  innocent  and 
unintentional,  or  willful  and  fraudulent,  renders  the  policy  voidable 
at  the  option  of  the  other  party, ^  provided  the  misrepresentation  is 
not  too  remotely  connected  in  time  with  the  transaction.'  For 
example,  an  incorrect  statement  that  no  lamps  were  used  in  the 
picker  room  of  a  cotton  factory  insured  was  held  to  avoid  a  policy 
which  was  issued  upon  the  faith  of  this  representation.^ 

It  is  important  to  observe  that,  unlike  warranties,  mere  representa- 
tions of  fact  need  be  only  substantially  correct.'* 

Thus  a  broker,  in  offering  a  risk  to  the  underwriter,  showed  the 
latter  his  written  instructions,  which  comprised  a  statement  re- 
specting the  vessel,  that  "she  mounts  twelve  guns  and  t.wenty 
men: '"  in  point  of  fact,  the  vessel  had  not  this  precise  force  on  board: 
but  she  had  an  armament  of  guns  and  swivels,  with  a  crew  of  men 
and  boys,  which  in  both  particulars  was  equivalent  to,  though  not 
identical  with,  the  force  specified.  It  was  held  that  the  statement 
made  to  the  underwriter,  being  a  representation,  was  satisfied  by  the 
substantial  fulfillment,  though  had  it  been  a  warranty  nothing  less 
than  a  strict  and  literal  fulfillment  would  have  sufficed.''* 

A  policy  on  ship  and  goods  from  Nassau  to  the  Clyde  was  effected 
on  the  18th  of  June,  1814.  The  broker  showed  the  underwriters 
a  letter,  dated  April  2,  in  which  it  was  stated,  the  Brilliant,  the 
ship  insured,  "will  sail  on  the  1st  of  May."  In  fact,  the  ship  had 
sailed  on  the  20th  of  April,  and  on  the  11th  of  May  had  been  captured 
by  an  American  privateer.  These  facts  were  wholly  unknown  to 
the  parties  by  whom  the  representation  was  made,  yet  it  was  held 
that  the  policy  was  avoided  for  misrepresentation.^ 

1  Armour    v.    Transatlantic    F.    Ins.  it   is   usually   the   insurance   company 

Co.,  90  N.  Y.  450;  Blaci  burn  v.  Vigors,  that  seeks  to  have  the  policy  adjudged 

L.  R.  17  Q.  B.  Div.  553,  561,  12  App.  void  for  misrepresentation. 

Cas.  539.     Must  be  both  material  and  2  Barnett  v.   Barnett,  83  Va.  504,  2 

untrue  to  avoid,  if  not  made  a  war-  S.  E.  733. 

ranty.  Fidelity  &  C.  Co.  v.  Alpert,  67  ^  Clark  v.  7ns.  Co.,  8  How.   (U.  S.) 

Fed.  460,  14  C.  C.  A.  474,  28  U.  S.  App.  235,  12  L.  Ed.  1061. 

393.     "Fraud  need  not  be  pleaded  to  *  Jeffrey  v.  United  Order,  97  Me.  176, 

make  the  complaint  non-demurrable,  53  Atl.  1102  (statements  in  an  applica- 

for  there  is  in  every  contract  of  insur-  tion  which  were  not  made  warranties); 

ance,  in  the  absence  of  an  express  pro-  ^Ftna  his.    Co.    v.   Simmons,  49   Neb. 

vision  on  that  head,  an  implied  condi-  811,  69  N.  W.  125  (warranty  must  be 

tion  of  the  truth  of  all  material  rep-  literally  true,  representation  only  sub- 

resentat ions  of  the  insured  on  the  faith  stantially  so);   Siiclley  v.   Delafield,  2 

of  which  the  contract  is  made,"  Evans  Caines  (N.  Y.),  222;  Jefferson  Ins.  Co. 

V.    Columbia  Fire  Ins.    Co.,   40   Misc.  v.  Co</ieaZ,  7  Wend.  (N.  Y.)  72,  22  Am. 

316,  321,  81  N.  Y.  Supp.  933.     If  not  Dec.     567;     Continental    Ins.     Co.    v. 

material   the  untruth  is   quite  unim-  Kasey,  25  Gratt.    (Va.)   268,   18  Am. 

portant,  Anderson  v.  Fitzgerald,  4  H.  L.  Rep.  681. 

Cas.  484,  504;  Vivar  v.  Supreme  Lodge,  5  Pawson  v.  Watson,  Cowp.  785. 

52  N.  J.  L.  455,  20  Atl.  36.    In  practice  o  Dennistoun  v.  Lillie,  3  Bligh.  P.  C. 

9 


130 


GENERAL    PRINCIPLES    OF    INSURANCE    LA"W 


And  where  a  representation  was  made  some  time  before  the  ship 
sailed,  to  the  effect  that  she  was  to  sail  with  convoy  and  a  certain 
armament,  Lord  Ellenborough  held,  that,  as  it  had  not  been  sub- 
stantially complied  with,  it  avoided  the  policy,  though  made  with- 
out moral  fraud. ^ 

In  a  New  York  case  the  insured  innocently  represented  that  he 
had  two  hundred  thousand  dollars  of  other  fire  insurance  upon  his 
jM-operty,  whereas,  in  reality,  his  other  insurance  amounted  to  only 
thirty  tliousand  dollars:  the  court  was  of  opinion  that  this  over- 
estimate was  material  as  matter  of  law,  and  that,  though  unin- 
tentional, it  would  avoid  the  contract.^  And  where  an  applicant 
erroneously  stated  that  no  other  company  had  refused  to  grant  him 
life  insurance  it  was  held  to  be  a  material  misrepresentation,  and 
good  ground  for  decreeing  a  cancellation  of  the  policy.^ 


202.  But  it  is  also  declared  that  the 
date  of  sailing  will  not  always  be  re- 
garded as  material  to  the  risk,  Mc- 
Lanahan  v.  Universal  Ins.  Co.,  1  Pet. 
(U.  S.)  188,  7  L.  Ed.  98;  Kerr  v.  Union 
Mar.  Ins.  Co.,  130  Fed.  415,  417,  64 
C.  C.  A.  617. 

1  Edirards  v.  Footner,  1  Camp.  530. 
So  in  case  of  an  insurance  on  goods, 
where  the  words  "to  return  five  per 
cent  for  convoy  and  arrival"  w-ere  in- 
serted in  the  policy.  Lord  Eldon  was  of 
opinion  that  these  words  clearly 
amounted  to  a  representation  that  it 
w-as  probable  the  vessel  would  sail 
with  convoy;  and  as  it  appeared  that 
the  assured  knew,  when  the  policy  was 
effected,  that  the  ship  had  actually 
sailed  without  convoy,  the  contract 
was  avoided,  Reid  v.  Harvey,  4  Dow. 
97. 

2  Armour  v.  Transatlantic  Fire  Ins. 
Co.,  90  N.  Y.  450.  In  the  last  case 
attention  was  also  called  to  the  fact 
that  the  rule  as  to  misrepresentations 
and  concealments  is  more  strict  in 
marine  than  in  fire  insurance.  An  ap- 
plicant named  the  payee  as  his  wife 
when  he  knew  that  she  was  not  his 
lawful  wife;  held,  that  there  was  no 
material  misrepresentation,  Vivar  v. 
Supreme  Lodge,  52  N.  J.  L.  455  (com- 
pare 95  App.  Div.  (N.  Y.)  241).  But 
where  the  agent  of  the  assured  rep- 
resented that  the  property  was  owned 
by  a  successful  business  man  when  in 
fact  it  was  owned  by  a  married  woman 
who  exercised  no  supervision,  the  court 
held  that  there  could  be  no  recovery, 
Freedman  v.  Fire  Assn.  of  Phila.,  168 
Pa.  St.  249,  32  Atl.  39. 


3  Am.  Union  Life  Ins.  Co.  v.  Judge, 
191  Pa.  St.  484,  43  Atl.  Rep.  374.  Any 
promissory  representation  made  dur- 
ing negotiations  is  merged  in  the  con- 
tract and  cannot  be  shown  to  vary  the 
contract,  but  if  such  representation  is 
made  as  an  inducement  with  fraudu- 
lent intent  it  has  been  said  that  it  may 
be  shown  in  an  action  to  rescind, 
Prudential  As.sur.  Co.  v.  ^■Etna  Life  Ins. 
Co.,  23  Fed.  438  (promise  not  to  re- 
insure); Prudential  Assur.  Co.  v.  Mt7ia 
L.  Ins.  Co.,  52  Conn.  576;  Alston  v. 
Mechanics'  Mut.  Ins.  Co.,  4  Hill 
(N.  Y.),  329  (promise  to  discontinue 
fire  place);  Kimball  v.  /Etna  Ins.  Co., 
9  Allen  (Mass.),  540,  85  Am.  Dec.  786 
(promise  that  house  should  in  future 
be  occupied);  Knecht  v.  Mut.  Life  Ins. 
Co.,  90  Pa.  St.  118,  35  Am.  Rep.  641; 
and  see  N.  J.  Rubber  Co.  v.  Commercial 
Union  Assur.  Co.,  64  N.  J.  L.  580,  46 
Atl.  777.  This  distinction,  however,  is 
questionable  since  in  effect  it  seems  to 
permil  the  addition  by  parol  of  a  new 
condition  or  warranty  to  the  contract, 
Mayor  v.  Brooklyn  Fire  Ins.  Co.,  4 
Keyes  (N.  Y.),  465,  466  ("It  is  a  well 
settled  rule,  that  a  verbal  representa- 
tion to  vitiate  a  contract  of  insurance 
must  relate  to  some  past  or  existing 
fact  material  to  the  risk,  and  that  a 
representation  in  the  nature  of  a 
promise  or  stipulation  for  future  con- 
duct must  be  inserted  in  the  policy,  or 
the  underwTiters  cannot  avail  them- 
selves of  it);  Alston  v.  Mechanics'  Ins. 
Co.,  4  Hill  (N.  Y.),  329,  criticizing 
Dennistoun  v.  Lillie,  3  Bligh.  202,  and 
citing  many  authorities;  Merchants' , 
etc.,  Ins.  Co.  v.  Washir^on,  etc.,  Ins. 


TEST  OF   MATERIALITY 


131 


§  98.  Mere  Opinion  or  Belief  not  Generally  Fatal. — Misrepresenta- 
tions of  fact  must  be  distinguished  from  erroneous  expressions  of 
opinion,  expectation  or  belief,  or  exaggerated  estimates  of  value. 
These  usually  are  not  fatal,  whether  correct  or  incorrect,  unless  made 
in  bad  faith. ^ 

Thus  where  a  broker,  in  proposing  an  insurance  upon  certain 
vessels  engaged  in  the  African  trade,  stated  that  they  were  ex- 
pected to  leave  the  coast  of  Africa  in  November  or  December,  when 
in  fact  they  had  all  left  in  May,  it  was  held  that  this  statement  having 
been  made  without  intent  to  deceive,  though  material  to  the  risk, 
was  a  mere  expression  of  opinion,  and  that  the  contract  was  not 
void.^ 

§  99.  Test  of  Materiality. — A  representation  is  material  which 
would  influence  the  judgment  of  a  prudent  insurer  in  fixing  the 
premium  or  determining  whether  he  will  assume  the  risk.^    Accord- 


Co.,  1  Handy  (Ohio),  408.  A  verbal 
promise  that  no  other  fire  shall  be  used 
cannot  be  shown,  Schmidt  v.  Peoria  M. 
&  F.  Ins.  Co.,  41  111.  295.  The  United 
States  Supreme  Court  says:  "The  only 
case  in  which  a  representation  as  to  the 
future  can  be  held  to  operate  as  an 
estoppel  is  where  it  relates  to  an  in- 
tended abandonment  of  an  existing 
right,  and  is  made  to  influence  others 
and  by  which  they  have  been  induced 
to  act.  An  estoppel  cannot  arise  from 
a  promise  as  to  future  action  with  re- 
spect to  a  right  to  be  acquired  upon  an 
agreement  not  yet  made,"  Ins.  Co.  v. 
Mowry,  96  U.  S.  544,  547, 24  L.  Ed.  674. 
See  Paste  v.  Aynerican  Union  Life  Ins. 
Co.,  32  App.  Div.  189,  191,  aff'd  165 
N.  Y.  631.  And  Judge  Caldwell  says: 
"While  the  representations  that  will 
create  an  estoppel  generally  have  rela- 
tion to  a  present  or  past  state  of  things 
the  rule  is  not  inflexible,"  American 
Surety  Co.  v.  Ballman,  115  Fed.  292, 
293  (certiorari  denied  in  187  U.  S. 
646,  23  S.  Ct.  846);  and  see  Dickerson 
V.  Colgrove,  100  U.  S.  578,  25  L.  Ed. 
618  (representations  as  to  intentions). 

1  Nat.  Bank  v.  Ins.  Co.,  95  U.  S.  673; 
Wheelton  v.  Hardisty,  8  El.  &  Bl.  232. 

2  Barber  v.  Fletcher,  1  Doug.  306. 
So  as  to  erroneous  representation  by 
broker  that  ship  then  at  Lisbon  was  to 
sail  in  a  few  days.  Held,  to  be  mere 
expression  of  expectation,  Bowden  v. 
Vaughan,  10  East,  415.  So  also  opin- 
ion as  to  good  health,  Barnes  v.  Asso., 


191  Pa.  St.  618, 43  Atl.  341 ,  45  L.  R.  A. 
264;  as  to  physical  condition.  Royal 
Neighbors  v.  Wallace  (Neb.,  1904),  99 
N.  W.  256;  as  to  serious  illness.  Su- 
preme Ruling,  etc.,  v.  Crawford  (Tex. 
Civ.  App.,  1903),  75  N.  W.  844;  as  to 
cause  of  death  of  relatives.  Supreme 
Lodge  v.  Dickson,  102  Tenn.  255,  52 
S.  W.  862;  as  to  values.  Phoenix  Ins. 
Co.  V.  Pickel,  119  Ind.  155,  21  N.  E. 
546,  119  Ind.  291,  21  N.  E.  898;  as  to 
age  of  building,  PhoenLr  Ins.  Co.  v. 
Wilson,  132  Ind.  449,  25  N.  E.  592;  as 
to  whether  any  material  facts  are  omit- 
ted in  application,  Louis  v.  Conn.  Mut. 
L.  Ins.  Co.,  58  App.  Div.  137,  68  N.  Y. 
Supp.  683,  aff'd  172  N.  Y.  659,  65  N.  E. 
1119. 

3  Mattson  v.  Modern  Samaritans,  91 
Minn.  434,  98  N.  W.  330;  Clark  v.  7ns. 
Co.,  40  N.  H.  333,  77  Am.  Dec.  721. 
Experts  are  not  allowed  to  testify 
as  to  whether  a  representation  is 
material  to  the  risk  and  the  issue  is 
ordinarily  for  the  jury,  Penn  Mut.  Life 
Ins.  Co.  V.  Mechanics',  etc.,  Co.,  72  Fed. 
413,  19  C.  C.  A.  286,  38  L.  R.  A.  33; 
Clark  V.  Ins.  Co.,  40  N.  H.  333,  77  Am. 
Dec.  721.  Burden  is  on  insurer  to  al- 
lege and  prove  defence  of  material  mis- 
representation or  concealment,  Price 
V.  Phoenix  M.  L.  Ins.  Co.,  17  Minn. 
497,  10  Am.  Rep.  166;  McCarty  v. 
Imperial  Ins.  Co.,  126  N.  C.  820,  36 
S.  E.  284;  Metropolitan  Life  Ins.  Co.  v. 
Howie,  62  Ohio  St.  204,  56  N.  E. 
908, 


132  GENERAL   PRINCIPLES   OF    INSURANCE   LAW 

ingly  it  will  be  observed  that  the  materiality  of  a  concealment  or 
representation  of  fact  depends,  not  on  the  ultimate  influence  of  the 
fact  upon  tlie  risk  or  its  relation  to  the  cause  of  loss,  but  on  the  im- 
mediate influence  upon  the  party  to  whom  the  communication  is 
made,  or  is  due,  in  forming  his  judgment  at  the  time  of  efi'ecting  the 
contract.  The  party  thus  sought  to  be  influenced  is  generally  the 
insurance  company.  Though  the  loss  should  arise  from  causes  totally 
unconnected  witli  the  material  fact  concealed  or  misrepresented, 
the  policy  is  void,  because  a  true  disclosure  of  the  fact  might  have 
led  the  company  to  decline  the  insurance  altogether,  or  to  accept  it 
only  at  a  higher  premium.' 

§  100.  Refers  to  What  Time.— The  closing  of  the  contract  is  the 
time  to  which  a  misrepresentation  or  concealment  must  be  presumed 
to  refer,  and  any  material  facts  coming  to  the  knowledge  of  either 
party  pending  the  negotiations  must  be  communicated,  even  after 
written  proposals  have  been  submitted.^ 

This  rule  may  be  illustrated  by  an  English  case,  in  which  an  in- 
surance office,  in  the  course  of  its  negotiations  for  a  policy  of  re- 
insurance from  the  defendant,  made  representations  that  it  was 
itself  retaining  a  substantial  net  liability  over  and  above  the  total 
amount  of  its  reinsurance.  Subsequently,  however,  the  plaintiff,  the 
original  insurer,  by  taking  out  further  reinsurance  from  another 
underwriter,  fully  covered  its  liability  under  the  policy  issued  by  it 
to  the  owner,  leaving  to  itself  no  real  share  or  net  interest  in  the  risk. 
In  other  words,  it  had  become  fully  reinsured.  Although  the  plain- 
tiff's representation  was  true  when  made,  and  although  through 
inadvertence  it  had  omitted  to  correct  it,  nevertheless  the  court 
held  that  the  policy  of  reinsurance  issued  by  the  defendant  was 
avoided.^ 

If  the  contract  has  been  closed  by  a  written  or  oral  binding,  as, 
for  example,  by  the  usual  binding  slip,  that  date  controls,  and  not 
a  subsequent  date  when  the  policy  may  chance  to  be  signed  or  de- 
livered."* 

i  Daniels  v.  Hudson  R.  F.  Ins.  Co.,  contract  if  the  change  be  material  and 

12  Cush.  (Mass.)  416,  59  Am.  Dec.  192.  to  the  prejudice  of  the  insurers,  Kerr 

^  Snow  V.  Merchants'  Mar.  Ins.  Co.,  v.  Union  Mar.  Ins.  Co.,  130  Fed.  415. 

61  N.  Y.  160;  Baldwin  v.  Chouteau  Ins.  3  Traill  v.  Baring,  4  D.  J.  &  S.  318. 

Co.,  56   Mo.    151,    17   Am.    Dec.   671.  *  lonides  v.  Pacific  Iru<s.  Co.,  L.  R.  6 

Thus  if  a  representation  be  true  when  Q.  B.  685;  Commercial  Mut.  Mar.  Ins. 

made    by    the    assured   yet    by   some  Co.  v.  Union  Mut.  Ins.  Co.,  19  How. 

change  intervening  between  that  time  (U.  S.)  318;  Cory  v.  Patton,  L.  R.  9 

and  tlie  time  of  closing  the  contract  it  Q.  B.  577  (1874);  Whitaker  v.  Farmers' 

then  becomes  untrue,  it  uill  void  the  Union  Mut.    Ins.    Co.,   29   Barb.   312. 


QUESTIONS  OF    FACT 


133 


Until  the  completion  of  the  contract,  representations  may 
withdrawn  or  qualified,  but  not  afterwards,  without  consent.^ 


be 


§  101.  Materiality  and  Substantial  Truth:  Questions  of  Fact. — 

Whether  a  representation  be  material  or  not,  and  whether  sub- 
stantially true  or  not,  are  questions  of  fact,  and  ordinarily  are  to  be 
determined  by  the  jury;  ^  but  when  the  testimony  in  its  entirety, 
relating  to  a  question  of  fact,  is  such  that  to  a  reasonable  mind  only 
one  inference  is  deducible  from  it,  the  issue  becomes  one  of  law,  and 
is  to  be  determined  by  the  court. ^ 


But  compare  Merchants'  Mut.  Ins.  Co. 
V.  Lyman,  15  Wall.  (U.  S.)  664,  21  L. 
Ed.  246,  in  which  there  seems  to  be  a 
dictum  to  the  effect  that  in  any  action 
upon  the  policy  its  date  or  the  date  of 
its  execution  will  prevail  for  this  pur- 
pose. If  such  was  intended  to  be  the 
doctrine  of  that  case  it  is  at  variance 
with  the  current  of  authority,  and  see 
Gordon  v.  United  States  Casualty  Co. 
(Tenn.  Ch.  A.,  1900),  54  S.  W.  98. 

1  Freeland  v.  Glover,  7  East,  462. 

2  Carrollton  Furniture  Co.  v.  Am. 
Credit,  etc.,  Co.,  124  Fed.  25,  59  C.  C.  A. 
545;  Miss.,  Kan.  &  Tex.  Tr.  Co.  v. 
German  Nat.  Bk.,  77  Fed.  117,  23  C.  C. 


A.  65;  Brooks  v.  Erie  Fire  his.  Co.,  76 
App.  Div.  275,  278,  78  N.  Y.  Supp. 
748,  aff'd  177  N.  Y.  572  (facts  as  to 
title);  Dulancy  v.  Fidelity  &  Cas.  Co. 
(Md.),  66  Atl.  614;  Strihley  v.  Imperial 
Mar.  Iris.  Co.  (1876),  1  Q.  B.  D.  507. 
It  is  said  that  expert  evidence  is  now 
in  practice  regularly  admitted  to  show 
whether  a  particular  circumstance  is 
material  or  not,  De  Hart  &  Simey,  Ins. 
(1907),  25.  Facts  which  have  only  to 
do  with  an  excepted  risk  clearly  are  not 
material. 

3  See  §  93  supra;  also  cases  cited  in 
latter  part  of  §  97. 


CHAPTER  V 

General  Principles — Continued 

Warranties 

§  102.  "Warranties:  Introductory.— The  investigation  which  we 
have  ah-eady  made  into  the  nature  of  insurance  has  demonstrated 
that  a  very  hirge  number  of  circumstances,  within  the  knowledge 
or  control  of  the  insured,  may  have  some  possible  bearing  upon  the 
risk  to  be  run  b}-  the  insurer.  By  virtue  of  the  general  rule  laid 
down  in  the  last  chapter,  it  appeared  that  the  insured  is  theoretically 
under  obligations  at  all  times  to  act  in  perfect  good  faith  towards 
his  insurers.  But  opinions  of  what  constitutes  good  faith  differ 
widely.  By  virtue  of  other  rules,  discussed  in  the  same  chapter, 
we  learned  also  that,  in  legal  theory,  facts  material  to  the  risk  must 
be  disclosed  with  su])stantial  accuracy  before  the  contract  is  closed. 
But  the  determination  of  issues  relating  to  materiality  and  sub- 
stantial truth  is  not  only  inherently  a  matter  of  considerable  diffi- 
culty, but  in  practice  turns  upon  the  chance  notions  of  juries.  It 
is  obvious,  therefore,  that,  from  the  application  of  such  general 
principles  of  law,  the  underwriter  can  obtain  no  very  definite  cri- 
terion by  which  to  form  a  scientific  estimate  of  the  extent  of  the 
hazard  in  a  particular  instance.  Moreover,  one  party  insured  must 
incur  and  is  willing  to  pay  for  an  exceptional  hazard.  The  necessities 
of  other  parties  insured  may  be  altogether  different;  and  yet  it  is 
of  the  utmost  importance  that  a  uniform  and  conventional  con- 
tract, the  meaning  of  which  may  be  settled  by  the  courts  and  the 
general  tenor  of  which  may  become  familiar  to  the  public,  shall  be 
employed  as  the  basis  for  many  instances. 

Thus  it  happens  that  a  large  number  of  matters,  which  in  the 
judgment  of  expert  underwriters  are  apt  to  have  an  influence  upon 
the  risk  or  upon  the  adjustment  of  a  loss,  and  which  are  often  in- 
volved in  the  course  of  an  orderly  and  reasonable  fulfillment  of  the 
main  engagement  of  the  underwriter,  must  become  part  and  parcel 
of  tlio  contract  itself,  and  must  fall  into  the  shape  of  detailed  and 


WARRANTIKS:    IXTKODUCTORV  135 

definite  stipulations  on  the  part  of  the  insured,  incorporated  either 
expressly  or  impliedly  into  the  usual  policy  of  insurance. 

Such  provisions,  whether  few  or  numerous,  have  been  selected 
out  of  the  mass,  and  in  terms  intended  to  be  definite  have  been 
inserted  in  the  contract  so  that  the  parties  may  understand  that 
they  are  to  l)e  performed,  not  substantially,  as  in  the  case  of  other 
pertinent  matters,  but  literally.  They  are  called  warranties;  and, 
with  recognition  that  the  purpose  of  incorporating  them  into  the 
contract,  either  expressly  or  by  implication  of  law,  is  to  render 
definite,  what  otherwise  would  be  uncertain,  the  law  prescribes 
that  they  must  be,  not  substantially,  but  precisely  met  and  satisfied.' 

This  construction  of  the  warranty  in  insurance  law,  regarded  as 
fair  to  the  underwriter,  was  also  deemed  promotive  of  the  general 
good,  since  many  of  the  usual  stipulations  of  the  policy  embody 
precautionary  measures  calculated  to  diminish  the  number  and 
severity  of  the  casualties  insured  against,  and  strongly  tend  in  the 
direction  of  preventing  dishonest  claims  and  fraudulent  fires  and 
shipwrecks.  Many  classes  of  contracts  have  little  bearing  upon  the 
public  welfare.  Take,  for  example,  the  familiar  instance  of  a  building 
contract.  Like  the  contract  of  insurance,  it  is  apt  to  contain  many 
particulars  and  some  of  them  relating  to  minute  details.  Unlike 
the  case  of  insurance,  however,  substantial  performance  by  the 
builder  will  save  him  from  a  forfeiture  of  his  contract  rights.^'  And 
doubtless  one  reason  for  the  liberality  of  the  rule  in  favor  of  the 
builder  is  found  in  the  fact  that  the  public  has  little  interest  in  the 
result  of  his  engagement.  But  not  so  at  all  in  the  case  of  insurance 
upon  property.  Indeed,  a  conflagration  is  likely  to  be  a  menace 
to  the  safety  of  the  whole  community,  and  for  every  loss  to  building 
or  to  ship  insured,  whether  it  be  an  honest  or  a  dishonest  loss,  the 
insured  public  must  make  payment  in  premiums.  Every  dishonest 
loss,  therefore,  is  a  wrong  not  only  to  the  insurer  but  also  to  the 
public  at  large.  Perhaps  no  doctrine  in  the  law  of  insurance  is  more 
important  than  that  of  warranties.  In  connection  with  the  marine 
policy,  at  an  early  date,  the  principle  of  construction  became  well 
established  that  the  insurer  is  discharged  from  liability  as  from  the 
time  of  default  if  it  appear  that  the  insured  has  failed  in  an  exact 
fulfillment   of  any   condition,   whether  in   the  form   of  statement 


^Imperial  Fire  Ins.  Co.  v.  Coos  Co.,  81   N.  E.   169;   Berwind  v.  Greenivich 

151   U.  S.  452,  14  S.  Ct.  379,  38  L.  Ins.  Co.,  114  N.  Y.  231,  21  N.  E.  15 

Ed.  231;  Capital  Fire  Ins.  Co.  v.  King  (implied  warranty  of  seaworthiness). 

(Ark.,  1907).  102  S.  W.  194;  Gaines  v.  2  FlaheHy  v.  Miner,  123  N.  Y.  382 
Fidelity  dt  Cas.  Co.,  188  N.  Y.  411, 


13<i 


(JENEKAL    i'UINCll'LES    ( )r    IN'iSUHANCE    LAW 


or  Stipulation,  warranted  by  the  contract.^  But  liability  already 
incurred  by  the  marine  underwriter  remains  undisturbed  notwith- 
standing a  subsequent  breach  of  contract,^  and  this  rule  is  the  same 
in  other  branches  of  insurance,  except  as  the  insurer  is  exonerated 
from  liability  for  prior  loss  by  the  express  terms  of  the  policy. 

§  103.  Definition  of  Warranty. — Warranties  are  either  express 
or  implied.-'  .Vn  express  warranty  is  a  stipulation'*  inserted  in 
writing  on  the  face  of  the  contract  by  which  the  assured  undertakes 
that  some  iiarficular  thing  shall  or  shall  not  be  done,  or  that  some 
condition  shall  be  fulfilled,  or  whereby  he  affirms  or  negatives  the 
existence  of  a  i)articular  state  of  facts. "^  Almost  all  the  provisions 
and  conditions  of  all  classes  of  insurance  policies,  implying  obligation 
or  action  on  the  part  of  the  insured,  are  construed  to  be  warranties, 
except  in  those  states  where  by  statute  they  have  been  converted 
into  mere  representations  or  into  engagements  less  stringent  than 
warranties.^ 

Warranties  are  sometimes  classified  as  affirmative  and  promissory, 
the  affirmative  relating  to  a  situation  or  state  of  facts  prior  to,  or 


1  Lord  Eldon  says:  "It  is  a  first 
principle  in  the  law  of  insurance,  that, 
if  there  is  a  warranty,  it  is  a  part  of  the 
contract  that  the  matter  is  such  as  it  is 
represented  to  be.  The  materiality  or 
immateriality  signifies  nothing,"  New- 
castle F.  Ins.  Co.  V.  Macmorran,  3  Dow 
Pari.  Cas.  255;  Lord  Mansfield,  "A 
warranty  must  be  strictly  performed, 
nothing  tantamount  will  do,"  Pawaon 
V.  Watson,  Cowp.  785;  Mr.  Justice  Bul- 
ler,  "It  is  a  matter  of  indifference 
whether  the  thing  warranted  be  mate- 
rial or  not,  but  it  must  be  literally 
complied  with,"  Blackhurst  v.  Coc'.ell. 
3  Term  R.  360;  Mr.  Justice  Ashhurst, 
"The  very  meaning  of  a  warranty  is 
to  preclude  all  questions  whether  it  has 
been  substantially  complied  Avith,  it 
must  be  literally,"  De  Hahn  v.  Hart- 
ley, 1  Term  R.  343,  2  Term  R.  186. 
See  many  instances  of  warranties, 
Phillips,  Ins.,  §§  754,  865. 

2Eng.  Mar.  Ins.  Act  (1906),  §33; 
Baines  v.  Holland  (1855),  10  Exch.  802; 
Phill.  Ins.  §  771. 

3  As  to  implied  warranties  see  eh. 
IX,  infra. 

*  Barnard  v.  Faber  (1893),  1  Q.  B. 
340  ("warranted  same  rate,  terms,  and 
identical  interest"  as  other  companies 
named). 

5Eng.   Mar.   Ins.   Act   (1906),   §33; 


Ripley  v.  .Firm  Ins.  Co.,  30  N.  Y.  136, 
157,  86  Am.  Dec.  362. 

8  See  Appendix,  ch.  1.  Many  of 
these  w'arranties  might  more  accu- 
rately be  described  as  mere  exceptions 
from  liability,  Conner  y.  Manchester 
Asstir.  Co.,  130  Fed.  743;  McCargo  v. 
New  Orleans  Ins.  Co.,  10  Rob.  (La.) 
202,  43  Am.  Dec.  180,  e.  g.,  warranted 
"free  from  capture;"  others  as  condi- 
tions precedent  to  right  of  recovery, 
Ellinger  v.  Mut.  Life  Ins.  Co.  (1905),  1 
K.  B.  31.  Indeed  the  use  of  the  term 
"warranty,"  as  applied  to  a  policy,  is 
peculiar,  since  in  other  branches  of  the 
law  the  terrii  signifies  a  collateral  en- 
gagement, breach  of  which  does  not 
avoid  the  contract,  but  gives  right  to 
damages.  A  warranty  may  relate  to 
past,  present  or  future,  one  or  all,  for 
example,  past  or  present  occupancy  of 
premises,  O'Niel  v.  Buffalo  Fire  Ins. 
Co.,  3  N.  Y.  122;  keeping  books  in  iron 
safe  in  future,  Virginia  F.  &  M.  Ins. 
Co.  V.  Morgan,  90  Va.  290,  18  S.  E.  191; 
keeping  watchman  in  past  and  agree- 
ing to  do  so  for  the  future,  Blumer  y. 
Phoenix  Ins.  Co. ,  45  Wis.  622.  A  war- 
ranty, if  relating  to  past  or  present,  is 
sometimes  called  affirmative,  if  relat- 
ing to  future,  promissory,  King  v.  Tioga 
etc..  Relief  Assoc,  35  App,  Div.  58,  60, 
54  N.  Y.  Supp.  1057. 


NO    t>PEClAL    F<JRA1    NECEaHAUV  137 

contemporaneous  with,  the  inception  of  the  insurance,  and  prom- 
issory relating  to  something  to  be  done  or  omitted  during  the  pen- 
dency of  the  contract;^  but  it  must  be  carefully  noted  that  both 
classes  are  stipulations,  and  that  neither  class  are  merely  repre- 
sentations, unless  made  so  by  statute.  By  the  recent  codification 
of  marine  insurance  law  in  England,  both  of  these  kinds  of  warran- 
ties are  classified  as  promissory. - 

The  implied  warranty  of  seaworthiness  is  affirmative.  The 
implied  warranty  that  there  shall  be  no  deviation  from  the  usual 
course  of  a  voyage  is  promissory.  In  the  New  York  standard  fire 
policy  the  express  warranties  regarding  concealment  and  misrep- 
resentation, the  statement  of  the  interest  of  the  insured  in  the 
property,  and  the  character  of  his  ownership,  are  affirmative.  The 
express  warranties  regarding  increase  of  hazard,  employment  of 
mechanics,  change  of  interest  title  or  possession,  vacancy  or  un- 
occupancy,  proceedings  after  loss,  and  others,  are  promissory. 
The  express  warranties  regarding  fraud  and  false  swearing,  other 
insurance,  and  chattel  mortgages,  are  both  affirmative  and  prom- 
issory. 

§  104.  No  Special  Form  Necessary. — To  constitute  a  warranty 
no  particular  form  of  words  is  necessary.  Neither  the  presence  nor 
the  absence  of  the  word  "warranted"  is  at  all  conclusive.^ 

Thus  it  is  worthy  of  notice  in  this  connection  that  the  word  'Svar- 
ranted"  nowhere  appears  in  the  New  York  standard  fire  policy, 
and  the  word  "warranty,"  only  once,  and  then  with  reference  to 
an  exceptional  contingency;  and  that  as  employed  in  some  clauses 
of  the  marine  policy,  the  term  "warranted"  simply  indicates  an 
exception  or  limitation  to  the  underwriter's  liability.  As  explained 
hereafter  under  the  topic  "marine  insurance,"  a  clause  "warranted 
free  of  average,"  that  is,  free  of  partial  loss,  is  of  this  character. 
It  means,  not  that  the  insurance  will  be  vitiated  by  the  occurrence 
of  a  partial  loss,  but  that  the  responsibility  of  the  underwriter 
to  make  payment  is,  under  such  a  policy,  created  solely  by  a  total 

1  May,  Ins.  §  157.  parties    governs,    Virginia    F.    &   M. 
2Eng.  Mar.  Ins.  Act  (1906),  §33.  Ins.   Co.   v.   Morgan,  90  Va.   290,   18 

2  Ames  V.  Manhattan  Life  Ins.  Co.,  S.  E.  191;  Bentsen  v.  Tarjlor  (1893),  2 
40  App.  Div.  465,  58  N.  Y.  Supp.  244,  Q.  B.  281;  Behn  v.  Burness  (1863),  .32 
aff'd  167  N.  Y.  .584;  Redman  v.  Hart-  L.  J.  Q.  B.  204,  205.  An  express  war- 
ford  Ins.  Co.,  47  Wis.  89,  1  N.  W.  393,  ranty  does  not  exclude  an  implied 
32  Am.  Rep.  751.  Such  a  word  simply  warranty,  unless  inconsistent  there- 
dispels  ambiguity,  Wood  v.  Hartford  with,  Sleigh  v.  Tyser  (1900),  2  Q.  B. 
Fire  Ins.  Co.,  13  Conn.  533,  35  Am.  333  (unseaworthy  though  approved  by 
Dec.  92.     The  probable  intent  of  the  Lloyd's  surveyors  as  provided). 


1,38  (JENEliAl,    I'HlNCll'LE.S    OF    INSURANCE    LAW 

loss,  which  may  or  may  not  follow  a  partial  loss.  So  also  a  clause, 
"warranted  free  of  capture."  simply  refers  to  an  excepted  peril, 
loss  by  which  is  not  assumed  l)y  tiio  underwriter,  but  remains  with 
the  insured.  The  same  is  true  of  wliat  are  sometimes  called  the 
memorandum  clauses  of  the  standard  fire  policy,  enumerating  cer- 
tain articles  and  certain  perils  which  are  not  covered,  or  are  not 
covered  unless  lialMlity  therefor  is  specifically  assumed  in  the  policy. 
Fire,  life,  and  accident  policies  are  for  the  most  part  explicit  in 
describing  what  provisions  go  to  the  validity  of  the  contract,  and 
the  courts  are  slow  to  construe  as  warranties  any  others  than  those 
so  defined,'  but  in  marine  insurance  any  statement  of  fact  or  stipula- 
tion, appearing  upon  the  face  of  the  policy,  or  expressly  incorporated 
into  it  by  reference,  and  relating  to  a  description  of  the  subject  insured 
or  to  the  risk,  will  in  general  be  regarded  as  a  warranty  by  the  insured 
whether  called  a  warranty  or  condition,  or  not.^ 

§  105.  Warranty  Must  be  Part  of  Contract. — While  a  representa- 
tion, technically  speaking,  is  a  mere  preliminary  or  collateral  in- 
ducement,^ to  be  a  warranty,  the  statement  or  stipulation  must 
form  part  of  the  contract  itself.'*  Therefore  when  the  contract  is  in 
writing  an  express  warranty  also  must  be  in  writing,^  and  contained 
either  in  the  policy  itself  or  in  some  paper  which  is  not  simply  referred 
to,  but  made  a  part  of,  or  incorporated  into,  the  contract.^     The 

i  Daniels    v.     his.     Co.,     12     Cush.  Co.,    66    N.    Y.    464     ("occupied    as 

(Mass.)  416,  59  Am.  Dec.  192;  Ellinger  dwelling");  Baker  v.  German  Fire  Ins. 

V.  Mut.  Life  Ins.  Co.  (1905),. 1  K.  B.  Co.,  124  Ind.  490,  24  N.  E.  1041  ("oc- 

31,  35.      New  York  court  questioned  cupied   as   hotel");    but   not   so   with 

whether  extreme  rule  of  marine  insur-  descriptive   phrases   if  employed  only 

ance  should  be  applied  to  fire,  Farm-  to    identify    the    subject,    Burleigh    v. 

ers'  Ins.  L.  Co.  v.  Snyder,  16  Wend.  Gebhard  F.  Ins.  Co.,  90  N.  Y.  220,  224. 

(N.  Y.)  481,  30  Am.  Dec.  118.  Thus  where  goods  insured  were  shipped 

2  Thomson  v.    Weems,  9   App.   Cas.  in   vessel   "called   the   American   ship 

671,  684;  Eng.  Mar.  Ins.  Act  (1906),  President,"   held,  no   warranty  of   na- 

§  35.     Descriptive  phrases  used  to  de-  tionality,  Le  Mesurier  v.   Vaughan,  6 

scribe  the  risk  are  construed  as  war-  East,  382.     Insuring  ship  by  an  Eng- 

ranties,  especially  in  marine  insurance.  lish  name  is  no  warranty  that  she  is 

Thus  the  "good  American  ship  called  English,  Clapham  v.  Cologan,  3  Camp, 

the  Rodman"  is  a  warranty  of  nation-  382. 

ality ,    Barker  v.   Phoenix   Ins.    Co. ,   8  3  Glendale  Woolen  Co.   v.  Protection 

Johns.   (N.  Y.)  307,  5  Am.  Dec.  339;  7ns.  Co.,  21  Conn.    19,   54  Am.    Dec. 

so   also    "the    Swedish    brig   Sophia,"  309. 

Lewis    V.     Thatcher,     15     Mass.     431.  ^  Daniels  v.  Hudson  River  F.  Ins.  Co., 

Some  courts  have  applied  same  rule  to  12  Cush.  (Mass.)  416,  59  Am.  Dec.  192. 

fire  insurance,  Wood  v.  Hartford  Fire  5  Oral  representations  are  not  war- 

Ins.  Co.,  13  Conn.  533;   Wall  v.  East  rsmties,  W y theville  Ins.  Co.  \.  Stultz,  87 

River  Mut.  Ins.  Co.,  7  N.  Y.  370  (hold-  Va.  629,  13  S.  E.  77. 

ing  the  rule  to  be  the  same  in  fire  as  in  «  First    Xat.    Bank   v.    Ins.    Co.,   50 

marine);  location  is  warranted,  Eddy,  N.  Y.  45;  Goddardv.  East  Texas  F.'ins. 

etc.,   Foundry   v.    Hampden,   etc.,   Ins.  Co.,  67  Tex.  69,  1  S.  W.  906,  60  Am. 

Co.,  8  Fed.  Cas.  300;  so  also  occupa-  Rep.    1;    Bean    v.    Stupart    (1778),    1 

tion,  Alexander  v.  Germania  Fire  Ins.  Dougl.  11, 


WHAT  REFERENCE  SUFFICIENT  TO  INCORPORATE  AS  WAUUAXTV     139 

importance  of  calling  attention  to  this  distinction  will  be  more  ap- 
parent when  it  is  borne  in  mind  that  many  written  applications  are 
made  part  of  the  contract  and  many  are  not.^ 

§  106.  What  Reference  Sufficient  to  Incorporate  as  Warranty. 

— A  statement  in  an  extraneous  paper  merely  referred  to  in  the 
policy  is  not  a  warranty;^  but  if  the  policy,  and  such  is  usually  the 
case  with  the  life  policy,  makes  the  application  a  part  of  the  contract, 
and  the  basis  of  the  undertaking,  then  the  statements  of  fact  or 
stipulations  therein  contained,  whether  relating  to  the  past,  present, 
or  future,  become  warranties.* 


1  Especially  in  cities  the  brief  written 
application  for  fire  insurance  usually 
is  not  made  part  of  the  contract.  Ap- 
plications for  life  insurance  almost  al- 
ways are  incorporated  into  the  con- 
tract. A  warranty  may  be  inserted  on 
the  margin  of  the  policy,  or  across  the 
lines.  Wood  v.  Hartford  Ins.  Co.,  13 
Conn.  533,  35  Am.  Dec.  92;  Mc- 
Laughlin V.  Atlantic  Mut.  Ins.  Co.,  57 
Me.  170  (as  to  leakage  and  shifting  of 
cargo);  Patch  v.  Phoenix  Ins.  Co.,  4-4 
Vt.  481  (as  to  payment  of  premium 
notes);  or  on  a  slip  attached  to  the 
policy,  Home  Ins.  Co.  v.  Can/,  10  Tex. 
Civ.  App.  300,  31  S.  W.  32i;  or  on  a 
separate  paper  expressly  referred  to  in 
policy,  and  made  part  thereof,  Wood  v. 
Hartford  Fire  his.  Co.,  13  Conn.  533, 
545,  35  Am.  Dec.  92.  An  indorsement 
upon  the  back,  however,  is  not  suffi- 
cient, unless  it  is  expressly  made  a  part 
of  the  contract,  Murdock  v.  Chenango 
Co.  Mut.  Ins.  Co.,  2  Comst.  (N.  Y.)  210. 
The  words  "see  back"  will  not  avail  to 
incorporate  the  indorsement.  The  Ma- 
jestic, 166  U.  S.  375,  17  S.  Ct.  597.  As 
to  meaning  of  "indorsed,"  see  Rey- 
nolds V.  Atlas,  etc.,  Ins.  Co.,  69  Minn. 
93,  71  N.  W.  831  (application  was 
attached  to  the  policy  with  mucilage). 

2  Houghton  v.  Mfrs.  Mut.,  8  Mete. 
(Mass.)  '114,  41  Am.  Dec.  489;  Jeffer- 
son Ins.  Co.  V.  Cotheal,  7  Wend.  (N.  Y.) 
72,  22  Am.  Dec.  567. 

^  Kelly  V.  Life  Ins.  C.  Co.,  113  Ala. 
453,  21  So.  361  (warranted  no  previous 
application  for  other  insurance);  Kraus 
v.  Modern  Woodmen  (la.),  110  N.  W. 
452,  36  Ins.  L.  J.  323  (statement  as 
to  age);  Fitch  v.  Amer.  Popular  Life 
Ins.  Co.,  59  N.  Y.  557,  17  Am.  Rep. 
372.  Thus  the  words,  "Reference  is 
had  to  survey  No.  83  on  file,"  etc., 
were  held  to  incorporate  contents  of 


survey  as  representations  and  not  war- 
ranties, Sheldon  v.  Hartford  F.  Ins.  Co., 
22  Conn.  235,  58  Am.  Dec.  420.  Simi- 
larly in  Farmers'  his.  &  L.  Co.  v.  <Sny- 
der',m  Wend.  (N.  Y.)  481,  30  Am.  Dec. 
118;  Lebanon  Mut.  Ins.  Co.  v.  Losch, 
109  Pa.  St.  100;  but  held  warranties 
where  application  was  made  "part  of 
the  contract,"  Cushman  v.  U.  S.  Life 
Ins.  Co.,  63  N.  Y.  404;  Chaffee  v.  Catta- 
raugus, etc.,  Ins.  Co.,  18  N.  Y.  376; 
Car.so7i  V.  Jersey  City  Ins.  Co.,  43 
N.  J.  L.  300,  39  Am.  Rep.  584  {contra. 
Supreme  Council  v.  Brashears,  89  Md. 
624,  73  Am.  St.  R.  244);  or  the  "basis 
of  the  contract,"  Bobbitt  v.  L.  &  L.  & 
G.  Ins.  Co.,  66  N.  C.  70,  8  Am.  Rep. 
494;  Anderson  v.  Fitzgerald,  4  H.  L. 
Cas.  484;  or  "basis  and  a  part  of  the 
contract,"  Ellinger  v.  Mut.  Life  Ins. 
Co.  (1905),  1  K.  B.  31;  but  where 
policy  describes  the  answers  as  rep- 
resentations they  will  be  so  construed 
though  application  describes  them  as 
warranties,  Moulor  v.  Am.  Life  Ins. 
Co.,  HI  U.  S.  335,  4  S.  Ct.  466,  28 
L.  Ed.  447;  compare  Fell  v.  John  Han- 
cock Mut.  L.  Ins.  Co.,  76  Conn.  494, 
57  Atl.  175;  and  where  words  were 
"reference  being  had  to  the  applica- 
tion," etc.,  "which  forms  a  part  of  the 
policy  for  a  more  particular  descrip- 
tion of  the  property,"  held,  that  con- 
tents of  application  were  not  war- 
ranties but  merely  descriptive,  Cum- 
berland Valley  Mut.,  etc.,  Co.  v.  Mitch- 
ell, 48  Pa.  St.  374.  In  the  following 
cases  the  policy  expressly  made  the 
application  a  warranty,  Morris  v. 
Imperial  Ins.  Co.,  106  Ga.  461,  32  S.  E. 
595;  Thomas  v.  Farm  Ins.  Co.,  108  111. 
91;  Taylor  v.  ^tna  Ins.  Co.,  120  Mass. 
254;  Le  Roy  v.  Market  Fire  Ins.  Co.,  39 
N.  Y.  90;  Foley  v.  Royal  Arcanum,  78 
Hun,  222,  28  N.  Y.  Supp.  952.     But 


140 


cjENi!:wAL  riuxcii'i.iois  of  insukance  law 


§  107.  Nature  of  Warranties.— Finding  its  origin  in  the  law  of 
marine  insunuicc,  at  a  time  when  the  contract  was  comparatively 
simple,  tlu)Ufz;h  obscurely  expressed/  and  when  the  underwriter  was 
largely  at  the  mercy  of  the  insured  for  a  correct  description  of  the 
subject  and  the  voyage  insured,  the  rule  became  firmly  imbedded  in 
the  I'^ngiish  connnon  law,  that  the  insured  must  strictly  comply  with 
the  terms  of  his  warranties.  That,  with  some  tendency  to  relax  the 
excessive  stringency  of  the  rule,^  is  still  the  law.  To  the  fire  and  life 
insurance  companies,  whose  policies  are  drawn  less  favorably  to  the 
insured,  than  is  the  conventional  marine  policy,*"*  the  rule  is  handed 


statutes  have  Iwen  passed  providing; 
in  subst'Uice  that  the  application  must 
be  attached  to  the  p6licy,  or  physically 
incorporated,  to  form  part  of  the  con- 
tract, or  that  the  policy  must  contain 
the  entire  contract,  see  Appendix,  ch.  I 
and  Enff.  Mar.  Ins.  Act  (1906),  §  22. 
The  New  York  Ins.  L.,  §  .58,  provides, 
"every  policy  of  insurance  issued  or 
delivered  within  the  state  by  any  life 
insurance  corporation  doing  business 
within  the  state  shall  contain  the 
entire  contract,"  etc. 

1  Browfh  V.   Whitmore,  4  T.  R.  210. 

2  Certain  authorities  criticise  the 
common-law  rule,  regarding  it  as  too 
severe  vmder  modern  conditions,  May, 
Ins.  §  1.56;  Germania  Ins.  Co.  v.  Riid- 
wig,  80  Ky.  223,  234;  Westfall  v. 
Hudson  R.  Fire  Ins.  Co., 2  Duer  (N.  Y.), 
490.  And,  as  applied  to  fire  and  life 
policies,  a  few  courts  have  come  very 
much  to  the  conclusion  that  a  sub- 
stantial compliance  with  a  warranty, 
especially  a  promissory  warranty,  is 
sufficient,  .-Etna  Ins.  Co.  v.  Johnson 
(Ga.),  56  S.  E.  643;  Germania  Ins. 
Co.  V.  Rudwiq,  80  Ky.  223,  234; 
Scottish  Union  &  N.  Ins.  Co.  v.  Moore, 
36  Tex.  Civ.  App.  312;  TucLer  v. 
Colonial  F.  Ins.  Co.,  58  W.  Va.  30. 
To  make  this  distinction  because  the 
warranty  is  promissory  rather  than 
affirmative  seems  unsound. 

3  The  forms  of  fire  policies,  and  con- 
spicuously those  in  u.se  prior  to  the 
adoption  of  the  standard,  were  occu- 
pied mainly  with  numerous  restric- 
tive stipulations,  printed  in  very  small 
type,  in  effect  agreements  as  to  what 
the  insured  mast  do  and  as  to  what 
the  insurer  icould  not  do.  The  New 
Hampshire  court  by  its  Chief  Justice 
graphically  pictured  and  scathingly 
criticised  such  a  form  in  De  Laney  v. 
Rockingham  Mut.  F.  Ins.  Co.,  52  N.  H. 


581.  These  fine  print  conditions, 
rarely  read,  were  fraught  with  danger 
to  the  unsuspecting  policy  holder. 
The  New  York  court  described  them 
as,  "crouched  unseen  in  the  .jungle  of 
printed  matter  with  which  a  modern 
policy  is  overgrown,"  Van  Schoick  v. 
Niagara  Fire  Ins.  Co.,  68  N.  Y.  434. 
On  the  other  hand,  before  the  adoption 
of  the  memorandum  clause,  the  con- 
ventional marine  policy,  in  addition 
to  the  privilege  granted  to  the  insured 
known  as  the  sue  and  labor  clause,  was 
occupied  almost  exclusively  with  state- 
ments of  what  the  undenvriters  would 
do,  in  respect  to  parties,  subject- 
matter,  and  voyage  described.  But 
the  deficiency  of  restrictive  clauses  in 
the  conventional  marine  policy  was 
perhaps  more  than  compensated  for 
by  maritime  custom  and  by  a  strict 
enforcement  of  the  canons  of  insurance 
law  in  favor  of  the  marine  underwriter. 
The  exacting  common-law  rule  re- 
garding concealments  and  misrepre- 
sentations by  the  insured  was  ex- 
plained in  the  last  chapter.  By  legal 
inference  the  insured  was  obliged  also 
to  act  in  good  faith  generally  in  matters 
appertaining  in  any  way  to  the  risk; 
and  the  marine  underwriter  was  given 
the  full  benefit  of  this  doctrine  during 
the  entire  life  of  his  contract.  Further- 
more, a  warranty  of  seaworthiness  was 
implied  in  the  voyage  policy,  and 
another  warranty  was  inferred  in  both 
voyage  and  time  policies  that  the 
customary  course  of  the  voyage 
should  be  pursued.  While  certain  of 
our  state  courts  have  vied  with  one 
another  in  finding  excuses  for  depriv- 
ing fire  insurance  companies  of  timely 
and  adequate  proofs  of  loss,  and 
reasonable  contract  methods  of  in- 
vestigating the  nature  and  extent  of 
the  loss,  the  English  common  law,  even 


NATURE   OF    WARRANTIES 


141 


down  from  the  law  of  marine  insurance  as  an  inheritance  not  alto- 
gether deserved,^  but  is  nevertheless  well  established.  A  warranty,  in 
general,  must  be  exactly  true  or  fully  performed,  or  the  assured  will 
forfeit  his  rights."  The  validity  of  the  policy  is  conclusively  pre- 
sumed to  depend  upon  a  fulfillment  of  the  warranties,  unless  waived, 
because  the  parties  by  their  contract  have  so   stipulated."''     It  is 


in  the  absence  of  express  or  stat- 
utory provision,  inferred  a  duty 
resting  upon  the  insured  to  make  a  full 
disclosure,  after  his  marine  loss,  of 
evidential  facts  relating  to  his  claim 
against  the  underwriter,  Boidton  \. 
Houlder  Bros.  (1904),  1  K.  B.  784. 
And  by  maritime  custom  goods  stowed 
on  deck  were  not  covered  by  a  policy 
on  ocean  transit,  Blackett  v.  Royal 
Exch.  (1832),  2  Cr.  &  J.  250.  A  com- 
parison of  two  cases,  one  in  marine 
and  the  other  in  fire  insurance  law, 
will  be  found  instructive,  Tate  v. 
Hyslop  (1885),  15  Q.  B.  D.  368;  Pelzcr 
Co.  V.  Sun.  Fire  Office,  36  S.  C.  213. 
Both  involved  the  non-disclosure  of 
the  release  by  the  insured  of  what 
might  otherwise  have  afforded  the 
underwriter  the  right  of  subrogation 
for  his  reimbursement.  In  the  fire 
policy  was  the  express  warranty  on 
the  subject.  In  the  marine  policy 
there  was  none.  In  both  cases  the 
issue  of  materiality  of  the  fact  con- 
cealed was  submitted  to  the  jury. 
But  in  the  marine  case  we  have  a  court 
friendly  to  the  underwriter.  In  the 
other,  despite  the  express  warranty, 
we  have  a  court  friendly  to  the  in- 
sured. Under  the  marine  policy  the 
underwriter  establishes  his  defense. 
Under  the  fire  policy,  the  insurance 
company  is  defeated  and  the  insured 
wins    out. 

1  Considering  that  the  New  York 
statutory  fire  policy  is  framed  for  all 
cases  it  is,  in  the  main,  fairly  drawn. 
Legible  type  is  prescribed.  In  individ- 
ual instances,  the  provision  against 
any  "other  insurance,"  rather  than 
over  or  excessive  insurance,  is  stringent 
and  works  injustice,  also  the  provision 
including  in  the  contribution  clause 
invalid  and  uncollectible  other  in- 
surance; also  the  provision  annulling 
the  contract,  rather  than  suspending 
liability  of  the  insurer,  during  the 
continuance  of  an  innocent  breach  un- 
connected with  the  loss;  also  the  re- 
quirement of  a  magistrate's  certificate 
as  a  condition  precedent,  when  called 


for  by  the  insurer;  and  certain  other 
particulars.  The  principal  cause  of 
just  criticism  by  the  courts,  however, 
has  arisen  from  the  fact  that  many 
fire  and  life  insurance  companies  have 
been  too  much  in  the  habit  of  en- 
forcing against  meritorious  claimants 
technical  provisions  of  their  policies, 
devised  as  a  needed  protection  against 
fraudulent  claims. 

-  Western  Assur.  Co.  v.  Altheimer,  58 
Ark.  565,  25  S.  AV.  1067;  Dimick  v.  Met. 
L.  his.  Co.,  67  N.  J.  L.  367,  51  Atl.  692; 
Dunjcr  v.  Mid.  L.  Ins.  Co.,  72  N.  H. 
572,  58  Atl.  502;  Met.  L.  Ins.  Co.  v. 
Hoivle,  62  Ohio  St.  204,  56  N.  E.  909. 
The  United  States  Supreme  Court  says: 
"For  a  comparatively  small  considera- 
tion the  insurer  undertakes  to  guar- 
antee the  insured  against  loss,  upon  the 
terms  and  conditions  agreed  upon  and 
upon  no  other.  ...  If  the  insured 
cannot  bring  himself  within  the  condi- 
tions of  the  policy  he  is  not  entitled  to 
recover  for  the  loss.  .  .  .  The  com- 
pliance of  the  assured  with  the  terms  of 
the  contract  is  a  condition  precedent  to 
the  right  of  recovery.  .  .  .  The  courts 
may  not  make  a  contract  for  the  par- 
ties. Their  function  and  duty  consist 
simply  in  enforcing  and  carrying  out 
the  one  actually  made,"  Imperial  Fire 
Ins.  Co.  V.  Coos  Co.,  151  U.  S.  452,  462, 
14  S.  Ct.  379,  38  L.  Ed.  231. 

'^  Mtna  L.  Ins.  Co.  v.  France,  91 
U.  S.  510,  23  L.  Ed.  401;  McKenzie  v. 
Scot.  Union  &  Nat.  Ins.  Co.,  112  Cal. 
548,  44  Pac.  922;  Hoover  v.  Royal 
Neighbors,  65  Kan.  616,  70  Pac.  595; 
Gennier  v.  Ins.  Co.,  109  La.  341,  33  So. 
361.  The  New  York  Court  says:  "The 
breach  of  an  express  warranty,  whether 
material  to  the  risk  or  not,  whether  the 
loss  happens  through  the  breach  or  not 
absolutely  determines  the  policy  and 
the  assured  forfeits  his  rights  there- 
under," Coqsvell  V.  Chnbb,  1  App.  Div. 
93,  36  N.  Y.  Supp.  1076,  aff'd  on  opin- 
ion, 157  N.  Y.  709.  "Whether  a  state- 
ment is  a  representation  or  a  warranty 
is  for  the  court.  The  question  of  the 
materiality  of  a  warranty  cannot  in  any 


I  J.J  GENERAL   PRINCIPLES   OF    INSURANCE   LAW 

important,  therefore,  to  grasp  the  legal  notion  that,  by  the  pre- 
\ailing  rule,  a  compliance  with  the  terms  of  a  warranty,  whether  in 
its  nature  aairmative  or  promissory,  is  a  condition  precedent  to  a 
right  of  recovery  under  the  policy.  If  an  affirmative  warranty, 
whether  express  or  implied,  is  broken  the  policy  never  attaches  to 
the  risk  at  all.  The  contract  is  dead  from  its  inception,  and  can  be 
resuscitated  only  by  the  free  grace  or  voluntary  action  of  the  insurer. 
If  a  promissory  warranty  is  broken,  the  contract  likewise  is  termi- 
nated from  the  time  of  the  breach,  unless,  as  before  stated,  the 
(•(Mupany  chooses  to  condone  the  default,  since  the  future  performance 
promised  is  a  condition  precedent  to  the  continuance  of  the  contract. ^ 
For  example,  where  the  warranty  related  to  the  cause  of  the  death 
of  the  father  of  the  assured  ^  or  to  an  application  for  other  life  in- 
surance,-''  or  asserted  that  the  beneficiary  was  husband  of  the  in- 
sured,^ or  that  insured  w^as  "never  an  inmate  of  a  hospital,'"'  al- 
though in  all  these  instances,  had  it  been  permissible  to  submit  such 
an  issue  to  the  jury,  the  jury  might  easily  have  found  that  the  matter 
warranted  was  immaterial;  nevertheless,  the  policy  was  avoided 
because  of  the  misstatement.^  And  so  likewise  a  breach  avoids  the 
fire  policy  although  the  prohibited  act  be  committed  by  a  tenant 
without  the  knowledge  or  consent  of  the  assured.'  Accordingly  it 
will  be  observed  that  motive,  honest  belief,  good  faith  of  the  assured 
are  all  irrelevant,  if  it  appear  that  a  warranty  has  been  violated.* 
Nor  will  it  matter  that  the  breach  in  nowise  contributed  to  the  loss.** 

event  be  either  a  question  for  the  court  857    (storing  of  oils   without   wTitten 

or  jury  because  it  is  upon  the  Uteral  permission);     Thuringia    Ins.     Co.    v. 

truth  of  a  warranty  that  the  vaUdity  Norwaysz,  104  111.  App.  390;  Badger  v. 

of  the  policy  depends   without  refer-  Platts,  68  N.  H.  222.  44  Atl.^  29G,  73 

ence  to  its  materiality, "/?oi/aZ.Vei(7/i6ors  Am.  St.  R.  572  (naphtha);  Kohlmann 

V.  WallaceM  Neb.  543,  92  N.  W.  897.  v.  Selvage,  34  App.  Div.  380,  54  N.  Y. 

1  But    bv   the   express   terms    of    a  Supp.  230  (gasoline) ;  Long  v.  Bceber, 

policy,  as  m  the  case  of  the  New  York  106  Pa.  St.  466,  51  Am.  Rep.  532;  but 

standard   fire    policy,    a    breach   of    a  see    special    clause    in    standard    fire 

promissory  warranty  also  may  avoid  policy  avoiding  policy,  if  the  hazard 

the  entire' contract.  "  be  increased  by  any  means  unthin  the 

'^  Metropolitan     Life     Ins.     Co.     v.  control  or  Icnowledge  of  the  insured. 
Rutherford,  98  Va.  195,  35  S.  E.  361.  »  Met   Life  Ins.  Co.  v.  Schmidt  (Ky., 

sKelbi  V.  Life  Ins.  C.  Co.,  113  Ala.  June,  1906),  93  S.  W.   1055   (disease 

453,  21  So.  361.  of  certain  organs;  falsity  avoids  regard- 

i  Makel  v.  Hancock  M^it.  L.  Ins.  Co.,  less  of  applicant's  belief);    Clemans  v. 

95  App.  Div.  241,  88  N.  Y.  Supp.  757;  Supreme  Assembly,  131  N.  Y.  485,  30  N. 

or  wife,  Gaines  v.  Fidelity  &  Cas.  Co.,  E.  496, 16  L.  R.  A.  33  (application  for 

111  App.  Div.  386,  97  N.  Y.  Supp.  836.  other  insurance);   Schwarzbach  v.  Ohio 

5  Farrell  v.  Security  Mut.  L.  Ins.  Co.,  Valley,  etc..  Union,  25  W.  Va.  622,  52 
125  Fed.  684,  60  C.  C.  A.  374.  Am.  Rep.  227  (hab.s,  etc.);    Boyle  v. 

6  See  findings  of  jury  and  reversal  on  Northwestern  Mut.  Assn.,  95  Wis.  312, 
appeal  in  McGou-an  v.  Supreme  Court,  70  N.  W.  351  (warranty  "sound 
104  Wis.  173,  80  N.  W.  603.  health"). 

^  Gunther  v.  L.  &  L.  &  G.  Ins.  Co.,  9  Bank  of  Balston  Spa  v.  Ins.  Co.,  50 

134  U.  S.  110,  10  S.  Ct.  448,  33  L.  Ed.      N.  Y.  45. 


NATURE   OF  WARRANTIES  143 

Thus,  in  an  early  case  where  the  words  "in  port  20th  July,  1776," 
were  written  in  the  margin  of  the  policy,  the  ship  in  fact  had  sailed 
on  the  18th  of  July,  and  Lord  Mansfield  held  that  a  breach  of  warranty 
was  established,  though  the  discrepancy  of  two  days  might  make 
no  material  difference  in  the  risk.*  Striking  illustrations  of  the  same 
legal  doctrine  may  be  gathered  from  recent  decisions. 

In  an  Arkansas  case  the  application  was  made  part  of  the  contract 
of  fire  insurance  and  warranted  by  the  insured.  In  it  he  stated  that 
his  house,  on  which  he  requested  a  policy  of  $1,200,  cost  $2,000,  when 
in  fact  it  cost  but  $1,700.  About  this  fact  there  was  no  dispute  for 
the  jury.  The  plaintiff  had  admitted  it.  This  slight  discrepancy, 
however,  seemed  wholly  immaterial,  inasmuch  as  the  policy  amounted 
only  to  $1,200,  considerably  less  than  the  actual  cost.  Nevertheless 
the  majority  of  the  court,  after  lucidly  explaining  the  difference 
between  a  representation  and  a  warranty,  adjudged  the  policy  void.' 

In  a  New  York  case,  nearly  contemporaneous  with  the  last,  the 
decedent,  the  insured,  had  stated  in  his  application  for  an  accident 
policy,  that  the  plaintiff,  named  as  beneficiary,  was  his  wife.  In 
fact  she  was  living  with  him,  and  indeed  had  married  him,  but  had 
a  prior  husband  living.  The  jury  was  obliged  to  find  as  matter  of 
fact  that  she  was  not  a  lawful  wife.  Her  counsel  contended  that  the 
private  affairs  of  this  couple  were  of  no  concern  to  the  insurance 
company  and  that  the  statement  in  the  application  was  substantially 
correct,  but  the  court,  without  dissent,  as  matter  of  law,  concluded 
that  the  warranty  had  been  broken  and  the  insurance  forfeited.^ 

1  Beati  V.  Stupart,  Doug.  12  (note).  Oct.  1  and  Apl.  1,"  in  Birrell  v.  Dryer 
A  ship  warranted  to  sail  from  A.  with  (1884),  9  App.  Cas.  345.  "Warranted 
"50  hands  or  upwards,"  starts  with  46  not  to  proceed  east  of  Singapore"  in 
only  but  afterwards  takes  on  6  more;  Simpson  S.  Co.  v.  Premier,  etc.,  Assn. 
policy  is  avoided,  De  Hahn  v.  Hartley  (1905),  10  Com.  Cas.  198;  "Sailing  on 
(1786),  1  T.  R.  343.  Insurance  on  ship  or  after  Mch.  1"  in  Sea  Ins.  Co.  v. 
and  cargo  at  and  from  Genoa  to  Dubhn,  Blogg  (1898),  1  Q.  B.  27;  "Warranted 
adventure  to  begin  from  loading  to  no  iron  in  excess  of  registered  tonnage ' ' 
clear  for  voyage.  Lord  Mansfield  held  in  Hart  v.  Stand.  M.  Ins.  Co.  (1S89),  22 
that  these  words  warranted  that  vessel  Q.  B.  D.  499  ("iron"  includes  steel); 
had  loaded  or  would  load  at  Genoa;  "Warranted  uninsured"  above  stated 
and  as  it  appeared  she  had  not  done  so,  amount;  the  other  insurance  con- 
but  at  Leghorn,  policy  was  avoided,  sisted  of  honor  policies,  in  Roddick  v. 
Hodgson  v.  Richardson,  1  W.  Bl.  463.  Ins.  Co.  (1895),  2  Q.  B.  380;  insurer  in- 
A  marine  policy  contained  the  clause,  solvent  in  General  Ins.  Co.  v.  Cory 
"warranted  to  navigate  only  inland  (1897),  1  Q.  B.  335. 
waters  of  United  States  and  Canada  -  Capital  Fire  Itis.  Co.  v.  King 
and  not  below  the  Thousand  Islands;"  (Ark.,  1907),  102  S.  W.  194  (a  sug- 
the  vessel  sailed  on  the  ocean  at  least  gestive  dissenting  opinion  in  which 
ten  miles  below  Sandy  Hook  Light-  two  judges  as  matter  of  construction 
house,  but  received  no  injury  there;  sought  to  invoke,  in  favor  of  the  in- 
Held,  the  policy  was  forfeited,  Cogswell  sured,  the  express  warranty  regarding 
V.  Chubb,  1  App.  Div.  93,  36  N.  Y.  misrepresentations  of  material  facts). 
Supp.  1076,  afT'd  157  N.  Y.  709.  ^Gaines  v.  Fidelilu  &  Caa.  Co.,  188 
"Warranted  no  St,  La'WTence  between  N.  Y.  411,  81  N.  E.   160.     ("It  is  -a 


144  GENERAL   PRINCIPLES   OF   INSURANCE   LAW 

In  the  last  two  instances  affirmative  warranties  were  violated. 
The  contracts,  therefore,  were  void  from  inception;  but  in  a  Penn- 
sylvania case,  a  householder  had  succeeded  in  procuring  a  valid 
insurance  in  standard  form  upon  his  household  goods.  On  the  day 
before  the  Fourth  of  July  he  bought,  for  use  on  the  Fourth,  a  lot  of 
assorted  fireworks,  which  with  his  knowledge  were  put  in  his  parlor 
overnight.  By  accident  they  ignited  there  and  caused  the  damage. 
The  policy  provides  that  it  shall  be  void  "if  there  be  kept,  used  or 
allowed  on  the  above  described  premises  benzine  .  .  .  fireworks,"  etc. 
Counsel  for  the  insured  claimed  that  this  proliibition  was  aimed  at  a 
prolonged  use  or  keeping,  and  urged  that  a  temporary  and  incidental 
use  of  benzine  or  fireworks  would  have  no  more  effect  on  the  policy 
than  if  a  stranger  drove  across  the  premises  with  gasoline  in  a  grocery 
wagon  or  in  an  automobile.  But  the  court  decided  that  the  prom- 
issory warranty  had  not  been  fulfilled.  As  a  result  the  insurance 
Avas  at  an  end,  and  the  judgment  granted  below  in  favor  of  the 
plaintiff  was  reversed.^ 

The  Virginia  court  furnishes  another  aspect  of  the  same  warranty. 
The  insured,  the  defendant  in  error,  but  plaintiff  below,  having 
erected  his  building  upon  a  pier  built  upon  the  bed  of  Chesapeake 
Bay,  rented  it  to  one  Livingston  who,  without  consulting  with  the 
insured,  gave  permission  to  a  man  by  the  name  of  Wells  to  set  off 
fireworks  on  the  pier  on  the  night  of  the  Fourth.  The  insured 
building  was  ignited  and  damaged  in  consequence.  Here  not  only 
was  the  forbidden  use  temporary,  but  the  insured,  having  no  knowl- 
edge of  it,  was  no  more  at  fault  than  he  would  have  been  if  his  house 
had  been  struck  by  lightning.  Nevertheless,  the  warranty  against 
the  use  of  fireworks  on  the  premises  had  not  been  kept,  and  the  re- 
covery by  the  insured  below  was  reversed  on  appeal." 

And  if  the  insured  by  his  fire  policy  warrants  that  there  is  no  other 
insurance  upon  the  property,  the  statement,  if  untrue,  will  avoid 
the  policy,  though  made  by  the  insured  in  ignorance  of  the  fact,  and 
though  wholly  immaterial  in  influencing  the  insurers.^  And  if  by 
his  contract  of  life  insurance  he  warrants  that  he  was  not  engaged 

general  rule  .  .  .  that  the  materiality  all  controversy  about  the  materiality 

of  the  fact  stated  by  the  assured  is  of  or  immateriality  of  the  statement.   ) 

no    consequence,    if    the    contract    be  ^  Heron  v.  Phcenix  Mut.  F.  Ins.  Co., 

that  the  matter  is  as  represented,  and  180  Pa.  St.  257,  36  Atl.  740,  36  L.  R. 

that  unless  it  prove  so,  whether  from  A.  517,  57  Am.  St.  R.  638. 

fraud,   mistake,    negligence    or    other  2  Westchester  F.   Ins.    Co.   v.   Ocean 

cause,    not    proceeding    from   the    in-  View  Pleasure  Pier  Co.    (Va.,   1907), 

surer,  or  the  intervention  of  the  law,  56  S.  E.  584. 

or  the  act  of  God,  the  assured  can  ^  Allen  v.  German-Am.  Ins.  Co.,  123 

have  no  claim.  .  .  .  One  of  the  very  N.  Y.  6,  25  N.  E.  309;  or  if  he  omits  to 

objects  of  the  warranty  is  to  preclude  state  one  of  the  incumbrances  upon  his 


WARRANTIES   CONTRASTED   WITH    REPRESENTATIONS  145 

in  selling  liquor,  the  validity  of  the  policy  will  depend  upon  the  truth 
of  the  statement.^  If,  however,  the  insured  warrants  that  his  build- 
ing is  "used  for  the  storage  of  ice,"  that  may  be  quite  true,  although 
at  the  time  of  the  commencement  of  the  risk  there  is  no  ice  there.^ 

The  clauses  of  the  policies  set  forth  in  Part  Second  of  this  treatise 
will  supply  numerous  examples  of  warranties. 

108.  Inability  to  Fulfill  no  Excuse. — The  inability  of  the  insured 

to  comply  with  the  requirements  of  his  warranties  offers  no  excuse, 
unless  the  insurers  are  in  some  way  responsible  for  the  omission.^ 

The  insurers  have  promised  to  pay  only  upon  condition  that  the 
insured  shall  fulfill  the  contract  upon  his  part,  not  upon  condition 
that  he  shall  find  it  convenient  or  possible  to  do  so.'* 

Sickness,  insanity,  death,^  and,  according  to  some  authorities, 
even  war  ^  will  furnish  no  excuse  for  the  violation  of  a  condition  in 
the  policy.  But  the  United  States  Supreme  Court  and  other  courts 
have  adopted  the  rule,  that  a  war  overrides  the  ordinary  obligations 
of  the  policy,  and  simply  suspends  them  until  the  war  is  terminated. 
However  reasonable  this  rule  may  be,  considered  logically,  it  is  in- 
convenient and  difficult  to  apply,  and  the  life  policy  may  furnish 
some  exception.'^ 

§  109.  Warranties  Contrasted  with  Representations. — As  previ- 
ously shown,  a  representation,  technically  speaking,  is  a  collateral 
inducement  which,  if  substantially  true,  or  if  immaterial  in  its  in- 
fluence upon  the  mind  of  the  underwriter,  will  furnish  no  ground  for 
avoiding  the  contract,  while  a  warranty  is  a  stipulation  of  the  con- 
tract itself,  to  be  rigidly  enforced  according  to  its  terms;*  but  the 

property,  in  answer  to  a  question  in  the  N.  Y.  389;  O'Brien  v.  Commercial  Ins. 
application  calling  for  them,  the  policy  Co.,  63  N.  Y.  108;  Bumstead  v.  Dirt- 
will  be  vitiated  if  the  answer  is  war-  dend  Mut.  Ins.  Co.,  12  N.  Y.  81. 
ranted  to  be  full,  although  the  jury  ^  Thompson  v.  Ins.  Co.,  104  U.  S. 
find  the  fact  to  be  immaterial,  Bow-  252;  Carpenter  v.  Centennial  Mut.  Life 
ditch  Mut.  Ins.  Co.  v.  Winslow,  3  Gray  Ins.  Co.,  68  Iowa,  453,  27  N.  W.  456; 
(Mass.),  415.  Howell  v.  Knickerbocker  Life,  44  N.  Y. 

1  Dwight  V.  Germania  Life  Ins.  Co.,  277. 

103N.  Y.  341,8N.  E.  654,57Am.  Rep.  ^Worthington   v.    Charter   Oak  Life 

229.  /?i^\  Co.,  41  Conn.  401. 

2  Dolliver  v.  St.  Joseph's  Fire  and  ^  v.  Y.  Life  his.  Co.  v.  Statham,  93 
Marine  his.  Co.,  131  Mass.  39.  U.  S.  24;  Semmes  v.  Hartford  Ins.  Co., 

3  "Accident,  mistake  and  misfor-  13  Wall.  (U.  S.)  158;  Cohen  v.  Mut. 
tune"  no  excuse,  Johnson  v.  Cos.  Co.,  Life  Ins.  Co.,  50  N.  Y.  610. 

73  N.  H.  259,  262,  60  Atl.  1009.  s  Thus   New  York   court  says:   "A 

■1  School  District  v.  Dauchy,  25  Conn.  representation  is  collateral  to  the  con- 

530;  Evans  v.  U.  S.  Life  Ins.  Co.,  64  tract  and  to  be  effective  must  be  ma- 

N.  Y.  304;  but  as  to  relaxation  of  the  terial    to    the    risk,  but    a    warranty, 

rule  respecting  requirements  after  loss  whether  material  or  not,  being  part  of 

see  McNally  v.  Phcenix  Ins.  Co.,  137  the  contract  has  the  force  of  a  condi- 

10 


146  GENERAL   PRINCIPLES   OF   INSURANCE   LAW 

bare  mention  of  these  propositions  in  the  abstract  fails  to  explain 
or  to  lay  proper  emphasis  upon  a  distinction  of  great  practical 
moment  to  be  drawn  between  a  representation  and  a  warranty. 
Tliis  distinction  is  better  defined  in  the  statement  that,  if  the  decisive 
issue  on  trial  involve  an  inquiry  either  as  to  the  substantial  truth  or 
as  to  the  materiality  of  a  representation,  the  right  to  determine 
the  case  is  apt  to  be  taken  from  the  court  and  carried  over  to  the 
jury.  Very  much  the  same  result  often  follows  where  the  decisive 
statement  or  representation,  although  made  part  of  the  contract 
itself,  because  of  some  special  phraseology  connected  with  it,  is 
construed  by  the  court  to  fall  short  of  a  warranty. 

Thus,  for  example,  under  the  standard  fire  policy  personal  prop- 
erty is  warranted  free  of  any  chattel  mortgage  without  written 
permit.  The  property,  in  a  given  instance,  is  so  incumbered.  The 
fact  is  indisputable,  for  the  defendant  on  the  trial  produces  from  the 
record  a  certified  copy  of  the  mortgage.  In  this  situation  of  the  case 
the  trial  judge  has  no  discretion.  He  must  dismiss  the  complaint 
of  the  assured  ^  or  direct  a  verdict  for  the  defendant  as  matter  of 
law,^  since  a  warranty  has  been  broken.  So  also  if  the  policy  by 
express  incorporation  of  an  application  contain  a  warranty,  shown 
to  be  untrue,  that  the  building  is  unincumbered.^  But  the  New 
York  standard  fire  policy  by  its  own  terms  contains  no  warranty 
respecting  incumbrances  upon  real  estate,  therefore  the  materiality 
of  any  innocent  misrepresentation  regarding  a  real  estate  mortgage 
or  other  lien  on  a  building,  whether  uttered  orally,^  or  appearing  in 
a  written  application  which  is  not  incorporated  into  the  contract  as 
a  warranty,^  must,  in  general,  be  submitted  to  the  decision  of  the 
jury,^  unless  the  misstatement  is  so  important  and  so  erroneous  as 
to  be  unquestionably  misleading.''' 


tion  precedent,  and  unless  it  is  true,  the  586;  and  see  Strong  v.  Mfrs.  Ins.  Co., 

insurer  is  not  bound  by  his  promise,"  10  Pick.  (Mass.)  40,  at  p.  44. 

Donley   v.    Glens   Falls   Ins.    Co.,    184  ^  Lebanon  Mut.  Ins.  Co.  v.  Losch,  109 

N.  Y.  107,  113,  76  N.  E.  914.  Pa.  St.  100. 

iCrikelair  v.  Ins.  Co.,  168  111.  309,  ^  Fidelity  &  Cas.  Co.  v.   AlpeH,  67 

48  N.  E.  167,  61  Am.  St.  R.  119  (unless  Fed.  460,  14  C.  C.  A.  474,  28  U.  S.  App. 

there  is  a,  w&iver);  Broum  Y.Westchester  393;    and    see    Columbia    Ins.    Co.    v. 

Fire  his.  Co.,  9  Kan.  App.  526,  58  Pac.  Lawrence,  10  Pet.  (U.  S.)  507,  515. 

276.  7  Eyan  v.  Springfield  F.  &  M.  Ins. 

2  Olney  v.  German  Ins.  Co.,  88  Mich.  Co.,  46  Wis.  671.    Where  a  disclosure 

94,  26  Am.  St    R.  281,  50  N.  W.  100.  of  incumbrances  is  expressly  called  for 

,     3  Gould  V.    York  County  Mut.   Ins.  by  the  printed  terms  of  an  application 

Co.,  47  Me.  403;  Smith  v.  Agricultural  blank,  Davenport  v.  New  Eng.  Mut.  F. 

Ins.  Co.,  118  N.  Y.  522,  23  N.  E.  883;  Ins.  Co.,  6  Cush.  (Mass.)  340;  or  by  the 

Kcng  V.  Tioga  Co.,  etc.,  Assn.,  35  App.  by-laws  of  a  mutual  company,  Hay- 

Div.  58,  54  N.  Y.  Supp.  1057.  ward  v.  New  England  Mut.  F.  Ins.  Co., 

■i  Buch  V.  Phoenix  Ins.  Co.,  70  Me.  10  Cush.  (Mass.)  444;  Toume  v.  Fitchr 


WARRANTIES   CONTRASTED   WITH   REPRESENTATIONS  14V 

Again,  the  application  for  a  life  policy  often  contains  many  in- 
quiries respecting  the  habits  of  the  insured,  and  the  physical  con- 
dition, past  or  present,  of  himself  and  relatives,  the  answers  to 
which,  written  in  by  the  company's  agent,  are  often  more  or 
less  erroneous.^  Where  the  accuracy  of  the  answers  is  warranted 
by  the  terms  of  the  policy  the  plaintiff's  case,  in  the  absence  of  an 
incontestable  clause  or  of  a  waiver,  is  frequently  hopeless,  but  the 
jury,  if  allowed  to  pass  upon  the  question,  is  apt  to  regard  such 
innocent  mistakes  as  immaterial,  no  matter  how  influential  they  may 
in  reality  have  been  with  the  underwriters.  Therefore,  if  the  court 
is  able  to  rule  that  under  the  terms  of  the  contract  in  its  entirety 
the  misstatements  are  to  be  construed  as  representations  rather 
than  warranties,"  the  plaintiff  may  look  forward  with  considerable 
confidence  to  a  recovery.^  An  important  illustration  of  this  dis- 
tinction is  to  be  found  in  a  recent  Massachusetts  case  in  which  the 
court  concluded  that  the  usual  sprinkler  clause,  frequently  made  a 
part  of  the  standard  fire  policy,  is  not  a  warranty,  but  a  mere  rep- 
resentation to  the  effect  that  due  diligence  shall  be  exercised  to  keep 
up  the  sprinkler  equipment.  Accordingly,  there  also  the  jury  was 
allowed  to  find  for  the  plaintiff,  although  the  facts  relating  to  the 
condition  of  the  equipment  were  substantially  without  dispute.^ 

In  the  interest  of  essential  justice,  while  giving  adherence  to  the 
common-law  doctrine  respecting  warranties  in  policies  of  insurance, 
many  courts  have  felt  impelled,  with  the  object  of  tempering  its 
harshness,  to  adopt  certain  special  countervailing  rules  in  the  in- 
terest of  the  insured.  These  form  the  subject  of  the  next  three 
chapters,  and  also  of  following  sections  in  this  chapter.  They  are 
in  a  measure  exceptional  in  their  character,  and  naturally  have 
invited  a  lack  of  uniformity  in  the  decisions  relating  to  them  and  an 

hurg  Mut.  F.  Ins.  Co.,  7  Allen  (Mass.),  be  material,  Kerr  v.  Union  Mar.  Ins. 

51,    that    circumstance    will    go    far  Co.,  130  Fed.  415,  64  C.  C.  A.  617. 

towaxds  making  material,  as  matter  of  i  Piedmont    &    A.    L.    Ins.    Co.    v. 

law,  any  substantial  misrepresentation  Ewinq,  92  U.  S.  377,  23  L.  Ed.  610; 

regarding  liens  or  their  amovmt  whether  Ihiion  Mut.  L.  Ins.  Co.  v.  Wilkinson, 

the  application  is  made  part  of  con-  13  Wall.  222,  20  L.  Ed.  617. 

tract  or  not.    The  same  is  true  regard-  -  Moulor  v.  Am.  Life  Ins.  Co.,  Ill 

ing  any  other  fact  expressly  called  for  V.  S.  335;  4  S.  Ct.  466;  Vivar  v.  Sii- 

by  an  application,  Vivar  v.  Knights  of  preme  Lodge,  52  N.  J.  L.  455,  20  Atl. 

Pythias,  52   N.  J.  L.  455,  20   Atl.  36;  36. 

Campbell  v.   Neic  England  Mut.   Life  ^  Fitch  v.  Ain.  Popular  Life  hi^.  Co., 

Ins.  Co.,  98  Mass.  381,  406  ("spitting  59  N.  Y.  557,  17  Am.  Rep.  372;  Mc- 

of  blood");  L^itz  V.  Met.  Life  Ins.  Co.,  Gowan  v.  Supreme  Court,  104  Wis.  173, 

186  Pa.  St.  527  ("never  sick,"  "never  80   N.   W.   603.      Jury  excused  many 

consulted     physician,"     held,     clearly  such  misstatements  in  last  two  cases 

material).     Where  specific   inquiry  is  though  some  of  them  were  serious, 

made,  for  instance,  for  date  of  sailing,  ^  F idler  v.  N.  Y.  Fire  Ins.  Co.,  184 

court  may  conclusively  presume  it  to  Mass.  12,  67  N.  E.  879. 


148  GENERAL    PRINCIPLES   OF    INSURANCE    LAW 


unfortunate  conlrariet.v  of  judicial  opinion.  They  include  such 
principles  of  insurance  law  as  these:  (1)  that  while  the  insured  must 
strictly  fulfill  his  warranty,  yet,  in  arriving  at  the  meaning  and 
scope  of  the  warranty,  special  emphasis  will  be  given  to  the  doctrine 
that  any  doubt  or  ambiguity  discoverable  in  the  language  used 
will  be  resolved  against  the  insurer;  (2)  that  expressions  showing 
on  their  face  that  they  are  merely  conjectural  are  no  part  of  the 
warranty;  (3)  that  a  statement  of  present  use  is  not  necessarily  a 
warranty  of  continuance;  (4)  that,  to  limit  forfeiture  to  a  part  of  the 
subject-matter  insured,  the  court  will  strive  to  construe  the  contract 
as  severable  or  divisible  into  two  or  more  insurances;  holding  the 
breach  of  warranty  applicable  only  to  the  portion  really  affected 
by  the  breach;  (5)  the  moot  doctrine  that  a  temporary  breach, 
unconnected  with  a  loss  in  time  or  in  causal  relation,  suspends 
liability  of  the  underwriter  during  its  continuance,  but  does  not 
altogether  avoid  the  poUcy;  (6)  waiver  and  estoppel. 

§  110.  In  Interpreting  Warranties,  Courts  Lean  Towards  the 
Insured. — Wartanties  form  a  large  part  of  many  policies.  The 
general  rules  applicable  to  the  construction  of  the  insurance  contract, 
and  mentioned  heretofore,  apply  to  them.  What  the  insured 
warrants  to  be  a  fact,  must  be  true.  What  he  warrants  to  do,  must 
be  performed;  but  in  determining  what  it  is  that  is  affirmed  or 
promised,  there  is  sometimes  room  for  latitude,  and  in  the  prelimi- 
nary inquiry  to  settle  the  meaning  and  scope  of  the  warranty,  doubts 
and  ambiguities  are  resolved  in  favor  of  the  insured.  Thus,  where 
the  insured  warranted  that  his  storehouse  "was  detached  at  least 
one  hundred  feet,"  without  stating  from  what,  the  court  interpreted 
the  warranty  as  meaning  detached  from  buildings  that  w^ould  affect 
the  risk,  and  held  that  the  policy  was  not  avoided  by  the  existence  of 
an  insignificant  building,  though  only  seventy-five  feet  distant.^ 

1  Burleigh  v.  Gebbard  F.  Ins.  Co.,  90  Assn.  Soc,  110  Fed.  80,  49  C.  C.  A.  31; 

N.  Y.  220  (if  words  "from  any  build-  Provident    Sav.    Life    Assur.    Soc.    v. 

ing"  had  been  added  to  warranty  there  Cannon,  103   111.   App.   534,  aff'd  201 

would  have  been  no  room  for  a  liberal  111.  260,  66  N.  E.  388;  King  Brick  Mfg. 

construction).       So     also     where     the  Co.  v.  Phoenix  Ins.  Co.,  164  Mass.  291, 

subject-matter   of  a   marine   policy  is  294,  41  N.  E.  277;  Jennings  v.  Supreme 

warranted    "in    good    safety"    on    a  Council,  81  App.  Div.   (N.  Y.)  76,  86 

particular  day,  it  is  sufficient  if  it  be  (in  which  statements  as  to  age,  good 

safe    at    any    time    during    that    day,  health,   etc.,   were   considered).      Will 

Blac'.hurst  v.   Cochell  (1789),  3  T.  R.  construe     as     warranty     only     when 

360.      If  language   and   circumstances  clearly    the    intent,   Carrollton  Furni- 

permit,  court    will    construe    as    rep-  ture  Co.  v.  American  Credit,  etc.,  Co., 

resentation     rather     than     warranty,  124  Fed.  25,  59  C.  C.  A.  545;  y£'<na  7ns. 

Moulor  V.  Ins.  Co.,  Ill  U.  S.  335,  4  Co.  v.  Simmons,  49  Neb.  811,  69  N.  W. 

S.  Ct.  466;  McClain  v.  Prov.  Sav.  Life  125;  Kettenbach  v.  Omaha  L.  Assn.,  49 


STATEMENTS   OF   OPINIOX,    EXPECTATION,    OR   BELIEF  149 

Two  recent  cases,  one  in  Texas  and  the  other  in  Nebraska,  aptly 
illustrate  the  rule.  In  the  Texas  ease  the  application  for  life  insurance, 
made  a  part  of  the  contract,  warranted  the  answers  "  to  be  full, 
complete  and  true,  and  without  suppression  of  any  circumstance 
which  would  tend  to  influence  the  company  in  issuing  a  policy." 
The  insured  was  asked  to  give  the  name  and  address  of  each  physician 
who  had  prescribed  for  him  within  the  past  five  years.  He  named 
his  regular  phA'sician  only,  Dr.  McElroy.  In  fact,  during  a  short 
portion  of  the  period,  from  October  22  to  the  eleventh  of  the  next 
month,  he  had  frequently  been  attended  by  a  Dr.  Miller.  By  the 
uncontradicted  testimony,  therefore,  his  answer  was  not  complete. 
But  the  court,  while  conceding  that  a  warranty  must  be  strictl}^ 
fulfilled,  nevertheless,  as  a  matter  of  construction,  fastened  upon 
the  qualifying  words  chosen  by  the  underwriter,  "without  sup- 
pression of  any  circumstance  which  would  tend  to  influence  the 
company,"  and  held  that  they  converted  the  answers  into  repre- 
sentations, involving  only  the  necessity  of  a  substantial  compliance 
in   good    faith. ^ 

In  the  Nebraska  case  the  written  application,  executed  by  the 
insured,  provided  that  suicide,  sane  or  insane,  within  three  years 
from  date,  would  render  the  certificate  null  and  void.  The  certifi- 
cate, however,  issued  by  the  association  provided  that  it  would  be 
incontestable  after  two  years  from  date.  More  than  two  years, 
but  less  than  three  years  thereafter,  the  insured,  while  temporarily 
insane,  took  his  own  life.  The  court  construed  the  ambiguity 
against  the  company,  and  allowed  the  widow  to  recover,  by  virtue 
of  the  incontestable  clause.' 

§111.  Statements  of  Opinion,  Expectation,  or  Belief. — State- 
ments of  opinion,  expectation,  or  belief,  though  in  the  form  of  war- 
ranties, are  ordinarily  held  to  require  only  good  faith. ^     To  the 

Neb.  842,  69  N.  W.  135.    This  rule  ap-  Court  of  I.  0.  of  F.,  107  Wis.  462,  83 

plies  to  statements  in  the  application,  N.  W.  775. 

Fidelity  Mut.   L.   A.   v.  Jeffords,   107  i  Reppond  v.  National  Life  Ins.  Co. 

Fed.  402,  46  C.  C.  A.  377,  53  L.  R.  A.  (Tex.,  1907),  101  S.  W.  786. 
193;   Northwestern  Mut.   L.   I.   Co.   v.  ^  Harr    v.    Hiqhland   Nobles    (Neb., 

Woods,    54    Kan.    663,    39    Pac.    189.  1907),  110  N.  W.  713. 
Same  rule  applied  though  application  3  Clapp  v.   Mass.   Ben.   Assoc,   146 

made  a  part  of  policy.  Queen  Ins.  Co.  Mass.  519;  Henn  v.  Met.  Life  Ins.  Co., 

V.    May    (Tex.    Civ.   App.,    1896),   35  67  N.  J.  L.  310,  51  Atl.  689.    Thus  as 

S.  W.  829.    Thus  where  answers  were  to   latent   diseases,    Endowment   Rank 

qualified   "as   near   correct   as   I   can  Knights    v.    Cogbill,  99  Tenn.   28,  41 

remember,"    ^tna    Life    Ins.    Co.    v.  S.  W.  340;  Endowment  Rank  Knights 

France,  94  U.  S.  561,  566,  24  L.  Ed.  v.  Rosenfeld,  92  Tenn.  508,  22  S.  W. 

287.     Compare  McGowan  v.  Supreme  204;    Schwarzback    v.     Union,  25  W. 

Va.  622,  52  Am.  Rep.  227. 


150  GKNKHAI.    1'U1N<  ll'LKS    OK    INSURANCE    LAW 

ditjclosurc  of  facts  known  lo  the  insured  the  insurer  is  entitled, 
but  not  to  his  hopes  or  f(>ars,  opinions  or  conjectures.  It  would  be 
prudent,  therefore,  for  the  applicant  for  life  insurance,  wiien  signing 
the  voluminous  form  of  {)rinted  proposals  usually  required,  to  add 
the  phrase  "to  the  best  of  my  belief,"  or  similar  qualifying  words. ^ 

An  important  application  of  the  rule  has  frequently  l)een  made 
in  the  common  instance  of  an  erroneous  answer  to  the  inquiry  of 
the  life  insurance  company  respecting  the  existence  of  latent  diseases 
in  the  insured  or  his  ancestors  in  the  indefinite  i)ast.  Such  responses 
from  a  layman  obviously  can  embody  little  more  than  opinion  or 
belief.' 

The  Court  of  Errors  and  Appeals  of  New  Jersey  has  repeatedly 
approved  this  doctrine,  and  once  recently.  Owen,  the  insured,  died 
about  a  month  after  procuring  a  life  policy  from  the  Metropolitan 
Life  Insurance  Co.  Defense  was  made  on  the  ground  that,  in  his 
application,  he  had  warranted  that  he  had  never  had  heart  disease. 
The  case  was  devoid  of  evidence  to  show  that  any  knowledge  of  the 
existence  of  this  obscure  disease  had  ever  been  brought  home  to  the 
applicant,  although  there  was  evidence  indicating  that  in  fact  his 
heart  was  seriously  affected  prior  to  his  proposals.  The  court  con- 
cluded that  only  good  faith  was  required  of  Owen,  and  that  the  jury 
were  at  liberty  to  find  that  his  answer  in  the  defendant's  application 
paper  was  given  according  to  his  bona  fide  belief  and  opinion. ■'' 

§  112.  Statement  of  Present  Use. — A  statement  of  the  present  use 
of  property,  if  it  does  not  go  to  the  essential  nature  of  the  subject 
of  insurance,  is  not  generally  considered  a  warranty  of  continuance 

For  example,  the  United  States  Supreme  Court  were  of  opinion 
that  a  warranty  in  a  contract  of  fire  insurance,  that  smoking  was 
not  allowed,  if  true  when  the  representation  was  made,  would  not  be 
broken  though  the  assured  or  otliers  smoked  afterwards  on  the  prem- 
ises.^ So  also  where  the  policy  of  insurance  described  the  property 
insured  as  being  a  two-story  frame  building  used  for  winding  and 
coloring  yarn  and  for  the  storage  of  spun  yarn,  it  did  not  warrant 
that  such  building  was  to  continue  to  be  thus  used.^     But  a  war- 

1  Moulor  V.  American  Ldfe  /ns.  Co. ,  3  Owen  v.   Metropolitan  L.  Inx    Co 

111   U.   S.   335;   Clapp  v.   Mass.   Ben.  (N.  J.  L.  1907)  36  Ins.  L.  J.  760 
Asso.,   146  Mass.   519,   16  N.   E.   433;  *  Hosjord  v.  Germania  Fire  Im   Co 

Wheelton  v.  Hardisty,  8  E.   &  B.  231.  127  U.  S.  399,  8  S.  Ct.  1199,  32  L.  Ed.' 

-  Henn    v.    Met.    Life    Ins.    Co.,   67  196. 
N.  J.  L.  310,51  Atl.  689;  Endoioment  ^  Smith  v.  Mechanics'  and  Traders' 

Rank  Knights  v.  Cogbill,  99  Tenn.  28,  Fire  Ins.  Co.,  32  N.  Y.  399.    The  Penn- 

41  S.  W.  340.  sylvania  court  held  that  words  "clerk 

sleeps  in  the  store"  imported  no  war- 


WHETHER  TEMPORARY  BREACH  AVOIDS  OR  SUSPENDS  CONTRACT     151 

ranty  that  a  house  was  of  stone  when  in  reaUty  it  was  partly  stone 
and  partly  wood,^  or  that  the  building  insured  was  a  dwelling  house, 
or  occupied  as  a  dwelling,  when  in  fact  it  was  not,  would  avoid  the 
policy.'  If  the  warranty  were  simply  that  the  house  was  a  dwell- 
ing, that  would  not  necessarily  mean  that  it  was  occupied  as  a  dwell- 
ing at  that  time.'"* 

§  113.  Questions  Unanswered  or  Partially  Answered. — If  a  ques- 
tion in  the  application  is  not  answered  at  all,  or  if  the  answer  is  not 
false  in  any  respect,  but  upon  its  face  is  only  incomplete,  there  is  no 
breach  of  warranty,  provided  the  insurer  accepts  the  application 
without  objection;  since,  if  not  satisfied,  the  company  should  demand 
fuller  information.  So,  also,  to  avoid  forfeiture,  equivocal  answers 
are  construed  most  strongly  against  the  company,  but  notwithstand- 
ing this,  the  applicant  must  answer  in  good  faith  and  not  attempt 
to  evade,  conceal,  or  mislead.^ 

§  114.  Whether  Temporary  Breach  Avoids  or  Only  Suspends 
Contract. — Does  the  contract  revive  when  the  situation  constitut- 
ing a  breach  of  warranty  terminates  before  loss?  For  example,  if  a 
vessel  though  unseaworthy  at  commencement  of  the  voyage  is  made 
seaworthy  shortly  thereafter  and  before  encountering  any  storm, 
or  if  a  dwelling  house  during  the  term  of  the  insurance  happens  to 
be  without  a  tenant  for  more  than  the  permitted  period  of  ten  days, 
but  becomes  occupied  before  the  fire,  is  the  policy  forfeited?  ^  It 
must  be  observed  that  in  any  event  the  insurer,  though  retaining 
the  full  premium  if  the  policy  has  once  attached,  is  relieved  from  all 

ranty  for  the  future,  Fnsbie  V. /ris.  Co.,  Compare   cases    §96.     An   answer  so 

27  Pa.  St.  325;  so  of  words,  "kiln  for  irresponsive  as  to  leave  the  question 

drying  corn  in  use,"  Shaw  v.  Roberts,  6  unanswered  will  not  avoid  the  policy 

Ad.  &  El.  75;  so  of  words  "occupied  unless  fraudulently  untrue,  Ferine  v. 

by  tenants,"  Catlin  v.  Spririgfield  Ins.  Grand  Lodge,  51  Minn.  224,  53  N.  W. 

Co.,  1  Sumn.  434;  Boardman  v.  N.  H.  367;  Hale  v.  Life,  etc.,  Co.,  65  Minn. 

Mut.  F.  Ins.  Co.,  20  N.  H.  551.  548,  68  N.  W.  182. 

^  Chase    v.    Hamilton    Ins.    Co.,    20  5  "Where  a  warranty  is  broken,  the 

N.  Y.  52.  assured   cannot    avail   himself   of   the 

2  Alexander   v.    Germania  Fire   Ins.  defense  that  the  breach  has  been  reme- 

Co.,  66  N.  Y.  464, 23  Am.  Rep.  76.  died,  and  the  warranty  complied  with, 

^Browning    v.    Home   Ins.    Co.,    71  before  loss,"  Eng.  Mar.  Ins.  Act  (1906), 

N.  Y.  508.    '  §  34  (2);  De  Hahn  v.  Hartley  (1786), 

*  London  Ass.  Co.  v.  Mansel,  L.  R.  1  T.  R.  343  (express  warranty);  Quebec 

11  Ch.  D.  363:  Phwni.r  Life  Ins.  Co.  v.  Mar.  Ins.  Co.  v.  Bank  (1870),  L.  R.  3 

Raddin.    120    V .    S.    183;    Carson    v.  P.  C.  234   (implied  warranty).     Same 

Jersey  Citii  Fire  Ins.  Co.,  43  N.  J.  L.  rule  applied  under  New  York  standard 

306;  Higgins  v.  Phoenix  Mut.  Ins.  Co.,  fire  policy,  Coitch  v.  Farmers'  F.  Ins. 

74  N.  Y.  6;  Dilleber  v.  Home  Ins.  Life  Co.,  64  App.   Div.    (N.   Y.)   367   (un- 

Co.,  69  N.  Y.  256,  25  Am.  Rep.  182.  occupancy  more  than  10  days). 


lo2 


(iKNKHAl.    1'H1N«  ll-I.KS    (.K    INSUUANCE    LAW 


res,,„nsil,ilitv,  m,  lon^  as  a  l.ivach  „f  condition  subsequent  continues 
Induced  bv'tl.is  an.l  other  considerations  many  courts  have  held 
that  if  the  lan.M.au-e  of  the  i.olicv  does  not  expressly  impose  absolute 
forfeiture  as  a  penalty  for  noncompliance  with  a  warranty,  the  con- 
tract will  revive  ujmn  termination  of  the  situation  prohibited,  es- 
pecially in  those  instances  in  which  the  violated  warranty  is  a  con- 
dition subsecpient   t<.  (he  attachment  of  the  risk." 

§  115.  To   Avoid    Forfeiture,   Contract   made  Severable.— Where 

two  or  more  items  of  property  are  insured  in  a  policy  for  separate 
amounts,  either  at  separate  rates  or  for  a  single  premium,  and  the 
breach  of  warranty  relates  to  a  portion  of  the  items  only,  courts  are 
prone  to  divide  the  contract  by  construction  into  separate  insurances 
so  as  to  limit  the  operation  of  the  forfeiture  to  the  items  really 
affected  by  the  prohibited  condition,^'  but  the  practical  application 
of  this  principle  has  led  to  varying  results.^ 


1  Adair  v.  South.  Mid.  Ins.  Co.,  107 
Ga.  297,  303,  33  S.  E.  78,  45  L.  R.  A. 
204,  73  Am.  St.  R.  122  (change  of  use); 
HiJidJey  V.  Gcrmania  F.  In.s.  Co.,  140 
Mass.  38,  45,  1  N.  E.  737,  54  Am.  Rop. 
445  (''it  has  the  benefit  of  the  tem- 
porary suspension  of  the  ri.sk  without 
any  rebate  of  the  premium,"  tem- 
porary illegal  use  held  to  suspend); 
Wheeler  v.  Phcenix  Ins.  Co.,  53  Mo. 
App.  44G  (loss  during  vacancy,  no 
recovery). 

2  Temporary  unseaworthiness  though 
existing  at  outset  held  by  some  courts 
to  suspend  and  not  avoid,  Lapene  v. 
Sun  Mut.  Ins.  Co.,  8  La.  Ann.  1,  58 
Am.  Dec.  668;  Hinckley  v.  Germanin  F. 
Ins.  Co.,  140  Mass.  38,  46,  1  N.  E.  737, 
54  Am.  Rep.  445;  Worthinqton  v. 
Bearse,  12  Allen  (Mass.),  382,  386; 
Deblois  v.  Ocean  Ins.  Co.,  16  Pick. 
(Mass.)  303;  but  see  prevailing  rule, 
ch.  IX,  infra.  Temporary  overinsur- 
ance.  Obermei/er  v.  Globe  .\Iitt.  Ins.  Co., 
43  Mo.  573;  temporary  hicreasc  of  risk, 
James  v.  Lt/coming  Ins.  Co.,  13  Fed. 
Cas.  309;  Mul.  F.  Ins.  Co.  v.  Coates- 
riUe  Shoe  Factory,  80  Pa.  St.  407. 
Failure  to  keep  fire  buckets,  Cady  v. 
Imperial  Im.  Co.,  4  Fed.  Cas.  984; 
Phxnix  .4,s,s?/r.  Co.  v.  Munqer,  etc.,  Co., 
(Tex.  Civ.  App.),  49  S.  W.  271.  But 
temporary  deviation,  from  its  date  ab- 
solutely avoids  ocean  marine  insur- 
ance, Burgess  v.  Equitable,  etc.,  Ins. 
Co.,  126  Mass.  70,  30  Am.  Rep.  654; 
Cogswell   v.   Chubb,   1    App.    Div.    93, 


aff'd  157  N.  Y.  709;  Fernandez  v.  Great 
West.  Ins.  Co.,  48  N.  Y.  571.  As  to 
conditions  subsequent  generally  see 
Ohio  F.  Ins.  Co.  v.  Burget,  65  Ohio  St. 
119.  61  N.  E.  712,  87  Am.  St.  R.  596, 
55  L.  R.  A.  825. 

:t  New  York  court  says,  citing  many 
cases,  "Where  by  the  same  policy  dif- 
ferent cla.sses  of  property,  each  sepa- 
rately valued,  are  insured  for  distinct 
amounts,  even  if  the  premium  for  the 
aggregate  amount  is  paid  in  gross,  the 
contract  is  severable,  and  a  breach  of 
warranty  as  to  one  subject  of  insurance 
only  does  not  affect  the  policy  as  to  the 
others,  unless  it  clearly  appears  that 
.such  was  the  intention,"  Donley  v. 
Glens  Falls  Ins.  Co.,  184  N.  Y.  107,  76 
N.  E.  914;  Woodside  v.  Canton  Ins.  Co., 
84  Fed.  283  (purpose  of  court  must  be 
to  ascertain  probable  intent  of  the 
parties);  Loom  is  v.  Rockjord  Ins.  Co., 
77  Wis.  87,  45  N.  W.  813,  8  L.  R.  A. 
834,  20  Am.  St.  R.  96  (sale  of  one  of 
several  buildings  does  not  avoid  as  to 
others.  Entirety  of  premium  as  con- 
sideration should  not  govern);  but 
compare  McQueeny  v.  Phoenix  Ins.  Co., 
52  Ark.  257,  12  S.  W.  498,  5  L.  R.  A. 
744,  20  Am.  St.  R.  179,  and  many  cases 
cited;  jEtna  Ins.  Co.  v.  Resh,  44  Mich. 
55,  6  N.  W.  114,  38  Am.  Rep.  228. 

■»  Pha:nix  Ins.  Co.  v.  Pickel,  119  Ind. 
155,  21  N.  E.  546,  12  Am.  St.  R.  393 
(many  cases  cited  pro  and  con.  Risk 
on  house  and  risk  on  barn  held  dis- 
tinguishable and  divisible). 


TO  AVOID  FORFEITURE,  CONTRACT  MADE  SEVERABLE 


153 


Thus,  a  prohibited  mortgage  on  pool  tables  was  held  not  to  avoid 
as  to  the  other  contents  of  the  building.^  And  if  a  policy  covers 
both  building  and  contents  the  insurance  on  building  is  held  to  be 
undisturbed  by  a  chattel  mortgage  on  contents  ^  or  by  sale  of  con- 
tents,^ and  the  insurance  on  contents  is  held  undisturbed  by  a  fatal 
but  innocent  misstatement  regarding  the  title  to  the  real  estate,"* 
or  b}'  a  prohibited  mortgage  on  the  real  estate,"'  or  even  by  aliena- 
tion of  the  real  estate,®  but  on  this  last  point,  as  on  others,  the  de- 
cisions lack  uniformity^  A  sale  of  one  of  several  buildings  will 
defeat  the  insurance  only  as  to  the  one  sold;  ^  and  vacancy  of  one 
house  does  not  avoid  as  to  another  unless  the  risk  in  the  latter  is 
affected /■*  But  if  the  breach  as  to  one  item  or  class  increases  the 
risk  on  the  rest,  or  if  the  breach  affects  the  risk  in  its  entirety,  this 
liberal  rule  of  construction  will  not  apply  and  the  policy  will  be 
altogether  avoided.^'' 


^Manchester  F.  Assur.  Co.  v.  Feibel- 
nian,  118  Ala.  308,  23  So.  759.  And 
violation  of  iron  safe  clause  held  for- 
feiture only  as  to  goods,  not  as  to 
furniture  or  fixtures,  Mitchell  v.  his. 
Co.,  72  Miss.  53, 18  So.  86, 48  Am.  St.  R. 
535;  or  building,  Hanover  Fire  Ins.  Co. 
V.  Crawford,  121  Ala.  258,  25  So.  912, 
77  Am.  St.  R.  55;  Roberts  v.  Sun  Mut. 
Ins.  Co.,  13  Tex.  Civ.  App.  64,  35  S.  W. 
955. 

2  Wright  v.  Fire  Ins.  Co.,  12  Mont. 
474,  31  Pac.  87,  19  L.  R.  A.  211;  Home 
F.  his.  Co.  V.  Bernstein,  55  Neb.  260,  75 
N.  W.  839. 

3  Royal  Ins.  Co.  v.  Martin,  192  U.  S. 
149,  24  S.  Ct.  247,  48  L.  Ed.  385. 

^  Schuster  v.  Dutchess  Co.  Ins.  Co., 
102  N.  Y.  260,  6  N.  E.  406;  Merrill  v. 
Agricultural  Ins.  Co.,  73  N.  Y.  459, 
29  Am.  Rep.  184. 

5  Kansas  F.  Ins.  Co.  v.  Saindon,  53 
Kan.  623,  36  Pac.  983;  State  Ins.  Co.  v. 
Schreck,  27  Neb.  527,  43  N.  W.  340,  6 
L.  R.  A.  524,  20  Am.  St.  R.  696. 
Contra,  McGowan  v.  Peoples  M.  F.  Ins. 
Co.,  54  Vt.  211;  Stevens  v.  Queen  Ins. 
Co.,  81  Wis.  335,  51  N.  W.  555,  29 
Am.  St.  R.  905. 

6  Phoenix  Ins.  Co.  v.  Grimes,  33  Neb. 
340,  50  N.  W.  168. 

7  E.^sex  Savings  Bk.  v.  Meriden  F. 
Ins.  Co.,  57  Conn.  335,  17  Atl.  930,  18 
Atl.  324,  4  L.  R.  A.  759  (citing  many 
cases  and  holding  that  the  risk  on  the 
whole  might  be  increased  by  sale); 
Barnes  v.  Union  Mul.  F.  Ins.  Co..  51 
Me.  110,  81  Am.  Dec.  562. 


8  Clark  V.  New  England  M.  F.  Ins. 
Co.,  6  Cush.  (Mass.)  342,  53  Am.  Dec. 
44;  Loomis  v.  Rockford  Ins.  Co.,  77  Wis. 
87,  45  N.  W.  813. 

9  Hartford  F.  Ins.  Co.  v.  Walsh,  54 
111.  164,  5  Am.  Rep.  115;  Speagle  v. 
Dwelling  House  Ins.  Co.,  97  Ky.  646,  31 
S.  W.  282;  Connecticut  F.  Ins.  Co.  v. 
Tilleij,  88  Va.  1024,  14  S.  E.  851,  29 
Am.  St.  R.  770.  Vacancy  as  to  house 
will  not  avoid  as  to  barn,  Worley  v. 
Des  Moines,  etc.,  Ins.  Co.,  91  Iowa,  150, 
59  N.  W.  16,  51  Am.  St.  R.  334;  contra, 
Herman  v.  Adriatic  F.  Ins.  Co.,  85 
N.  Y.  162,  39  Am.  Rep.  644;  and  see 
Dohlantry  v.  Ins.  Co.,  83  Wis.  181,  53 
N.  W.  448  (vacancy  in  one  was  thought 
to  affect  the  risk  in  another). 

10  Southern  F.  Ins.  Co.  v.  Knight,  111 
Ga.  622,  36  S.  E.  821,  52  L.  R.  A.  70, 
78  Am.  St.  R.  216  (breach  as  to  stock 
avoided  as  to  building);  Geiss  v.  Ins. 
Co.,  123  Ind.  172,  24  N.  E.  99,  18  Am. 
St.  R.  324;  Taijlor  v.  Atichor  Mut.  F. 
Ins.  Co.,  116  Iowa,  625,  88  N.  W.  807, 
93  Am.  St.  R.  261.  57  L.  R.  A.  328 
(chattel  mortgage  on  cattle  does  not 
avoid  as  to  house  and  furniture); 
Baldwin  v.  Hartford  F.  his.  Co.,  60 
N.  H.  422,  49  Am.  Rep.  324  (alienation 
of  one  parcel  avoids  as  to  all  unless 
court  can  rule  that  there  has  been  no 
increase  of  risk);  Fire  Asso.  v.  Williams 
son,  26  Pa.  St.  196  (gunpowder  in  one 
of  three  buildings  endangered  all); 
Loomis  v.  Ins.  Co.,  77  Wis.  87,  45  N.  W. 
813,  8  L.  R.  A.  834,  20  Am.  St.  R.  96. 
If  premium  is  indivisible  it  has  been 


i;,  I  (Jt;SKIt.\l.    I'KlNCll'LKS    OF    INSlKANCK    LAW 

An  excellent  illust r:it i(»ii  <>f  these  distinctions  is  furnished  by  a 
recent  New  York  case  in  wliicli  it  was  held  that  misstatements  re- 
<;anlinK  title,  lions  and  incuinl)ranccs  avoided  onl}'  as  to  the  real 
estat(>,  l)Ut  a  tuisstatenient  tliat  insured  had  no  reason  to  fear  in- 
cendiarism was  a  breach  of  warranty  alTectino;  the  entire  contract.^ 

50  also  a  prohibited  vacancy  of  the  building  is  held  to  avoid  the 
insurance  as  to  its  contents  also.-  And  where  the  insurance  company 
had  a  lien  on  the  real  estate  for  the  entire  premium  the  court  con- 
cluded that  a  prohibited  mortgage  on  the  building  avoided  the  in- 
<uiance  as  to  contents  also.'' 

.\n  iron  safe  clause  calls  for  the  keeping  of  an  inventory  and  a 
complete  set  of  account  books  by  a  merchant  or  manufacturer. 
Whether  a  violation  of  this  special  clause  avoids  the  entire  policy 
on  l)uilding  and  contents,  or  only  the  item  of  goods,  when  insured 
at  a  .separate  amount,  is  a  disputed  point."* 

The  effect  upon  this  rule  of  the  phraseology  of  the  New  York 
standard  fire  policy  "this  entire  policy  shall  be  void,"  etc.,  will  be 
hereinafter  discussed.  The  primary  rule,  that  any  fraud  on  the 
l)art  of  the  assured,  though  relating  only  to  a  single  item  of  the 
subject-matter,  defeats  any  recovery  Avhatsoever,  will  not  be  for- 
got t  en.  •'' 

>}  116.  Void  Means  Voidable. — Though  the  contract  is  said  to  be 
avoided  l\v  the  violation  on  the  part  of  the  insured  of  any  of  the 
conditions  or  warranties  inserted  for  the  benefit  of  the  insurer, 
this  means  that  the  contract  is  voidable  at  the  option  of  the  insurer.*" 
The  insurer,  therefore,  may  waive  the  forfeiture  and  revive  the  con- 
tract or  he  may  estop  himself  from  taking  advantage  of  the  breach." 

Jj  117.  Burden  on  Insurer  in  Pleading  and  Proof. — Rules  relat- 
ing to  pleading  and  burden  of  proof  are  so  far  local  and  peculiar  to 

held    that    contract   is   not   severable,  as  to  all  the  personal  property,  Burr  v. 

Knhlcr  V.  Imrn  State  Inn.  Co.,  106  Iowa,  German  Ins.  Co.,  84  Wis.  76,  54  N   W 

:i8(),  76  X.  W.  7^4.  22,  36  Am.  St.  R.  905. 

1  Donley  v.  Glem  Falls  Ins.  Co.,  184  •«  Coggins  v.  .'Etna  Ins.   Co    (N    C 
\.  Y.  107.  76  N.  E.  914.  1907),  56  S.  E.  506  (insurance  both  on 

2  Agricultural  Ins.  Co.  v.  Hamilton,  storehouse  and  stock  avoided  Cases 
82  Md.  88,  3.3  Atl.  429,  30  L.  R.  A.  6.33,  cited  pro  and  con.). 

51  Am.  St.  R.  457;  Ilartshome  v.  Agri-  s  See  §  94. 

cultural  Itis.  Co.,  50  N.  J.  L.  427,  14  e  .y.    Y.  Life  Ins.   Co.  v.  Baker,  83 

Atl.    615;    also   as   to   barn   and   out-  Fed.   647;   Shearman   v.    The  Niagara 

buildings,  Herman  v.  Adriatic  F.  Ins.  Fire  Ins.  Co.,  46 'N.Y.  526  7  Am   Ren 

Co.,    85    N.    Y.    162,    39    Am.    Rep.  380;    Quebec   Mar.    Ins.    Co     v   ' Banlc 

6-14-  n      1    ,  ,r        z.    ,  IJ^"^^) '  ^  ^-  ^  P-  C-  244 ;  Provincial  Ins. 

^McGowan  v.  Peoples'  Mut.  F.  Ins.  Co.  v.  Leduc  (1874),  L  R   6  P  C  '>43- 

Co.,  .54  Vt.  211,  41  Am.  Rep.  843.  Eng.  Mar.  Ins.  Act  (1906),  §.34  m  ' 
Seizure  by  attachment  of  part  avoids  7  See  following  chapters 


BURDEN    ON    INSURER    IN   PLEADING   AND   PROOF 


155 


the  jurisdiction  that  no  attempt  will  be  made  to  deal  with  this  sub- 
ject exhaustively. 

It  may  be  stated,  however,  that  fire  and  life  policies,  and  to  some 
extent  marine,  relate  to  such  a  multitude  of  minute  particulars, 
many  of  them  often  having  no  bearing  upon  the  case  in  hand,  and 
many  of  the  warranties  being  conditions  subsequent,  that  the 
majority  of  courts  place  upon  the  insurance  company  the  burden 
of  specially  pleading  and  proving  any  breach  of  warrant}^  upon  which 
it  may  rely  in  defense.^  This  practice  prevails  very  generally  where 
the  breach  is  founded  upon  the  violation  of  a  condition  subsequent; 
or  upon  an  exception  to  the  insurer's  liability,'  or  upon  a  misstate- 
ment in  the  application/'*    But  in  some  jurisdictions  the  assured  must 


1  Triple  Link,  etc.,  Assn.  v.  Williams, 
121  Ala.  138,  26  So.  19  (1899);  hidian 
River,  etc.,  Bk.  v.  Hartford  F.  Ins.  Co. 
(Fla.),  35  So.  228;  Phoenix  Ins.  Co.  v. 
Stocks,  149  111.  319,  36  N.  E.  408; 
Benjamin  v.  Conn.  Ind.  Ass.,  44  La. 
Ann.  1017,  11  So.  628,  32  Am.  St.  R. 
362;  Hale  v.  Life  Ind.  &  I.  Co.,  65 
Minn.  548,  68  N.  W.  182  (burden  on 
company  to  prove  invalidity  of  con- 
tract); Dimick  v.  Met.  Life  his.  Co.,  67 
N.  J.  L.  367,  51  Atl.  692  (special  plea 
required) ;  Slocovich  v.  Orient  Mut.  Ins. 
Co.,  108  N.  Y.  56,  66,  14  N.  E.  802 
(after  proof  of  loss  by  the  peril  named, 
burden  is  on  defendant  to  show  in- 
validity of  contract);  Union  Ins.  Co.  v. 
McGookey,  33  Ohio  St.  555.  Contra, 
as  to  marine  policy,  McLoon  v.  7ns. 
Co.,  100  Mass.  472,  97  Am.  Dec.  116. 

2  Blasingame  v.  Ins.  Co..  75  Cal.  633, 

17  Pac.  925  (fall  of  building);  (contra, 
Phoenix  Ins.  Co.  v.  Boren,  83  Tex.  97, 

18  S.  W.  484);  Phenix  Ins.  Co.  v. 
Pickel,  119  Ind.  155,  21  N.  E.  546,  12 
Am.  St.  R.  393;  Russell  v.  Fideliti/  F. 
Ins.  Co.,  84  Iowa.  93.  50  N.  W.  546; 
Transatlantic  F.  Ins.  Co.  v.  Bamberger 
(Ky.),  11  S.  W.  .595  (fallen  building); 
Coburn  v.  Travellers'  Ins.  Co.,  145 
Mass.  226,  229,  13  N.  E.  604  (holding 
that  stipulation  by  way  of  defeasance 
added  to  principal  contract  must  be 
pleaded  and  proved.  General  denial 
not  sufficient);  Freedman  v.  Atlas 
Assur.  Co.,  133  Mich.  212,  94  N.  W. 
757  (burden  on  company  to  prove 
fallen  building);  Malicki  v.  Chi.  Guar, 
etc.,  Soc,  119  Mich.  151,  156,  77  N.  W. 
690;  Murray  v.  X.  Y.  Life  Ins.  Co.,  85 
N.  Y.  236,  239;  Van  Valkenhurgh  v. 
Am.  Pop.  L.  Ins.  Co.,  70  N.  Y."  605; 
Ins.  Co.  v.  Crunk,  91  Tenn.  376,  23 


S.  W.  140  (exception  of  fallen  build- 
ing); Johnston  v.  North  W.  Live  Stock 
Ins.  Co.,  94  Wis.  117,  68  N.  W.  868. 
The  plaintiff  need  not  allege  perform- 
ance of  promissory  warranties,  that 
is  of  conditions  subsequent,  Tillis  v. 
L.  &  L.  &  G.  Ins.  Co.,  46  Fla.  268. 

3  Piedmont  &  A.  L.  Ins.  Co.  v.  Ewing, 
92  U.  S.  377,  23  L.  Ed.  610  (next  to  im- 
possible to  prove  negatives.  Burden  on 
company  to  prove  affirmative  if  it  re- 
lies on  any  misstatement);  American 
Cred.  Ind.  Co.  v.  Wood,  73  Fed.  81,  84, 
19  C.  C.  A.  264,  38  U.  S.  App.  583; 
Continental  Life  Ins.  Co.  v.  Rogers,  119 
111.  474;  Supreme  Council  v.  Brashears, 
89  Md.  624,  43  Atl.  866,  73  Am.  St.  R. 
244;  Chambers  v.  Ins.  Co.,  64  Minn.  495, 
67  N.  W.  367,  58  Am.  St.  R.  549. 
Breese  v.  Met.  Life  Ins.  Co.,  37  App; 
Div.  152,  55  N.  Y.  Supp.  775.  Contra, 
Vincent  v.  Mut.  Res.  Fund,  etc.,  77 
Conn.  281,  58  Atl.  963;  .Johnson  v. 
Maryland  Cas.  Co.,  73  N.  H.  259; 
Babbitt  V.  L.  &  L.  &  G.  Ins.  Co.,  66 
N.  C.  70,  8  Am.  Rep.  494;  Leonard  v. 
State  Mut.  L.  Assu.  Co.,  24  R.  I.  7,  51 
Atl.  1049  (general  denial  enough); 
Sweeney  v.  Met.  L.  Ins.  Co.,  19  R.  I. 
171,  36  Atl.  9,  38  L.  R.  A.  297,  61  Am. 
St.  R.  751.  As  to  what  plaintiff  must 
allege  and  prove  see  A77ierican  Credit, 
etc.,  Co.  V.  Wood,  73  Fed.  81,  19  C.  C.  A. 
264;  Cowan  v.  Phoenix  Ins.  Co.,  78  Cal. 
181,  20  Pac.  408;  Vincent  v.  Mut.  Res. 
Fund,  etc.,  77  Conn.  281,  58  Atl.  963; 
O'Connell  v.  Supreme  Conclave,  102  Ga. 
143,  28  S.  E.  282,  66  Am.  St.  R.  159; 
Phoenix  Ins.  Co.  v.  Stocks,  149  111.  319, 
36  N.  E.  408  (fire  insurance);  Conti- 
nental Life  Ins.  Co.  v.  Rogers,  119  111. 
474  (life  insurance);  Phcenix  Ins.  Co.  v. 
Pickel.    119  Ind.  155,  21  N.  E.  546,  12 


lAO 


UENliUAI.    I'1{1.\(  II'I.KS    «»l     INSUUANCK    LAW 


allege  and  prove  a  coinpliaiict'  with  all  conditions  that  are  precedent 
to  a  valid  inception  of  llic  contract.' 

s<  118.  Statutes  Making  Warranties  Representations.— In  spite, 
hnwevor.  (if  tlio  liheral  rules  of  construe;! ion  described  in  the  last 
eight  sections,  tho  strict  doctrine  of  warranty  has  often  worked  in- 
justice especially  in  instances  where  the  insured  by  reason  of  some 
inadvertent  niisstatement  in  his  api)lication  for  life  or  fire  insurance 
has  incurred  a  technical  forfeiture  of  his  policy,  frequently  possess- 
ing no  knowledge  or  appreciation  of  the  situation  in  good  season  to 
permit  a  correction  of  the  fatal  error.^  To  mitigate  the  severity  of 
this  rigid  conunon-law  rule,  many  states  have  passed  statutes,  vary- 
ing somewhat  in  application  and  phraseology,  but  the  dominant 
provision  in  most  of  which  is  that  in  the  absence  of  fraud  no 
statement  by  the  insured  shall  effect  forfeiture  of  his  policy  unless 
it  relate  to  a  mailer  material  to  the  risk."''     Some  of  the  statutes  go 


Am.  St.  H.  '.VXi  (fire  iii-siirunce);  Mc- 
Loon  V.  ('ammvninl  Ins.  Co.,  100  Ma.s.s. 
472,  1  Am.  Hep.  129;  Johnson  v.  Marij- 
land  Cns.  Co.,  73  N.  H.  259;  Bogardus 
V.  N.  y.  Life  Ins.  Co.,  101  N.  Y.  328,  4 
N.  E.  .522;  ^fr^fnnns  v.  Western  Assur. 
Co.,  43  App.  Div.  550,  GO  N.  Y.  Supp. 
1143,  aff'd  167  X.  Y.  602;  S^tUivan  v. 
Sprin{)  Garden  Iiis.  Co.,  34  App.  Div. 
128,  54  N.  Y.  Supp,  629;  Hcrsetf  v. 
Xorthem  Assur.  Co.,  75  Vt.  441,  56 
Atl.  95.  But  the  burden  rests  upon 
plaintitY  to  bring  hiinself  within  the 
terms  of  the  main  promise  of  the  in- 
.surer,  Whitlitcli  v.  Fldelitit  &  Cas.  Co., 
149  N.  Y.  45,  43  N.  E.  405  (death 
from  external,  violent  and  accidental 
means). 

1  Phoenix  Ins.  Co.  v.  Pickel,  119  Ind. 
155.  21  N.  E.  .546;  Jones  v.  Ace.  Assn., 
92  Iowa,  6.52,  61  N.  W.  485;  Johnston 
V.  Xorthu-cstern,  etc.,  Co.,  94  Wis.  117, 
68  N.  W.  868.  Other  courts  while 
theoretically  adhering  to  this  rule 
practically  omit  to  enforce  it  against 
the  assured  by  holding  that  far  less 
will  establish  a  prima  facie  case,  Vin- 
cent V.  Mut.  Res.  F.,  etc.,  77  Conn.  281, 
58  Atl.  963;  Allen  v.  Phoenix  Assur.  Co. 
adaho,  Nov.,  1906),  88  Pac.  245. 

2  Continental  Fire  Ins.  Co.  v.  Whit- 
aker,  112  Tenn.  151,  79  S.  W.  119,  64 
L.  R.  A.  451;  Hartford  Life  Ins.  Co.  v. 
Stallings,  110  Tenn.  1,  72,  S.  W.  960; 
Metropolitan  L.  Ins.  Co.  v.  Ihdherford, 
98  Va.  195,  35  S.  E.  361.  As  to  stat- 
utes providing  that  the  policy  must 


contain   the  entire  contract,  etc.,  see 
Appendix,  ch.  I. 

=' Appendix,  ch.  1.  Thus  Kenton 
Ins.  Co.  V.  Wiqginton,  89  Ky.  330,  12 
S.  W.  668,  7  L.  R.  A.  81  (misstatement 
as  to  ownership).  Question  of  materi- 
ality is  thus  by  statute  relegated  to  the 
iury,  Keller  v.  Home  Life  Ins.  Co,  198 
Mo.  440  (1906),  95  S.  W.  903  (health 
consumption);  Albert  v.  Mut.  L.  Ins: 
Co.,  122  N.  C.  92,  30  S.  E.  327,  65  Am. 
St.  R.  693;  Price  v.  Standard  L.  &  A. 
Ins.  Co.,  90  Minn.  264,  95  N.  W.  1118; 
unless  the  facts  allow  of  only  one  in- 
ference. Smith  V.  Mut.  L.  Ins.  Co.,  196 
Pa.  St.  314,  46  Atl.  426;  March  v.  Life 
Ins.  Co.,  186  Pa.  St.  629,  40  Atl.  1100, 
65  Am.  St.  R.  887.  And  in  the  face  of 
the  statutory  provision  the  parties 
cannot  withdraw  the  issue  from  the 
jury  by  agreeing  in  the  policy  that  the 
matter  is  material,  Fidelity  Mut.  L. 
Assn.  v.  Miller,  92  Fed.  63,  34  C.  C.  A. 
211;  Germania  Ins.  Co.  v.  Rudwig,  80 
Ky.  223;  Hcrmany  v.  Assoc,  151  Pa. 
St.  17,  24  Atl.  1064.  So  also  if  the 
contract  is  really  made  in  one  state 
the  parties  must  not,  to  evade  such 
statutes  of  that  state,  agree  in  the 
policy  that  some  different  body  of  law 
shall  apply,  for  instance,  the  statutes 
of  another  state,  McClain  v.  Provident 
Sav.  L.  Ass.  Sac,  110  Fed.  80,  49  C.  C. 
A.  31;  Franklin  L.  Ins.  Co.  v.  Galliqan, 
71  Ark.  295,  73  S.  W.  102,  100  Am  St. 
R.  73;  Dolan  v.  Mut.  R.  Fund  L.  Ass., 
173  Mass.  197,  53  N.  E.  398;  Fidelity 


SUCH   ENACTMENTS    VALID    AND    CONTKOLLING  157 

further  and  provide  in  substance  that  a  breach  of  any  condition  in 
the  poHcy  itself  shall  not  avoid  unless  loss  occur  during  or  by  reason 
of  it,  or  unless  the  risk  be  thereby  materially  increased.^ 

§  119.  Such  Enactments  Valid  and  Controlling.— Such  statutory 
provisions  are  constitutional  and  obligatory;-  and  no  matter  what 
may  be  the  language  of  the  contract,  they  enter  into  and  control  all 
policies  issued  after  the  act  goes  into  effect.'^ 

The  Missouri  statute  excluding  suicide  as  a  defense  to  the  com- 
pany in  life  insurance  offers  an  impressive  illustration  of  the  rule. 
Although  such  a  statute  should  be  regarded  by  the  highest  federal 
court  as  inconsistent  with  public  policy,  or  even  with  sound  morality, 
nevertheless  that  court  will  give  to  it  a  controlling  effect,  and  will 
not  for  that  reason  alon?  disregard  its  provisions.'* 

Mut.  L.  Assn.  v.  Fickiin,  74  Md.  172,  127  Mich.  639,  87  N.  W.  62,  54  L.  R.  A. 

21   Atl.  680,  23  Atl.    197;   Kmtlci/  v.  739.     Thus  a  statutory  provision  that 

Travelers'  Ins.  Co.,  187  Pa.  St.  197,  40  a  breach  shall  not  avoid  unless  con- 

Atl.    808;    Sieders   v.    Mcrchinti<'   Life  tributing  to  the  risk  is  not  unconstitu- 

Assn..  93  Tex.  194,  54  S.  W.  753.  tional.     Northwestern     Nat.     L.     Ins. 

1  For  instance  Maine  R.  S.  (1883),  To.  v.  i?%s,  27  S.  Ct.  126  (Dec,  1906). 
c.  49,  §20;  Mich.  Comp.  1..  (1897),  '■i  Christian  \.  Conn.  Mut.  L.  Ins.  Co., 
§5180;  Mo.,  2  R.  S.  (1899),  §7974;  143  Mo.  460,  45  S.  W.  268;  Kloster- 
N.  H.  Pub.  St.  (1901),  c.  170,  §2;  mann  v.  Germania  L.  Ins.  Co.,  6  Mo. 
N.  C.  Acts  (1893),  c.  299,  §9;  Ohio  App.  582.  The  word  "representa- 
R.  S.,  §3643;  Okla.,  1  R.  S.  (1903),  tions"  as  used  in  statutes  includes  also 
§  3202;  So.  Dak.  R.  Code  (1903),  statements  warranted.  White  v.  Provi- 
§  1951.  dent  Sav.  L.,  etc.,  Soc,  163  Mass.  108, 

2  John  Hancock  M.   L.   Ins.   Co.   v.  39  N.  E.  771. 

Warren,  181  U.  S.  73,  21  S.  Ct.  535,  *  Whitfield    v.    /Etna    L.    his.    Co. 

45  L.  Ed.  955;  McGannon  v.  Ins.  Co.,      (U.  S.,  1907),  27  S.  Ct.  578. 


CHAPTER  VI 

General  Principles — Continued 

Waiver  and  Estoppel 

§  120.  Nature  of  Waiver  and  Estoppel  in  General. — Waiver  is 
the  voluntary  relinquishment  of  a  known  right. ^  Estoppel  in  pais 
is  the  bar  w  hich  equity  raises,  in  the  interest  of  fair  dealing,  to  pre- 
vent the  one  party  from  enforcing,  to  the  detriment  of  the  other  party, 
certain  rights  which  it  possesses  under  the  letter  of  the  contract, 
where,  by  its  declarations,  agreement,  or  conduct,  it  has  induced 
the  other  party  to  rest  secure  in  the  belief  that  such  rights  have  been 
relinquished.-  While  waiver,  properly  speaking,  is  the  voluntary 
abandonment  of  a  right,  estoppel  includes  those  cases  where  an 
abandonment  is  inferred  or  imposed  by  the  court  from  the  nature 
of  the  conduct  of  the  party  who  would  otherwise  be  entitled  to  the 
right.  Waiver  rests  upon  knowledge^  of  the  right,  and  an  intention 
to  abandon  it,"*  by  the  party  waiving.  Estoppel  rests  upon  mislead- 
ing conduct  by  one  party  to  the  prejudice  of  the  other,  and  is  forced 
upon  the  wrongdoer  by  the  court,  but  only  to  prevent  fraud,  either 
actual  or  constructive.'''  The  words  waiver  and  estoppel,  however, 
are  often  used  interchangeably  by  the  courts.^ 

1  Dale  V.  Cmtinental  Ins.  Co.,  95  Ins.  Co.  v.  Loyd,  67  Ark.  584,  56  S.  W, 
Tenn.  38,  .50,  31  S.  W.  266;    Findehen      44  77  Am.  St.  R.  136. 

V.  Metropole  Fire  Ins.  Co.,  57  Vt.  520.  -^  Bemiecke  v.  Conn.  Mid.  L    I    Co  , 

2  Union  Ins.  Co.  v.  McGookeij,  33  105  U.  S.  355,  359,  26  L.  Ed.  990; 
Ohio  St.  555.  The  United  States  Su-  Northicestern  Mut.  L.  I.  Co.  v.  Mont- 
preme  Court  says:  "Any  agreement,  gomery,  116  Ga.  799,  43  S.  E.  79; 
declaration,  or  coin-se  of  action  on  the  Stringham  v.  Mut.  Life  Ins.  Co.,  44 
part  of  an  insurance  company  which  Ore.  447,  75  Pac.  822. 

leads  a  party  insured  honestly  to  be-  *  Sullivan  v.  Prudential  Ins.  Co.,  172 

lieve    that    by  conforming     thereto   a  N.  Y.  482,  485,  65  N.  E.  268. 

forfeiture  of  his  policy  will  not  be  in-  5  Thebaud  v.  Great  Western  Ins.  Co., 

curred,  followed  by  due  conformity  on  50  N.  E.  284,  155  N.  Y.  516,  522. 

his  part,  will  and  ought  to  estop  the  «  Waiver  and  estoppel  disting"ished 

company  from  insisting  upon  the  for-  Metcalf  v.  Phoenix  Ins.  Co.,  21   R    l' 

feiture,    though   it   might   be   claimed  307,  43  Atl.  541.     Implied  wai\er  de- 

under  the  express  letter  of  the  con-  fined,  Astrich  v.  German- A jn   Ins   Co 

tr_act,"  Ins.  Co.  v.  Eggleston,  96  U.  S.  131   Fed.   13,  65  C.   C.   A.   251    '  The 

572;  Georgia  Home  In.s.  Co.  v.  Allen,  terms     "implied     waiver"     and     "es- 

128Ala.  451,  30  So.  537;  P/an/ers'i¥w(.  toppel"     are     used     interchan<^eably 

[158J 


WHETHER    NEW   CONSIDERATION    REQUIRED  159 

The  doctrine  of  implied  waiver  and  estoppel,  adopted  with  the 
design  of  evading  unconscionable  forfeitures,^  moderates  the  rigor 
of  the  technical  common-law  rules  relating  to  concealment,  mis- 
representation, and  warranty,  as  set  forth  in  the  last  two  chapters, 
and,  doubtless,  in  many  individual  cases,  has  accompHshed  an  equi- 
table   result. - 

The  party  that  generally  waives  or  is  estopped  in  insurance  law 
is  the  insurer,  but  the  same  doctrine  may  be  applied  in  favor  of  the 
insurer,^  and  against  the  insured.  Thus,  where  a  policy  provided 
that  it  should  cease  until  a  premium  note  was  paid,  the  court  held 
that,  in  an  action  by  the  insured  upon  the  policy,  he  was  estopped 
from  setting  up  the  claim  that  the  note  was  unauthorized  by  the 
charter  and  ultra  vires.^ 

§  121.  Election  once  Made  is  Final. — If  wdth  knowledge  of  the 
forfeiture  the  insurer  elects  to  revive  the  contract,  and  evinces  his 
election  by  an  unequivocal  and  positive  act  of  confirmation,  or  by 
conduct  amounting  to  an  estoppel,  he  cannot  thereafter  insist  upon 
the   past  breach.'^ 

§  122.  Whether  New  Consideration  Required. — To  support  a 
waiver  or  an  estoppel  the  insured  need  pa}^  no  fresh  consideration  for 
the  indulgence  granted,  provided  he  can  show  that  in  reliance  upon 
the  statement  or  conduct  of  the  insurers  he  has  been  misled  to  his 
detriment.^     Mutual  promises  afford  evidence  of  a  sufficient  con- 

Bernhard    v.    Rochester    German    In^.  signee    for     creditors    will    enure    to 

Co.  (Conn.),  65  Atl.  134.  benefit   of  assured,   Mut.   R.   F.   Life 

1  Russell  V.  Prudential  Ins.  Co.,  176  Assn.  v.  Cleveland  Co.  Mills,  82  Fed. 

N.  Y.  178,  68  N.  E.  252;  Kiernan  v.  508,  27  C.  C.  A.  212. 

Didchess,  etc.,  Co.,  150  N.  Y.  190,  44  iHale  v.  Mich.  F.  Mut.  F.  Ins.  Co. 

N.  E.  698.  (Mich.,  1907),  111  N.  W.  1068. 

^  Welch  y.  Fire  Association,  120  Wis.  ^Masonic   Mutual   Benefit   Asso.    v. 

4.56,  468,  98  N.  W.  227   (though  ad-  Beck,  77  Ind.  203,  40  Am.  Rep.  295; 

mitting  that  the  doctrine  of  estoppel  Brink   v.    Hanover   Fire   Ins.    Co.,   80 

by   parol    testimony    is    exceptionally  N.   Y.    108.     This  is  based  upon  the 

peculiar    to    insurance    contracts,    the  plainest  principles  of  law,  good  faith, 

court    does    not    feel    warranted,    "in  and    fair    dealing,    Grant    v.    Eliot    & 

seriously   questioning   the   wisdom   of  Kittery  M.  F.  I.  Co.,  75  Me.  196,  203. 

it ").  But  a  waiver  as  to  one  breach  does  not 

3  Mut.  Life  I.  Co.  v.  Hill,  193  U.  S.  of  necessity  imply  a  similar  indulgence 

.551,  24  S.  Ct.  538.     Waiver  or  estoppel  in  future,  Thompson  v.  Ins.  Co.,  104 

operates   also   in   favor   of   privies   in  U.  S.  252,  26  L.  Ed.  765. 

blood   or  estate,   for  example,  an  as-  '^  Kiernan  v.  Didchess  Co.  Mut.  Ins. 

signee  oi  a  Viie  policy,  Meederv.  Provi-  Co.,    150   N.    Y.    190,   44    N.    E.    698; 

de7d  Sav.  L.  A.  Soc,  171   N.  Y.  432,  approved  in  Germania  Fire  Ins.  Co.  v. 

64  N.  E.  167;  also  in  favor  of  the  bene-  Pitcher,  160  Ind.  392,  64  N.  E.  921: 

ficiary,  Frank  v.   Mid.  Life  Ins.   Co.,  Walker  v.  Ins.  Co.,  156  N.  Y.  628,  51 

102  N.  Y.  266,  6  N.  E.  667,  55  Am.  N.  E.  392;  Dobson  v.  Hartford  Ins.  Co.. 

Rep.  807;  and  waiver  in  favor  of  as-  86  App.  Uiv.  115,  ajff'd  179  N.  Y.  557, 


160 


GENERAL   FKINCIPLES   OF  INSURANCE   LAW 


sidenition;  so  also  loss  to  a  promisee  is  as  effective  in  establishing 
consideration  as  advantage  to  a  promisor.^  And,  if  the  act  of  waiver 
or  estoppel  occur  l)efore  loss,  it  may  be  presumed  that  except  for 
reliance  up(m  it  the  insured  might  have  protected  himself  by  taking 
out  other  insurance.^  So  also  if  it  have  to  do  with  formalities  relat- 
ing to  the  proofs  of  loss,  or  time  for  instituting  action,  it  maybe  pre- 
sumed that  except  for  misleading  conduct  of  the  insurer  the  insured 
would  have  governed  himself  by  the  strict  technicalities  of  the  con- 
tract.^ In  case,  however,  (here  is  no  element  of  estoppel  or  of  new 
consideration,  then,  by  the  weight  both  of  reason  and  authority, 
the  act  of  waiver,  unless  it  be  evidenced  by  an  executed  written 
statement  or  agreement,"*  is  not  binding  upon  the  insurer.'"*    Other- 


1  De  Frece  v.  Xatiorial  Life  Ins.  Co., 
136  N.  Y.  144,  151,  32  N.  E.  556,  citing 
many  cases. 

-  Manchester  v.  Guardian  Assur.  Co., 
151  N.  Y.  88,  92.  45  N.  E.  381,  56  Am. 
St.  R.  600  (citing  cases);  Wing  v. 
Harvest,  5  De  G.,  M.  &  G.  265,  268. 

^  Dobson  V.  Hartford  F.  Ins.  Co.,  86 
App.  Div.  115,  83  N.  Y.  Supp.  456, 
aff'd  179  N.  Y.  557;  Georgia  Home  his. 
Co.  V.  Kinnicr,  28  Grat.  (Va.)  88. 

4  Gibson  El.  Co.  v.  L.  &  L.  &  G.  Ins. 
Co.,  159  N.  Y.  418,  426,  54  N.  E.  23 
(there  must  be  either  express  waiver  or 
estoppel);  Viele  v.  Germania  Ins.  Co., 
26  Iowa,  9,  57,  96  Am.  Dec.  83.  Writ- 
ten waiver  is  effective  if,  like  the 
standard,  the  policy  so  provides,  Nel- 
son V.  Traders'  Ins.  Co.,  181  N.  Y.  472, 
476;  since  then  the  original  considera- 
tion supports  it.  And  a  modification  of 
a  contract  consisting  of  a  present  aban- 
donment of  a  right  by  a  party,  if  duly 
executed  in  writing,  should'  be  held 
binding  though  unsupported  by  fresh 
consideration,  Rice  v.  Fidel.  &  Dep. 
Co.,  103  Fed.  427,  434,  43  C.  C.  A.  270; 
Quebec  Mar.  Ins.  Co.  v.  Bank,  L.  R. 
3  P.  C.  234,  244;  Weir  v.  Aberdeen,  2 
B.  &  Aid.  320.  The  insurance  com- 
pany has  an  absolute  right  to  abandon 
any  of  the  many  clauses  inserted  by 
it  and  framed  solely  for  its  benefit, 
loua  Life  Ins.  Co.  v.  Lewis,  187  U.  S 
335,  338,  23  S.  Ct.  126,  47  L.  Ed.  204. 
No  better  or  more  orthodox  evidence 
of  the  exercise  of  this  option  can  be 
suggested  than  a  WTitten  permit,  exe- 
cuted and  delivered  to  the  insured; 
compare.  Lariin  v.  Hardenbrook,  90 
N.  Y.  333;  Simons  v.  Supreme  Council 
178  N.  Y.  263.  In  analogy  to  the  law 
of  gifts,  a  ^\Titten  permit  should   be 


held  irrevocable  from  time  of  delivery, 
if  granted  without  misapprehension 
of  the  facts,  though  without  fresh 
consideration  and  without  change  of 
position  on  the  part  of  the  insured, 
Opitz  v.  Karel,  118  Wis.  527,  95  N.  W. 
948;  Rice  v.  Fidelity  &  Dep.  Co.,  103 
Fed.  427,  43  C.  C.  A.  270.  Thus,  under 
the  marine  policy,  though  a  vessel  has 
not  yet  sailed,  a  permit  to  touch  and 
stay  should  be  held  binding  upon  the 
underwriter,  and  irrevocable  from 
delivery.  So  also,  under  the  fire  pol- 
icy, the  same  rule  should  apply  to  a 
permit  extending  the  time  to"  begin 
action,  though  the  limited  period  of 
twelve  months  has  already  expired 
before  the  permit  is  granted,  see  Pren- 
tice V.  Knickerbocker  Life  Ins.  Co.,  77 
N.  Y.  483,  33  Am.  Rep.  651.  But 
compare  Knickerbocker  Life  Ins.  Co 
V.  Norton,  96  U.  S.  399.  The  permit, 
if  delivered,  may  be  actually  attached 
to  the  policy  at  any  time,  Bennett  v. 
Western  Underwriters'  Assn.,  130  Mich. 
216. 

5  Ins.  Co.  Y.Wolff,  95  U.  S.  326,  333, 
24  L.  Ed.  387;  United  Firemen's  Ins. 
Co.  V.  Thomas,  82  Fed.  406,  27  C.  C.  A 
42,  47  L.  R.  A.  4.50  (cited  with  ap- 
proval, 183  U.  S.  340);  Morris  v.  Orient 
Ins.  Co.,  106  Ga.  472,  475,  33  S.  E.  430; 
Northwestern  Mut.  L.  7?i.s.  Co.  v 
Amerman,  119  III.  329,  10  N.  E  225 
59  Am.  Rep.  799;  .V.  Y.  Cent.  Ins.  Co. 
y.  Watson,  23  Mich.  486;  Burdick  v. 
Life  Assn.,  77  Mo.  App.  629,  636; 
Armstromj  v.  Agricultural  Ins.  Co.,  130 
N.  Y.  560,  568,  29  N.  E.  991;  Under- 
wood  V.  Farmers'  Joint  Stock  Ins  Co 
57  N.  Y.  .500,  506;  Murrin  v.  Universal 
L.  Ins.  Co.,  16  Hun,  49J,  aff'd,  with- 
out deciding  this  point,  85  N.  Y.  278 


DISTURBANCE    OF    CONTRACT   BY   PAROL  161 

wise  the  sanction  of  the  written  contract  is  virtually  destroyed  by 
parol  ;^  but,  especially  in  matters  of  mere  formality,  like  serving 
proofs  of  loss,  there  are,  in  some  cases,  dicta  to  the  effect  that  even 
after  breach  and  without  any  new  consideration  or  estoppel  the 
company  may  waive  forfeiture,  and  that  such  waiver  may  be  shown 
by  parol;  but,  in  most  if  not  in  all,  elements  of  estoppel  in  fact  existed.^ 

§  123.  Action  Usually  upon  Contract:  Not  for  Rescission  or 
Reformation. — It  will  be  observed  that,  as  the  question  ordinarily 
arises  in  practice,  the  insured,  when  he  claims  a  waiver  or  an  es- 
toppel, is  not  aiming  at  reformation  of  the  policy  in  equity,  nor  at 
rescission  for  fraud  or  mistake.  Rescission  wdth  restitution  of  pre- 
miums is  in  most  instances  an  inadequate  or  unsatisfactory  form  of 
relief,  and  rather  than  apply  to  a  judge  for  reformation  of  the  con- 
tract the  assured  is  apt  to  entertain  a  preference  for  a  jury  trial. 
Accordingly,  he  ordinarily  brings  his  action  upon  the  policy,  and 
under  the  doctrine  of  waiver  and  estoppel,  as  applied  by  most  courts, 
may  be  allowed  to  recover,  although  under  the  terms  of  the  written 
contract,  in  conjunction,  it  may  be,  with  the  testimony  of  his  own 
witnesses,  no  cause  of  action  is  established  against  the  insurers.* 

§  124.  Disturbance  of  Contract  by  Parol. — In  most  instances 
waiver  or  estoppel  must  be  established  by  oral  testimony.  For  exam- 
ple, the  written  application  for  the  life  policy  is  made  part  of  the 
contract  and  its  statements  are  warranted  to  be  true.  It  declares 
that  the  age  of  the  insured  is  thirty-five,  or  that  he  never  had  typhoid 
fever,  or  that  he  has  taken  out  no  other  insurance;  but,  on  the  trial 
of  the  action  brought  by  his  representatives  on  the  policy,  the  testi- 

284;  Ri-pley  v.  ^tna  Ins.  Co.,  30  N.  Y.  Iowa,   9,   96   Am.    Dec.  83;   Kingman 

136,  8Q  Am.  Dec.  362;  Lantzv.  Vermont  v.  Lancashire  Ins.   Co.,  54  S.  C.   599, 

L.  Ins.  Co.,  139  Pa.  St.  546,  21  Atl.  80,  32  S.  E.  762;  and  see  Pratt  v.  Ins.  Co., 

23  Am.  St.  R.  202,  10  L.  R.  A.  577;  130  N.  Y.  206,  29  N.  E.  117;  Roby  v. 

Dale  V.  Continental  Ins.  Co.,  95  Tenn.  Ins.  Co.,  120  N.  Y.  510,  24  N.  E.  808; 

38,  50,  31  S.  W.  266;  Merchants'  Mid.  Titus  v.  Ins.   Co.,  81   N.   Y.   410    (in 

Ins.  Co.  V.  Lacroix,  45  Tex.  158;  Mc-  which  it  is  declared  that  there  need  be 

Farland  v.  Peabody  Ins.  Co.,  6  W.  Va.  no  estoppel  and  no  new  agreement). 

425.     Contra,  other  cases  with  dicta  in  i  Northern  Assur.  Co.  v.  Grand  View 

substance    that    the    company    may  Bldg.   Asso.,   183   U.   S.   308,   361,  22 

voluntarily   dispense   with   the   condi-  S.  Ct.  133,  46  L.  Ed.  213;  Conn.  F.  Ins. 

tion,  whether  there  is  a  new  considera-  Co.   v.   Buchanan,   141   Fed.  877,  889 

tion  or  an  e«toppel  or  not  and  that  its  (citing  many  cases), 

election    may    be    shown    by    parol,  2  gee  Prentice  v.  Kniclerbocker  Life 

Alabama  State  Mut.  Assur.  Co.  v.  Lonj,  Ins.  Co.,  77  N.  Y.  483,  33  Am.  Rep. 

etc.,   Co.,    123   Ala.    667,   26   So.   655;  651. 

Home  Fire  Ins.   Co.   v.   Kuhlman,  58  ^  Rowley  v.  Empire  Ins.  Co.,  36  "N.Y. 

Neb.  488,  78  N.  W.  936,  76  Am.  St.  R.  550;  Van  Schoick  v.  Niagara  Fire  Ins. 

Ill;    Viele   v.   Germania  Im.    Co.,   26  Co.,  68  N.  Y.  434. 

11 


l()2  GKNEUAL    I'HINCII'LES    OK   INSURANCE    LAW 

mony  shows  that  iiis  age  was  forty,  or  that  he  had  been  afflicted  with 
typhoid  fever,  or  tliat  he  had  taken  out  other  insurance.  Under  the 
doctrine  of  parol  waivers,  however,  the  plaintiff  is  permitted  to  show 
by  oral  testimony  that  the  agent  of  the  company  had  knowledge  of 
the  truth  of  the  circumstances  misstated  in  the  application,  and 
closed  the  contract  and  received  the  premium  or  delivered  the  policy 
in  full  possession  of  such  knowledge.  The  agent  denies  any  such 
knowledge;  the  issue  so  raised  goes  to  the  jury,  and  if  decided  for  the 
plaint ilT,  as  it  usually  is,  without  much  regard  to  weight  of  evidence, 
the  plaintiff  recovers.^ 

In  like  manner,  the  fire  policy  provides  that  it  shall  be  void  if  the 
insured  is  not  unconditional  and  sole  owner,-  or  has  other  insurance,^ 
or  uses  certain  hazardous  articles,''  or  if  the  insured  building  stands 
on  leased  ground,^  or  if  the  insured  personal  property  is  covered  by 
a  chattel  mortgage,*'  without,  in  each  case,  written  permit  indorsed 
on  the  policy.  There  is  no  such  permit,  but  on  the  trial  the  plain- 
tiff is  allowed  to  show  that  when  he  applied  for  the  insurance  he 
mentioned  to  the  agent  the  circumstances  constituting  the  breach. 
The  agent  denies  this.  The  issue  goes  to  the  jury.  The  plaintiff 
recovers.  The  leading  case  of  Plumb  v.  Cattaraugus  Ins.  Co7  is  said 
to  have  changed  the  law  for  New  York.*  And  this  was  conceded 
by  the  New  York  Court  of  Appeals  in  a  later  case.^  But  the  doctrine 
of  parol  waivers  in  general  as  adopted  by  New  York  subsequently 
met  with  approval  in  most  of  the  states. 

§  125.  Effect  of  Doctrine  on  Common-Law  Rules  of  Evidence. — 

It  is  often  said  that  the  doctrine  of  waiver  and  estoppel  does  not 
subvert  the  terms  of  the  policy,  and  is  not  repugnant  to  the  ordi- 
nary rules  of  evidence.^"  This  maybe  true  where  the  plaintiff  brings 
his  action  to  annul  or  to  reform  the  contract,  but  where,  as  is  usual, 
the  action  is  brought  to  recover  upon  the  policy,  it  would  seem  to 
be  more  sensible  and  accurate  to  concede,  that,  so  far  as  this  doctrine 
tolerates  parol  evidence  of  knowledge  by  the  insurers,  prior  to  the 

^  Sternaman  v.   Met.  Life  Ins.   Co.,  '^Bergeron  v.  Pamlico  Ins.,  etc.,  Co., 

170  N.  Y.  13,  62  N.  E.  763,  57  L.  R.  A.  Ill  N.  C.  45,  15  S.  E.  883. 

318,  88  Am.  St.  R.  625.  6  Robbins  v.  Springfield  F.  Ins.  Co., 

2  Virginia  F.  &  M.  Ins.  Co.  v.  Rich-  149  N.  Y.  477,  44  N.  E    159 
mond  Mica  Co.,  102  Va.  429,  46  S.  E.  ^  18  N.  Y.  392,  72  Am.  Dec.  526. 
463,  102  Am.  St.  R.  846.  «  Dewees  v.   Manhattan  Ins.    Co.,   6 

3  Sumn  V.  Macon  Fire  Ins.  Co.,  102  Vroom.  (N.  J.)  374. 

Ga.  96,  29  S.  E.  147.  9  Rowley  v.  Empire  Ins.  Co.,  36  N.  Y 

*  Hartley  v.  Prnn.  Fire  Ins.  Co.,  91       550. 
Minn.  382,  98  N.  W.  198,  103  Am.  St.  ^o  Queen  Ins.  Co.  v.  Kline    17  Ky 

^-  *12.  L.  R.  619,  32  S.  W.  214  (1895);  Pitney 

V.  Glens  Falls  Ins.  Co.,  65  N.  Y.  25.  " 


CONSIDERATION      FAVORING    DOCTRINE   OF   PAROL   WAIVERS     163 

Closing  of  the  contract,  of  facts  at  variance  with  its  stipulations,  and 
permits  the  insured  to  give  his  oral  version  of  antecedent  and  con- 
temporaneous negotiations  and  transactions,  it  does  constitute  a 
substantial  departure  from  the  ordinary  rule  of  evidence;  since  a 
doctrine  which  denies  all  force  and  effect  to  an  unambiguous  clause 
of  a  written  contract,  to  all  intents  and  purposes,  expunges  the  clause 
from  the  contract  altogether.^ 

§  126.  Considerations  Favoring  Doctrine  of  Parol  Waivers. — The 

policy  is  prepared  in  the  interest  of  the  insurers.  The  applicant 
must  take  it  or  nothing.  It  is  a  general  form  framed  for  all  in- 
stances and  not  for  the  particular  instance.  Its  conditions  are 
numerous  a  ^d  complex,  and  often  the  insured  does  not  receive  it 
until  after  the  contract  is  closed.  He  may  have  no  opportunity  to. 
compare  it  with  the  application,  though  the  latter  may  constitute  a 
part  of  the  contract.  It  would  not  be  consonant  with  fair  dealing, 
indeed  it  would  work  actual  fraud,  to  permit  an  insurer  in  return  for 
the  premium  to  deliver  a  pretended  contract  of  insurance,  while 
knowing  all  the  time,  from  the  very  threshold  of  the  transaction, 
that  a  forfeiture  is  already  incurred,  and  that  therefore  the  policy 
will  be  of  no  more  avail  to  the  insured  than  a  piece  of  waste  paper.^ 

With  respect  to  another  class  of  forfeitures,  the  contention  is 
made  that  it  would  not  be  just  to  hold  the  insured  responsible  for 
erroneous  answers  in  the  application  or  policy,  where  the  insertion 
or  omission  complained  of  is  the  act  of  the  company  or  its  representa- 
tive, without  connivance  on  the  part  of  the  insured,  since  in  such  a 
case  the  alleged  breach  of  contract  is  not  the  act  of  the  insured  at 
all,  or  not  mainly  his  act.^ 

Again,  where  the  policy  during  its  life,  whether  before  or  after 
loss,  becomes  voidable  at  the  option  and  to  the  knowledge  of  the 
insurers,  words  or  acts  of  the  insurers,  confirmatory  of  the  continued 
validity  of  the  contract,  ought  to  be  taken  as  good  evidence  of  the 
exercise  of  this  option  to  condone  the  default,  if  otherwise  their  effect 
would  be  to  mislead  the  insured  to  his  prejudice.'  To  this  last  propo- 
sition substantially  all  the  authorities  agree,  provided  the  represen- 
tative of  the  insurer,  acting  on  its  behalf,  has  sufficient  power  to 
waive. 


1  See  the  important  case  of  Northern  2  Van,  Schoick  v.  7ns.  Co.,  68  N.  Y. 

Assur.    Co.    V.    Grand    View   Building  434. 

Assn.,  183  U.  S.  308,  22  S.  Ct.  133,  46  3  Wilkinson  v.    Jna.    Co.,   13   Wall. 

L.  Ed.  213;  Franklin  Fire  Ins.  Co.  v.  (U.  S.)  222. 
Martin,  40  N.  J.  L.  568. 


164  GENERAL    PRINCIPLES   OV   INSURANCE    LAW 

§  127.  Considerations  Opposed  to  the  Doctrine.— The  contract  of 
insurance  should  not  be  put  outside  the  pale  of  common-law  rules.' 
By  its  own  terms  it  provides  an  exclusive,  reasonable,  and  business- 
like method  for  making  modifications  in  the  contract  by  the  em- 
l)loyment  of  written  consents  called  permits.'  The  instrument  as 
written  is  the  most  reliable  evidence  of  the  agreement.^  To  go 
outside  of  it  is  to  encourage  falsehood  and  fraud  to  the  certain  injury 
of  one  or  other  of  the  parties  and  to  the  detriment  of  the  public. 
The  inevitable  tendency  will  be  toward  a  multiplication  of  fires  and 
an  increase  of  premium  rates.  Claimants,  through  lack  of  memorv 
(n-  by  evil  design,  will,  too  often,  fit  oral  testimony  to  the  exigencies 
of  their  case.  A  material  witness  on  one  side  or  the  other  may  die 
before  trial.  Since  the  written  contract  alone  is  reported  to  the 
company,''  the  applicant  should  know  that  the  statements  in  the 
application  and  policy,  whether  right  or  wrong,  must,  in  most  in- 
stances, constitute  all^that  the  home  office  has  before  it  in  estimat- 
ing risks  and  fixing  rates  of  premium.  He  should  know  that  the 
insurers  have  never  wittingly  given  authority  to  their  agents  to 
distort  or  secrete  from  them  any  facts  bearing  upon  these  vital 
subjects.  Under  the  doctrine  of  waiver  and  estoppel  it  sometimes 
happens  that  the  insured  is  allowed  to  recover  upon  a  policy  in  spite 
of  forfeiture  where,  if  the  facts  disclosed  for  the  first  time  at  the 
trial  had  been  made  known  to  the  company  in  advance,  it  would 
have  declined  the  risk  altogether,  and  very  frequently  the  undis- 
closed facts  would  aftect  the  rate  of  premium.  Thus,  there  is  often 
thrust  upon  the  insurers,  by  an  anomalous  doctrine  of  law,  a  con- 
tract which  they  neither  have  m.ade,  nor,  if  the  facts  had  been  lis- 
closed  to  them,  would  have  made.^ 

§  128.  Practical  Operation  of  Doctrine.— The  doctrine  of  parol 
waivers  as  applied  to  excuse  breaches  of  warranties  contained  in 
policies  is  largely  a  development  of  recent  years,^  and  may  fairly  be 

1  Northern  Assur.  Co.  v.  Grand  View  The  United  States  Circuit  Court  savs- 

Bldg.  Assn.,  183  U.  S..308,  22  S.  Ct.  "There  is  too  much  tendency  on  the 

133,  46  L.  Ed  213.  part  of  judges  to  construe  away  valid 

^  .\orthern  Assur.  Co.  V.  Grand  View  provisions    in    contracts    of    insurance 

Bldg.  Ass7i.,  183  U.  S.  308,  supra;  Nel-  and  indemnity  and  thus  reach  some 

son  Y.  Traders  Ins.  Co.,  181  N.  Y.  472.  more  equitable  conclusion.    The  result 

V    T   T  'o     ^'-        *"  ^^^^  ^^'''-   ^"■'  ^^  ^^    ^^^^    'hard    case'    law,    which    is 

N.J^  L.  384,  55  Atl.  291.  mostly  bad  law,  and  always  variable 

t  fee  §  / 5,  supra  law,"  Jackson  v.  Fidelity  &  Cas.  Co. ,  75 

5  If  the  general  form  of  the  contract  Fed.  359,  21  C.  C  A  394 

IS  unfair  it  is  the  function  of  legis-  « Doctrine    of    allowing    parol    evi- 

lature,  not  of  court  or  jury,  to  change  dence   that   agent   of   company  knew 

It  {pPf^«  f  • /ns-  (l'i-''£^osCo    151  facts  at  variance  with  policy  was  for 

U.  b.  452,  14  fe.  Ct.  379,  38  L.  Rd.  231.  many   years    repudiated    by   substan- 


PRACTICAL   OPERATION   OF    DOCTRINE 


165 


called  an  American  innovation  in  the  law  of  insurance.'  Its  ap- 
plication has  often  fostered  dishonest  claims  and  encouraged  per- 
jury in  sustaining  them.  The  tendency  of  this  has  been  to  drive 
the  companies  into  an  illiberal  policy  in  modifying  their  contracts 
and  in  adjusting  their  losses.  Such  action  of  the  companies,  in 
turn,  has  stimulated  the  courts  to  adopt  a  more  and  more  rigorous 
application  of  the  doctrine  against  the  insurers,  and  has  called  forth 
frequent  and  varied  interference  by  the  legislatures  of  all  the  states;  ^ 
thus  this  whole  branch  of  the  law  in  the  United  States  has  been 
thrown  into  confusion  and  uncertainty.^  The  cases  upon  this  sub- 
ject in  this  country  constitute  a  considerable  portion  of  the  law  of 
insurance,'*  and  many  of  the  opinions  of  our  courts  of  last  resort, 
as  reported  in  them,  are  hopelessly  at  variance  with  one  another. 
Nevertheless,  all  the  courts  recognize  that  there  exists  in  the  law 
of  insurance  an  equitable  doctrine  of  waiver  and  estoppel,^  but 
when  and  how  to  apply  it  is  the  perplexing  problem.  Estoppel  is  a 
rule  of  law  avowedly  subverting  and  overriding  the  terms  of  the 
contract,  but  adopted  for  the  purpose  of  preventing  fraud. ^     The 


tially  all  courts  in  actions  on  the  con- 
tract, Weston  V.  Ernes,  1  Taunt.  115, 
(Lord  Mansfield  with  unerring  judg- 
ment discriminates  between  matter  of 
inducement  and  matter  of  contract). 
Carpenter  v.  Providence  Wash.  Ins.  Co., 
16  Pet.  (U.  S.)  495;  Atherton  v.  Brown, 
14  Mass.  152;  Hartford  F.  Ins.  Co.  v. 
Davenport,  37  Mich.  609;  Dewees  v. 
Manhattan  Ins.  Co.,  35  N.  J.  L.  366; 
Jennings  v.  Chenango  Co.  Mut.  Ins. 
Co.,  2  Denio  (N.  Y.),  75. 

1  In  the  index  to  the  last  edition  of 
Arnould,  Mar.  Ins.  (1901),  we  look  in 
vain  for  the  subject  "parol  waiver  or 
estoppel."  According  to  last  edition 
Bunyon,  F.  Ins.  (1906),  the  following 
two  cases  furnish  the  only  instances 
cited  from  English  and  Irish  reports 
involving  a  variation  in  the  terms  of 
the  policy  by  virtue  of  the  doctrine  of 
waiver  and  estoppel,  Winx^  v.  Harvey, 
5  De  G.,  M.  &  G.  265;  Armstrong  v. 
Turquand,  9  Ir.  C.  L.  R.  32,  in  both  of 
which  renewal  pi-emiums  were  ac- 
cepted with  knowledge  of  facts  con- 
stituting breach.  A  modification  by 
agreement  with  fresh  consideration  to 
each  party  is,  of  course,  allowed, 
Supple  v.  Cain,  9  Ir.  C.  L.  R.  1,  and 
credit  for  first  premium  inferred  where 
the  policy  recites  its  prepayment, 
Roberts  v.  Security  Co.  (1897),  1  Q.  B. 
Ill,  but  in  the  last  two  cases  there  is 
no  subverting  of  the  written  terms  by 


parol.  Nor  is  there  in  a  marine  case 
where  the  English  court  held  that  the 
underwriter  might  elect  to  waive  for- 
feiture for  an  inducing  misrepresenta- 
tion made  prior  to  the  contract,  Morri- 
son V.  Universal  Mar.  Ins.  Co.,  L.  R. 
8  Exch.  40,  id.  197.  The  English  court 
does  not  find  waiver  or  estoppel,  even 
where  true  answers  are  given  to  the 
company's  solicitor  and  erroneous  an- 
swers are  written  into  the  application 
by  him,  Biqgar  v.  Rock  Life  Assur.  Co. 
(1902),  1  K.  B.  516.  In  striking  con- 
trast stand  many  thousands  of  Ameri- 
can cases,  reported  and  unreported,  in 
which,  on  contradictory  oral  evidence 
extrinsic  to  the  policy,  the  jury  has 
been  allowed  to  ignore  an  admittedly 
violated  warranty. 

2  Appendix,  ch.  I. 

3  An  experienced  jurist  says:  "The 
insurance  company  is  the  sport  of 
legislatures  and  its  contract  the  foot- 
ball of  the  courts,"  Prof.  Finch  in  Re- 
ports Am.  Bar  Assn.,  vol.  20,  p.  496. 

*  Waiver  and  estoppel  confront  the 
insurance  lawyer  in  court  perhaps  more 
frequently  than  any  other  issue. 

5  Even  in  England,  see  Mar.  Ins. 
Act  (1906),  §  34  (3). 

6  Security  Ins.  Co.  v.  Fay,  22  Mich. 
467,  473,  7  Am.  Rep.  670,  per  Camp- 
bell, Ch.  J.  The  statement,  often  made, 
that  "waiver  is  a  technical  doctrine 
introduced  and  applied  by  courts  for 


166  GENERAL    PRINCIPLES   OF  INSURANCE   LAW 

meaning  of  the  written  contract  may  be  plain.  The  effects  of  es- 
toppel lire  ;is  varied  and  multifarious  as  are  the  estimates  among 
\\\o.  various  tribunals  of  what  constitutes  fraud. 

.^  129.  Difficulty  in  Applying  Doctrine.— In  attempting  to  make 
practical  api)li('at  ion  of  tlie  doctrine  of  waiver  and  estoppel,  in  actions 
on  the  contract,  we  are  apt  to  find  that  certain  fundamental  princi- 
ples of  law  are  brought  into  collision.  Of  these  the  following  may  be 
mentioned:  first,  it  is  the  prerogative  of  a  court,  not  of  a  jury,  to 
construe  an  unambiguous  written  contract;  second,  the  court  must 
enforce  the  agreement,  if  at  all,  as  it  is  made  by  the  parties;  ^  third, 
when  its  terms  are  plain,  the  agreement  must  not  be  varied  by  parol 
evidence;  -  fourth,  either  party  may  voluntarily  abandon  a  clause 
of  the  contract  inserted  for  his  benefit,'^  or,  by  misleading  conduct 
amounting  to  fraud,  may  estop  himself  from  taking  advantage  of  it;'* 
but  the  testimony  establishing  a  waiver  or  an  estoppel  in  subversion 
of  the  written  contract  is  almost  always  necessarily  parol,^  and 
whether  such  testimony  is  true  presents  a  question  for  the  jury.^ 

Besides  the  embarrassment  arising  from  any  effort  to  harmonize 
propositions  so  irreconcilable,  a  further  and  most  serious  difficulty 
presents  itself  in  many  instances  of  this  class.  Insurance  com.- 
panies  can  act  only  by  personal  representatives  or  agents,  there- 
fore they  can  accomplish  waivers  and  estoppels  only  through  the 
medium  of  agents,"  and  an  agent  to  bind  his  principal  nmst  possess 
sufficient  authority,  either  real  or  apparent.*  The  policy  usually 
declares  in  substance  that  agents  have  no  authority  to  waive  any 
provisions  of  the  policy  except  by  written  agreement  indorsed 
thereon  or  attached  thereto,   and   probably   agents  rarely  receive 

the  purpose  of  defeatino;  forfeitures,"       Agricultural  his.  Co.,  130  N.  Y.  560, 

Alabama    State    Mut.    As.'^ur.    Co.    v.       29  N.  E.  991. 

Lon<7,  f<c.,Co..l23Ala.  667,  20So.  655;  i  Elliott   v".    Farmers'   Ins     Co      114 

^f  Pv  N  ^oo  *^^?''^""'"^    ^"■-   ^    ^^^*^"*^-  ^°^^'^'  1^^'  ^^^   (""^'^  cannot  make  a 

(N.  Y)  381;  Kicrnan  v.  Dutchess  Co.  new  contract  for  them  nor  refuse  to  en- 

Mut.  Ins.  Co.,  1.50  N.  Y.  190,  44  N.  E.  force  the  contract  they  made") 

698,  IS  not  so  satisfactory  as  the  state-  2  Xorthern  Assur.  Co.  v.  Grand  View 

ment  that  the  doctiine  of  waiver  and  Bldg.  Assn.,  183  U.  S.  308,  22  S    Ct 

estoppel  is  apphed  solelv  for  the  pur-  133,  46  L   Ed   213 

pose    of    preventing    fraud.    Xorthern  -^  Iowa  Life  Ins.' Co.   v.   Lewi^,   187 

icq"/!    a  ■  ^'kc^''?."y  \^a  ^J'^^-  ^•^^^^•'  ^'-  S-  335,  348,  23  S.  Ct.  126. 

t^^ttYo^i-.T'  ^n'  "t?/  PJ-  1^?'  ^^  *  Wilkinson   v.    Im.    Co.,    13   Wall. 

L.  Ed.  213;  Ins.  Co.  v.  Wolff,  95  U.  S.  (U.  S.)  222. 

326,  2  L.  Ed.  387;  Northwestern  Mut.  5  gee  §  r>4   supra 

L.  Ins.  Co.  V.  .Amerman,  119  111.  329,  6  See  §93   supra 

Ru.ssell\'.  Prudential  Ins.  Co., 176N.Y.      Mich  514  32  Am  St  R   519   is  T    R 

't\Y^I^-  !?■  If'  ^?  ^H-  ^'-  ^-  *556;       A.  481    53  N  V\^818.  '  ^  ^^  ^• 

lm%2\o-7f-i^l^A-''^f^-^-  "^'^'"-'^    '■    Prudential    Ins.     Co., 

0I6,  o22,  50  N.  E.  284;  Arm.>^troiuj  v.       'jy  .Mi,,,,.  17(),  108  N.  W.  861. 


DIFFICULTY    JX    Al'i'L\lXG    DOCTRINE  l67 

affirmative  instructions  to  waive  in  any  other  way.  Under  such 
circumstances,  what  is  the  apparent  power  of  the  agent  to  bind  the 
company,  in  matters  of  waiver  and  estoppel?  Shall  the  limit  of 
authority,  as  defined  by  instructions  and  as  described  in  the  policy 
to  which  the  assured  is  a  party,  be  regarded  as  the  true  measure,^ 
or  shall  the  court  gauge  the  extent  of  authority  by  the  rule  that  the 
power  of  the  agent  is  coextensive  with  the  reasonable  requirements 
and  natural  incidents  of  the  transaction  which  he  is  employed  to 
conduct  in  the  interest  of  the  company?  -  Is  the  insured  justified 
in  assuming  that  the  contract  terms  as  written  may  be  thus  ignored 
or  evaded?  Is  such  an  irregular  disturbance  of  the  contract  to  be 
considered  a  reasonable  or  natural  incident  of  the  transaction? 

To  these  questions  different  answers  have  been  given,  according 
as  one  or  another  of  these  considerations  has  been  uppermost  and 
controlling  in  the  mind  of  the  court.,  and  the  different  answers  have 
ramified  into  very  divergent  results  in  multitudes  of  cases  decided 
in  the  many  independent  jurisdictions  of  this  country.^  A  maze  of 
conflicting  rulings,  which  do  not  all  fall  within  concise  and  logical 
formulae,  must  engage  our  strict  and  patient  attention  in  the  two 
chapters    next    succeeding. 

^Northern  Ass.   Co.  v.  Grand  View  ^  Ins.    Co.    \.    Wilkinson,    13   Wall. 

Building  Assn.,  183  U.  S.  308,  22  S.  Ct.       (U.  S.)  222. 

133,  46  L.  Ed.  213.  a  See    ch.    VIII,  infra,  and  Cooley 

Ins.  (1905),  pp.  2455-2787. 


CHAPTER  VII 


General  Principles 


Waiver  and  Estoppel — Continued 


§  130.  What  Cannot  be  Waived. — Parties  to  a  contract  of  insur- 
ance made  within  a  state  cannot  avoid  the  provisions  of  a  general 
statute  of  that  state,  adopted  as  matter  of  pubHc  poUcy,  unless  the 
statute  authorizes  it.^  The  rule  requiring  an  insurable  interest, 
whether  prescribed  by  statute  or  not,  being  adopted  out  of  regard 
to  the  welfare  of  the  state,  may  not  be  altogether  waived  by  the  par- 
ties.2 

A  corporation  cannot  in  general  do  an  act  idtra.  vires  or  beyond 
its  corporate  powers  as  defined  by  its  charter,  and  every  one  deal- 
ing with  the  corporation  is  presumed  to  be  cognizant  of  the  nature 
and  extent  of  such  power." 

Thus  if  a  fire  insurance  company  organized  in  New  York  should 


1  St.  Paul  F.  &  M.  Ins.  Co.  v.  Sharer, 
76  Iowa,  282;  Emery  v.  Piscataqua  F. 
&  iM.  his.  Co.,  52  Me.  322;  Chamber- 
lain V.  N.  H.  Fire  Ins.  Co.,  55  N.  H. 
249.  Thus,  that  there  shall  be  no 
forfeiture  of  a  life  policy  for  non- 
payment of  premiums,  etc.,  without 
a  notice  of  at  least  fifteen  days,  duly 
mailed,  N.  Y.  Ins.  L.,  §  92;  Mid.  Life 
Ins.  Co.  V.  Cohen,  179  U.  S.  262;  Baxter 
V.  Brooklyn  Life  Ins.  Co.,  119  N.  Y. 
450,  23  N.  E.  1048  (statute  governs 
rights  and  obligations).  Nor  can  the 
parties  waive  other  remedial  provi- 
sions regarding  forfeiture,  N.  Y.  Life 
Ins.  Co.  v.  Cravens,  178  U.  S.  389. 
And  rule  applies  to  foreign  company 
making  contract  in  the  state.  Equitable 
Life  Assur.  Sac.  v.  Clements,  140  U  S 
226,  11  S.  Ct.  822;  Knights  Templars, 
etc.,  Co.  V.  Jarman,  187  U.  S.  204 
(Missouri  statute  making  life  company 
liable  despite  suicide  of  insured).  So 
also  as  to  provisions  of  standard  policy 
prescribed  by  statute,  Wild-Rice  L.  Co. 
v.  Royal  Ins.  Co.,  99  Minn.  190,  108 
N.  W.  871;  or  of  statutes  in  substance 


transforming  w^arranties  into  mere 
representations,  Hancock  Mut.  Life 
Ins.  Co.  v.  Warren,  181  U.  S.  76;  or 
declaring  a  policy  valued  as  to  build- 
ings. Orient  Ins.  Co.  v.  Daggs,  172  U.  S. 
557;  Reilly  v.  Franklin  Ins.  Co.,  43  Wis. 
449;  or  making  a  solicitor  the  agent  of 
the  insurance  company,  McMaster  v. 
N.  Y.  Life  Ins.  Co.,  183  U.  S.  25;  Con- 
tinental Life  Ins.  Co.  v.  Chamberlain, 
132  U.  S.  304,  10  S.  Ct.  87,  33  L.  Ed. 
341;  or  providing  that  license  shall  be 
revoked  if  company  removes  a  case  to 
federal  court,  Security  Mut.  L.  Ins.  Co. 
V.  Prewitt,  202  U.  S.  246;  Cable  v.  U.  S. 
Life  Ins.  Co.,  191  U.  S.  288.  A  cor- 
poration cannot  abrogate  such  laws  by 
attempted  contract  stipulations.  Na- 
tional, etc.,  Assoc.  V.  Brahan,  193  U.  S. 
635,  650,  24  S.  Ct.  532. 

^  Auctil  V.  Mfrs.  L.  Ins.  Co.  (1899), 
App.  Cas.  604;  and  see  Gedqe  v.  Royal 
Exch.  (1900),  2  K.  B.  214. 

3  Jemison  v.  Citizens'  Savings  Bank, 
122  N.  Y.  140;  Gibbs  v,  Richmond 
Co.  Mut.  Ins.  Co.,  9  Daly  (N  Y.). 
203. 


[168] 


WHAT   CANN(yr    BK   WAIVED 


169 


attempt  to  make  a  contract  of  life  or  ocean-marine  insurance,  the 
contract  would  be  void.^  So  also  a  policy  of  a  mutual  company  is 
void  as  to  a  class  of  property  not  included  within  the  privileges  of  its 
charter;  ^  or  if  issued  to  one  not  a  member  of  the  company;  ^  or  if 
upon  property  located  outside  the  territory  of  its  operations  as  de- 
fined by  statute. "^ 

Especially  in  the  federal  courts  the'doctrine  of  ultra  vires  is  strictly 
enforced;^  but  in  the  interest  of  justice  premiums  will  be  returned 
to  an  innocent  party  upon  disaffirmance  of  the  contract;  or  other 
equitable  reinstatement  will,  if  practicable,  be  allowed.'^ 

Many  of  the  state  courts,  however,  have  adopted  the  rule  that 
after  a  contract  ultra  vires  has  become  executed  by  the  one  party, 
the  other  party  is  estopped  from  asserting  its  own  wrong,  and  cannot 
be  excused  from  performance  upon  the  plea  that  the  contract  was 
beyond  its  powerJ  With  the  aid  of  this  doctrine,  apparently,  con- 
tracting parties  may  largely  ignore  the  limits  which  are  imposed  by 
statutes  and  charters  for  the  security  of  the  stockholders,  and  also, 
it  may  be,  for  the  benefit  of  the  public  generally. 


1  Re  Arthur  Average  Assoc,  32  L.  T. 
N.  S.  525.  But  any  directions  of  the 
charter  as  to  the  internal  manage- 
ment of  the  affairs  of  the  corporation 
are  not  in  general  binding  upon  out- 
siders, hi  re  Athenceum  Life  Assur.  Co., 
27  L.  J.  Ch.  829.  Nor  are  charter 
provisions  binding  upon  third  persons 
which  extend  to  the  directors'  dis- 
cretionary powers  to  do  a  certain  act, 
Ernest  v.  Nicholls,  6  H.  L.  Cas.  401; 
as,  for  example,  where,  by  the  regula- 
tions of  the  company,  insurance  is  to 
be  made  only  to  three-fourths  of  the 
value  of  property,  but  the  officers  of 
the  company  are  to  decide  what  is  the 
value,  Jones  v.  Bangor  Mut.  S.  Ins. 
So.,  61  L.  T.  N.  S.  7i27.  And,  in  gen- 
eral, for  a  deviation  from  the  pre- 
scribed method  of  doing  a  valid  cor- 
porate act,  the  corporation  will  not  be 
discharged  from  liability  to  an  inno- 
cent person,  and  therefore  in  such 
matters  of  informality  or  of  inaccuracy, 
directions  whether  of  the  charter  or 
by-laws  may  be  waived.  Relief  Ins.  Co. 
V.  Shair,  94  U.  S.  574;  First  Bapt. 
Church  v.  Brooklyn  Fire  Ins.  Co.,  19 
N.  Y.  305;  In  re  County  Life  Assur.  Co., 
L.  R.  5  Cli.  App.  288.  Thus  a  by-law 
barring  applications  from  persons  en- 
gaged in  certain  occupations.  Cover- 
dale  v.  Royal  Arcanum,  193  111.  91,  61 
N.  E.  915;  or  a  by-law  limiting  mem- 
bership to  persons  below  a  certain  age, 


Wiberg  v.  Minn.,  etc.,  Assoc,  73  Minn. 
297,  76  N.  W.  37. 

2  Geraghty  v.  Washtenaw  Mut.  F. 
Ins.  Co.  (Mich.,  1906),  108  N.  W.  1102 
(citing  many  cases  pro  and  con). 

3  In  re  Mutual  Guaranty  F.  Ins.  Co. 
(la.,  1899),  77  N.  W.  868;  Corey  v. 
Sherman  (la.),  60  N.  W.  232.  Com- 
pare Coulson  V.  Flynn,  181  N.  Y.  62, 
73  N.  E.  507. 

4  Eddy  V.  Ins.  Co.,  72  Mich.  651. 

5  California  Bank  v.  Kennedy,  167 
U.  S.  362  (citing  many  cases,  English 
and  American);  Central  Transp.  Co.  v. 
Pullman's  P.  C.  Co.,  139  U.  S.  24,  59; 
First  Nat.  Bank  v.  Converse,  200  U.  S. 
425;  Ashhury  Railu-ay  C.  dk  Iron  Co.  v. 
Riche,L.  R.,  7  H.  L.  653. 

6  Pullman's  Car  Co.  v.  Transp.  Co., 

171  U.  S.  138. 

7  V ought  v.  Eastern  Bldg.  &  L.  Assn., 

172  N.  Y.  508,  518;  Boners  v.  Ocean 
Ace.  &  Guaranty  Corp.,  110  App.  Div. 
691,  aff'd  187  N.  Y.  561;  Brisay  v.  Star 
Co.,  13  Misc.  (N.  Y.),  349;  Denver  F. 
Ins.  Co.  V.  McClellajid,  9  Colo.  11,  9 
Pac.  771;  Matt  v.  Society,  70  Iowa,  455, 
30  N.  W.  799;  and  see  many  cases  cited 
in  dissenting  opinion,  Garaghty  v. 
Washtenaio  Mut.  F.  Ins.  Co.  (Mich.), 
108  N.  W.  1102.  But  on  the  other 
hand  the  New  York  Supreme  ('ourt 
has  recently  followed  the  federal  rule, 
Appleton  v.  Cit.  Cent.  Nat.  Bk.,  116 
App.   Div.  404. 


1,(1  (;i:m;i;ai.   rifi.\(  itlks  oi    INSIHANCE   LAW 

§  131.  What  can  be  Waived  Stock  Companies. — An}-  condition 
or  provision  of  the  policy  inserted  for  the  benefit  of  the  insurers,  even 
those  stipulations  wiiich  j^rovide  that  there  shall  be  no  waiver,  or 
that  no  waiver  shall  be  made  except  in  a  certain  manner  as  by  writ- 
ing, or  that  certain  classes  of  persons  shall  be  deemed  to  have  no 
authority  to  waive,  may  be  waived  by  the  insurers  through  such 
representatives  as  in  fact  have  tlie  requisite  authority.'  This  is  put 
upon  the  ground  that  parties  having  power  to  make  a  contract  have 
power  by  mutual  consent  to  abrogate  or  alter  it  to  any  extent  at 
their  pleasure,  unless  restrained  by  statute.^ 

§  132.  New  Subject  not  to  be  Introduced  by  Waiver. — The 
doctrine  of  waiver  and  estoppel,  it  is  said,  is  not  to  be  extended  so 
far  as  to  introduce  into  the  contract  an  entirely  new  subject-matter. 

Thus  if  by  the  terms  of  the  poUcy  a  designated  house  is  the  sub- 
ject of  insurance,  the  insured  will  not  be  permitted  to  show  by  parol 
that  in  consequence  of  the  representations  or  conduct  of  the  insurers 
another  house  ought  to  be  substituted.^  Neither  can  a  new  peril 
or  cause  of  loss  be  added  to  the  contract  by  application  of  this 
doctrine.'* 

§  133.  Waiver — Mutual  Companies. — By  some  courts,  especially 
those  of  i\Iassachusetts,  it  has  been  held  that  the  officers  and  agents 
of  a  mutual  insurance  company  have  no  authority  to  waive  such  of 
its  charter  regulations  or  by-laws  as  relate  to  the  essential  terms 
of  the  contract.^ 

1  Phoenix  Ins.  Co.  v.  Hart,  149  111.  .V.  Y.  Cent.  Ins.  Co.,  22  N.  Y.  402,  411; 
513,  36  N.  E.  990;  Glasscock  v.  Des  Morrison  v.  Universal  Mar.  Ins.  Co., 
Moines  Ins.   Co.,  125  Iowa,  170,  100      L.  R.  8  Exch.  40,  id.  197. 

N.  W.  503.  s  Sanders  v.  Cooper,  115  N.  Y.  279, 

2  Thus  in  a  late  case, /oira  Li/e /ns.  22  N.  E.  212;  Birnstein  v.  Stui/ve- 
Co.  V.  Lewis,  187  U.  S.  335,  348,  the  sant  Ins.  Co.,  83  App.  Div.  (N.  Y.)  436, 
Federal  Supreme  Court  says:  "A  for-  82  N.  Y.  Supp.  140;  Xorthrup  v.  Por- 
feiture,  of  course,  may  be  waived,  for  ter,  17  App.  Div.  80,  44  N.  Y.  Supp. 
the  obvious  reason  expressed  in  7ns.  814.  Remedy,  if  any,  in  such  a  case  is 
Co.  V.  Norton,  96  U.  S.  235,  a  party  by  reformation,  Le  Gendre  v.  Scottish 
always  has  the  option  to  waive  a  con-  Union  &  Nat.  Ins.  Co.,  95  App.  Div. 
dition  or  stipulation  made  in  his  own  (N.  Y.)  562,  565,  88  N.  Y.  Supp.  1012. 
favor,  and  an  agent  can  be  given  such  i  McCoy  v.  NoHhwestern,  etc.,  Assoc 
power,  and  whether  it  has  been  given  92  Wis.  577,  66  N.  W.  697,  47  L.  R  a' 
or    not    may  be    proved    by   parol."  681. 

Phoenix  Ins.   Co.  v.   Caldwell,  187  111.  5  McCoy  v.  Metrop.  Life  Ins.  Co    133 

73,  58  N.  E.  314;  Hunt  v.  State  Ins.  Co.,  Mass.  85;  Brewer  v.   Chelsea  Mut  'Pire 

66  Neb.  121,  92  N.  W.  921.     Waivers  7ns.  Co.,  14  Gray  (Mass.),  203;  Mulrey 

of   specific    conditions   enumerated   in  v.  Shawmut  Mut.  Fire  Ins.  Co    4  Allen 

Cooley  Ins.,  pp.  2464-2465.     Inducing  (Mass.),  116,  81  Am.  Dec.  689-  Belle- 

fraud  or  misrepresentations   prior  to  ville  Mut.  Ins.  Co.  v.  Van  Winkle    1 

contract  may  also  be  waived,  Bigler  v.  Beasley,  333.  ' 


WHAT    AMOUNTS    ro    WAIVEK   OR    ESTOPPEL  171 

This  distinction  is  put  upon  the  ground  that  pohcyholders  in  a 
mutual  company  are  members  of  the  company,  and  that  the  by-laws 
are  binding  upon  all,  and  that  the  officers  and  other  representatives 
of  the  company  are  special  agents  appointed  to  enforce  the  by-laws 
and  mutual  arrangements,  and  not  to  disregard  them  in  favor  of 
one  of  the  members  as  against  his  associates. 

Even  in  Massachusetts  the  limitation  extends  only  to  provisions 
that  are  of  the  essence  of  the  contract.  Technical  requirements  in 
regard  to  the  form  and  the  contents  of  the  proofs  of  loss,  or  limita- 
tion of  time  to  sue,  may  be  waived.^ 

And  the  tendency  among  the  courts  seems  to  be  to  deny  the  dis- 
tinction between  mutual  and  stock  companies  altogether,  in  respect 
to  the  power  of  the  officers  and  agents  to  waive  conditions  and  estop 
the  company  from  insisting  upon  forfeitures.^ 

§  134.  What  Amounts  to  Waiver  or  Estoppel — Doctrine  Ampli- 
fied.— Any  unequivocal  and  positive  act  by  the  insurers  recognizing 
the  policy  as  valid  and  inconsistent  with  the  notion  that  the  com- 
pany proposes  to  avail  itself  of  a  breach — as,  for  example,  the  ac- 
ceptance of  a  premium  or  assessment,  the  delivery  of  the  policy 
or  a  renewal  receipt,  or  the  levying  of  an  assessment,  or  the  indorse- 
ment of  any  permit  on  the  policy — constitutes  a  waiver  of  all  known 
grounds  of  forfeiture,  and  the  company  is  said  to  be  estopped  from 
setting  them  up  in  defense,  provided  the  insured  can  show  that  by 
such  act  he  has  been  misled  to  his  injury.''  Thus  though  the  assured 
made  a  transfer  of  the  property  so  that  he  no  longer  had  any  in- 
surable interest  as  owner,  nevertheless  as  the  company  continued 

1  Priest  V.  Citizens'  Mut.  Fire  Ins.  member  to  pay  his  assessments  at  cer- 
Co.,  3  Allen  (Mass.),  602;  Jenjiings  v.  tain  stipulated  times,  a  waiver  of  such 
Metropolitan  Life  Ins.  Co.,  148  Mass.  provision  may  be  shown  by  a  course  of 
61,  18  N.  E.  601.  conduct  inducing  the  members  to  be- 

2  Relief  Ins.  Co.  v.  Shaw,  94  U.  S.  lieve  that  the  assessment  would  be 
574;  Railway,  etc.,  AssJi.  v.  Tucker,  157  received  thereafter,  Foresters  of  Amer- 
111.  194,  42  N.  E.  398;  Nat.  Mid.  Ben.  ica  v.  Hollis,  70  Kan.  70,  78  Pac.  160. 
Asso.  V.  Jones,  84  Ky.  110;  Gxmther  v.  Doctrine  of  waiver  is  applicable  to 
New  Orleans,  etc.,  Asso.,  40  La.  Ann.  each  underwriter  to  a  Lloyd's  policy, 
776,  5  So.  65,  2  L.  R.  A.  118,  8  Am.  Ralli  v.  White,  21  Misc.  285.  47  N.  Y. 
St.  R.  554;  Orm.sby  v.  Laclede  Farmers',  Supp.  197. 

e<c.,  Co.,  98  Mo.  App.  371,  72  S.  W.  139;  ^  Bevin    v.    Conn.    Mut.    Life   Ins. 

Miller  \.  Hillsborough  Mut.  Fire  A ssur.  Co.,  23   Conn.   244;    Rathbone  v.  City 

Asso.,  44  N.  J.  Eq.  224;  Pratt  v.  D.  H.  Fire  Ins.  Co.,  31  Conn.  194;   Jones  v, 

M.  F.  Ins.  Co.,  130  N.  Y.  206,  29  N.  E.  Bangor  Mut.  Life  Ins.  Co.,  61  L.  T.  N. 

117;  Kister  v.  Lebanon  Mut.  Ins.  Co..  727   (1890);   Hartford  Fire   Inc.  i^o. 

]28  Pa.  St.  553,  18  Atl.  447;  Stylow  Landfare,  63  Neb.  559,  88  N.  W.  779, 

v.   Wis.   Odd  Fellows'  Mut.   Life  Ins.  Weedv.  London  &  L.  Fire  Ins.  Co.,  116 

Co.,  69  Wis.  224,  34  N.  W.  151.     So  N.  Y.  106;  Armstrong  v.   Turquan-'     ^ 

though  the  by-laws  of  an  association  Irish  C.  L.  32. 
provide  for  forfeiture  upon  failure  of  a 


172 


fJKNElLM.    riUNCirLES    OF    1N8UUAXCE    LAW 


to  levy  assessments  upon  him  with  full  knowledge  of  the  facts,  he  was 
pernultod  to  recover,  and  the  company  was  held  to  be  estopped 
from  settiufj  up  lack  of  insurable  interest  at  the  time  of  loss.^ 

If  is  very  important,  however,  to  observe  that  an  oral  consent  or 
promise  maile  to  the  insured  at  or  before  the  execution  of  the  con- 
tract, to  the  effect  that  he  may  in  future  violate  the  terms  of  the 
policy  as  written,  is  not  binding,  and  cannot  be  shown  by  parol, 
because  the  oral  promise  becomes  merged  in  the  contract.'  Thus  an 
antecedent  promise  by  an  agent,  that  a  premium  note  need  not 
be  paid  when  due,  cannot  be  shown  by  parol.-''  80  also  knowledge 
by  the  agent  of  the  company  at  the  time  the  contract  is  made,  that 
the  assured  intends  to  take  out  other  insurance,  though  coupled 
with  the  statement  that  the  policy  is  correct,  cannot  avail  to  excuse 
a  breach  of  warranty  prohibiting  the  taking  out  of  other  insurance 
without  written  consent.^ 

But  some  courts  in  their  anxiety  to  avoid  forfeiture  do  not  give 
adherence  to  this  sound  rule.^ 

§  135.  The  Same— Acceptance  of  Premium.— Acceptance  by  the 

company  of  payment  of  premiums  or  assessments  is  a  waiver  of 
known  forfeitures.^     So  the  acceptance  of  a  note  for  the  first  pre- 


1  Light  V.  Mut.  Fire  Ins.  Co.,  169 
Pa.  St.  310,  32  Atl.  439,  47  Am.  St.  R. 
904.  So  also  payment  of  a  small  loss 
by  fire  revives  the  policy  for  the  bal- 
ance of  its  term  and  for  any  future 
loss,  Westchester  Fire  Ins.  Co.  v.  Mc- 
Adoo  (Tenn.  Ch.  App),  57  S.  W.  409 
(1899). 

2  Ins.  Co.  V.  Mowry,  96  U.  S.  544, 
24  L.  Ed.  674;  7ns.  Co.  v.  Lyman,  15 
Wall.  (U.  S.)  664;  Walton  v.  Agri- 
cultural Ins.  Co.,  116  N.  Y.  317.  22 
N.  E.  443,  5  L.  R.  A.  677.  Worachek 
V.  New  Denmark  Mut.  Home  F.  I.  Co., 
102  Wis.  81,78  N.  W.  165;  Doctrine 
cannot  apply  to  intended  violations. 
United  Firemen's  Ins.  Co.  v.  Thomas, 
82  Fed.  406,  27  C.  C.  A.  42,  47  L.  R.  A. 
457. 

3  Thompson  v.  Knickerbocker  Life 
Ins.  Co.,  104  U.  S.  252. 

^  Gray  v.  Germania  Fire  Ins.  Co.,  155 
N.  Y.  I'SO,  184,  49  N.  E.  675. 

5  Oral  consent  to  subsequent  other 
insurance,  Havens  v.  Home  Ins.  Co., 
Ill  Ind.  90,  93,  12  N.  E.  137,  60  Am. 
Rep.  689;  Ind.  School  District  v. 
Fidelity  Ins.  Co.,  113  Iowa,  65,  84 
N.  W.  956;  Woolpert  v.  Franklin  Ins. 
Co.,  42  West  Ya.  647,  26   S.  E.  521; 


oral  extension  of  time  to  complete 
house.  Queens  Ins.  Co.  v.  Kline,  17  Ky. 
L.  R.  619,  32  S.  W.  214;  oral  consent  to 
future  increase  of  risk.  Orient  Ins.  Co. 
V.  McKnight,  197  111.  190,  64  N.  E.  339. 
^Phoenix  L.  I.  Co.  v.  Raddin,  120 
U.  S.  183;  Hennessey  v.  Met.  Life  Ins. 
Co.,  74  Conn.  699,  52  Atl.  490;  Fitz- 
gerald V.  Hartford  Life  <&  A.  I.  Co.,  56 
Conn.  116,  13  Atl.  673,  7  Am.  St.  R. 
288;  Rice  v.  New  England  Mutual  Aid 
Soc,  146  Mass.  248;  Schrieber  v.  Ins. 
Co.,  43  Minn.  367,  45  N.  W.  708; 
Magnet  v.  Mutual  Life  Assn.,  17  App. 
Div.  13.  44  N.  Y.  Supp.  862.  aff'd  162 
N.  Y.  657,  57  N.  E.  1116;  Schwarzbach 
v.  Ohio  Valley  Prot.  Union,  25  W.  Va. 
622,  52  Am.  Rep.  227;  Mc Kinney  v. 
German  Mutual  F.  I.  Co.,  89  Wis.  653, 
666,  62  N.  W.  413,  46  Am.  St.  R.  861. 
This  rule  has  been  applied  in  the  case 
of  a  violation  of  the  provisions  of  the 
policy  as  to  other  insurance.  Phoenix 
Ins.  Co.  V.  Covey,  41  Neb.  724,  60 
N.  W.  12;  as  to  the  premises  being 
vacant,  Germania  Fire  Ins.  Co.  v. 
Kleiver,  129  111.  599,  22  N.  E.  489;  as 
to  title  or  interest,  Whited  v.  6'er- 
mania  Fire  Ins.  Co.,  13  Hun  (N.  Y.), 
191,  aff'd  76  N.  Y.  415,  32  Am   Rep. 


EFFECT   OF    PRIOR    COURSE    OF   DEALING  178 

mium  waives  a  provision  that  the  poHcy  shall  not  take  effect  until 
the  first  premium  has  been  paid.^  The  acceptance  and  retention, 
however,  of  a  premium  or  assessment,  if  in  ignorance  of  the  facts 
constituting  forfeiture,  will  not  operate  as  a  waiver,  since  knowledge 
of  the  facts  is  an  essential  element  of  waiver  and  estoppel.^ 

§  136.  The  Same — Receipt  of  Overdue  Premiums. — The  accept- 
ance by  the  insurer  of  the  amount  of  an  overdue  premium  will 
operate  as  a  waiver  of  its  rights  to  forfeit  the  policy  for  failure  to 
pay  the  premium  when  due.^ 

§  137.  The  Same — Consent  to  Assignment  of  Policy. — Where  an 
assignment  of  a  policy  and  the  transfer  of  the  property  covered 
thereby  are  consented  to  by  the  insurer  with  knowledge  of  forfeiture 
already  incurred,  it  will  be  estopped,  in  an  action  by  the  assignee 
for  a  loss  subsequently  occurring,  to  avail  itself  of  the  forfeiture.'* 

§  138.  The  Same — Renewal  of  Policy. — A  renewal  of  a  policy  by 
the  company  with  knowledge  of  a  prior  breach  of  warranty,'''  or 
misrepresentations  originally  made,^  constitutes  a  waiver. 

§  139.  Effect  of  Prior  Course  of  Dealing. — An  insurance  company 
may  be  estopped  from  enforcing  a  breach  for  non-payment  of  a 
premium  when  due,  by  a  uniform  course  of  dealing  with  the  insured 
which  justifies  a  belief  that  a  forfeiture  will  not  be  enforced  therefor. 
Such  an  estoppel  may  arise  from  the  continued  acceptance  of  pre- 

330;  as  to  change  of  residence  of  in-  feiture,  Neal  v.  Gray,  124  Ga.  510,  52 

sured  in  a  life  policy,  Garber  v.  Globe  S.  E.  622;  Sullivan  v.  Conn.  Indemnity 

Mut.  Life  Ins.  Co.,  Fed.  Cas.  No.  5, 2U;  Assn.,  101  Ga.  809,  29  S.  E.  41   (es- 

Gerniania  Ijis.  Co.  v.  Rudwig,  80  Ky.  pecially  where  agent  has  no  authority 

223;   as   to   misrepresentation   regard-  to  waive);  Elliott  v.  Lycoming  County 

ing  pregnancy,  Chicago  Guaranty  F.  L.  Mut.  I.  Co.,  66  Pa.  St.  22,  5  Am.  Rep. 

As.m.  V.  Ford,  104  Tenn.  533,  58  S.  W.  323. 

239.  3  Globe  Mutual  Life  Ins.  Co.  v.  Wolff, 

1  Lawrence  v.  Penti.  Mut.  L.  I.  Co.  95  U.  S.  326,  24  L.  Ed.  387;  White  v. 

113    La.    87,    36    So.    898.      Compare  McPeck,  185  Mass.  451,  70  N.  E.  462; 

London   &   L.   Assur.   Co.    v.   Fleming  James  v.  Mut.  Res.  Fund  L.  Ass.,  148 

(1897),  App.  Cas.  499.     Receiving  as-  Mo.  1;  Tripp  v.  Vermont  Life  Ins.  Co., 

sessments  waives   defense   that    bene-  55  Vt.  100. 

ficiary  does  not  belong  to  class  speci-  *  Home  Mutual  Ins.  Co.  v.  Nichols 

fied  in  by-laws,  Coulson  v.  Flynn,  181  (Tex.  Civ.  App.,  1903),  72  S.  W.  440. 

N.  Y.  62,  73  N.  E.  507.              "  ^  Allen  v.  Home  Ins.   Co.,  133  Cal. 

^Miller  v.  Head  Camp,  45  Oregon,  29,  65  Pac.    138;    Mechler  v.  Phoenix 

192,  77  Pac.  83;  Diehl  v.  Adams  County  Ins.  Co..  38  Wis.  665. 

Mut.  I.  Co.,  58  Pa.  St.  443,  98  Am.  e  Witherell   v.   Marine   Ins.   Co.,   49 

Dec.    302.      A    mere    demand    by    an  Me.  200.     Compare  Agricultural  S.  & 

agent  for  payment  of  premium,   un-  L.  Co.  v.  L.  &  L.  &  G.  Ins.  Co.,  32 

heeded,  constitutes  no  waiver  of  for-  Ont.  369. 


171 


GENERAL   PRINCIPLES   OF   INSURANCE   LAW 


niiumt!  after  they  are  due.'  Occasional  indulgences  or  acts  of 
leniency,  however,  will  not  be  construed  as  a  permanent  waiver  or 
an  agreement  to  extend  the  same  indulgence  for  the  future.' 


jj  140.  Subsequent  Parol  Permits. — A  consent,  oral  or  written,  by 
tlio  insurers  or  theii-  duly  authorized  agent,  given  to  the  insured  after 
the  execution  of  the  contract,  permitting  him  to  deviate  from  the 
requirements  of  the  policy,  will  operate  as  a  waiver  or  estoppel  if 
the  insured  has  relied  upon  it  in  such  a  way  that  he  would  sustain 
injury  in  case  the  consent  were  repudiated  by  the  insurers.^  Thus 
where  such  an  agent,  upon  being  requested  to  make  the  required 
indorsement  giving  permit  for  other  insurance,  replied  that  he  had 
"fixed  it  all  right,"  the  court  held,  that  though  no  indorsement  was 
ever  made  upon  the  policy,  an  estoppel  was  established  since  no  limi- 
tation upon  the  agent's  authority  was  contained  in  the  policy.^ 

Under  this  rule  of  law  it  became  the  common  occurrence  on  the 
trial  for  an  unscrupulous  claimant  to  testify,  in  excuse  of  a  breach 
of  warranty,  that  he  had  gone  to  some  officer  or  agent  of  the  com- 
pany, told  him  the  facts,  and  received  the  reply  "all  right."  This 
sort  of  testimony,  coupled  with  the  practice  frequently  adopted  by 


1  Hartford  Life  Annuity  Ins.  Co.  v. 
UnsplI,  144  U.  S.  439,  36  L.  Ed.  496; 
United  States  L.  I.  Co.  v.  Lesser,  126 
-Ma.  568,  28  So.  646;  Neal  v.  Gray 
124  Ga.  510,  52  S.  E.  622,  Cotton 
States  L.  /.  Co.  v.  Lester,  62  Ga. 
247,  35  Am.  Rep.  122;  Illinois  Life 
Assn.  V.  Wells,  102  III.  App.  544,  aff'd 
200  111.  445,  65  N.  E.  1072;  Mudd  v. 
German  Ins.  Co.,  22  Ky.  L.  R.  308, 
56  S.  W.  977;  Appleton  v.  Phceni.r 
Mut.  L.  I.  Co.,  59  N.  H.  541,  47  Am. 
Rep.  220;  Sehceller  v.  Grand  Lodge, 
110  App.  Div.  (N.  Y.)  456;  Bryan  v. 
Xational  L.  I.  Assn.,  21  R.  I.  149,  42 
Atl.  513.  Where  the  insurer  allows  a 
person  on  several  occasions  to  solicit 
life  insurance  and  deliver  policies  with- 
out cash  premiums,  but  for  notes,  it  is 
estopped  from  denying  due  receipt  of 
premium,  Tooker  v.  Security  Trust  Co., 
26  App.  Div.  372,  aff'd  165  N.  Y.  608, 
58  N.  E.  1093;  De  Frecc  v.  N.  L.  Ins 
Co.,  130  N.  Y.  144,  32  N.  E.  .556.  Com- 
pany is  estopped  to  claim  forfeiture  for 
non-payment  of  premium  where  its 
general  agent  lias  written  recjuesting 
the  insured  to  hold  the  amount  until 
called  for,  and  on  several  occasions 
the  premium  had  not  been  called  for 
until  several  days  after  maturity,  .£<na 
Life   Ins.    Co.    v.  Fallow,    110   Tenn. 


720,  77  S.  W.  937.  So  an  instruction 
to  agents,  recited  in  a  letter  of  a  general 
agent,  that  if  the  premium  is  paid  more 
than  thirty  days  after  it  is  due  there 
must  be  a  health  certificate,  is  evidence 
against  the  company  that  credit  is 
allowed,  Kendric.k  v.  Mutual  Ben.  L.  I. 
Co.,  124  N.  C.  315,  32  S.  E.  728,  70 
Am.  St.  R.  592.  And  the  continued 
acceptance  of  checks  for  several  years 
will  waive  a  right  to  forfeit  the  policy 
for  failure  to  pay  as  directed  by  the 
usual  notices,  Hallowell  v.  Life  Ins.  Co., 
126  N.  C.  398,  35  S.  E.  616. 

2  Thompson  v.  Ins.  Co.,  104  U.  S. 
252,  259,  26  L.  Ed.  765;  Schmertz  v. 
United  States  L.  I.  Co.,  118  Fed.  250, 
55  C.  C.  A.  104;  Haydel  v.  Mutual  Res. 
F.  L.A.,  104  Fed.  718,  44  C.  C.  A.  169. 
Permit  to  store  fireworks  for  a  certain 
period  is  a  waiver  of  a  known  for- 
feiture but  will  not  operate  beyond  the 
period  named,  Betcher  v.  Capital  Fire 
Ins.  Co.,  78  Minn.  240,  80  N.  W.  971. 

3  Iowa  Life  Ins.  Co.  v.  Lewis,  187 
U.  S.  335,  348,  23  S.  Ct.  126;  Orient, 
his.  Co.  V.  McKnight,  197  111.  190,  64 
N.  E.  339;  Batchelder  v.  Queen  Ins.  Co., 
135  Mass.  449;  Pechner  v.  Ins.  Co.,  65 
N.  Y.  195. 

^  Kotwicki  V.  Thuringen  Ins.  Co.  134 
Mich.  82,  95  N.  W.  976. 


KNOWLEDGE   OF   BREACH  175 

trial  judges  of  allowing  proof  of  waiver  and  estoppel  under  general 
allegation  of  full  performance,  placed  insurance  companies  largely  at 
the  mercy  of  dishonest  claimants.^  In  consequence,  the  New  York 
standard  fire  policy,  and  often  other  policies,  fire,  life,  and  accident, 
provide  in  substance  that  no  officer  or  agent  shall  have  power  to 
waive  except  by  written  agreement  indorsed  upon  or  attached  to 
the  policy.  Such  limitations  upon  the  authority  of  agents,  thus 
brought  to  the  attention  of  the  assured  by  the  policy  itself  and 
sometimes  by  the  terms  of  the  application,  powerfully  affect  the 
decisions  in  many  jurisdictions  and  have  rendered  practically  obso- 
lete a  large  number  of  earlier  cases. 

§  141.  Knowledge  of  Breach — When  a  Waiver. — If  at  the  time  of 
closing  the  contract  the  insurers  have  knowledge  of  the  existence  of 
a  cause  of  forfeiture  which  would  invalidate  the  policy  from  the  time 
of  its  inception,  thej^  are  held,  by  accepting  the  premium  or  deliver- 
ing the  policy,  to  waive  the  forfeiture,  or  to  be  estopped  from  in- 
sisting upon  it.  This  is  the  rule  in  most  of  the  state  courts.^  The 
rule  has  also  been  extended  to  the  case  where  though  the  agent  had 
no  knowledge  of  the  facts  relating  to  incumbrances  the  assured 
expressly  left  it  to  him  to  ascertain,  and  the  company  was  held  to 
have  waived  forfeiture  since  the  company  had  assumed  the  burden 
of  ascertaining  the  facts.^  Constructive  knowledge  of  the  fact  of  a 
former  application  growing  out  of  the  circumstance  that  if  the 
company  had  searched  its  records  it  might  have  found  it,  however, 
is  not  sufficient  to  excuse  a  breach  of  warranty  by  reason  of  an  un- 

1  Northern  Assur.  Co.  v.  Grand  View  3  Skinner  v.  Norman,  165  N.  Y.  565, 

Bldg.  Assn.,   183  U.   S.  308,  364,  22  571,  59  N.  E.  309,  80  Am.  St.  R.  776  (in 

S.  Ct.  133,  46  L.  Ed.  213.  which  the  court  said:  "When  a  person 

^  Loring  v.  Dutchess  Ins.  Co.,  1  Cal.  has  sufficient  information  to  lead  him 
App.  186,  81  Pac.  1025  (1905);  John-  to  a  fact  he  shall  be  deemed  conversant 
son  V.  Atna  Ins.  Co.,  123  Ga.  404,  Avith  it").  A  line  of  cases  holds  that 
51  S.  E.  339  (1905);  German  Ins.  insurer  has  waived  warranties  regard- 
Co.  V.  Shader  (Neb.),  93  N.  W.  972,  ing  title  and  sole  ownership  if  he  issues 
60  L.  R.  A.  918  (citing  cases  from  some  standard  policy  without  making  spe- 
twenty-seven  states  to  same  effect);  cific  inquiries.  Sharp  v.  Scottish  Union 
Lewis  V.  Guardian  F.  Ins.  Co.,  181  /h,s.  Co.,  136  Cal.  542,  69  Pac.  253,  615; 
N.  Y.  392.  For  full  con.sideration  National  F.  Ins.  Co.  \.  Lumber  Co. ,211 
of  this  subject  see  §§173-175.  As  to  111.  115,  127;  Glens  Falls  Ins.  Co.  v. 
contrary  rule  in  federal  and  other  Michael  (Ind.),  79 'N.E.  905;  Miotke  v. 
courts  see  §  142.  This  doctrine  is  Mil.  &  M.  Ins.  Co.,  113  Mich.  166; 
applicable  to  the  implied  warranty  Phila.  Tool  Co.  v.  Brit.-Am.  Assur. 
of  seaworthiness  in  a  marine  policy.  Co.,  132  Pa.  St.  236.  Such  decisions 
Knowledge  of  unseaworthy  condition  are  unsatisfactory.  The  policy  itself 
at  the  time  of  its  issuance  works  pointedly  demands  a  true  disclosure, 
estoppel,  Hoxie  v.  Home  Ins.  Co.,  Parsons  v.  Lane,  97  Minn.  98,  106 
32  Conn.  21,  85  Am.  Dec.  240;  The-  N.  W.  485;  Westchester  F.  Ins.  Co.  v. 
baud  V.  Great  Western  Ins.  Co.,  155  Ocean  View  P.  Pier  Co.  (Va.,  1907 j 
N.  Y.  516,  50  N.  E.  284.  56  S.  E.  584. 


176  GENERAL   PRINCIPLES  OF   INSURANCE   LAW 

true  statement  in  the  application  since  the  company  has  not  under- 
taken or  agreed  to  invesligate.^ 

But  mere  knowledge  by  the  insurers  at  any  time  of  the  existence 
of  facts  amounting  to  cause  of  forfeiture  does  not  of  itself  accomplish 
a  waiver  or  estoppel.  If  it  did,  the  company  could  never  take  ad- 
vantage of  a  forfeiture,  for  the  moment  it  became  aware  of  it,  it  would 
be  debarred  from  insisting  upon  it.  There  must  exist,  in  addition  to 
a  knowledge  of  the  breach  and  in  conjunction  with  it,  some  positive 
act  of  recognition  or  confirmation  of  the  continuing  validity  of  the 
insurance,  such,  for  example,  as  delivering  the  policy,  or  accepting 
the  premium,  or  indorsing  a  permit,  upon  which,  in  connection  with 
the  knowledge,  a  waiver  may  l)e  i)redieated,  and  by  force  of  which 
the  contract  otherwise  avoided  may  l^e  said  to  be  acquiesced  in  or 
revived.^ 

But  in  finding  a  waiver  the  court  must  not  extend  the  insurer's  act 
of  indulgence  to  other  transactions,  though  relating  to  the  same 
))olicy,  unless  some  practice  or  continued  course  of  dealing  warrant- 
ing it  is  shown.  The  insurer  alone  has  the  powder  to  do  that.  Thus, 
where  a  waiver  of  forfeiture  for  other  insurance  on  the  same  property, 
without  written  permit,  was  inferred  because  the  defendant's  agent 
had  knowledge  of  the  other  insurance  at  the  time  he  issued  the  de- 
fendant's policy,  the  court  held  that  a  subsequent  increase  in  the 
amount  of  the  other  insurance,  procured  by  the  plaintiff  without  the 
defendant's  consent,  vitiated  its  policy  and  defeated  recovery  upon 
it.^  In  like  manner,  though  the  court  infer  from  the  coinsurance 
clause  a  consent  to  other  insurance,  this  consent  will  not  by  implica- 
tion be  extended  to  a  permit  for  excessive  or  overinsurance.'' 

§  142.  Rule  in  Federal  Courts — Massachusetts — ^New  Jersey. — 
The  federal  courts  and  those  of  Massachusetts  and  New  Jersey 
adhere  more  closely  to  the  doctrine  of  the  common  law,^  and  hold 
that  in  an  action  on  contract  a  waiver  of  a  forfeiture  existing  at  the 
inception  of  the  contract  cannot  be  established  by  parol  testimony 

^  Rhode  V.  Met.  Life  Ins.   Co.,   129  Mexico  Lumber  Co.,  \0  Colo.  App.  22Z, 

Mich.  112,  88  N.  W.  400;  Hackett  v.  236,  51  Pac.  174.    See  §  143,  infra. 

Supreme  Council,  44  App.   Div.   524,  3  Kelly  v.   L.   &  L.   &  G.   Ins    Co 

aff'd  168  N.  Y.  588,  60  N.  E.   1112.  (Minn.,  1907),  111  N.  W.  395. 

Contra,  O'Rourke  V.  John  Hancock  Mut.  *  Cutler  v.  Royal  Ins.  Co  ,  70  Conn 

Life  I.  Co.,  23  R.  I.  457,  50  Atl.  834,  91  566;  Woolford  v.  Phoenix  Ins.  Co     190 

Am.  St.  R.  643.  Mass.  233,  76  N.  E.  722;  but  see' Pool 

2  Clemans  v.  Supreme  Assembly  Royal  v.  Milwaukee  Mech.  Ins.  Co     91  Wis 

Soc,  etc.,  131  N.  Y.  485,  30  N.  E.  496;  530;    Catoosa    Springs    v.    Linch     18 

Weed  V.  London  &  Lan.  Ins.  Co.,  116  Misc.  (N.  Y.)  210.                            ' 

N.    Y.    106;    Merchants'   Ins.    Co.    v.  5  Weston  v.  Emes,  1  Taunt.  115. 


SILENCE  NOT  A    WAIVER  177 

of  what  was  said  and  done  at  or  before  the  closing  of  the  contract.* 
In  all  jurisdictions  a  sufficient  ground  of  estoppel  may  be  shown  by 
parol,  but  the  practice  is  not  uniform  as  to  when  recourse  must  be 
had  to  an  equity  forum. ^ 

§  143.  Silence  not  a  Waiver. — Mere  silence  or  inaction  on  the 
part  of  the  company  after  knowledge  of  a  forfeiture  by  the  insured 
will  not  in  general  operate  as  a  waiver.  The  company  has  not  con- 
tracted to  search  out  the  insured  and  advise  him  as  to  the  legal 
effect  of  the  provisions  of  the  policy.^  To  hold  the  contrary  is  to 
make  a  new  agreement  for  the  parties.  But  this  rule  is  modified 
with  respect  to  irregularities  in  the  proofs  of  loss  which  upon  notice 
might  be  corrected.^  Mere  failure  to  reply  to  a  letter  from  the  in- 
surea  stating  that  at  some  future  date  he  will  pay  a  premium  about 
to  fall  due  is  no  waiver.^  Nor  is  failure  to  answer  a  letter  from  the 
insured  an  admission  that  a  person,  calling  on  the  insured  in  respect 
to  a  loss  under  the  policy,  has  authority  to  adjust  the  loss  or  waive 
proofs.^ 

In  connection  with  the  cancellation  clause  of  the  tire  policies  in 
common  use  a  very  practical  illustration  of  this  general  rule  is  fur- 
nished. By  the  weight  of  authority  and  reason  the  right  to  cancel 
under  the  clause  imposes  no  duty  upon  the  insurers,  upon  learning 
of  a  forfeiture,  to  do  so,  nor  does  the  mere  failure  to  cancel  furnish 
a  sufficient  ground  for  claiming  a  waiver  or  an  estoppel.    The  sound- 

1  Allen  V.  Mass.  Mut.  Ace.  Ass.,  167  court  says,  "Did  this  court  intend  to 
Mass.  18;  Thomas  v.  Commercial  Union  approve  the  proposition  that  to  cause 
Ass.  Co.,  162  Mass.  29;  Dimick  v.  Met.  a  forfeiture  some  affirmative  action 
Life  Ins.  Co.,  69  N.  J.  L.  384,  401,  55  was  necessary  by  the  company — a 
Atl.  291;  Martin  v.  7ns.  Co.,  of  No.  Am.  declaration  to  that  effect  and  the  sur- 
57  N.  J.  L.  623,  31  Atl.  213;  Northern  render  of  the  premium  notes?  To  hold 
Assur.  Co.  V.  Grand  View  Buildinq  the  latter  would  be  to  hold  that  this 
Assn.,  183  U.  S.  308,  22  S.  Ct.  133,  46  court  intended  to  reverse  a  number  of 
L.  Ed.  213.  Referring  to  that  case  the  decisions  made  upon  careful  considera- 
same  court  has  since  said:  "There  is  no  tion."  Mere  silence  or  neglect  to  act 
attempt,  by  parol  testimony,  to  con-  is  no  waiver,  Rundell  v.  7ns.  Co.,  128 
tradict  any  stipulations  of  the  policy,  Iowa,  575;  Belcher  v.  Capital  Fire  I. 
something  which  we  have  recently  held  Co.,  78  Minn.  240,  80  N.  W.  971;  Keith 
cannot  be  done,"  Hartford  F.  Ins.  Co.  v.  Ins.  Co.,  117  Wis.  531,  94  N.  W. 
v.  Wilson.,  187  U.  S.  467,  478,  23  S.  Ct.  295;  Sun  Mut.  Ins.  Co.  v.  Dudley,  65 
189.  Ark,  240,  248,  45  S.  W.  539;  Gibson  El. 

2  Iowa  Life  Ins.  Co.  v.  Lewis,  187  Co.  v.  L.  &  L.  &  G.  Ins.  Co.,  159  N.  Y. 
U.  S.  335,  348,  23  S.  Ct.  126;  Northern  418,  427,  54  N.  E.  23;  Armstrong  v. 
Assur.  Co.  V.  Grand  View  Bldg.  Assn.,  Agricultural  Ins.  Co.,  130  N.  Y.  560, 
183  U.  S.  308,  361,  22  S.  Ct.  133;  Met-  29  N.  E.  991. 

ro-politan  Life  Ins.  Co.  v.  McTague,  49  *  See  §  144,  infra. 

N.  J.  L.  587,  60  Am.  Rep.  661;  Carson         ^  Dale   v.    Continental   Ins.    Co.,   95 

v.  Jersey  City  Ins.  Co.,  43  N.  J.  L.  300,  Tenn.  38,  31  S.  W.  266. 

39  Am.  Rep.  584.  8  Parker  v.  Farmers'  Fire  Ins.   Co. 

3  Iowa  Life  Ins.   Co.   v.  Lewis,   187  188  Mass.  257,  74  N.  E.  286. 
U.  S.  335.  where  at  pp.  350,  351  the 

12 


178  GENERAL   PRINCIPLES    OF   INSURANCE    LAW 

ness  of  this  conclusion  becomes  the  more  apparent  when  it  is  noted 
that  the  contract  makes  the  right  to  cancel  an  option,  not  an  obli- 
gation.^ 

There  are,  however,  many  cases  in  which  courts  have  adopted  the 
opposite  view,  holding  tliat  a  failure  affirmatively  to  assert  a  forfeit- 
ure within  a  reasonable  time  after  acquiring  knowledge  is  a  waiver 
by  the  company. ^  These  cases  create  for  the  insurer  a  new  obliga- 
tion, and  without  new  compensation  they  practically  impose  upon 
him  the  intolerable  burden  of  investigating  every  rumor  of  forfeiture, 
and,  if  it  turns  out  to  be  based  upon  fact,  of  looking  up  the  assured 
and  serving  upon  him  notice  of  cancellation  with  proportionate  re- 
turn of  premium.  In  other  cases  the  court  concluded  that  special 
circumstances  had  thrust  upon  the  insurer  the  duty  of  affirmative 
action.  Thus  where  the  assured  wrote  the  company  that  the  policy 
was  at  a  certain  bank,  that  he  did  not  remember  its  conditions,  that 
he  had  taken  out  additional  insurance  and  further  said,  "if  there  is 
anything  that  conflicts  with  your  policy,  advise  me,"  the  company 
was  held  estopped.^ 

§  144.  Proofs  of  Loss — Technicalities. — Technical  requirements  as 
to  the  form  and  contents  of  the  proofs  of  loss,  or  time  of  their  ser- 
vice, or  time  for  bringing  suit,  will  more  readily  be  held  to  be  waived 
than  essential  elements  of  the  contract  which  more  vitally  affect 
the  risk.'*     Thus  waiver  of  service  of  proofs  within  the  specified 

1  Betcher  v.  Capital  Fire  Ins.  Co.,  78  of    loss,    the    company    should    have 

Minn.  240,  80  N.  W.  971;  Straker  v.  affirmatively  objected  to  the  other  in- 

Ph(Bni.v  Ins.  Co.,  101  Wis.  413,  421,  77  surance  lest  the  insured  should  settle 

N.  W.  752.    Contra,  Phoenix  Ins.  Co.  v.  with  other  companies  to  his  prejudice. 

Grove,  215  111.  2J9,  74  N.  E.  141;  Pol-  ^  Cleaver    v.    Traders'   Ins.    Co.,    40 

lock  v.  German  F.  Ins.  Co.,  127  Mich.  Fed.    711;    Searle   v.    Dwelling   House 

460,  473,  86  N.  W.  1017.  Ins.  Co.,  152  Mass.  263;  Eastern  R.  R. 

^  Cassimns  v.  Scottish  Union  &  Nat.  Co.  v.  Relief  Ins.   Co.,  i05  Mass.  570; 

Ins.   Co.,   135  Ala.   256,  33   So.    163;  Jennings  v.  Metropolitan  Life  Ins.  Co., 

Glens  Falls  Fire  Ins.   Co.   v.   Michael  148    Mass.   61;    Trippe   v.    P.    F.  So- 

(Ind.,  1905),  74  N.   E.  964;   Swedish-  ciety,  140  N.  Y.  23,  28,  35  N.  E.  316, 

Am.  Ins.  Co.  v.  Knutson,  67  Kan.  71,  37  Am.  St.  R.  529;    Goodwin  v.  Mass. 

72    Pac.    526,    100   Am.    St.    R.    382;  Mw<.  L^/e /ns.  Co.,  73  N.  Y.  480.    As  to 

Kalmiitz  v.  Xorthern  Mut.  Ins.  Co.,  186  agent's  authority  to  waive  see  ch.  VIII, 

Pa.  St.  571,  40  Atl.  816;  Morrison  v.  infra.     It  is  held  that  a  manifest  dis- 

Ins.  Co.,  69  Tex.  353;  see  Norris  v.  tinetion  should  be  observed  in  giving 

Hartford  Fire  Ins.  Co.,  57  S.  C.  358,  construction  to  the  two  classes  of  con- 

35  S.  E.  572  (failure  to  cancel  policy,  ditions,  those  that  operate  upon  the 

and  return  unearned  premium  is  evi-  parties  and  the  contract  prior  to  the 

dence  for  jury  to  consider  upon  ques-  loss,  and  those  which  have  for  their 

tion  of  an  intention  to  waive).  general  object  to  define  the  mode  in 

^  Ranch  v.  Millers'  Mut.  F.  Ins.  Co.,  which  an  accrued  loss  is  to  be  estab- 

131  Mich.  281;  Everett  v.  London,  etc.,  lished, adjusted, and  recovered  after  the 

Ins.  Co.,  142  Pa.  St.  332,  21  Atl.  819,  reciprocal  rights  and  liabilities  of  the 

24  Am.  St.  R.  499,  in  Avhich  the  court  parties  have  become  fixed  by  the  oc- 

conduded  that  upon  leceiving  proofs  currence  of  the  peril  insured  against, 


DENIAL   OF   ALL   LIABILITY 


179 


^ii.  i  may  be  found  by  the  jury  from  evidence  fairly  tending  to  show 
it,  though  without  written  agreement  on  the  pohcy.^ 


§  \  45.  Denial  of  all  Liability. — A  positive  denial  by  the  insurer 
of  al:  liabiUty  under  the  policy,  it  has  often  been  held,  relieves  the 
insurv-d  from  the  duty  of  furnishing  notice  or  proofs  of  loss,^  or  of 
death,*'  or  correcting  proofs  alread}^  furnished,'*  or  submitting  to  a 
personal  examination,  or  to  an  appraisal  under  the  terms  of  the 
policy.  In  such  a  case,  it  is  said,  the  proofs  do  not  tend  to  induce 
the  ina  jrer  to  pay  and  are  useless.^  The  argument  is  that,  if  the 
insurer  declares  the  polic}^  annulled  upon  other  grounds,  the  in- 
sured Uwed  not  go  to  the  unnecessary  trouble  and  expense  of  a 
further  e  ^mpliance  with  the  terms  of  the  contract  intended  to  supply 
the  insui  jr  with  evidence  of  the  nature  and  extent  of  its  liabilitv-^ 


McNally  v    P.  Ins.  Co.,  137  N.  Y.  389, 
398,  33  N.    L  475. 

1  "The  New  York  court  said:  "It  is 
well  settled  that  when  liability  has 
become  fixe.  I  by  the  capital  fact  of  loss 
within  the  i  finge  of  the  responsibility 
assumed  in  the  contract,  courts  are 
reluctant  to  (eprive  the  insured  of  the 
benefit  of  th  it  liability  by  any  narrow 
or  technical  construction  of  the  con- 
ditions and  stipulations  which  pre- 
scribe the  for  lal  requisites  by  means  of 
which  the  aci  rued  right  is  to  be  made 
available  for  his  indemnification,"  Ser- 
gent  v.  L.  &  L.  &  G.  Ins.  Co.,  155 
N.  Y.  349,  3, '5,  49  N.  E.  935,  Bart- 
lett,  J.;  Gray  v.  Blum,  55  N.  J.  Eq. 
553,  38  Atl.  64  5;  Snyder  v.  Ins.  Co.,  59 
N.  J.  L.  544,  37  Atl.  1022,  59  Am.  St. 
R.  625.  But  si)e  Travelers'  Ins.  Co.  v. 
Mijers,  62  Ohio  St.  529,  57  N.  E.  458, 
and  cases  cited, 

2  Rot/al  Ins.  C  \  v.  Martin,  192  U.  S. 
149,  48  L.  Ed.  385,  24  S.  ,Ct.  247; 
Con.  Ins.  Co.  v.  ^arkes,  142  Ala.  650, 
39  So.  204;  Fros:  v.  No.  Brit.  &  Mer. 
Ins.  Co.,  77  Vt,  407,  60  Atl.  803; 
Continental  Ins.  (  >.  v.  Dayiiel,  25  Kv. 
Law.  Rep.  1501,  ,'8  S.  W.  866;  Pru- 
dential Ins.  Co.  V.  Devoe,  98  Md.  584, 
56  Atl.  809;  Gern\iger  v.  North  Caro- 
lina Home  Ins.  Co.  133  N.  C.  407,  45 
S.  E.  773;  Scottish  Union  &  Nat.  Ins. 
Co.  V.  Moore  (Tt  <.  Civ.  App.),  81 
S.  W.  573;  Cooper  \,  Ins.  Co.,  96  Wis. 
362,  71  N.  W.  606. 

^  lona  Life  Ins.  .o.  v.  Lewis,  187 
(J.  S.  335;  Knickerbyicker  Life  Ins.  Co. 
v.  Pendleton,  112  U.  S  696,  5  S.  Ct.  314. 

*  Virginia  F.  &  Mar.  Ins.  Co.  v. 
Goode.  95  Va.  762,  30  S.  E.  370,  371. 


•»  Phcenix  Ins.  Co.  v.  Kerr,  129  Fed. 
723.  As  to  waiving  service  of  proofs 
of  loss  by  conduct  of  the  agent  see 
Sergent  v.  Liverpool,  L.  &  G.  Ins.  Co., 
155  N.  Y.  349,  355,  49  N.  E.  935; 
Bishop  V.  Agri.  Ins.  Co.,  130  N.  Y. 
488,  29  N.  E.  844;  Frost  v.  No.  Brit. 
&  Merc.  Ins.  Co.,  77  Vt.  407,  60  Atl. 
803.  As  to  not  waiving  see  Hicks 
V.  Brit.-Am.  A.ss.,  162  N.  Y.  284,  56 
N.  E.  743.  And  as  to  agent's  author- 
ity to  waive,  see  also  Dobson  v.  Hart- 
ford Fire  Ins.  Co.,  86  App.  Div.  115, 
aff'd  179  N.  Y.  557,  71  N.  E.  1130; 
Smaldone  V.  Ins.  Co.  of  North  Am.  162 
N.  Y.  580,  57  N.  E.  168;  Germania  Fire 
Ins.  Co.  V.  Pitcher,  160  Ind.  392,  64 
N.  E.  921;  Smjder  v.  Ins.  Co..  59  N.  J. 
L.  544,  37  Atl.  1022,  59  Am.  St.  R.  625. 

6  On  principle  this  rule  is  not  clear 
or  satisfactory,  Armstrong  v.  Ins.  Co., 
130  N.  Y.  560,  29  N.  E.  991.  It  is 
based  on  the  assumption  that  if  some 
agent  of  the  company  has  denied  lia- 
bility the  company  has  no  occasion  to 
investigate  the  facts  or  to  commit  the 
insured  to  the  sworn  statement  pro- 
vided for  by  the  policy.  If  the  con- 
tract methods  of  investigation  were 
aimed  solely  at  ascertaining  the  amount 
of  loss,  and  if  the  company  was  surely 
right  in  its  opinion  that  a  fatal  breach 
had  occurred,  the  justice  of  the  rule 
would  be  more  apparent.  But  where 
the  company  turns  out  to  be  wrong  in 
its  opinion  and  ultimately  is  required 
to  pay  the  claim,  the  question  arises, 
ought  it  to  have  been  deprived  of  the 
benefit  of  important  contract  provi- 
sions for  ascertaining  the  nature  and 
amount    of    loss,   a   compliance    with 


180 


gb;neral  principles  of  insurance  law 


§  146.  Demanding  Proofs  of  Loss.— Demanding  the  usual  verifiec 
proofs  of  loss  in  itself  effects  no  waiver  or  estoppel.  No  matter  Hoaa 
many  grounds  of  forfeiture-  the  company  may  suspect  or  believe  tc 
exist,  it  is  entitled  to  insist  upon  the  contract  provisions  framed  for 
the  very  purpose  of  enabling  it  to  pass  upon  and  estimate  intelli- 
gently the  nature  and  amount  of  the  loss.^  Among  these,  many 
legislatures  have  seen  fit  to  prescribe  that  as  a  preliminary  to  any 
action  the  assured  must  make  up  and  swear  to  a  statement  of  the 
particulars  of  the  loss.^  Manifestly  no  intention  to  waive  can  be 
gathered  from  a  mere  request  for  a  fulfillment  of  this  reasonable 
requirement,  and  as  to  estoppel  the  essential  element  of  injury  or 
prejudice  to  the  insured  is  lacking,  since  the  insured  is  bound  by 
his  contract  to  do  the  very  same  thing  though  the  company  make 
no  affirmative  request  at  all.^  The  request  may  benefit  the  in- 
sured by  calling  his  attention  to  a  condition  precedent  which  might 


which,  by  the  terms  of  the  contract,  is 
made  an  absolute  condition  precedent 
to  any  right  of  recovery,  and  a  fulfil- 
ment of  which  on  the  part  of  the  as- 
sured naturally  precedes  an  intelligent 
and  final  answer  by  the  company  to 
the  claim  thus  presented  against  it, 
Boruszweski  v.  Middlesex  Mut.  Ins. 
Co.,  186  Mass.  589.  Simply  because 
the  assured  is  believed  to  have  vio- 
lated one  condition  precedent  why 
should  the  court  permit  him  to  violate 
with  impunity  another  condition  prec- 
edent? Again,  assume  that  the  ad- 
juster or  other  agent  of  the  company 
has  been  led  to  believe  that  the  claim 
of  the  assured  is  fraudulent,  and  is 
induced  by  the  assured,  as  frequently 
occurs  during  the  preliminary  in- 
vestigation, to  make  some  admission 
to  that  effect,  it  is  by  no  means  clear 
either  under  the  law  of  contracts  or 
with  regard  to  considerations  of  equity 
and  public  policy  that  a  court  is 
justified  in  ruling  that,  while  the  plain- 
tiff is  entitled  to  enforce  the  policy, 
the  company  cannot  pursue  provisions 
of  the  same  contract  devised  expressly 
for  the  purpose  of  enabling  it  when 
suspecting  fraud  to  thoroughly  venti- 
late the  facts.  This  is  obviously  the 
main  purpose  of  the  contract  require- 
ment for  verification  of  proofs  or  state- 
ments and  also  for  personal  examina- 
tion under  oath.  The  truth  is  that  the 
company  usually  desires  and  reason- 
ably demands  proofs  of  loss  verified 
by  the  claimant,  except  as  the  claim  is 
either   recognized    by   itself   or   aban- 


doned by  the  assured.  In  any  other 
event,  if  the  policy  is  to  be  construed 
like  other  contracts,  the  company 
would  seem  entitled  to  them  without 
submitting  to  the  penalty  of  forfeiting 
its  rights.  No  implication  of  waiver 
can  arise  from  acts  done  in  accordance 
with  the  contract,  Parker  v.  Knights 
Templars.  70  Neb.  268,  97  N.  W.  281; 
Hare  v.  Headley,  oA  N.  J.  Eq.  545,  555, 
35  Atl.  445.  So  far  from  involving  the 
notion  of  waiver,  the  English  court 
concludes  that  it  is  a  natural  incident 
of  any  insurance  contract  that  the 
insured  must  furnish  full  information 
after  loss,  even  though  there  be  no 
express  promise  to  do  so,  Harding  v. 
Bussell  (1905),  2  K.  B.  83;  Boulton  v. 
Houlder  Bros.  (1904),  1  K.  B.  784. 
Some  cases  go  so  far  as  to  hold  that 
denial  of  liability  is  a  waiver  of  the 
clause  giving  the  company  sixty  days 
after  notice  in  which  to  pay  loss  and 
that  suit  may  be  brought  at  once, 
Edwards  v.  Firemen's  Ins.  Co.,  43 
Misc.  354,  87  N.  Y.  Supp.  507;  Frost 
V.  North  British  Mercantile  I.  Co.,  77 
Vt.  407,  60  Atl.  803.  The  soundness 
of  this  rule  is  doubtful. 

1  Boruszweski  v.  Middlesex  Mut.  Ins. 
Co.,  186  Mass.  589. 

2  Boulton  V.  Houlder  (1904),  1  K.  B. 
784;  Harding  v.  Bussell  (1905),  2  K.  B. 
83;  Hicks  v.  Brit.- Am.  Assn.,  162  N.  Y. 
284,  56  N.  E.  743  (N.  Y.  standard 
fire  policy,  used  generally  throughout 
the  country,  with  the  exception  of  a 
few  states). 

^Peabody  v.  Satterle,  166  N.  Y.  174, 


DEMANDING    PROOFS    OF   LOSS 


181 


otherwise  be  overlooked.     It  cannot  cause  him  unreasonable  preju- 
dice.^ 

It  must  be  observed  also  that  one  great  difficulty  with  all  parol 
waivers  is  that  written  terms  of  the  contract  are  sought  to  be  set 


59  N.  E.  818;  Perry  v.  Caledonian  Ins. 
Co.,  103  App.  Div.  (N.  Y.)  113. 

1  As  Vice  Chancellor  Emery  says: 
"If  the  act  relied  on  as  indicating  the 
intention  is  referable  to  other  causes 
or  reasons  than  a  waiver  of  a  right,  it 
should  not  be  construed  to  be  such 
waiver,"  Hare  v.  Headley.  54  N.  J.  Eq. 
545,  555.  35  Atl.  445;  Parker  v. 
Knights  Templars,  70  Neb.  268,  97 
N.  W.  281.  The  argument  that  the 
company  ought  not  to  put  the  insured 
to  any  further  trouble  if  the  contract  is 
to  be  forfeited  is  more  than  offset  by 
the  consideration  that  a  rule  of  con- 
struction must  not  be  applied  which 
may  result  in  depriving  the  company 
of  some  of  its  most  reasonable  con- 
tract rights  in  the  event  that  it  shall 
decide  or  be  compelled  to  fulfill  the  con- 
tract upon  its  part.  Most  of  the  cases 
that  have  held  or  intimated  that  ask- 
ing for  the  usual  proofs  of  loss  estops 
the  company  from  subsecjuently  setting 
up  a  prior  known  forfeiture  have 
invoked  the  rule  of  the  New  York 
court  as  stated  in  the  Titus  case, 
Titus  V.  Glens  Falls  bis.  Co..  81  N.  Y. 
410;  see  §  147,  infra,  in  which  addi- 
tional and  unusual  requirements  were 
demanded  by  the  company  involving 
considerable  trouble  and  expense  to 
the  assured.  That  rule  when  applied 
to  other  cases  may  well  receive  modi- 
fications which  the  same  court  subse- 
quently engrafted  upon  it.  Thus  in  a 
later  case,  held,  without  dissent,  that 
calling  for  proofs  of  loss  will  not  estab- 
lish waiver  or  estoppel,  Armstrong  v. 
Agricidtural  Ins.  Co.,  130  N.  Y.  560, 
567,  29  N.  E.  991.  The  court  says  of 
the  defendant:  "It  needs  no  argu- 
ment to  show  that  it  was  justified  in 
standing  upon  its  legal  rights  and 
asserting  them  in  the  ordinary  way 
and  at  the  proper  time,  so  long  as  in 
doing  so  it  did  not  mislead  the  plain- 
tiff to  his  own  harm.  It  had  a  right 
to  base  its  defense  to  any  claim  made 
upon  it  upon  the  violation  prior  to  the 
fire  of  any  provision  of  the  contract, 
and  to  require  performance  by  the 
assured  after  the  fire  of  those  condi- 
tions which  he  had  contracted  to  per- 
form and  which  were  essential  to  his 


cause  of  action  and  preliminary  to  the 
assertion  of  any  claim  upon  the  policy. 
And  in  demanding  strict  compliance 
with  such  condition  it  did  not  waive 
any  of  its  rights  under  the  contract," 
Brown,  J.,  all  concurring.  This  case  is 
cited  with  approval  in  Phoenix  Ins.  Co 
V.  Flemming,  65  Ark.  54,  44  S.  W.  464, 
in  which  it  is  held  that  a  demand  for 
proofs  or  books  of  account  will  effect 
no  waiver  of  a  known  forfeiture  "the 
elements  of  estoppel  must  exist."  See 
also  McCormick  v.  Springfield  F.  &  M. 
Ins.  Co.,  66  Cal.  361,  5  Pac.  617.  In  a 
later  case  the  New  York  court  says,  by 
Landon,  J.,  all  concurring:  "It  was  a 
condition  precedent  to  the  maturity  of 
the  claim  of  the  plaintiff  that  proofs  of 
death  specified  in  the  contract  should 
be  furnished.  The  acts  of  the  defend- 
ant in  furnishing  blanks  in  the  first 
instance  and  giving  instructions  as  to 
the  manner  of  filling  them  were  acts  of 
courtesy.  .  .  .  All  the  papers  con- 
stituting the  proofs  of  death  and  its 
cause  were  part  of  the  evidence  proper 
for  the  defendant  to  ask  and  for  the 
plaintifT  to  give  in  order  to  impart  to 
the  defendant  that  full  knowledge  of  the 
facts  which  under  the  circumstances 
was  material  to  the  reserved  question 
of  Ronald's  reinstatement  as  a  mem- 
ber and  also  a  condition  precedent  to 
any  further  acts  to  be  relied  upon  as  a 
waiver  of  forfeiture."  Ronald  v.  M.  R. 
F.  L.  Assn.,  132  N.  Y.  378,  384,  30 
N.  E.  739.  See  also  Matthie  v.  Globe 
Fire  Ins.  Co.,  174  N.  Y.  489,  67  N.  E. 
57.  In  the  last  two  cases,  to  be  sure, 
there  was  in  effect  an  express  reserva- 
tion of  rights  or  denial  of  liabilitj^  by 
the  company,  but  the  policies  to  which 
the  assured  themselves  are  parties  con- 
tain a  clearer  reservation  of  rights  than 
does  an  e.v  parte  declaration,  and  if  a 
demand  for  preliminary  formal  proofs, 
with  an  intent  not  to  abandon  a  known 
forfeiture,  were  so  clear  a  fraud  as  to 
demand  the  interposition  of  the  doc- 
trine of  estoppel,  an  ex  parte  reservation 
must  have  little  bearing  on  the  result. 
In  a  Pennsylvania  case  the  agent,  with 
knowledge  of  a  ground  of  forfeiture, 
said  to  the  assured:  "Go  on  and  make 
out  your  proofs  of  loss."     He  also  de- 


182 


GENERAL   PRINCIPLES   OF   INSURANCE   LAW 


aside  by  testimony  which  at  best  is  uncertain  and  unreHable.^  A 
ohiinuuit  often  asks  the  adjuster  or  agent  some  question  in  regard 
to  proofs  of  loss.  The  adjuster  may  simply  give  his  best  impression 
in  response.  He  can  with  courtesy  do  no  less.  The  incident,  really 
harmless  and  often  trivial,  figures  at  the  trial  as  a  demand  for  proofs 
of  loss  with  knowledge  of  prior  grounds  of  forfeiture.- 

Opposed  to  the  formidable  array  of  authorities  upon  this  practical 
point  as  cited  in  the  notes,  we  find,  however,  numerous  court  opin- 
ions and  text-books  in  which  the  statement  is  made  broadly  that 
calling  for  proofs  of  loss  waives  any  known  forfeiture,  or  estops  the 
insurer  from  insisting  upon  it,  but  in  most  of  such  opinions  by  the 
judges  it  will  be  found  that  the  remark  was  a  mere  dictum,  and  that 
in  the  facts  of  the  case  the  company  was  shown  to  have  put  the 
assured  to  an  unreasonable  burden  of  trouble  and  expense  by  calling 
for  additional  or  extraordinary  proofs  over  and  above  what  the 
policy  prescribes  as  necessary  without  special  demand.^ 


§  147.  Demanding  Additional  Proofs  of  Loss. — If  with  full  knowl- 
edge of  facts  constituting  forfeiture  and  without  denying  liability 
the  insurer  demands  the  additional  proofs,  to  obtain  which  under 


manded  a  magistrate's  certificate  and 
bills  or  duplicates  showing  the  prop- 
erty, but  the  court  said:  "He  did  noth- 
ing to  mislead  her,  to  place  her  in  a 
worse  position  or  to  cause  her  to  incvu- 
any  expense  which  she  would  not  have 
been  obliged  to  incur  Imd  he  remained 
silent,"  and  the  court  held  that  no 
waiver  or  estoppel  had  been  made  out, 
Freedman  v.  Ins.  Co.,  175  Pa.  St.  3,50, 
34  Atl.  730.  So  also  McCormick  v.  Ins. 
Co.,  86  Cal.  260,  24  Pac.  1003,  in  whicli 
the  court  says:  "It  is  an  essential  ele- 
ment of  estoppel  by  conduct  that  the 
party  claiming  the  estoppel  should 
have  relied  upon  the  conduct  of  the 
other,  and  was  induced  by  it  to  do 
something  which  he  otherwise  would 
not  have  done."  Quoted,  with  ap- 
proval, in  Fir.^t  Nut.  Bk.  v.  Maxwell, 
123  Cal.  360,  367,  55  Pac.  980,  69  Am. 
St.  R.  64;  Wheaton  v.  Ins.  Co.,  76  Cal. 
415,  18  Pac.  758,  9  Am.  St.  R.  216  n.; 
Boyd  V.  Vanderbilt,  90  Tenn.  212,  16 
S.  W.  470,  25  Am.  St.  R.  676.  The 
Iowa  court  says  of  the  agent:  "He  left 
word  for  them  that  they  should  send 
in  their  proofs  but  this  it  was  their 
duty  to  do  in  order  to  establish  a  right 
of  recovery  regardless  of  any  sugges- 
tions on  his  part,"  Runddl  v.  Anchor 
F.  Ins.  Co.,  128  la.  575,  101  N.  W.  517, 


519;  Phoenix  Ins.  Co.  v.  Stevenson,  78 
Ky.  150.  So  also  the  federal  court 
holds  that  a  request  for  a  carpenter's 
estimate  of  cost  of  rebuilding  as  a 
proof  of  loss  which  put  the  assured  to 
an  expense  of  $5.00  would  not  estop 
the  company.  Firemen's  Fund  Ins.  Co. 
V.  McGreevy,  118  Fed.  415,  55  C.  C.  A. 
54a 

I  Northern  Assur.  Co.  v.  Grand  View 
Bldg.  Assn.,  183  U.  S.  308,  22  S.  Ct. 
733. 

.2 The  Tennessee  court  says:  "It  is 
inconceivable  that  there  should  be  au- 
thority for  the  position  that  if  the  in- 
surer, after  a  loss,  requires  proof  of 
loss,  it  thereby  waives  all  right  to  set 
up  as  a  defense  that  it  is  not  liable  by 
reason  of  llic  fact  that  it  never  had  a 
valid  contract  at  all,"  Boyd  v.  Ins.  Co., 
90  Tenn. 212, 219. 

^  See,  for  example,  Georqia  Home 
Ins.  Co.  V.  Goodc,  95  Va.  75i,  30  S.  E. 
366,  369,  where  copies  of  invoices  were 
demanded;  Planters'  Mat.  Ins.  Co.  v. 
Loyd,  67  Ark.  584,  56  S.  W.  44,  77  Am. 
St.  R.  136;  German  Fire  I.  Co.  v. 
Grunert,  112  III.  68;  Phoenix  Assur.  Co. 
V.  Munyer,  etc.,  Mfg.  Co.  (Tex.  Civ 
App.),  49  S.  W.  271;  Reiner  v.  Dwelling 
House  Ins.  Co.,  74  Wis.  89,  42  N.  W 
208. 


WHERE    POLICY    PROVIDES    THAT    Sl'CH    ACTS    BE    NOT    WAlVt:K     ]H'A 

the  policy  an  affirmative  request  is  necessary,  as,  for  example,  a 
magistrate's  certificate,  an  appraisal,  or  examination  of  the  assured 
under  oath,  or  other  information,  to  furnish  which  involves  trouble 
or  expense  to  the  assured,  in  many  cases  the  insurer  is  held  to  be 
estopped  from  relying  upon  the  forfeiture,  unless  the  policy,  like  the 
standard  fire  policy,  expressly  provides  that  such  acts  shall  not 
constitute  a  waiver.^  It  should  be  stated,  however,  that  this  rule, 
to  say  the  least  very  dubious  in  principle,'  has  in  practice  worked 
badly,  since  a  jury  rarely  discriminates  between  full  knowledge  and 
mere  suspicion,  and  the  companies  through  fear  of  waiving  their 
defenses  are  often  induced  to  forego  the  benefit  of  contract  methods 
of  investigating,  to  which  they  are  justly  entitled/^ 

§  148.  Where  Policy  Provides  that  Such  Acts  Shall  Not  be  a 
Waiver. — The  standard  and  other  policies  often  provide  that  re- 
quirements by  the  company  regarding  appraisal  and  examination 
of  the  insured  under  oath  and  of  his  papers,  shall  not  be  deemed  a 
waiver.     This  constitutes  a  non-waiver  agreement. 

By  the  weight  of  authority  full  effect  is  to  be  given  to  this  restric- 
tion, and  if  an  appraisal  or  examination  of  the  assured,  or  of  his 
books  and  bills,  is  demanded  in  good  faith,  no  waiver  or  estoppel 
will  result,  since  the  company  has  a  contract  right  to  postpone  its  act 
of  final  election  until  these  methods  of  investigation  have  been 
pursued.'* 

1  The  rule  invoked,   originally  laid  St.  R.  136;  Smith  v.  St.  Paul  F.  &  M. 

down  in  Tittis  v.  Glens  Falls  Ins.  Co.,  I.    Co.,    3    Dak.    80,    13    N.    W.    355; 

81  N.  Y.  410,  419,  but  slightly  revised  Replogle  v.  American  Ins.  Co.,  132  Ind, 

by    the    same    court    in    McNally    v.  360,  31  N.  E.  947;  Grubbs  v.  North  Caro- 

Pha:nix  Ins.  Co.,  137  N.  Y.  389,  397,  Una  Home  Ins.  Co.,  108  N.  C.  472,  13 

33  N.  E.  475;  Carpenter  v.  German-Am.  S.  E.  236,  23  Am.  St.  R.  62;  Cannon  v. 

Ins.  Co.,  135  N.  Y.  298,  31  N.  E.  1015;  Home  Ins.  Co.,  53  Wis.  585,  11  N.  W. 

Roby  v.  Am.  Cent.  Ins.  Co.,  120  N.  Y.  11.    Contra,  e.  g.,  Freedman  v.  Ins.  Co., 

510,  24  N.  E.   808   (no  one  of    these  175  Pa.   St.   350.     The  question  may 

cases  involved  the  standard  fire  policy  easily  be  one  for  the  jury,  Walter  v. 

which  contains  a  limitation  upon  the  Mutual  City  &  V.  F.  I.  Co.,  120  Mich, 

power  of  the  agent  to  waive),  is  stated  35,  78  N.  W.  1011;  Hoine  bis.  Co.  v. 

as  follows:  "When  an  insurance  com-  Phelps,  51  Neb.  623,  71  N.  W.  303. 

pany,  with  knowledge  of  all  the  facts  2  Phcenix  Ins.   Co.  v.  Flemming,  65 

constituting  a  breach  of  a  condition  Ark.  54;  Boruszweski  v.  Ins.  Co.,  186 

or  a  warranty,  requires  the  assured  by  Mass.  589;  Boyd  v.  7ns.  Co.,  90  Tenn. 

virtue  of  the  contract  to  do  some  act  or  212;  London  &  L.  Ins.  Co.  v.  Honey, 

incur  some  trouble  or  expense,  the  for-  2  Vict.  L.  R.  7. 

feiture  is  deemed  to  have  been  waived,  3  Unless  the  companies  suspect  fraud 

as    such    requirement    is    inconsistent  they  rarely  ask  for  the  examination  of 

with  the  position  that  the  contract  has  the   insured  under  oath,   as  provided 

ceased  to  exist,  and  consistent  only  with  for  by  the  policy.     They  must  furnish 

the  theory  that  the  obligations  of  the  the  stenographer,  and  the  proceeding 

contract  are  still   binding  upon  both  usually   is    much   more    expensive    to 

parties,"   Planters'   Mut.    Ins.    Co.    v.  them  than  to  the  assured. 

Loyd,  67  Ark.  584,  56  S.  W.  44,  77  Am.  *  Phoenix   Ins.  Co.  v.  Flemming,   65 


184 


GENERAL    PKlM'll'LLS    OK    1X«1  KANCE    LAW 


§  149.  Non-waiver  Agreement.— In  order  to  prevent  the  accept 
unco  of  proofs  of  loss  or  other  acts  in  connection  with  an  investiga- 
tion of  loss  from  operating  as  a  waiver  of  a  forfeiture,  a  non-waiver 
agreement  is  freque;itly  entered  into  between  the  insurer  and  in- 
sured by  which  it  is  provided  that  such  acts  shall  not  waive  the 
rights  of  either  party.  Such  a  special  agreement,  executed  by  the 
parties  after  the  loss,  will  be  binding  in  accordance  with  its  terms.^ 

§  150.  Taking  Part  in  Adjustment.— If  the  company  sends  its 
adjuster  to  investigate  the  facts  and  to  take  part  in  an  effort  to 
ascertain  the  extent  and  nature  of  the  loss  before  determining  the 
proper  course  to  pursue,  the  court  ought  not  to  be  eager  to  infer  a 
waiver  of  forfeiture,  although  the  insured  may  have  been  put  to 
some  slight  trouble  or  expense  in  connection  with  the  investigation. ^ 


Ark.  54,  44  S.  W.  464,  39  L.  R.  A.  789, 
67  Am.  St.  R.  900  (examination  of 
books);  Phrnix  Itts.  Co.  v.  Searles,  100 
Ga.  97,  27  8.  E.  779;  Boyd  v.  Ins.  Co., 
90  Tenn.  212  (estimates  of  loss  and 
value);  Citi/  Drug  Store  v.  Scottish 
Union  &  Nat.  Ins.  Co.  (Tex.  Civ.  App. , 
1898),  44  S.  W.  21  (examination  of 
insured);  Oshkosh  Match  Works  v. 
Manchester  Fire  Ass.  Co.,  92  Wis.  510, 
66  N.  W.  525  (examination  of  insured) ; 
Walker  v.  Phceni.v  Ins.  Co.,  89  Hun 
(N.  Y.),  333,  35  N.  Y.  Supp.  374,  re- 
versed on  another  point,  1.56  N.  Y.  628, 
633,  where  the  Court  of  Appeals,  with- 
out committing  itself  on  this  point, 
said:  "Assuming  that  whatever  was 
said  or  done  between  the  representa- 
tive of  the  insurance  company  and  the 
owner  of  the  property  which  related 
solely  to  an  appraisal  is  not  to  be  re- 
garded as  evidence  of  waiver  owing  to 
the  provision  in  the  policy  relating  to 
that  subject"  (but  compare  Gibson 
Elec.  Co.  V.  L.  &  L.  &  G.  Ins.  Co.,  159 
N.  Y.  418,  426,  54  N.  E.  23);  Johnson 
V.  American  Ins.  Co.,  41  Minn.  396,  43 
N.  W.  .59  (arbitration);  Queen  Ins.  Co. 
V.  Young,  86  Ala.  424,  5  So.  116, 11  Am. 
St.  R.  51  n.  (appraisal);  Briggs  v.  Fire- 
men's Fund,  65  Mich.  .52,  31  N.  W.  616 
(arbitration);  Holbrook  v.  Baloise  Fire 
Ins.  Co.,  117  Cal.  .561,  49  Pac.  .5.55 
(appraisal);  London  &  L.  Ins.  Co.  v. 
Honey,  2  Vict.  L.  R.  7  (arbitration  of 
loss).  As  to  what  tacts  do  not  con- 
stitute waiver  of  failure  to  serve  proofs 
of  loss  see  Ri'er  v.  President,  etc.,  F. 
Ins.  Co.,  90  App.  Div.  (N.  Y.)  391,  83 
N.  Y.  Supp.  546;  Fournier  v.  German- 
Am.  Ins.  Co    -^3  P    I.  36,  49  AtL  98; 


but  as  to  arbitration  compare  Elliott  v. 
Merchants',  etc.,  Ins.  Co.,  109  Iowa,  39, 
79  N.  W.  452. 

1  Fletcher  v.  Minneapolis  F.  &  M. 
M.  I.  Co.,  80  Minn.  1.52,  83  N.  W.  29; 
Keei-Rountree,  etc.,  Co.  v.  Merchants', 
etc.,  Co.,  100  Mo.  App.  504,  74  S.  W. 
469;  Hayes  v.  U.  S.  Fire  Ins.  Co.,  132 
N.  C.  702,  44  S.  E.  404.  But  see  Corson 
v.  Anchor  Mid.  F.  I.  Co.,  113  Iowa,  641, 
85  N.  W.  806.  It  is  construed  strongly 
against  the  company  and  liberally  in 
favor  of  the  insured,  Pennsylvania  Fire 
Ins.  Co.  V.  Hughes,  108  Fed.  497,  47 
C.  C.  A.  459.  The  policy  imposes  upon 
the  parties  no  obligation  to  enter  into 
such  an   agreement. 

"  Matthie  v.  Globe  Fire  Ins.  Co.,  174 
N.  Y.  489,  67  N.  E.  57;  Young  v.  St. 
Paid  Fire  &M.  I.  Co.,  68  S.  C.  387,  47 
S.  E.  681.  So  conversations  and  trans- 
actions between  the  parties  which  indi- 
cate simply  an  attempt  to  obtain  in- 
formation which  might  lead  to  a 
possible  adjustment  will  not  operate  as 
a  waiver  of  the  defense  of  fraudulent 
concealment.  Firemen's  Fund  Ins.  Co. 
V.  McGreevy,  118  Fed.  415,  55  C.  C.  A. 
543;  or  of  the  condition  of  the  policy  as 
to  proofs  of  loss,  Riker  v.  Fire  Ins.  Co. 
of  North  America,  90  App.  Div.  391,  85 
N.  Y.  Supp.  546;  or  of  the  limitation 
clause  for  bringing  action,  Allen  v. 
Dutchess  Co.  Mut.  Ins.  Co.,  95  App. 
Div.  86,  88  N.  Y.  Supp.  5.30.  An  ad- 
justment, however,  and  an  agreement 
to  pay  the  amount  due  will  operate  as  a 
waiver  of  any  right  to  defeat  recovery 
on  the  policy  for  breach  of  its  con- 
ditions, Tillis  v.  Liverpool  &  L.  &  G.  I. 
Co.  (Fla.,  1904),  35  So.  171;  Wagner  v. 


COMPANY    MAY    DEFEND    ()\    OTHEK    GROUNDS,     ETC.  1  S,") 

§  151.  Company  May  Defend  on  Other  Grounds  Than  Those 
First  Named. — Stating  to  the  assured  after  loss  certain  reasons  or 
grounds  for  refusing  payment  is  in  general  no  waiver  of  other  grounds 
of  forfeiture,  nor  will  the  company  be  thereby  estopped  when  it  sub- 
sequently comes  to  litigation  from  setting  up  any  other  defenses 
that  it  may  have. 

A  number  of  decisions  to  the  contrary,  especially  in  Michigan/  are 
opposed  to  the  weight  of  authority  and  find  slender  support  in  rea- 
son.^ 

Elements  of  estoppel  are  generally  lacking  in  such  a  case.  There 
is  no  breach  of  contract  obligation  by  the  insurer,  nor  is  there  any 
misleading  conduct  to  the  prejudice  of  the  assured.  In  no  one  of 
the  cases  here  cited  on  this  subject,  on  the  one  side  or  the  other, 
was  it  established  that  the  assured  would  have  abandoned  his  claim 
and  refrained  from  instituting  action  if  the  insurer  had  remained 
altogether  silent  until  litigation.  The  company  owes  no  dut}^,  until 
it  interposes  its  defenses  in  a  lawsuit,  to  assign  its  reasons  for  not 
paying.  An  assignment  of  reasons  is  not  only  gratuitous,  but  often 
largely  a  matter  of  lay  opinion.  The  claimant  generally  knows 
more  about  the  facts  than  the  company  does  at  all  stages  of  the 
preliminary  investigation,  and  much  more  at  the  outset.^  And  if 
he  has  not  undertaken  the  litigation  solely  as  a  result  of  fraudulent 
or  deceitful  misrepresentations  of  fact  by  some  agent  duly  authorized 
to  stand  in  the  place  of  the  company,  it  is  difficult  to  see  how  an>- 
adequate  basis  of  estoppel  has  been  established. 

This  rule  in  favor  of  the  insurance  company,  however,  must  not 

Dwelling  House  Ins.  Co.,  143  Pa.  St.  Home  Life  Ins.  Co.  v.  Pierce,  75  III. 

338,  22  Atl.  885;  Levy  v.  Peabody  Ins.  426. 

Co.,  10  W.  Va.  560,  27  Am.  Rep.  598,  "^  Armstrong  v.  Agricultural  his.  Co., 

unless  the  settlement  is  procured  by  130  N.  Y.  560,  29  N.  E.  991;  McCollum 

fraud  on  the  part  of  the  insured.    The  v.  Mut.   Life  Ins.   Co.,  55  Hun,   103, 

insurer  cannot  urge  payment  by  mis-  aff'd  124   N.  Y.   642;  Devens  v.   Me- 

take   from    want    of    knowledge   of   a  clumics'  &  T.  Ins.  Co.,  83  N.  Y.  168, 

breach,  it  being  its  duty  when  claim  is  173;  Cassimus  v.  Scottish  Union  &  Not. 

made  to  ascertain  the  facts  as  to  any  7ns.  Co.,  135  Ala.  256,  269,  33  So.  163; 

breach,  Smith  v.  Gkns  Falls  Ins.  Co.,  Lackmann  v.   Kearney,   142  Cal.    112, 

62N.  Y.  85.  115,   75   Pac.    668;    Welsh   v.    London 

1  For  example  see  Taylor  v.  Supreme  Assur.  Corp.,  151  Pa.  St.  607,  619,  25 

Lodge,  135  Mich.  231,  97  N.  W.  680;  Atl.  142,  31  Am.  St.  R.  786;  National 

Douville  V.  Farmers'  Mvt.  Ins.  Co.,  113  Ins.  Co.  v.  Broion,  128  Pa.  St.  386,  18 

Mich.  158,  71  N.  W.  517;  Smith  v.  Ger-  Atl.   389;   Findlay  v.   Union  Mut.   F. 

man  Ins.  Co.,  107  Mich.  270.  65  N.  W.  Ins.  Co.,  74  Vt.  211,  52  Atl.  429,  93 

236,  30  L.  R.  A.  368;  Towle  v.  Ionia,  Am.  St.  R.  885. 

Eaton  &  B.  F.  M.  F.  I.  Co.,  91  Mich.  '^Devens  v.   Mechanics'   &    Traders' 

219,  51  N.W.  987;  Castncrv.  Farmer.r  Ins.   Co.,  83  N.  Y.   168,   173   ("They 

Mut.  Ins.  Co.,  50  Mich.  273,  275,  15  may  refuse  to  pay  without  specifying 

N.   W.    452;    Continental   Ins.    Co.    v.  any  ground  and  insist  upon  any  avail- 

Waugh,  60  Neb.   348,  83   N.   W.   81;  able  ground"). 


IS()  GENEKAI.    I'KINCII'LES    OF    INSt'llANCJE    LAW 

be  extended  to  apply  to  an  undisclosed  defense  which  might  upon 
timely  notice  after  loss  have  been  met  and  remedied.^  Nor  does 
the  rule  apply  to  the  subject  of  amendments  of  pleadings  after  action 
is  begun  and  after  tlie  issues  therein  have  been  framed.  Every  court 
exercises  its  own  discretion  to  withhold  the  privilege  of  setting  up 
new  defenses,  or  to  grant  it,  and  with  or  without  the  imposition  of 
terms,  as  seems  to  it  reasonable. - 

i:^  152.  Claimant  not  Concluded  by  Statements  in  Proofs  of  Loss. 

— Statements  in  the  proofs  of  loss  are  evidence  against  the  claim- 
ant because  they  are  in  the  nature  of  admissions/"'  but  by  virtue  of 
the  line  of  reasoning  described  in  the  last  section  he  may  contradict 
and  correct  them  on  the  trial.^  The  essential  elements  of  estoppel 
are  lacking,  except  in  the  very  rare  instance  in  which  the  company 
might  prove  that  it  defended  solely  because  of  some  error  in  the 
proofs. 

A  striking  instance  of  the  general  rule  is  furnished  by  the  Van 
Tassel  case,  where  after  taking  the  defendant  to  the  court  of  appeals 
the  plaintiff  was  allowed  to  increase  his  claim  from  five  thousand  to 
ten  tliousand  dollars  and  ultimately  to  recover  judgment  for  the 
latter  amount.^  It  will  be  observed,  however,  that  proofs  of  loss  are 
not  evidence  on  behalf  of  the  claimant  to  prove  the  truth  of  their 
contents,  but  simply  to  prove  his  compliance  with  the  clause  of  the 
policy  requiring  the  preparation  and  service  of  proof s.** 

§  153.  Retention  of  Proofs  Waives  Defects  That  Might  Have 
Been  Remedied. — For  the  insurers  to  retain  the  proofs  of  loss  or 
death,  without  pointing  out,  within  a  reasonable  time,  any  objection 
to  their  form  or  contents  constitutes  a  waiver  of  such  mistakes  and 
defects  as  the  insured  could  have  remedied  upon  notice.  Here  is  a 
clear  ground  of  estoppel."^     Silence  in  such  a  case  would  be  unrea- 

1  See  §  153.  94  U.  S.  593;  24  L.  Ed.  294,  White  v 

■i  Pennsylvania     Fire     Ins.     Co.     v.  Royallns.  Co.,  U9  N  Y  485  44  N   E 

^J^^H'^r'.}?^  ^^d-  t?^'  ^^^'  '^'^  C-  C-  A.  77;   Bentley  v.   Standard  Ins.    Co.,'  40 

459;  \]  ildey  Cas.  Co.  v.  Sheppard,  61  W.  Va.  729,  23  S.  E.  584;  Names  v 

Kan.  351,59  Pac.  651,  47  L.  R.  A.  650;  Union    Ins.    Co,    104    Iowa     ei"?     74 

Hutton  V.  Patrons'  Mut.  F.  I.  Co.,  191  N    W    14                                    -        -- 

Pa.  St.  369   43  Atl.  219;  Nat.  Ins.  Co.  5  Underivood,  a.s   Ex'r,  v    Greenwich 

y^Broini,  128  Pa.  tet    386,  18  Atl.  389;  7ns.  Co.,  28  App.  Div.  (N.  Y.)  163.  151 

Phemx  Ins.  Co.  v.  Caldwell,  85  111.  App.  N.  Y.  1.30,  45  N.  E.  365. 

^^tr       n          A'     4       oown/TTc,  s  ^L^^ndv^ck^r/Ins.Co.',\2^lo^^'a,^^(i 

•JO     of  ^f  )'■  ^^^^''^^'  22  Wall.  (U.  S.)  104  N.  W.  429;  Scottish  Union  &  Nat 

32,   35;   Antes   V    IFesf.   Ins.   Co.,   84  Ins.  Co.  v.  Keene,  85  Md.  263,  37  Atl' 

Iowa,  355,  51  N   W.  7.  33;    Tucker   v.    Colonial   Ins.    Co      58 

^  Supreme  Lodge  v.  Beck,  181  U.  S.  W.  Va.  30,  51  S  E  86 

49;      Conn.      Ins.     Co.     v,     Schwenk,  '' Sutton  v.  Am.  Ins.' Co.,  188  Pa.  St. 


WAIVER    OR    ESTOPPEL   MUST    BE    PLEADKf) 


187 


sonably  misleading.  The  affirmative  act  of  keesping  the  proofs  in- 
dicates acceptance  and  satisfaction  with  their  form.^  Such  objec- 
tions must  be  made  promptly  ^  and  the  insured  must  be  allowed  a 
reasonable  time  to  make  corrections. *"' 


§  154.  Waiver  or  Estoppel  Must  be  Pleaded. — The  prime  purpose 
of  a  pleading  is  to  inform  the  opponent  in  advance  of  trial  of  the 
precise  point  of  controvers3^  When  the  plaintiff  relies  upon  waiver 
or  estoppel  in  place  of  due  performance  of  conditions  precedent,  he 
must,  as  a  general  rule,  plead  the  facts  either  in  the  complaint  or  in 
some  jurisdictions  in  the  replication.  This  seems  to  be  the  sounder 
rule,'*  and  certainly  is  the  safer  practice.  There  are,  however,  many 
cases  announcing  a  contrary  rule,^  and  they  have  to  support  them 
the  argument  that  a  plaintiff  ought  not  to  be  required  to  allege 
what  he  is  not  compelled  to  prove  in  order  to  make  out  his  affirmative 
or  prima  facie  case.  Logically  all  the  warranties  of  the  policy  must 
be  shown  to  be  fulfilled  before  the  assured  establishes  his  right  to 


380,  41  Atl.  537;  First  Nat.  Bank  v. 
Am.  Cent.  Ins.  Co.,  58  Minn.  492,  80 
N.  W.  345;  Faulkner  v.  Manchester 
Assur.  Co.,  171  Mass.  349,  50  N.  E. 
529;  Virginia  F.  &  M.  Ins.  Co.  v. 
Goode,  95  Va.  762,  30  S.  E.  370;  Brock 
V.  Des  Moines  Ins.  Co.,  106  Iowa,  30, 
75  N.  W.  683;  Weed  v.  Hamburg- 
Bremen,  133  N.  Y.  394,  31  N.  E.  231; 
Cummer  Lumber  Co.  v.  Manufacturers' 
M.  F.  I.  Co.,  67  App.  Div.  (N.  Y.)  151, 
73  N.  Y.  Supp.  668. 

1  Kiernan  v.  Insurance  Co.,  150 
N.  Y.   198. 

2  Welsh  V.  London  Assur.  Co.,  151 
Pa.  St.  607,  25  Atl.  142,  31  Am.  St.  R. 
786;  De  Witt  v.  Agri.  Ins.  Co.,  157  N.  Y. 
353,  51  N.  E.  977. 

^Cummins  v.  German-Am.  Ins.  Co., 
197  Pa.  St.  61,  46  Atl.  902.  The  in- 
surance company  is  under  no  obliga- 
tion to  furnish  blanks  unless  imposed 
by  statute  and  its  refusal  to  do  so  is  no 
waiver,  Continental  Ins.  Co.  v.  Dor- 
wan,  125  Ind.  189,  25  N.  E.  213.  An 
adjustment  as  to  amount  of  loss  waives 
proofs,  Gerhart  v.  Northern  Ass.  Co.,  86 
Mo.  App.  596. 

*  For  example,  Hennesseif  v.  Met. 
Life  Ins.  Co.,  74  Conn.  699,  52  Atl.  490; 
McCo'i  v.  loira  State  Ins.  Co.,  107  Iowa, 
80,  77  N.  W.  529;  Eiseman  v.  Hawkeye 
Ins.  Co.,  74  Iowa,  11,  36  N.  W.  780; 
Dwelling  House  Ins.  Co.  v.  Johnson,  47 
Kan.  1,  27  Pac.  100;  Phenix  Ins.  Co. 
V.  Bachelder,  32  Neb.  490,  29  Am.  St. 


R.  443;  Victors  v.  N^at.  Prov.  Union 
113  App.  Div.  715  (cannot  show 
waiver  under  allegation  of  full  per- 
formance); Allen  V.  Dutchess  Co.  Mut. 
Ins.  Co.,  95  App.  Div.  (N.  Y.)  86,  87, 
88  N.  Y.  Supp.  530;  Ryer  v.  Prudential 
Ins.  Co.,  85  App.  Div.  7,  9,  82  N.  Y. 
Supp.  971;  Todd  v.  Union  Cas.  & 
Surety  Co.,  70  App.  Div.  52,  55,  74 
N.  Y.  Supp.  1062;  Meeder  v.  Prov.  Sav. 
Life  A.'isur.  Soc,  58  App.  Div.  80,  83, 
aff'd  171  N.  Y.  432,  64  N.  E.  167  (in 
which  a  trivial  exception  to  general 
rule  was  allowed);  Smith  v.  Wctmore, 
167  N.  Y.  234,  237,  60  N.  E.  419, 
Elting  v.  Dayton,  70  App.  Div.  52,  43 
N.  Y.  St.  Rep.  363,  aff'd  144  N.  Y.  644, 
39  N.  E.  493;  Pioneer  Mfg.  Co.  v. 
Phoenix  Assur.  Co.,  110  N.  C.  176,  28 
Am.  St.  R.  673,  14  S.  E.  731;  St.  Paul 
F.  &  M.  Ins.  Co.  V.  Hodge,  30  Tex. 
Civ.  App.  257,  71  S.  W.  386. 

5  For  example,  N.  J.  Rubber  Co.  v. 
Commercial  Union  Assur.  Co.,  64 
N.  J.  L.  580,  46  Atl.  777,  64  L.  J.  L. 
51;  Nickell  v.  Phoenix  Ins.  Co.,  144 
Mo.  420,  46  S.  W.  435;  Andrus  v. 
Fidelity  Mut.  L.  Ins.  Ass.,  168  Mo.  151, 
161;  McManus  v.  Western  Assur.  Co., 
43  App.  Div.  550,  aff'd,  without  opin- 
tion,  167  N.  Y.  602;  Bogardus  v.  .V.  Y. 
Life  Ins.  Co.,  101  N.  Y.  328,  334  (dic- 
tu7n);  Johnston  v.  Northwestern  Live 
Stock  I.  Co.,  94  Wis.  117,  68  N.  W.  868; 
and  see  169  N.  Y.  310. 


188  GENERAL    PKl.NCll'I.ES    ol'    INSURANCE    LAAV 

recover,^  but  the  warranties  of  the  life  and  fire  poUcies  are  so  in- 
tricate and  numerous,  and,  to  prove  so  many  of  them,  would  involve 
testimony  of  a  negative  character,  that  most  courts  hold,  as  matter 
of  justice  and  convenience  alike,  that  plaintiff  need  only  allege  and 
prove  the  fulfillment  of  certain  essential  affirmative  conditions  of 
the  contract,  for  instance,  the  existence  of  insurable  interest,  the 
occurrence  of  the  peril,  the  amount  of  loss,  the  service  of  proofs,  and 
perhaps  the  amount  of  other  contributing  insurance.' 

The  defendant  also  must  allege  any  defense  of  waiver  or  estoppel 
upon  which  it  relies.^ 

The  Connecticut  court,  however,  has  declared  broadly  that  a 
party  need  not  plead  an  estoppel  in  pais.^  On  the  other  hand,  the 
Kansas  court  has  declared  as  broadly  that  the  plaintiff  must  plead 
and  prove  the  performance  of  all  conditions  precedent  to  his  right 
of  recovery,  or  a  waiver  by  the  insurer.^ 

i  Leonard  v.  Slate  Mid.  Life  Assur.  ^  Grant  v.  Pratt,  87  App.  Div.  490, 

Co.,  24  R.  I.  7,  51  Atl.  1049,  96  Am.      84  N.  Y.  Supp.  983. 
St.  R.  698;  Hennesftei/  v.  Ins.  Co.,  74  *  Bernhard  v.  Rochester  German  Ins. 

Conn.  699,  supra.       '  Co.  (Conn.),  6.5  Atl.  134. 

2  See  §  117,  supra.  ^Shawnee  F.  Ins.  Co.  v.  Knerr,  72 

Ka.i.  385,  S3  Pac.  611. 


CHAPTER  VIII 

GENERii  iu  Principles — Continued 

Waiver  and  Estoppel  by  Agents 

§  155.  Introductory. — A  corporation  or  association,  though  a  legal 
entity,  can  transact  business  onl}^  by  personal  representatives. 
Therefore  it  is  only  through  the  medium  of  agents  that  an  insur- 
ance company  can  mak«;  or  modify  a  contract.^  Whatever  a  policy 
or  an  application  may  declare  as  to  lack  of  authority,  the  company's 
agent,  by  virtue  either  of  express  or  implied  instructions,  is  and  must 
in  fact  and  in  law  be  vusted  Avith  certain  powers  in  performing  the 
duties  actually  intrusted  to  him  by  the  principal.  Indeed  to  ap- 
point him  to  the  position  is  to  clothe  him  with  some  measure  of 
authority.^ 

It  is  obvious,  then,  that  the  phraseology^  used  by  the  companies 
or  current  in  the  trade  to  describe  an  insurance  agent  is  not  of  ne- 
cessity controlling.  More  significant  is  it  to  ascertain  the  real  or  ap- 
parent grant  of  power  as  defined  by  the  requirements  of  the  act  or 
the  demands  of  the  business,  which  the  agent  has  been  employed 
by  the  company  to  perform  or  to  conduct  on  its  behalf  and  in  its 
interest.^  Within  the  jurisdiction  of  many  courts  this  circumstance 
is  deemed  more  potent  in  determining  the  contract  rights  of  the 
parties  under  the  policy  than  any  general  stipulation  regarding  a 
limit  to  the  agent's  authority  expressed  in  the  printed  policy  itself."* 

§  156.  Ostensible  Authority. — If  the  company  holds  out  its  agent 
to  the  public  as  authorized  to  do  a  particular  act,  or  to  transact  a 
particular  kind  of  business,  this  carries  with  it  an  authority  to  adopt 
the  ordinary  means,  and  do  and  say  the  appropriate  things,  to  ac- 
complish the  object  for  which  the  agent  is  employed.^ 

1  Sternaman  v.  Met.  Life  Ins.  Co. ,  3  Wilder  v.  Continental  Cas.  Co. 
170  N.  Y.  13,  19,  62  N.  E.  763,  88  Am.  (U.  S.  C.  C,  Jan.,  1907),  36  Ins.  L.  J. 
St.  R.  625;  Imperial  Fire  Ins.  Co.  v.      426. 

Dunham,  117  Pa.  St.  460,  12  Atl.  668.  *  Kilborn    v.     Prudential    Ins.     Co 

2  Union  Mut.  L.  Ins.  Co.  v.  Wilkin-  (Minn.,  1906),  108  N.  W.  861  (contain- 
son,  13  Wall.  222,  20  L.  Ed.  617;  Fire      ing  excellent  discussion). 

Assn.  V.  Masterson  (Tex.  Civ.  App.),  ^  Ins.    Co.    v.    Wilkinson,    13   Wall. 

83  S.  W.  49.  (U.    S.)   222,   20  L.   Ed.   617;   Indian 

[189] 


190  (;enekal  i'HJNt;ii'LE«  of  insurance  law 

To  determine  the  extent  of  the  authority,  then,  regard  must  be 
had  not  only  to  the  actual  instructions  given  by  the  principal,  which 
are  seldom  disclosed  to  the  insured,  but  also  to  the  character  of  the 
particular,  business  involved  ^—whether,  for  example,  it  be  simply 
that  of  soliciting  for  insurance,  superintending  the  execution  of  the 
application  and  forwarding  it  to  the  home  office;  or  whether  it  be 
that  of  investigating  losses  and  reporting  the  result  to  the  company; 
or  whether  it  involve  the  ampler  powers  and  wider  discretions  of 
making  and  modifying  contracts,  and  of  adjusting  and  settling 
losses.^ 

§  157.  Undisclosed  Instructions  not  Binding  upon  the  Insured. — 

If  the  natural  and  ordinary  demands  of  the  business  actually  in- 
trusted to  the  agent  invest  him  with  the  power  to  adopt  a  certam 
course  of  action  or  representation,  the  principal  is  bound  thereby, 
and  may  not  be  permitted  to  show  that  his  undisclosed  instructions 
of  a  different  tenor  and  effect  have  been  violated  by  the  agent. ^ 

Hence,  it  often  happens  that  an  agent  has  power  to  bind  his  prin- 
cipal in  flat  disobedience  of  his  express  instructions.'* 

For  the  agent's  wrongful  or  fraudulent  acts  of  commission  or 
omission,  and  for  his  material  misrepresentations  or  trickery  within 
the  scope  of  his  ostensible  authority  as  thus  defined,  the  company 
is  liable.  Thus,  where  the  soliciting  agent  of  a  life  company,  in 
filling  up  the  application,  fraudulently  misstated  the  age  of  the 
assured,  and  filled  out  a  physician's  certificate,  and  forged  the  name 
of  the  examining  physician  thereto,  and  while  the  policy  was  in  his 
hands  for  delivery  changed  the  age  of  the  assured  as  stated  therein, 
so  as  to  show  his  real  age,  and  then  delivered  it,  and  neither  the 
assured  nor  the  company  knew  anything  of  these  fraudulent  acts, 
it  was  held,  that  the  company  was  liable.^ 

River  State  Bank  v.  Hartford  Fire  Ins.  142  N.  Y.  382,  389,  37  N.  E.  615    25 

Co.,  46  Fla.  283,  35  So.  228;  Hahn  v.  L.  R.  A.  637. 

Guardian  A.s.si/r.  Co.,  23  Ore.  576,  32  -i  Rugglesv.  Am.  Central  Ins.  Co.,  114 

Pac.  683,  37  Am.  St.  R.  709;  Medley  v.  N.  Y.  415,  11  Am.  St.  R.  674;  Wahh 

German  Alhnnce  Ins.  Co.,  55  W.  Va.  v.  Hartford  Fire  Ins.  Co.,  73  N.  Y.  5,  9; 

342,  47  S.  E.   101;  Alexander  v.  Con-  Sanford  v.  Orient  Ins.  Co.,  174  Mass' 

tinental  his.  Co.,  67  Wis.  422,  30  N.  W.  416,  54  N.  E.  883,  75  Am    St    R    358 

727,  58  Am.  Rep.  869.  ^  McArthur  v.   Home  Life  Ass  ,   73 

1  Ins.  Co.  V.  Edwards,  122  U.  S.  457;  Iowa,  336,  5  Am.  St.  R.  684.     But  the 

Eastern  R.  R.   Co.  v.  Relief  Ins.  Co.,  English  court  apparently  regards  the 

105  Mass.  570.  acts  of  the  company's  solicitor  in  writ- 

-lorra  Life  Ins.   Co.   v.   Lewis,   187  ing  answers  in  the  application  as  done 

U.  S.  335,  23  S.  Ct.  126;  American  Ins.  on  behalf  of  the  applicant  who  is  held 

Co    V.  Gallatin,  48  Wis.  36,  3  N.  W.  bound  to  read  his  application  and  see 

' '2-  El          J         /-,  ^^  ^*  ^^^^  ^^^  answers  are  correct  under 

3  J'orward  v.    Continental  Ins.    Co.,  penalty  of  forfeiture  if  his  warranties 


AGENCY    DETERMINED    BY   FACTS   OF    EACH    CASE 


191 


§  158.  Agency  Determined   by  Facts   of  Each   Case. — Who  are 

agents  of  the  company,  and  whether  brokers  and  agents  are  the 
representatives  of  the  insured  or  of  the  insurers/  and  what  is  the 
extent  of  their  authority/  are  questions  of  fact  to  be  determined 
by  the  circumstances  of  each  case,  and  may  be  proved  by  parol 
whatever  the  pohcy  says.^  As  matter  of  law  the  principal  is  re- 
sponsible for  the  acts  of  his  agent  within  the  scope  of  his  actual 
authority  whatever  the  policy  may  say.''  Nor  can  a  by-law  of  an 
order  or  mutual  company  change  the  rule  of  law  in  this  respect.^ 

By  the  prevailing  rule  in  this  country,  a  person  employed  by  an 
insurance  compan}^  to  solicit  the  public  to  take  insurance,  and  sign 
applications  as  a  preliminary  step,  is  to  be  regarded  as  the  company's 
agent,  although  he  aid  the  insured  in  filling  up  the  application  blank, 
and  although  he  is  paid  by  a  commission  out  of  the  premium.^  The 
obvious  reasons  for  this  rule  are  forcibly  explained  by  the  United 
States  Supreme  Court  in  the  leading  case  of  the  Unioyi  Mutual 
Insurance  Company  v.  WilkinsonJ 


are  not  fulfilled,  Biggar  v.  Rock  Life 
Assur.  Co.  (1902),  1  K.  B.  516. 

1  Knights  of  Piithias  v.  Withers,  111 
U.  S.  260,20  8.  Ct.  611. 

2  Frost  V.  Xorth.  Brit.  &  Mer.  Ins. 
Co.,77Vt.  407,  60Atl.  803. 

3  Ins.  Co.  V.  Wilkinson,  13  Wall. 
(U.  S.)  222,  20  L.  Ed.  617;  Commercial 
Ins.  Co.  V.  Ives,  56  111.  402;  Kausal  v. 
Minn.  Farmers'  Mid.  Fire  Ins.  Co.,  31 
Minn.  17,  47  Am.  Rep.  776;  Sternaman 
V.  Met.  Life  Ins.  Co.,  170  N.  Y.  13,  19, 
62  N.  E.  763,  88  Am.  St.  R.  625,  57 
L.  R.  A.  318.  Often  a  question  is 
presented  for  the  jury,  Milwaulee 
Mechanics'  Ins.  Co.  v.  Schalbnan,  188 
111.  213,  59  N.  E.  12;  Lewis  v.  Guardian 
Fire  &  L.  A.,  181  N.  Y.  392,  74  N.  E. 
224;  Fto.s<  v.  Xorth.  Brit.  &  Mer.  Ins. 
Co.,  11  Vt.  407,  60  Atl.  803.  But,  if 
the  facts  are  undisputed,  the  relation- 
ship of  agency  may  become  a  question. 
of  law,  Allen  v.  German-Am.  Ins.  Co., 
123  N.  Y.  6.  25  N.  E.  309. 

'  Knights  of  Pi/thias  v.  Withers,  177 
V.  S.  260,  20  S.  Ct.  611;  Sternaman  v. 
Met.  Life  Ins.  Co.,  170  N.  Y.  13,  19, 
62  N.  E.  763,  88  Am.  St.  R.  625,  57 
L.  R.  A.  318. 

5  Matter  of  Brovm.  v.  Order  of  Forest- 
ers, 176  N.  Y.  132,  68  N.  E.  145. 

estate  Ins.  Co.  v.  Taylor,  14  Colo. 
499,  24  Pac.  333,  20  Am.  St.  R.  281; 
Continental  Ins.  Co.  v.  Pearce,  39  Kan. 
396,  18  Pac.  291,  7  Am.  St.  R.  557 
(actual  relationship  of  agency  cannot 


be  subverted  by  any  device  of  words 
in  the  policy).  Medley  v.  Ins.  Co., 
55  W.  Va.  342,  47  S.  E.  101.  See, 
however,  Reed  v.  Ins.  Co.,  17  R.  I. 
785,  24  Atl.  833,  18  L.  R.  A.  496; 
Biggar  v.  Rock  Life  Assur.  Co.  (1902), 
1  K.  B.  516. 

7  13  Wall  (U.  S.).222,  20  L.  Ed.  617, 
in  which  the  court  by  Justice  Miller 
said:  "If,  however,  we  suppose  the 
party  making  the  insurance  to  have 
been  an  individual,  and  to  have  been 
present  when  the  application  was 
signed,  and  soliciting  the  assured  to 
make  the  contract  of  insurance,  and 
that  the  insurer  himself  wrote  out  all 
these  representations,  and  was  told 
by  the  plaintiff  and  his  wife  that  they 
knew  nothing  at  all  of  this  particular 
subject  of  inquiry,  and  that  they  re- 
fused to  make  any  statement  about 
it,  and  yet  knowing  all  this,  wrote 
the  representation  to  suit  himself, 
it  is  equally  clear  that  for  the  insurer 
to  insist  that  the  policy  is  void  be- 
cause it  contains  this  statement, 
would  be  an  act  of  bad  faith  and  of 
the  grossest  injustice  and  dishonesty. 
And  the  reason  for  this  is  that  the 
representation  was  not  the  state- 
ment of  the  plaintiff,  and  that  the 
defendant  knew  it  was  not  when  he 
made  the  contract;  and  that  it  was 
made  by  the  defendant,  who  procured 
the  plaintiff's  signature  thereto.  It 
is  in  precisely  such  cases  as  this  that 


192 


GENERAL  PRINCIPLES   OF   INSURANCE   LAW 


§  159.  Efifect  of  Stipulations  in  the  Contract  itself  as  to  who  are, 
or  are  not,  Agents  of  the  Company. — Policies  of  fire  insurance  fre- 
quently contain  either  one  of  these  two  stipulations:  (1)  That  any 


courts  of  law  in  modern  times  have 
introduced  the  doctrine  of  equitable 
estoppels,  or,  as  it  is  sometimes  called, 
estoppels  in  pais.  The  principle  is 
that  where  one  party  has  by  his  rep- 
resentations or  his  conduct  induced 
the  other  party  to  a  transaction  to 
give  him  an  advantage  which  it  would 
be  against  equity  and  good  conscience 
for  him  to  assert,  he  would  not  in  a 
court  of  justice  be  permitted  to  avail 
himself  of  that  advantage.  And  al- 
though the  cases  to  which  this  prin- 
ciple is  to  be  applied  are  not  as  well 
defined  as  could  be  wislied,  the  gen- 
eral doctrine  is  well  understood  and 
is  applied  by  courts  of  law  as  well 
as  equity  where  the  technical  ad- 
vantage thus  obtained  is  set  up  and 
relied  on  to  defeat  the  ends  of  justice 
or  establish  a  dishonest  claim.  It 
has  been  applied  to  the  precise  class 
of  cases  of  the  one  before  us  in  nu- 
merous well-considered  judgments  by 
the  courts  of  this  country.  Indeed, 
the  doctrine  is  so  well  understood  and 
so  often  enforced  that,  if  in  the  transac- 
tion we  are  now  considering,  Ball, 
the  insurance  agent,  who  made  out 
the  application,  had  been  in  fact  the 
underwriter  of  the  policy,  no  one 
would  doubt  its  applicability  to  the 
present  case.  Yet  the  proposition 
admits  of  as  little  doubt  that  if  Ball 
was  the  agent  of  the  insurance  com- 
pany, and  not  of  the  plaintiff,  in  what 
he  did  in  filling  up  the  application, 
the  company  must  be  held  to  stand 
just  as  he  would  if  he  were  the  prin- 
cipal. Although  the  very  well-con- 
sidered brief  of  counsel  for  plaintiff 
in  error  takes  no  issue  on  this  point, 
it  is  obvious  that  the  soundness  of 
the  court's  instructions  must  be 
tested  mainly  by  the  answer  to  be 
given  to  the  question,  'Whose  agent 
was  Ball  in  filling  up  the  application?' 
This  question  has  been  decided  dif- 
ferently by  courts  of  the  highest 
respectability  in  cases  precisely  anal- 
ogous to  the  present.  It  is  not  to  be 
denied  that  the  application,  logically 
considered,  is  the  work  of  the  assured; 
and  if  left  to  himself,  or  to  such  as- 
sistance as  he  might  select,  the  person 
so  selected  w^ould  be  his  agent,  and 
he   alone   would   be   responsible.      On 


the  other  hand,  it  is  well  knovni — 
so  well  that  no  court  would  be  justi- 
fied in  shutting  its  eyes  to  it — that 
insurance  companies  organized  under 
the  laws  of  one  State,  and  having  in 
that  State  their  principal  business 
office,  send  these  agents  all  over  the 
land  with  directions  to  solicit  and 
procure  applications  for  policies,  fur- 
nishing them  with  printed  arguments 
in  favor  of  the  value  and  necessity  of 
life  insurance,  and  of  the  special 
advantages  of  the  corporation  which 
the  agent  represents.  They  pay  these 
agents  large  commissions  on  the 
premiums  thus  obtained,  and  the 
policies  are  delivered  at  their  hands 
to  the  assured.  The  agents  are  stimu- 
lated by  letters  and  instructions  to 
activity  in  procuring  contracts,  and 
the  party  Avho  is  in  this  manner  in- 
duced to  take  out  a  policy  rarely  sees 
or  knows  anything  about  the  company 
or  its  officers  by  whom  it  is  issued, 
but  looks  to  and  relies  upon  the  agent 
who  has  persuaded  him  to  effect  in- 
surance as  the  full  and  complete 
representative  of  the  company,  in  all 
that  is  said  or  done  in  making  the  con- 
tract. Has  he  not  a  right  to  so  regard 
him?  It  is  quite  true  that  the  reports 
of  judicial  decisions  are  filled  with 
the  efforts  of  these  companies,  by 
their  counsel,  to  establish  the  doctrine 
that  they  can  do  all  this  and  yet  limit 
their  responsibility  for  the  acts  of 
these  agents  to  the  simple  receipt  of 
the  premium  and  delivery  of  the 
policy,  the  argument  being  that,  as 
to  all  other  acts  of  the  agent,  he  is 
tlie  agent  of  the  assured.  This  propo- 
sition is  not  without  support  in  some 
of  the  earlier  decisions  on  the  subject; 
and  at  a  time  when  insurance  com- 
panies Avaited  for  parties  to  come  to 
them  to  seek  assurance,  or  to  forward 
applications  on  their  own  motion,  the 
doctrine  had  a  reasonable  foundation 
to  rest  upon.  But  to  apply  such  a 
doctrine  in  its  full  force  to  the  system 
of  selling  policies  through  agents, 
which  we  have  described,  would  be  a 
snare  and  a  delusion,  leading,  as  it 
has  done  in  numerous  instances,  to 
the  grossest  frauds,  of  which  the  in- 
surance corporations  received  the 
benefits,    and     tlic    p.'ulies    supposing 


EFFECT  OF  STIPULATIONS   IN   THE    CONTRACT   AS  TO   AGENTS    193 


person,  other  than  the  assured,  who  maj^  have  procured  the  insur- 
ance to  be  taken  shall  be  deemed  to  be  the  agent  of  the  assured,  and 
not  of  the  company,  in  any  transaction  relating  to  the  insurance; 
(2)  that  in  any  matter  relating  to  the  insurance  no  person,  unless 
duly  authorized  in  writing,  shall  be  deemed  the  agent  of  the  com- 
pany. 

And  life  policies  often  contain  a  provision,  in  substance,  that 
agents  are  not  authorized  to  make,  alter,  or  discharge  contracts,  or 
to  waive  forfeitures,  or  to  grant  permits,  or  to  receive  for  premiums 
an3^thing  but  cash,  or  that  certain  designated  officers  are  the  only 
persons  so  authorized. 

These  stipulations  are  not  necessarily  illegal  or  against  public 
policy,  and  are  held  to  be  of  binding  force  upon  the  insured  if  the 
recital  as  to  agency  contained  in  them  is  not  untrue.^  Such  stipu- 
lations, however,  are  not  conclusively  binding,  because  the  relation- 
ship between  the  company  and  its  agents  is  not  created  or  determined 
by  the  policy  but  exists  independent  of  the  policy.  This  extrinsic 
fact,  therefore,  may  always  be  shown  by  extraneous  evidence  when- 
ever such  evidence  is  available.^ 


themselves  insured  are  the  victims. 
The  tendency  of  the  modern  decisions 
in  this  country  is  steadily  in  the  op- 
posite direction.  The  powers  of  the 
agent  are,  prima  facie,  coextensive 
with  tiie  business  intrusted  to  his  care, 
and  will  not  be  narrowed  by  limita- 
tions not  communicated  to  the  person 
with  whom  he  deals.  An  insurance 
company,  establishing  a  local  agency, 
must  be  held  responsible  to  the  parties 
with  whom  they  transact  business 
for  the  acts  and  declarations  of  the 
agent,  within  the  scope  of  his  em- 
ployment, as  if  they  proceeded  from 
the  principal."  This  opinion  has  been 
quoted  with  approval  by  many  state 
courts.  See  also  Follette  v.  Mut.  Ace. 
Asso.,  110  N.  C.  377,  14  S.  E.  923, 
15  L.  R.  A.  668,  28  Am.  St.  R. 
697. 

i/ns.  Co.  v.  Norton,  96  U.  S.  234; 
Conway  v.  Phoenix  Mut.  Life  Ins.  Co., 
140  N.  Y.  79,  35  N.  E.  420;  Allen  v. 
German-Am.  Ins.  Co.,  123  N.  Y.  6; 
Whited  V.  Germania  Fire  Ins.  Co.,  76 
N.  Y.  415,  32  Am.  Rep.  330;  Merserau 
V.  Phoenix  Mut.  Life  Ins.  Co.,  66  N.  Y. 
274. 

2 Thus  the  New  York  court  says: 
"The  power  to  contract  is  not  unlim- 
ited. .  .  .  Parties  cannot  ...  by  agree- 
ment change  the  laws  of  nature  or  of 
logic  or  create  relations  physical,  legal 

13 


or  moral  which  cannot  be  created.  .  .  . 
The  parties  .  .  .  could  agree  that  the 
person  who  filled  out  part  A  of  the  ap- 
plication was  the  agent  of  the  insured 
and  not  of  the  company.  ...  It  is 
quite  different,  however,  with  the  work 
of  the  medical  examiner  because  that 
requires  professional  skill  and  experi- 
ance  and  the  insurer  permits  it  to  be 
done  only  by  its  own  appointee," 
Sterna  man  v.  Met.  Life  Ins.  Co.,  170 
N.  Y.  13,  19,  62  N.  E.  763;  Matter  of 
Broum  v.  Order  of  Foresters,  176  N.  Y. 
132,  137,  68  N.  E.  145,  88  Am.  St.  R. 
625,  57  L.  R.  A.  318,  by  O'Brien,  J., 
Knights  of  Pythias  v.  Withers,  177  U.  S. 
260,  in  which  the  court  says:  "The 
position  of  the  secretary  must  be  deter- 
mined by  his  actual  power  and  au- 
thority and  not  by  the  name  which  the 
defendant  chooses  to  give  him,"  and 
held  that  agency  must  be  determined 
by  the  facts  of  the  case  and  not  by  the 
stipulations  of  the  policy.  Power  may 
be  inferred  from  parol  evidence  of  acts 
or  course  of  dealing,  Stewart  v.  Union 
Mut.  Life  Ins.  Co.,  155  N.  Y.  257,  49 
N.  E.  876,  42  L.  R.  A.  147;  Quinlan  v. 
Providence  Wash.  Ins.  Co.,  133  N.  Y. 
356,  364  et  seq.,  31  S.  E.  31,  28  Am.  St. 
R.  645;  U.  S.  Life  Ins.  Co.  v.  Lesser,  126 
Ala.  568,  28  So.  646;  Thompson  v. 
Traders'  Ins.  Co.,  169  Mo.  12,  23,  68 
S.  W.  889. 


194 


GENERAL   PRINCIPLES    OF   INSURANCE   LAW 


So  also  it  is  obvious  that  after  the  inception  of  the  contract  the 
company  may,  as  matter  of  fact,  change  the  scope  of  the  authority 
of  the  persons  employed  by  it,  or  alter  the  manner  of  bestowing  au- 
thority upon  them;  therefore  extrinsic  evidence,  if  any  there  be,  of 
such  facts,  must  be  competent.^ 

As  to  how  far  the  relationship  of  agency,  existing  between  the 
insurer  and  his  representative,  may  be  affected  by  a  stipulation  in 
the  contract  between  the  insurer  and  the  insured,  authorities  do  not 
agree.  The  New  York  court  seems  to  have  settled  upon  the  dis- 
tinction that  a  lay  soHcitor  of  the  insurer,  in  his  work  of  filling  up 
llio  application,  may  by  stipulation  in  the  poHcy,  subsequently 
delivered,  be  converted  into  the  agent  of  the  insured,  while  a  medical 
examiner    cannot.^ 

To  neutralize  the  effect  of  such  stipulations,  or  prohibit  them 
altogether,  many  states  have  passed  statutes  on  the  subject.^ 

§  160.  Effect  of  Stipulations  as  to  the  Manner  of  Waiving. — Where 


i/ns.  Co.  V.  Norton,  96  U.  S.  234; 
Wilber  v.  Williamsburgh  City  Fire  Ins. 
Co.,  122  N.  Y.  443;  Fmsi  v.  North  Brit. 
&  Mer.  Ins.  Co.,  77  Vt.  407,  60  AM. 
803.  Thus  an  agent  of  an  insurance 
company  may  be  shown  to  have  an 
actual  authority  to  waive  a  forfeiture 
for  non-payment  of  premiums,  al- 
though the  poHcy  itself  declare  that  he 
has  no  such  authority,  Wyman  v. 
Phoenix  Mnt.  Ins.  Co.,  119  N.  Y.  274, 
23  N.  E.  907.  So,  also,  if  the  agent  has 
in  fact  an  authority  broad  enough,  he 
may  by  his  acts,  if  done  within  the 
scope  of  his  actual  employment,  estop 
the  company  from  claiming  that  an 
alleged  violation  of  the  letter  of  the 
contract  really  brought  about  by  the 
agent  himself  shall  constitute  a  de- 
fense, Messelbach  v.  Norman,  122  N.  Y. 
578,  26  N.  E.  34.  Certain  states,  by 
statute,  have  adopted  the  rule  in  effect 
that  the  soliciting  agent  and  others 
shall  be  deemed  agents  of  the  insurers, 
no  matter  what  the  policy  provides; 
see  Appendix,  ch.  I  and  N.  Y.  Ins.  L. 
§  59;  such  statutes  are  constitutional. 
Continental  Life  Ins.  Co.  v.  Chamber- 
lain, 132  U.  S.  304,  10  S.  Ct.  87.  Under 
these  statutes  acts  and  knowledge  by 
such  agents  are  imputed  to  company 
and  may  avail  to  estop  it,  despite  the 
stipulation  in  the  policy  to  the  con- 
trary. Noble  v.  Mitchell,  100  Ala.  519, 
14  So.  581,  25  L.  R.  A.  238;  John  Han- 
cock Mut.  L.  Ins.  Co.  V.  Schlink,  175 


111.  284,  51  N.  E.  795;  Fred  Miller 
Brewing  Co.  v.  Council  Bluffs  Ins.  Co., 
95  Iowa,  31,  66  N.  W.  565;  Bliss  v. 
Potomac  F.  Ins.  Co.,  134  Mich.  212,  95 
N.  W.  1083;  Bankers'  L.  Ins.  Co.  v. 
Robbing,  55  Neb.  117,  75  N.  W.  585; 
N orris  v.  Hartford  F.  Ins.  Co..  57  S.  C. 
358,  35  S.  E.  572;  Wis.  Cent.  R.  Co.  v. 
Phoinix  Ins.  Co.,  123  Wis.  313,  101 
N.  W.  703;  Speiser  v.  Pha;nix  Life  Ins. 
Co.,  119  Wis.  530,  97  N.  W.  207. 

2  Sternaman  v.  Mut.  Life  Ins.  Co. , 
170  N.  Y.  13,  62"  N.  E.  763,  88  Am. 
St.  R.  625;  Wilber  v.  Williamsburgh 
City  F.  Ins.  Co.,  122  N.  Y.  443,  in 
which  the  court  citing  earlier  New  York 
cases  said,  "it  was  entirely  competent 
for  the  parties  to  agree  that  a  third 
person  participating  in  the  negotiations 
should,  for  the  purpose  of  procuring 
the  policy,  be  deemed  an  agent  of  the 
assured."  Apparently  the  English 
court  would  take  the  same  view  as 
regards  the  work  of  transcribing  into 
the  application  the  oral  answers  of 
the  insured,  Biggar  v.  Rock  Life  Assur. 
Co.  (1902),  1  K.  B.  516;  Contra, 
Kausal  v.  Minn.  Farmers'  M.  F.  Ins. 
Co.,  31  Minn.  17,  16  N.  W.  430,  47 
Am.  Rep.  776.  And  see  cases  §  158 
which  hold  in  substance  that  a  matter 
of  fact  cannot  be  disturbed  by  any 
device  of  words  in  a  policy. 

^  Appendix,  ch.  I  and  N.  Y.  Ins.  T.. 
§  59,  and  cases  under  this  section. 
supra. 


RESTRICTION   ON    AGENTS'    AUTHORITY,   ETC.  195 

the  policy  by  its  terms  permits  a  waiver  of  its  conditions,  it  generally 
provides  that  such  waiver  shall  be  made  only  by  written  agreement, 
indorsed  upon  the  policy,  or  attached  thereto. 

The  declaration  that  a  solicitor  is  not  the  company's  agent  or  is 
not  to  be  so  regarded  unless  he  holds  a  written  commission,  is  of  no 
avail,  as  before  shown,  unless  true,'  and  is  subject  for  a  notice  more 
properly  than  for  a  stipulation,  but  an  exclusive  method  of  undoing 
or  altering  an  important  contract  is  fit  subject  for  the  mutual  en- 
gagements of  the  parties.  Indeed  to  provide  that  a  waiver  must  be 
evidenced  by  writing  is  eminently  reasonable  and  business-like,  and 
full  force  and  effect  ought  to  be  given  to  such  a  clause.^  The  great 
majority  of  courts,  however,  decided  that  notwithstanding  this  clause 
agents  having  general  powers  to  accept  risks  and  close  contracts, 
including  the  ordinary  local  or  countersigning  agents  of  fire  com- 
panies, could  waive  this  clause  as  well  as  any  other  clause.^ 

§  161.  The  Same — Restriction  on  Agents'  Authority  in  Standard 
Fire  Policy  and  other  Policies. — The  clause  last  described  having 
thus  been  nullified  in  most  of  the  state  courts  by  judicial  interpreta- 
tion and  by  the  application  to  it  of  the  very  doctrine  of  parol  waivers 
which  its  object  was  to  eliminate,  the  committee  appointed  to  frame 
a  standard  fire  policy  for  New  York  adopted  a  further  clause,  in 
substance  that  no  officer,  agent  or  other  representative  had  or  should 
be  deemed  to  have  power  to  waive,  except  by  written  agreement 
indorsed  or  attached  to  the  policy.'* 

1  See  §  159,  svpra.  provisions  of  the  policy  that  anything 
^  Assur.  Co.  V.  Building  Asso.,  183  less  than  a  distinct  .specific  agreement, 
U.  S.  308,  361,  22  S.  Ct.  133;  Gladding  clearly  expressed  and  indorsed  on  the 
V.  Ins.  Co.,  66  Cal.  6;  O'Leary  v.  policy,  should  not  be  considered  as  a 
Merchants'  &  D.  &  M.  I.  Co.,  100  waiver  of  any  printed  or  written  condi- 
lowa,  173,  69  N.  W.  420,  62  Am.  St.  R.  tion  or  restriction  therein,  the  court 
555.  The  Massachusetts  court  says:  recognize  and  affirm  the  law  as  settled 
"A  company  which  has  seen  fit  to  pre-  in  this  state  that  such  condition  can  be 
scribe  that  the  terms  and  conditions  of  dispensed  with  by  the  company  or  its 
its  policy  shall  only  be  waived  by  its  general  agents  by  oral  consent  as  well 
written  or  printed  assent,  has  pre-  as  by  writing,"  Weed  v.  London  & 
scribed  only  a  reasonable  rule  to  guard  Lancashire  Fire  Ins.  Co.,  116  N.  Y. 
against  the  uncertainties  of  oral  evi-  117,  22  N.  E.  229;  Phoenix  Ins.  Co.  v. 
dence,  and  by  this  the  insured  has  Hart,  149  111.  513,  36  N.  E.  990;  his. 
assented  to  be  bound,"  Kyte  v.  Com-  Co.  v.  Sheffij,  71  Miss.  919,  10  So.  307; 
mercial  Union  Assur.  Co.,  144  Mass.  Knarston  v.  Manhattan  L.  I.  Co..  124 
46,  10  N.  E.  518.  And  note  that  the  Cal.  74,  76,  56  Pac.  773;  St.  Paul  F.  & 
insurance  company  itself  acquires  M.  I.  Co.  v.  Parsons,  47  Minn.  352,  50 
knowledge  of  the  terms  of  its  contract  N.  W.  240.  The  reasons  for  this  doc- 
only  as  they  are  written,  since  the  trine  were  much  more  persuasive  as 
"daily  report"  contains  nothing  else,  applied  to  older  forms  of  policies  in 
§  75,  supra.  use  prior  to  the  adoption  of  uniform 

3  §§  173,  175,  infra.    The  New  York  and  statutory  fire  policies, 
court    voiced    the    prevailing    opinion  *  Its  phraseology  was  based  upon  a 

when  it  said:    "Notwithstanding   the  New  York  decision,  Wahh  v.  Hartford 


196 


GENERAL   PRINCIPLES   OP^   INSURANCE   LAW 


In  some  jurisdictions  this  clause  also,  when  invoked  by  the 
insurers,  amounts  to  nothing.'  In  many  it  amounts  to  httle  or  noth- 
ing as  api^Hcd  to  forfeitures  occurring  at  the  inception  of  the  con- 
tract,^ and  in  some  it  amounts  to  little  or  nothing  as  applied  to  war- 
ranties relating  to  proceedings  after  loss.'  But  the  clear  trend  of 
the  later  decisions  in  many  courts  is  in  the  direction  of  giving  to  this 
and  similar  clauses  full  force  and  effect  in  actions  brought  upon  the 
contract,  and  of  referring  the  assured  to  the  equity  branch  of  the 
court  when  he  asks  for  what,  as  before  shown,  is  always  equivalent 
to  a  reformation  of  the  contract  as  written.^ 

Other  courts  ignore  such  stipulations,  either  holding  that  a  com- 
pany cannot  deprive  itself  of  its  inalienable  authority  to  modify  its 
contracts  as  it  may  choose,  in  writing  or  by  parol,*  or  else  deciding 
that  the  limitation  specified  in  the  policy  is  applicable  only  to  ex- 
press waivers  and  not  to  estoppel  incurred  by  misleading  con- 
duct.^ 


Fire  Ins.  Co.,  73  N.  Y.  5.    To  make  the 

E revision  of  practical  avail  against  dis- 
onest  claimants  it  was  necessary  to 
include  in  the  restriction  "officers"  as 
well  as  "agents."  A  somewhat  similar 
clause  appears  in  many  life  policies. 

1  See  cases  note  5.  infra. 

2  For  example,  German-Am.  Ins.  Co. 
V.  Humphreij,  62  Ark.  348,  35  S.  W. 
428,  54  Am.  St.  R.  297;  Beebe  v.  Ohio 
Farmers'  Ins.  Co.,  93  Mich.  514,  32 
Am.  St.  R.  519,  18  L.  R.  A.  481,  53 
N.  W.  818;  Wood  v.  American  Fire  Ins. 
Co.,  149  N.  Y.  382,  44  N.  E.  80,  52 
Am.  St.  R.  733;  Medley  v.  German 
Alliance  Ins.  Co.,  55  W.  Va.  342,  47 
S.  E.  101;  Welch  v.  Fire  Assn.  of  Phila., 
120  Wis.  406,  98  N.  W.  227. 

3  For  example,  Indian  River  State 
Bk.  V.  Hartford  Fire  Ins.  Co.,  46  Fla. 
283,  35  So.  228;  Snyder  v.  Ins.  Co.,  59 
N.  J.  L.  544,  37  Atl.  1022,  59  Am.  St.  R. 
625;  Dibbrell  v.  Georgia  Home  Ins.  Co., 
110  N.  C.  193,  14  S.  E.  783,  28  Am.  St. 
R.  678.  See  recent  case  of  Bernhard  v. 
Rochester  German  Ins.  Co.  (Conn.),  65 
Atl.  134. 

4  For  example,  see  these  notable  de- 
cisions from  six  influential  courts  in 
the  United  States  and  England,  North- 
ern Assur.  Co.  v.  Grand  View  Bldg. 
A.S.SOC.,  183  U.  S.  308,  22  S.  Ct.  133, 
46  L.  Ed.  213  (standard  policy  gives 
measure  of  agent's  authority,  and  stipu- 
lations are  not  to  be  contradicted  by 
parol);  Russell  v.  Prudential  Ins.  Co., 
176  N.  Y.  178,  68  N.  E.  252,  98  Am. 
St,  R.  656  (limit  of  authority  named 


must  prevail  and  agent  has  no  au- 
thority to  waive  cash  payment  of  first 
premium  by  delivering  the  life  insur- 
ance policy);  Hicks  v.  Brit.-Am.  Assur. 
Co.,  162  N.  Y.  284,  56  N.  E.  743,  48 
L.  R.  A.  424  (countersigning  agent  has 
no  power  to  waive  service  of  proofs 
of  loss  under  standard  fire  policy); 
Straker  v.  Phoenix  Ins.  Co.,  101  Wis. 
413,  77  N.  W.  752  (such  agent  has  no 
power  to  make  subsequent  parol 
waiver  of  prohibited  increase  of  risk). 
Untrue  statements  in  application  or 
policy  avoid  the  contract  though  the 
company's  agent  knew  the  truth  when 
delivering  the  policy,  Batchelder  v. 
Queen  Ins.  Co.,  135  Mass.  449;  McCoy 
v.  Met.  Life  Ins.  Co.,  133  Mass.  82; 
Dimick  v.  Met.  Life  Ins.  Co.,  69  N.  J.  L. 
384,  55  Atl.  291;  Biggar  v.  Rock  Life 
Assur.  Co.  (1902),  1  K.  B.  516. 

5  An  attempted  illegal  restriction 
upon  corporate  action,  Beebe  v.  Ohio 
F.  Ins.  Co.,  93  Mich.  514,  53  N.  W.  818, 
18  L.  R.  A.  481  n.,  32  Am.  St.  R.  519; 
St.  Paul  F.  &  M.  Ins.  Co.  v.  Parsons, 
47  Minn.  352,  50  N.  W.  240;  Ho77ie  Ins. 
Co.  V.  Gibson,  72  Miss.  58,  17  So.  13; 
Burdick  v.  Security  Life  Assn.,  11  Mo. 
App.  629;  James  v.  Mut.  Res.,  etc., 
Ass.,  148  Mo.  1,  49  S.  W.  978;  ^tna 
Life  Ins.  Co.  v.  Fallow,  110  Tenn.  720, 
77  S.  W.  937;  Home  Ins.  Co.  v.  Nichols 
(Tex.  Civ.  App.),  72  S.  W.  440;  Kahn 
v.  Traders'  Ins.  Co.,  4  Wyo.  419,  34 
Pac.  1059,  62  Am.  St.  R.  47. 

«Mei.  Life  Ins.  Co.  v.  Sullivan,  112 
ill.  App.  500. 


1  AUTHORITY   OF   OFFICERS   OF  THE    COMPANY  197 

§  162.  Policy  Restrictions,  when  Operative. — Provisions  in  the 
policy  as  to  who  shall  or  shall  not  he  deemed  to  be  agents  of  the  com- 
pany for  purposes  of  waivers  or  declaring  how  agency  shall  be  evi- 
denced, are  in  general  binding  upon  the  insured  only  from  the  time 
when  he  receives  them.^  Such  provisions  are  in  their  essence  notices 
by  the  insurer  rather  than  engagements  by  the  insured.  Therefore 
if  not  contained  in  the  application  they  do  not  apply  to  transactions 
prior  to  the  issuance  of  the  policy.^  But  the  important  stipulation 
that  waivers  can  only  be  effected  b}'  written  agreement  indorsed  on 
the  policy  has  been  held  operative  from  date  of  the  contract,  no 
matter  when  the  policy  itself  may  be  delivered,  and  though  the 
insurance  rest  only  in  a  binder.^ 

§  163.  Authority  of  Officers  of  the  Company. — Unless  restricted  by 
legislature,  charter,  or  actien  of  the  directors,  officers  have,  in  general, 
authority  to  make  and  alter  contracts,  waive  conditions  and  for- 
feitures, give  permits,  cancel  policies,  adjust  losses,  and  compromise 
claims  in  their  discretion.^ 

It  is,  however,  well  within  the  power  of  a  legislature  or  of  a  board 
of  directors  to  prescribe  a  form  of  policy  stipulating  that  no  officer 
or  agent  shall  have,  or  be  deemed  to  have,  power  to  waive  except  in 

^Mutual  Ben.  Life  Ins.  Co.  v.  Robi-  Alexander  v.  Germania  F.  Ins.  Co.,  66 

son,  58  Fed.  723,  7  C.  C.  A.  444,  22  L.  N.  Y.  464;  Wood  v.  Firemen's  Ins.  Co., 

R.  A.  325.    As  to  exclusive  method  of  126  Mass.  316;  but  the  better  view  is 

waiving,  to  wit,  by  written  agreement,  that  the  policy  cannot  change  the  facts 

see  §  161.  and  convert  the  company's  agent  into 

2  ICawsa^  V. /ns.  Co.,  31  Minn.  17,  16  an    agent    for    the    assured,    Knights 

N.  W.  430,  47  Am.  Rep.  776  (see  cases  Pvthias   v.    Withers,    177    U.    S.    260; 

cited  in  Shotlifj  v.  Modern  Woodmen,  Wilder   v.    Continental   Cas.    Co.,    150 

100  Mo.  App.  138);  Kister  v.  Lebanon  Fed.    92. 

Mut.  Ins.  Co.,  128  Pa.  St.  553,  18  Atl.  ^  Hicls  v.  Brit.-Am.  Assur.  Co.,  162 
447,  15  Am.  St.  R.  696,  5  L.  R.  A.  646;  N.  Y.  284,  56  N.  E.  743,  48  L.  R.  A. 
South  Bend,  etc.,  Co.  v.  Dakota  F.  &  424.  And  see  Hartford  Fire  Ins.  Co.  v. 
M.  Ins.  Co.,  2  So.  Dak.  17,  48  N.  W.  Wilson,  187  U.  S.  467,  478.  Contra, 
310  (citing  cases  pro  and  con).  Contra,  Crouse  v.  Hartford  F.  Ins.  Co.,  79  Mich. 
McCoy  V.  Met.  Life  Ins.  Co.,  133  Mass.  249,  44  N.  W.  496.  Binders  are  usually 
82;  Biggar  v.  Rock  Life  Assur.  Co.  taken  out  through  brokers  who  are 
(1902),  1  K.  B.  516.  But  if  notice  or  perfectly  familiar  with  the  terms  of  the 
agreement  of  restriction  upon  agent's  policy.  A  clause  in  a  policy  limiting- 
authority  is  in  the  application  it  is  the  authority  of  the  agent  is  held  by 
binding  from  date  of  execution  of  ap-  Maryland  court  to  apply  only  to 
pMc&tion,  Kent/on  V.  Knights  Templars,  waivers  after  policy  goes  into  effect, 
122  N.  Y.  247,  25  N.  E.  299.  And  in  Dulaney  v.  Fidelity  &  Cas.  Co.  (ISId.), 
some  cases  it  has  been  held  that  an  66  Atl.  614. 

agreement    in    the    policy    that    the  4  Such  matters  are  seldom  attended 

solicitor  shall  be  deemed  the  agent  of  to  by  boards  of  directors.    The  presi- 

the  insured  is  binding  as  to  transac-  dent  or  other  general  officer  of  a  cor- 

tions  prior  to  receipt  of  policy,  Wilber  poration  has  power,  prima  facie,  to  do 

v.  Williamsburg  City  Fire  Ins.  Co.,  122  any  act  which  the  directors  could  au- 

N.  Y.  443,  25  N.  E.  926;  Rohrback  v.  thorize  or  ratify,  Hastings  v.  Brooklyn 

Germania   F    Ins.   Co.,  62  N.  Y.   47;  L.  I.  Co.,  1.38  N.  Y.  473,  34  N.  E.  289. 


198  GENERAL   PRINriPLES   OF   INSURANCE   LAW 

writing.  T\\o  clause  is  reasonable  and  calculated  to  protect  and 
hencfit  l)()tli  parties.  Its  recital  would  seem  to  be  prima  facie  true 
and  bindinj!;  even  as  to  acts  of  oflicers.antl,  according  to  the  view  of 
the  United  States  Supreme  Court,  it  imposes  upon  the  assured  the 
burden  of  proving  by  extrinsic  evidence  any  actual  authority  to 
waive  by  parol  in  any  given  instance.' 

§  164.  Authority  of  Managers. — General  managers  of  foreign  in- 
surance conipaiiics  and  of  doniostic  fii-e  or  marine  companies,  with 
regard  to  the  doctrine  of  wai\er  and  estoppel,  in  the  absence  of  ex- 
press restrictions  upon  tlieir  authority  made  know^n  to  the  insured, 
stand  sul)staiilially  in  the  place  and  stead  of  officers.^ 

§  165.  Limited  Authority  of  Solicitors — Life. — Solicitors  or  can- 
vassing agents  of  life  insurance  companies  have  as  a  rule  no  express 
authority  to  make,  alter,  or  discharge  contracts,  or  to  waive  for- 
feitures, or  to  grant  permits.  In  this  regard  they  are  essentially 
special  agents  and,  with  few  exceptions,  there  is  no  reason  why,  in 
the  ordinary  course  of  business,  they  should  be  assumed  by  those 
dealing  with  them  to  have  such  authority.^ 

§  166.  The  Same — Exception  as  to  First  Premium. — A  local  agent 
of  a  life  company,  who  is  intrusted  with  the  business  of  taking  appli- 
cations and  closing  the  transaction  by  delivering  the  policy  and  col- 
lecting the  premium,  is  held  to  have  an  implied  authority  to  deter- 
mine how  the  premium  then  due  shall  be  paid,  whether  by  cash  or, 
as  is  sometimes  done,  by  giving  credit,  provided  the  application  does 
not  contain  in  sul)stance  notice  that  he  has  no  power  to  waive.'* 

By  the  weight  of  authority  the  agent  is  held  to  have  this  dis- 
cretionary power,  although  the  policy  expressly  provide  that  the 

^  Xortlurn    A.    Co.    v.    Grand    View      Ark.   328,  8S  S.   W.   9.50-   McGurk  v 
B  A.,  18.3  U.  S.  308,  301,  22  S  Ct.  133;      Metropolitan  Life,  56  Conn    528    1  L 

rT^io^J  "^i^f 'oo  i'-  n.  IJ-  P"',^.^^  ^  '^-  '^6311.;    Van  Werden  v.  Equitable 

I     b.  423,  4.33   22  S.  Ct.  862,  ni  which  Life  A.  Soc,  99  Iowa,  621,  68  N    W 

the   court   declared    that    "a   general  S92;  Eatstern  R.  R.  Co.  v.  Relief  Ins' Co' 

agent     ha.s  no  power  to  waive  by  parol  105  Mass.  570;  Stuart  v.  Reliance  Ins 

under  .standard    fire    policy.   Farmers'  Co.,  179  Mass.  434.  60  N  E   929-  Frost 

Mut.In^  Asso.y.  Price,  112  Ga.  264,  v.  North  British  Mercantile  I.  Co.,  77 

Co.    193  Pa.  St    184,  19o,  44  Atl.  317.      Co.  v.  Bowdre,  67  Miss.  620,  7  So  596 
Contra,  Lamberton  v.  Connecticut  Fire      19  Am  St  R  326 

f"  R^a'  ??9^^';?"-  ^f'  ^r^-  ^/,?'  ^  '  Coiton  States  Life  Ins.  Co.  v.  Scurry, 

L.  R.  A.  222;  Home  Ins.  Co.  v.  Gibson,      50  Ga  48  ^^ui,y, 


ERRONEOUS    ANS\VER.S    WRITTEN    INTO    A IM'LICATIOX    OF    AGENT     199 

first  premium  shall  be  paid  in  cash;  '  but  this  conclusion  is  based 
upon  his  possession  of  the  document  for  purposes  of  delivery,  and 
his  instructions  to  deliver  it,  and  consequently  his  power  does  not 
extend  to  subsequent  premiums  or  premium  notes. ^ 

But  where  the  application  or  policy  gives  notice  that  the  agent 
has  no  authority  to  waive  or  to  accept  anything  but  cash  and  stipu- 
lates that  the  policy  will  not  be  binding  until  the  first  premium  has 
lieen  paid  in  cash,  the  contract  restriction  will  prevail,*''  though  some 
courts  take  a  different  view/  A  soliciting  agent  has  no  implied 
authority  to  take  in  payment  personal  property,  as,  for  instance,  a 
horse, ^  or  services.*^ 


§  167.  Erroneous  Answers  Written  into  Application  by  Agent. — 

Where  the  company's  soliciting  agent  by  mistake  or  evil  design  in- 
serts erroneous  answers  in  the  application  in  place  of  correct  oral 
answers  of  the  applicant,  by  the  weight  of  authority  the  company 
is  estopped  from  relying  upon  forfeiture  occasioned  by  the  error, 
provided  no  restriction  upon  the  agent's  authority  to  waive  is  re- 
cited in  the  application.^ 


1  Mut.  Life  Ins.  Co.  v.  Abbey,  76 
Ark.  328,  88  S.  W.  950;  Peck  v.  Wash. 
Life  Ins.  Co.,  91  App.  Div.  597,  600, 
aff'd  181  N.  Y.  585. 

2  Critchett  v.  Am.  his.  Co.,  53  Iowa, 
404,  5  N.  W.  543;  Roehner  v.  Knick. 
Life  Ins.  Co.,  63  N.  Y.  160;  Life  Ass. 
Co.  V.  Ward,  17  C.  B.  645. 

3  For  example,  Russell  v.  Prudential 
Ins.  Co.,  176  N.  Y.  178,  68  N.  E.  2.52, 
98  Am.  St.  R.  656. 

*  For  example,  State  Ins.  Co.  v.  Hale 
(Iowa,  1901),  95  N.  W.  473. 

5  Hoffman  v.  John  Hancock  Mid.  I. 
Co.,  92  U.  S.  161,  23  L.  Ed.  539. 

8  Carter  v.  Cotton  States  L.  I.  Co. ,  56 
Ga.  237;  but  see  Willcuts  v.  North- 
ivestern  Mut.  M.  L.  I.  Co.,  81  Ind.  300. 

7  Ins.  Co.  V.  Wilkinson,  13  Wall.  222, 
20  L.  Ed.  617  (age  of  mother);  Sovthern 
Ins.  Co.  V.  Hastings,  64  Ark.  253,  41 
S.  W.  1093  (mortgage);  Parno  v.  Iowa 
M.  M.  Ins.  Co.,  114  Iowa,  132,  86 
N.  W.  210  (incmnbrance) ;  Ins.  Co.  v. 
Weeks,  45  Kan.  751,  26  Pac.  410 
(watchman,  etc.);  Otte  v.  Hartford  Life 
Ins.  Co.,  88  Minn.  423,  93  N.  W.  608, 
97  Am.  St.  R.  532  (health  of  insured); 
i\ute  et  al.  v.  Hartford  Fire  Ins.  Co. 
109  Mo.  App.  585,  83  S.  W.  83  (title); 
Jacobs  V.  Northicestern  Life  Assurance 
Company,  30  App.  Div.  285,  51  N.  Y. 
Supp.  967,  aft'd  164  N.  Y.  582,  58  N.  E. 


1088  (rejected  application  for  other  in- 
surance); O'Brien  v.  Home  Benefit  So- 
ciety, 117  N.  Y.  310,  22  N.  E.  954 
(diseases  of  insured  and  medical  at- 
tendance); Miller  V.  Phoeni.v  Mutual 
Life  Insurance  Co.,  107  N.  Y.  292,  14 
N.  E.  271  (age);  Prudential  Ins.  Co.  v. 
Haley,  91  III.  App.  363  (age).  Contra, 
for  example,  Biggar  v.  Rock  Ins.  Co. 
(1902),  1  K.  B.  516;  McCoy  v.  Met. 
Life  Ins.  Co.,  133  Mass.  82;  Martin  v. 
Ins.  Co.,  57  N.  J.  L.  623,  31  Atl. 
213;  Franklin  F.  Ins.  Co.  v.  Martin, 
40  N.  J.  L.  568,  29  Am.  Rep.  271. 
The  last  cases  hold  in  accordance  with 
the  usual  rule  of  law  that  if  plaintiff 
is  entitled  to  reformation,  he  must  sue 
in  equity.  The  mistake,  however,  is 
really  the  act  of  the  agent,  done  in  the 
course  of  his  employment.  He  is  the 
expert  and  largely  dominates  the  trans- 
action. The  application  is  usually  sent 
to  the  company  before  the  policy  issues 
and,  except  where  statutes  compel,  the 
applicant  miiy  have  no  copy  or  any  op- 
portunity to  compare  it  with  the  policy 
itself,  which  usually  declares  the  truth 
of  the  answers  to  be  warranted.  Until 
action  is  begun  the  claimant  may  be 
ignorant  of  the  existence  of  any  breach 
of  contract.  A  detailed  application, 
however,  is  now  rarely  used  in  fire  in- 
surance, see  §  75,  but   is   usually  part 


200  GENEIIAL    ridXCirLLS   UF    IN.SUKAN'CE   LAW 

Thus,  where  (he  applicant  for  life  insurance,  formerly  a  slave  and 
not  knowing  the  age  at  which  her  mother  had  died,  had  told  the  local 
agent  that  she  could  not  tell  what  it  was,  and  the  agent  from  other 
sources  of  information  erroneously  stated  the  age  at  40  years  instead 
of  23.  the  court  heUl,  that  the  agent  was  the  representative  of  the 
company  and  not  of  the  applicant  in  transcribing  the  answers,  and 
that  tlie  company  was  estopped  from  relying  upon  the  breach  of 
warranty  contained  in  the  application.^ 

Many  courts,  however,  hold  that  if  the  error  occurs  because  the 
applicant,  though  able,  and  having  the  opportunity,  to  read  the 
application,  neglects  to  do  so,  no  estoppel  will  result.  Pursuant  to 
this  view  the  breach  of  warranty  is  to  be  enforced,  though  the  act  of 
writing  the  erroneous  answer  is  done  by  the  agent  of  the  company, 
and  relief,  if  any,  must  be  had  in  equity.^ 

In  an  English  case,  Biggar,  the  insured,  was  canvassed  by  the 
insurance  company,  and  was  induced  to  send  in  a  proposal  for  in- 
surance against  accidents.  Cooper,  the  soliciting  agent  of  the  com- 
pany, instead  of  consulting  Biggar  as  to  the  answers  to  be  given, 
filled  them  in  as  best  he  might,  and  then  invited  Biggar  to  sign  the 
paper,  which  he  did  without  reading  it.  The  answers  inserted  hy 
Cooper  were  false  in  many  particulars,  but  Biggar  did  not  know  it. 
The  proposal  contained  a  declaration  by  which  the  applicant  agreed 

of    the    life    insurance    contract,    see  Iowa,  652,  8.5  N.   W.   985;  Smith  v. 

§  77.    There  can  be  no  question  as  to  People's  Mvtual  Live  Stock  I.  Co.,  173 

the   justice   of  the   principal   rule,   no  Pa.    St.    15,    33    Atl.    567;    Brown    v. 

matter  what  may  be  the  stipulation  of  Metropolitan  L.  I.  Co.,  65  Mich.  306, 

the  policy,  when  the  agent  fills  out  and  32  N.  W.  610,  8  Am.  St.  R.  894  (collu- 

also  signs  the  application  in  the  name  sion,  a  question  for  jury);  Speiser  v. 

of    the    assured    without    the    latter's  Phoenix  Mid.  L.  I.  Co.,  119  Wis.  530, 

knowledge.    Then  the  document  though  97  N.  W.  207. 

labeled  an  application  is  not  the  appli-  i  Union  Mut.  Ins.  Co.  v.  Wilkinson, 

cant's  proposal,  but  the  agent's.    This  13  Wall.  222,  20  L.  Ed.  617  (opinion 

is  true  both  of  fire  insurance  and  of  life,  of  the  court  given  in  note  §  158,  supra). 
Beymimjhoff  v.  Agricultural  Ins.  Co.,  93  2  T\Jew  York  Life  Ins.  Co.  v.  Fletcher, 

N.  Y.  495;  Moury  v.  Agricultural  Ins.  117  U.  S.  519,  6  S.  Ct.  837;  Ryan  v 

Co.,  64  Hun,  137,  18  N.  Y.  Supp.  834,  World  Mut.  L.  I.  Co.,  41  Conn.   168, 

aflf'd  138  N.  Y.  642;  Lycoming  Ins.  Co.  19  Am.  Rep.  490;  Kansas,  etc.,  Ins.  Co. 

V.  Jackson,  83  111.  302,  25  Am.  Rep.  v.  Central  Nat.  Bk.,  60  Kan.  630,  57 

386;  Baker  v.  Ohio  Farmers'  Ins.  Co.,  Pac.  524;  Mercer  Co.,  etc.,  v  Stale  Ins 

70  Mich.  199,  38  N.  W.  216,  14  Am.  Co.,  61  Mo.  App.  597;  Virginia  F.  &  m'. 

St.  R.  485;  Ian  Harden  v.  Metropolitan  Ins.  Co.  v.  Morgan,  90  Va  290   18  S  E 

L.  his.  Co.,  110  Mich.  682,  68  N.  W.  191;  Biggar  v.  Rock  Ins.  Co    (1902)    1 

982;  Wells  v.  Metropolitan  L.  Ins.  Co.,  K.  B.  516.    Other  courts  make  the  dis- 

^E.'^^^•o'R^\^^^'  ^^  ^-  ^-  ^^PP-  ^^'  t'nction  that  if  the  applicant  is  de- 
alt d  163  N.  V.  572;  Leonard  v.  New  terred  from  reading  the  application  by 
^ngland  Mut.  L  Ins.  Co.,  22  R.  I.  519,  representations  or  misleading  conduct 
48  Atl.  808.  \\  hether  the  false  answer  of  the  agent  the  company  will  be  es- 
is  to  be  attributed  to  the  fault  of  the  topped.  Van  Hovten  v.  Met.  Life  I  Co 
agent  is  usually  a  question  for  the  jury,  110  Mich.  682,  68  N.  W.  982  '' 
Schaeffer  v.  Anchor  Mut.  F.  I.  Co.,  113 


agent's  INTEIIPKETATION  OF   THE  CONTRACT       201 

that  its  statements  should  form  the  basis  of  the  policy,  and  the  policy 
contained  the  usual  proviso  that  it  was  granted  on  the  condition  of 
their  truthfulness.  The  King's  Bench  Division  in  rendering  judgment 
for  the  company,  decided  that  the  company's  solicitor,  in  filling  up 
the  application,  acted  as  agent  for  Biggar.  The  English  court  also 
approved  and  adopted  the  views  of  the  United  States  Supreme  Court 
as  expressed  in  Neiv  York  Life  Insurance  Co.  v.  Fletcher,^  and  held,  that 
the  insured,  in  allowing  another  to  fill  up  his  proposal,  and  in  neglect- 
ing to  read  it,  became  responsible  for  its  contents.^ 

But,  on  the  other  hand,  it  is  clear  that  if  the  company's  agent, 
without  the  consent  or  knowledge  of  the  applicant,  makes  any 
addition  or  alteration  in  the  proposals,  after  their  execution  or  after 
the  applicant  supposes  them  to  be  complete,  the  company  cannot 
predicate  forfeiture  upon  the  failure  of  the  applicant  to  read  the 
paper  before  delivering  or  forwarding  it.^ 

If,  however,  the  erroneous  statements  in  the  application  are  the 
result  of  fraud  on  the  part  of  the  insured  or  collusion  with  the  agent, 
or  if  the  insured  knows  that  the  answers  are  falsely  transcribed,  the 
company  will  not  be  estopped  from  insisting  upon  the  letter  of  the 
contract.^ 

§  168.  Agent's  Interpretation  of  the  Contract. — Many  courts  hold 
the  insurance  company  to  the  solicitor's  interpretation  of  the  mean- 
ing of  the  questions  in  the  application  or  terms  of  the  contract  as 
explained  by  him  to  the  applicant.^ 

1  117  U.  S.  519,  6  S.  Ct.  837,  29  L.  Co.,  183  U.  S.  25,  38,  22  S.  Ct.  10; 
Ed.  934.  Equitable  Life  Ins.  Co.  v.  Hazelwood, 

2  Biggar  v.  Rock  Life  Assur.  Co.  75  Tex.  338,  12  S.  W.  621,  16  Am.  St. 
(1902),  1  K.  B.  516.  Compare  Contra,  R.  893,  7  L.  R.  A.  217  (what  consti- 
German  Ins.  Co.  v.  Gray,  43  Kan.  497,  tutes  a  previous  application  for  insur- 
23  Pac.  637,  8  L.  R.  A.  70,  19  Am.  ance);  Continental  Ins.  Co.  v.  Chambcr- 
St.  R.  150  (cases  cited);  Follette  v.  lain,  132  U.  S.  304,  10  S.  Ct.  87  (what 
Mut.  Ace.  Asso.,  110  N.  C.  377,  14  constitutes  "other  insurance");  Ilotch- 
S.  E.  923,  15  L.  R.  A.  668,  28  Am.  kiss  v.  Phoenix  Ins.  Co.,  76  Wis.  269, 
St.  R.  693.  44  N.  W.  1106,  20  Am.  St.  R.  69  (what 

3  McMaster  v.  Ins.  Co.,  183  U.  S.  constitutes  occupancy);  Jacobs  v.  St. 
25,  22  S.  Ct.  10,  46  L.  Ed.  64.  Paul  F.  &  M.  Ins.  Co.,  86  Iowa,  145, 

i  Ketcham   v.   Am.   Mut.   Ace.   Ass.,  53  N.  W.   101    (what  constitutes  "in- 

117  Mich.  521,  76  N.  W.  5.     Contra,  cumbrance").    So  also  where  the  agent 

Keystone  Mut.  Ben.  Asso.  v.  Jones,  72  has   written   into   the   application   his 

Md.  363   (age  misrepresented).     Thus  construction  of  the  answers  and  not 

where  the  insured  told  the  agent  he  the  answers  themselves  as  given  by  the 

could   write  the   answer  as  he   liked,  applicant,   the   company  is  estopped, 

policy    was    held    avoided,    Blooming  A^.  J.  Mutual  Life  his.  Co.  v.  Bal  er,  QA 

Grove  Mut.  Ins.  Co.  v.  McAnerney,  102  U.  S.  610;  Am.  Life  Ins.  Co.  v.  Mahone, 

Pa.  St.  335,  48  Am.  Rep.  209;  and  see  21  Wall.   (U.  S.)   152;  Malleable  Iron 

Lewis  V.  Phoenix  Mut.  Life  Ins.  Co.,  39  Works  v.  Phoenix  Ins.   Co.,  25  Conn. 

Conn.  100.  465;  Heiuey  v.  Met.  Life  Ins.  Co.,  100 

5  McMaster  v.  New   York  Life  Ins.  Me.    523,    62    Atl.    600;    O'Brien    v 


202  GENIJKAI-    l'i;iN(llM,i;s    t»l-    INSUKANCE    LAW 

§  169.  Mere  Knowledge  of  Solicitor  Works  no  Estoppel.— A  solic- 
itor or  canvasser  ha.s.iii  general,  no  authority,  either  real  or  apparent, 
to  countersign  the  policy,  change  its  terms  or  give  permits.  The 
mere  possession  of  knowledge  by  him  of  facts  constituting  grounds 
of  forfeiture,  though  at  the  inception  of  the  contract,  works  no  es- 
toppel.' 

Thus,  where  the  written  answers  to  the  questions  of  the  medical 
examiner  regarding  past  ailments  and  medical  attendance  were 
incorrect,  the  policy  was  held  avoided  for  breach  of  warranty,  al- 
though the  jury  found  that  the  facts  had  been  truly  disclosed  to  the 
company's  solicitor,  who,  however,  had  nothing  to  do  with  transcrib- 
ing into  the  application  the  answers  relating  to  the  medical  branch 
of  the  inquiry.  And  the  unanimous  judgment  of  the  court  below 
was  reversed.^ 

§  170.  Notice  of  Restriction  upon  Solicitor's  Authority. — Where 
the  application  or  premium  note  contains  a  notice  or  stipulation 
that  the  soliciting  agent  has  no  authority  to  waive  or  change  the 
terms  of  the  contract,  or  where  the  assured  stipulates  that  the  written 
statements  of  the  application  shall  be  the  only  statements  upon  which 
the  contract  is  made,  such  notice  or  stipulation  is  by  the  weight  of 
authority  and  reason  held  controlling,  errors  of  the  agent  in  trans- 

Home  Benefit  Society,  117  N.  Y.  .310,  N.  W.  5.     Contra,  Boetcher  v.  Hawkeye 

22    N.    E.    9.54    (health);    /n.s.    Co.    v.  /ns.  Co.,  47  Iowa,  2.53.    The  acquisition 

Hancock,  100  Tenn.  .51.3,  .52  L.  R.  A.  of  knowledge  of  a  ground  of  forfeiture 

665,   62   S.   W.    145    (title);   Equitable  does  not  in  itself  enlarge  the  powers  of 

Li]e  Ins.  Co.  v.  Hazlewood,  75  Tex.  338,  a  special  agent,  though  if  he  already 

16  Am.   St.   R.   893,  7   L.   R.   A.   217  had  authority  to  alter  the  terms  of  the 

(health  and  medical  advice).     The  in-  contract  it  might  then  in  conjunction 

surance  company  is  responsible  for  the  with     authorized     acts     of     sufficient 

falsehood  if  its  medical  examiner  in-  gravity  become  a  factor  in  operating 

correctly  transcribes  into  the  applica-  an  estoppel.    If  knowledge  by  a  special 

tion  true  oral  answers  of  the  applicant,  agent  of  a  ground  of  forfeitvire  could 

since   the  medical  examiner  must   be  work  an  estoppel  simply  because  he  was 

regarded    as   agent   for   the   company  doing    something    for    the    company 

only.  Prudential  Ins.  Co.  v.  Haley,  91  when  he  acquired  it,  then  the  knowl- 

111.  App.  363;  Butler  v.  Mich.  Mut.  L.  edge  of  his  office  or  errand  boy  might 

7ns.  Co.,  184  N.  Y.  337,  340;  Sterna-  accomplish  the  same  result,   and   the 

man  v.  Met.  L.  Ins.  Co.,  170  N.  Y.  13;  conclusion  would  be  reached  that  the 

Ames   V.    Manhattan  L.   Ins.    Co.,   40  binding  obligation  of  a  solemn  written 

App.   Div.   46.5,  58  N.   Y.   Supp.   244,  contract    may    be    destroyed    by    the 

aff'd  167  N.  Y.  584;  Leonard  v.  State  casual  information  acquired  or  found 

Mut.  L.  A.  Co.,  24  R.  I.  7,  51  Atl.  1049,  by  a  jury  to  be  acquired  by  a  subordi- 

96  Am.  St.  R.  698.  nate  agent  employed  to  do  some  trivial 

^Butler  V.  Mich.  Mut.  L.  Ins.  Co.,  act  for  the  company  without  the  con- 

184  N.  Y.  337,  77  N.  E.  398;  Jacobs  v.  nivance   or   knowledge   of   any   of   its 

Northwestern  L.  Ins.  Co.,  30  App.  Div.  responsible     or    commissioned     repre- 

285,  51  N.  Y.  Supp.  967,  aff'd  164  N.  Y.  sentatives. 

582;  Clemans  v.  Supreme  Assembly,  131  2  Butler  v.    Michigan   Mid    L    Ins 

N.  Y.  485,  30  N.  E.  496,  16  L.  R.  A.  33;  Co.,  184  N.  Y.  337,  77  N  E  398 
Ketcham  v.  Assoc,  117  Mich.  521,  76 


ILLITERATE   APPLICANTS  203 

cribing  the  answers  will  not  in  general  estop  the  company  and  the 
assured,  unless  illiterate,  must  stand  upon  his  contract  as  written, 
since,  in  reality,  such  agent  has  no  power  to  alter  the  written  con- 
tract and  notice  of  his  limited  authority  is  thus  brought  home  to  the 
assured.^ 

Applying  the  doctrine  that  notice  to  an  agent  is  notice  to  the 
principal  and  that  the  principal  is  responsible  for  any  carelessness  or 
misconduct  of  his  agent  in  transacting  the  business  in  fact  intrusted 
to  him,  other  courts,  however,  have  thrown  the  door  wide  open  for 
the  introduction  of  parol  evidence  to  contradict  the  written  policy, 
and  where,  as  is  usual,  there  is  dispute  as  to  what  occurred,  have 
submitted  the  issues  of  fact  thus  raised  to  the  jury,  irrespective  of 
stipulations  in  the  application  or  policy.  This  view  is  based  mainly 
on  the  ground  that  the  act  complained  of  is  really  the  act  of  the 
company's  agent,  hence  of  the  company,  and  that  an  estoppel  derives 
its  sanction  from  a  paramount  rule  of  law  and  not  at  all  from  the 
contract  itself  which  indeed  its  ostensible  object  is  to  subvert.^ 

§  171.  Illiterate  Applicants. — If  the  assured  cannot  read  or  is 
ignorant  and  illiterate  and  has  given  correct  oral  answers,  the  com- 
pany, regardless  of  policy  stipulations,  is  held  responsible  for  errors 
of  its  agent  in  transcribing.^ 

I  Biggar  v.  Rock  Ins.  Co.,  1  K.  B.  301;  Ryan  v.  World  Mut.  L.  Ins.  Co., 

516  (1902);  North.  A.sswr.  Co.  v.  Grand  41  Conn.  168,  171,  172,  19  Am.  Rep. 

Vieiv  Build.  As.m.,  183  U.  S.  308,  363,  490;  Rinker  v.  ^na  Life  Ins.  Co.,  214 

364,  22  S.  Ct.  133  (cited  and  defined  in  Pa.    St.    608,    64    Atl.    82    (evidence 

Hagan  v.  Scottish  Ins.  Co.,  186  U.  S.  of    correct    answer    and    omission    to 

423,  433,  22  S.  Ct.  862);  A'.    }'.  Life  read   application   inadmissible).      But 

Ins.  Co.  V.  Fletcher,  117  U.  S.  519,  6  if  in  fact  the  agent  has  general  powers, 

8.  Ct.  837;  Ins.  Co.  v.  Norton,  96  U.  S.  his  acts  will  estop  the  company,  Ger- 

240;  Ins.  Co.  v.  Wolff,  95  U.  S.  326;  man  Ins.  Co.  v.  Gray,  43  Kan.  497,  23 

Dimick  v.  Met.  Life  I.  Co.,  69  N.  J.  L.  Pac.  637,  8  L.  R.  A.  70,  19  Am.  St.  R. 

.384,    55  Atl.   291,  66   L.   R.   A.   774;  150. 

Riissellv.  Prudential  Ins.  Co., 17GN.Y.  "^Lynchburg  Fire  Ins.   Co.   v.   West, 

178,  68  N.  E.  2,52,  98  Am.  St.  R.  656;  76  Va.  575,  44  Am.  Rep.  177;  Stone  v. 

Steicnrtv.  Union  Mut.  L.  Ins.  Co.,  155  Hawkeyc  his.    Co.,   68   Iowa,   737,   28 

N.  Y.  257,  49  N.  E.  876,  42  L.  R.  A.  N.  W.  47,  .56  Am.  Rep.  870;  Germania 

147;  McCollum  v.  Mut.  L.  his.  Co.,  55  Ins.  Co.  v.  Wingfield,  22  Ky.  Law  R. 

Hun,  103,  8  N.  Y.  Supp.  249,  aff'd  124  4,55,  57    S.  W.  4.56;    Improved  Match 

N.  Y.  642,  27  N.  E.  412;  Kemjon  v.  Co.  v.  Mich.  Mut.  Fire  Ins.  Co.,  122 

K.  T.  &  M.  M.  A.  As.soc.,  122  N.  Y.  Mich.  256,  80  N.  W.   1088;  Welch  v. 

247,  25  N.  E.  299;  Hamilton  v.  Fid.  Fire  Assn.  of  Phila.,  120  Wis.  456,  98 

.1/;//.  Ins.  Co.,  27  App.  Div.  480,  50  N.  W.  227;  Globe  Mut.  Life  Ins.  Assoc. 

X.    Y.   Supp.  526;  Bernard  v.    United  v.  Ahem,  191  111.  167,  60  N.  E.  806. 
Life  Assoc,  14  App.  Div.  (N.  Y.)  142,  ^Capital  F.  Ins.  Co.  v.  Montgomery 

43  \.   Y.  Supp.  .527;  Allen  v.  Mass.  (Ark.,   Jan.,    1907),    100   S.    W.    749; 

Mut.    Ace.    Asso.,    167    Mass.    18,    44  LaMarche  v.  New  York  Life  I.  Co.,  12Q 

N.  E.   1053;  Batchelder  v.  Queen  Ins.  Ca.1.  498,  58  Pac.  1053;  Dryer  v.  Security 

Co.,  135  Mass.  449;  McCoy  v.  Met.  L.  Fire  Ins.  Co.   (Iowa),  82  N.  W.  494; 

Ins.  Co.,  133  Mass.  82;  Fitzmaurice  v.  Rogers  v.  Phoenix  Ins.   Co.,   121   Ind. 

Mut.  L.  Ins.  Co.,  84  Tex.  61,  19  S.  W.  570,  23  N.  E.  498;  State  Ins.  Co.  v. 


201  GENERAL   PRINCIPLES   OF   INSURANCE   LAW 

The  ability  to  read  and  understand  is  the  only  defense  which  the 
applicant  has  against  the  wrongful  act  of  the  company's  agent  in 
failing  to  write  the  answers  as  given;  and,  especially  where  no  copy 
of  the  application  is  furnished  to  the  insured,  the  claimant  is  likely 
to  know  nothing  of  the  mistake  until  after  his  action  has  been  com- 
menced upon  the  policy.  The  equities  in  such  a  case  are  all  against 
the  company.  The  popularity  of  life  insurance  among  the  lower 
classes  in  this  country  gives  ^  special  importance  to  this  doctrine. 

A  good  illustration  is  furnished  in  the  New  York  reports.  One 
Peter  O'Brien,  on  becoming  a  member  of  a  benefit  society,  signed 
the  usual  application,  and  by  it,  among  other  things,  asserted  that 
he  had  never  had  rheumatism  and  had  never  been  attended  by  a 
physician.  Both  these  answers  were  untrue,  but  O'Brien  could 
neither  read  nor  write,  and  the  application,  which  was  warranted 
to  be  the  basis  of  the  contract,  and  full,  complete,  and  true,  whether 
written  by  his  own  hand  or  not,  was  filled  in  by  an  agent  of  the  so- 
ciety. The  defendant's  witnesses  testified  that  the  answers,  as  writ- 
ten, correctly  recorded  O'Brien's  statements,  but  there  was  some 
testimony  to  the  contrary  which  carried  that  issue  to  the  jury.  The 
verdict  for  the  plaintiff  was  unanimously  affirmed  by  the  New  York 
Court  of  Appeals. 2 

The  last  case  and  others  like  it  were  cited  with  approval  by  the 
California  court  in  an  action  by  La  Marche,  an  illiterate  farmer  of 
foreign  birth,  who  had  received  a  visit  from  the  defendant's  solicitor, 
Eaton.  In  consideration  of  a  promissory  note  of  La  Marche  for 
$430.50  in  payment  of  the  first  premium,  and  of  fourteen  annual 
premiums  of  like  amount  to  be  paid  during  the  years  to  come,  Eaton 
promised  him  an  endowment  polic}'^  of  $10,000,  payable  at  the  end 
of  fifteen  years  or  sooner.  Eaton  received  the  promissory  note  from 
La  Marche,  also  his  proposals  signed  in  blank;  but,  before  forwarding 
them  to  the  company,  Eaton  filled  up  the  application  with  terms 
calling  for  a  policy  of  much  less  liberal  purport  than  that  promised. 
The  policy,  executed  in  accordance  with  the  written  application, 
was  sent  to  the  plaintiff  by  mail;  he  returned  it  to  the  defendant 
with  his  objections,  and,  after  having  paid  the  promissory  note,  he 

Grai/,  44  Kan.  731,  2,5  Pac.  197;  Mvllen  outnumber  all  other  kinds  of  life  in- 

V.  Ins.  Co.,  182  Pa.  St.  150,  37  Atl.  988;  surance    policies. 

Hayes  V.  Saratoga  &  W.  Fire  I.  Co.,  81  '^O'Brien   v.    Home   Benefit   Societi/, 

App.  Div    287,  80  N.  Y.  Supp.  888,  117  N.  Y.  310,  22  N.  E.  954.     And 

af?'d  179  N.  Y.  535;  O'Brien  v.  Howe  see    Clemans    v.    Supreme    As.'iembly, 

Benefit  Soc,  117  N.  Y.  310,  22  N.  E.  131  N.  Y.  485,  30  N.  E.  496,  16  L.  R. 

954.  A.  33;  Sternaman  v.  7ns.  Co.,  170  N.  Y. 

1  Industrial     policies     very    largely  13,  62  N.  E.  763,  57  L.  R.  A.  318,  8S 

Am.  St.  R.  625, 


AUTHORITY   OF  COMMiySlONED    AGENTS — FIRE  205 

sued  the  defendant  for  damages  sustained.  The  nonsuit  granted  on 
the  trial  was  reversed  on  appeal;  the  court  holding  that  the  insurer, 
and  not  La  Marche,  was  responsible  for  the  errors  in  the  application.^ 

§  172.  Authority  of  Commissioned  Agents — Fire. — The  regular 
local  or  commissioned  agents  of  fire  insurance  companies  are  said 
to  be  general  agents,  and  except  as  restrictions  upon  their  authority 
are  inserted  in  the  application  or  policy,  or  otherwise  made  known  to 
the  insured,  they  are  held  to  have  power  to  waive  conditions  and 
forfeitures,  and  to  estop  the  company,  without  written  permit.^ 
This  conclusion  is  based  largely  upon  the  extent  of  their  actual  au- 
thority, which  embraces  such  acts  as  accepting  or  rejecting  proposals, 
countersigning,  delivering,  canceling,  renewing  policies,  giving 
written  permits,  and  fixing  rates  of  premiums.^ 

The  fire  policy  in  common  use  in  this  country  does  not  make  the 
payment  of  the  premium  a  condition  precedent  to  the  validity  of 
the  contract,  and  the  countersigning  agent  may  extend  credit  to  the 
insured,  or  not,  as  he  chooses.'*  The  general  custom  where  credit  is 
given  is  for  the  agent  to  do  so  on  his  own  responsibility.  But  in 
case  the  agent  should  make  default  in  accounting  to  the  company 
the  policy  will  nevertheless  be  valid. *^  And  though  the  policy  provide 
that  it  shall  not  take  effect  until  the  premium  is  paid  in  cash,  the 

^■La  Marche  v.  A'.  Y.  Life  Ins.  Co.,  filled  up  as  occasion  required,"  Car- 

126  Cal.  498,  58  Pac.  1053.  penter  v.    German-Am.   Ins.    Co.,    135 

^Silverberg  v.  Phoenix  Ins.   Co.,  67  N.  Y.  298,    302,31    N.   E.    1015;  Pit- 

Cal.  36,  7  Pac.  38;  Walsh  v.  Hartford  ney  v.  Glens  Falls,  65  N.  Y.  6.     The 

Fire  Ins.  Co.,  73  N.  Y.  5;  Alexander  v.  United  States  Supreme  Court  calls  the 

Continental  Ins.  Co.,  67  Wis.  422,  30  countersigning  agent  a  general  agent 

N.  W.  727,  58  Am.  Rep.  869.    A  party  in  Hagan  v.  Scottish   Union  Ins.  Co., 

taking  premium  and  delivering  poHcy  186   U.    S.    423,   433,   22   S.   Ct.   862, 

is  presumed  to  be  agent  of  tlie  com-  though  not  strictly  such  in  that  or  in 

pany  with  authority,  Walker  v.  Lvon  most     cases.       Another     court     says: 

F.  Ins.  Co.,  175  Pa.  St.  345,  34  Atl.  736.  "Possession  of  blank  policies  and  re- 

3  Commissioned     or     countersigning  newal  receipts  signed  by  the  president 

agents    hold    a    written    commission,  or  secretary  is  evidence  of  such  general 

granting  them  "full  power  to  receive  agency,"  Grabbs  v.  Farmers'  Mut.  F. 

proposals  for  insurance  [in  a  certain  Ins.  Assoc,  125  N.  C.  389,  397,  34  S.  E. 

locality],  to  fix  the  rates  of  premiums,  503. 

to  receive  moneys,  and  to  countersign,  *  Kollitz  v.  Equitable  Mut.  Fire  Ins. 

issue,  and  renew  policies  of  insurance  Co.,  92  Minn.  234,  99  N.  W.  892.     If 

signed  by  the  president  and  attested  by  the  insured  give  a  note  for  the  pre- 

the  secretary  (or  signed  by  the  man-  mium  he  cannot  defend  against  pay- 

ager),  subject  to  the  rules  and  regula-  ment  of  the  note  on  the  ground  that 

tions  of  the  company  and  to  such  in-  the   note  is   without   consideration  or 

structions  as  may  from  time  to  time  be  that  the  policy  is  void;  only  the  com- 

given  by  the  officers."    The  court  says:  pany  can  raise  that  point,  Doyle  v.  Hill 

"It    appears   that    Mandeville   was    a  (S.    C,    Oct.,    1906),    55    S.    E.    446; 

general  agent  of  the  defendant,  clothed  Kimbro  v.  A''.  Y.  Life  Ins.  Co.  (Iowa), 

with  power  to  make  contracts  of  in-  36  Ins.  L.  J.  57. 

surance  and  to  issue  policies,  and  was  ^Miller  v.  Life  Co.,  12  Wall.  (U.  S.) 

furnished  with  printed  forms  which  he  286,  20  L.  Ed.  398. 


•JOCi 


GENERAL   PRINCIPLES   OF  INSURANCE   LAW 


general  agent  has  power  to  waive  the  provision  and  give  credit,  and 
will  be  held  to  have  waived  it  if  he  deliver  the  policy  without  en- 
forcing payment,'  provided  the  application  or  policy  does  not  give 
nolico  that  he  has  no  such  power.- 

s<  173.  The  Same— Restrictions  upon  Authority  Coupled  with 
Knowledge  of  Forfeiture  when  Policy  Issues.— Most  of  the  standard  ^ 
and  other  forms  of  fire  policies  now  in  use  provide  in  substance  that 
no  olhcer  (^r  agent  shall  have,  or  be  deemed  to  have,  authority  to 
waive  orally.  Most  of  the  state  courts,  however,  have  continued  to 
apply  the  rule  that  if  the  countersigning  agent  when  he  issues  a 
policy  has  knowledge  of  facts  constituting  forfeiture  the  company 
will  be  estopped  from  taking  advantage  of  the  breach. -• 

Since  the  notal)le  decision  of  the  United  States  Supreme  Court  in 
the  Northern  Assur.  Co.  case  •'  repudiating  this  doctrine  as  unsound, 
at  variance  with  the  primary  rule  of  evidence,  and  opposed  by  the 
weight  of  authority  in  England  and  in  this  country,  many  state 
courts  and  text-writers  have  nevertheless,  with  the  federal  decision 
before  them,  reiterated  their  former  opinion.® 


i  Bodine  v.  Exchange  Fire  Ins.  Co., 
.51  N.  Y.  117,  10  Am.  Rep.  566;  Boehen 
V.  W illiainsbur(jh  City  Ins.  Co.,  35 
N.  Y.  131,  90  Am.  Dec.  787;  Walsh  v. 
Hartford  Fire  Ins.  Co.,  73  N.  Y.  5. 

'-Russell  V.  Prudential  Ins.  Co.,  176 
N.  Y.  178,  68  N.  E.  252,  98  Am.  St.  R. 
6.56. 

3  .\11,  probably,  at  date  of  writing  in 
1907,  except  Maine,  New  Hampsliire, 
Massachusetts,  Minnesota,  Iowa  and 
South  Dakota.  The  Wisconsin  stand- 
ard policy  has  a  further  special  provision 
that  before  the  delivery  of  the  policy 
and  also  after  loss,  knowledge  of  the 
a^ent  of  the  company  shall  be  knowl- 
edge of  the  company,  Welch  v.  Fire 
.■isso.,  120  Wis.  4.56.  See  appendix  of 
statutes,  ch.  I. 

••  The  reasons  are  .set  forth  in  many 
cases,  for  example,  in  Forward  v.  Con- 
tinental his.  Co.,  142  N.  Y.  382,  37 
X.  E.  615,  25  L.  R.  A.  637.  The  court 
declares  that  the  rule  is  well  settled  in 
that  state,  Lewis  v.  Guardian  F.  Ins. 
Co.,  181  N.  Y.  392,  74  N.  E.  224. 
The  New  York  cou'-ts  "are  anchored 
to  the  proposition,"  Wisotzley  v. 
Niagara  Fire  Ins.  Co.,  112  App.  Div. 
599,  602,  98  N.  Y.  Supp.  760,  citing 
other  late  cases  in  highest  court.  Sim- 
ilar views  have  been  expressed  by 
many  courts.     See    for  example,  the 


following  late  cases,  German-Am.  Ins. 
Co.  V.  Humphrey,  62  Ark.  348,  35 
S.  W.  428,  54  Am.  St.  R.  297  (chattel 
mortgage);  Allen  v.  Home  Ins.  Co., 
133  Cal.  29,  65  Pac.  138  (sole  owner- 
ship); Swain  v.  Macon  F.  Ins.  Co., 
102  Ga.  96,  29  S.  E.  147  (other  in- 
surance); Hartford  F.  Ins.  Co.  v. 
Keating,  86  Md.  130,  38  Atl.  29,  63  Am. 
St.  R.  499;  Beebe  v.  Ohio  Farmers'  Ins. 
Co.,  93  Mich.  514,  53  N.  W.  818,  32 
Am.  St.  R.  519,  18  L.  R.  A.  481; 
Andrus  v.  Maryland  Cas.  Co.,  91  Minn. 
358,  98  N.  ^Y.  200;  Assur.  Co.  v.  Phelps, 
77  Miss.  625,  27  So.  745;  Grabbs  v. 
Farmers'  M.  F.  I.  Assn.,  125  N.  C.  389, 
34  S.  E.  503;  Spalding  v.  New  Hamp. 
F.  I.  Co.,  71  N.  H.  441,  52  Atl.  858 
(other  insurance);  Gandy  v.  Orient  Ins. 
Co.,  52  S.  C.  224,  29  S.  E.  655;  Welch  v. 
Fire  Assn.  of  Phila.,  120  W^is.  456,  98 
N.  W.  227  (title). 

5  183  U.  S.  308,  22  S.  Ct.  862,  46 
L.  Ed.  213,  and  approved  or  followed 
in  Haqan  v.  Scottish  Union  &  N.  I. 
Co.,  186  U.  S.  423,  433,  22  S.  Ct.  862; 
also  in  187  U.  S.  467,  478;  151  Fed. 
961;  141  Fed.  877,  889;  138  Fed.  497; 
133  Fed.  909;  129  Fed.  610  (cannot 
waive  proofs  of  loss);  117  Fed.  369, 
and  other  cases. 

^German  Ins.  Co.  v.  Shader  (Neb., 
1903),  93  N.  W    972,  60  L.  R.  A.  918 


RESTRICTIONS   UPON   AUTHORITY   OF  AGENTS,    ETC. 


207 


In  the  famous  federal  case  referred  to,  the  plaintiff  had  received 
from  the  defendant  its  policy  in  standard  form  for  $2,500,  upon  his 
household  effects.  On  this  policy  an  action  was  brought  to  recover 
for  a  loss  by  fire.  The  standard  policy  provides  that  it  shall  be 
avoided  by  other  insurance  without  written  consent,  also  that  waivers 
shall  be  given  only  by  written  agreement  and  that  no  agent  shall  be 
deemed  to  have  authority  to  waive  in  any  other  way.  At  the  time 
the  insurance  was  effected,  plaintiff  had  a  policy  for  $1,500  on  the 
same  property,  issued  by  another  company.  According  to  the  plain- 
tiff's testimony,  which  was  flatly  contradicted,  this  circumstance  was 
mentioned  at  the  time  to  the  local  countersigning  agent  of  the  de- 
fendant, who  nevertheless  signed  and  delivered  the  policy  of  the 
defendant  without  objection,  and  without  attaching  a  written  permit 
for  other  insurance.  The  plaintiff's  parol  testimony  was  received 
over  the  defendant's  objection  and  exception      Judgment  on  the 


(citing  corroborating  decisions  from 
some  twenty-seven  states);  Orient  Ins. 
Co.  V.  McKnight,  197  111.  190,  64  N.  E. 
339  (future  increase  of  hazard);  Chis- 
more  v.  Anchor  F.  Ins.  Co.  (Iowa,  July, 
1906),  108  N.  W.  230  (vacancy;  court 
considers  the  "overwhelming  weight  of 
authority"  to  be  on  its  side);  German- 
American  Ins.  Co.  V.  Yellow  Poplar 
Lumber  Co.  (Ky.),  84  S.  W.  551  (clear 
space  clause);  Parso7is  v.  Lane,  97 
Minn.  98  (Minnesota  standard  policy 
nowresembles  the  Massachusetts  form); 
Hartley  v.  Penn.  F.  Ins.  Co.,  91  Minn. 
382,  98  N.  W.  198,  103  Am.  St.  R.  512 
(use  of  gasoline);  Thompson  v.  Trad- 
ers' Ins.  Co.,  169  Mo.  12  (other  insur- 
ance); Spalding  v.  A^ew  Hampshire  F. 
Ins.  Co.,  71  N.  H.  441,  52  Atl.  858 
(other  insurance);  Benjamin  v.  Palatine 
Ins.  Co.,  80  'App.  Div.  260,  SO  Supp. 
256,  aff'd,  on  opinion  below,  177 
N.  Y.  589,  70  N.  E.  1095  (pendency 
of  foreclosure);  Ins.  Co.  v.  Rich- 
mond  Mica  Co.,  102  Va.  429,  46  S.  E. 
463,  102  Am.  St.  R.  846  (sole  owner- 
ship); Medley  v.  7ns.  Co.,  55  West.  Va. 
342,  47  S.  E;  101,  105  (title);  Welch  v. 
Fire  Asso.  of  Phila.,  120  Wis.  456,  468, 
98  N.  W.  227,  231,  in  which,  however, 
the  court  admitted  that  as  an  original 
proposition  of  law  it  would  be  difhcult 
to  sustain  the  rule,  but  thought  that 
the  legislature  alone  could  interfere  in 
that  state.  Ranged  in  general  on  the 
side  of  the  federal  courts  we  find  the 
courts  of  England,  Weston  v.  Ernes 
(1803),  1  Taunt.  115  (parol  conver.sa- 
tions  to  show  knowledge  or  intent  not 


admissible);  and  see  Biggar  v.  Rock 
Ins.  Co.  (1902),  1  K.  B.  516  (answers 
erroneously  inserted  by  agent  not  read 
by  applicant).  Canada:  Shannon  v. 
Gore  Mid.  his.  Co.,  2  Ont.  App.  396 
(other insurance).  Massachusetts : Har- 
ris V.  North  Am.  Ins.  Co.,  190  Mass. 
361  (unoccupancy);  Thomas  v.  Com- 
mercial  Union  Ass.  Co.,  162  Mass.  29, 
37  N.  E.  672;  and  see  Allen  v.  Mo.ss. 
Mid.  Ace.  Assoc,  167  Mass.  18; 
Batchelder  v.  Queen  Ins.  Co.,  135  Mass. 
449.  New  Jersey:  Deirees  v.  Man- 
hattan Ins.  Co.,  35  N.  J.  L.  366  (char- 
acter of  occupancy);  Martin  v.  Ins.  Co. 
of  North  Am.,  57  N.  J.  L.  623  (leased 
ground) ;  Frankliyi  F.  Ins.  Co.  v.  Mar- 
tin, 40  N.  J.  L.  568,  29  Am.  Rep.  271 
(misdescription);  and  see  Dimick  v. 
Met.  Life  Ins.  Co.,  69  N.  J.  L.  384. 
Oklahoma:  L.  &L.  &  G.  Co.  v.  Richard- 
son Lumber  Co.,  11  Okla.  585,  69 
Pac.  938  (clear  space  clause).  Possi- 
bly Connecticut:  Sheldon  v.  Hartford 
Fire  Ins.  Co.,  22  Conn.  235,  58  Am. 
Dec.  420  (but  see  McGurk  v.  /«.s-.  Co., 
56  Conn.  528,  540).  And,  assuming  its 
earlier  standard  policy  like  the  New 
York  standard  to  be  constitutional, 
Minnesota:  Anderson  v.  Manchester  F. 
Assur.  Co.,  59  Minn.  182,  50  Am.  St. 
R.  400,  28  L.  R.  A.  609  (other  insur- 
ance). With  West  Virginia  swinging 
from  one  side  to  the  other,  Mauj)in  v. 
Ins.  Co.,  53  W.  Va.  557,  45  S.  E.  1003 
(iron  safe  clause),  reversed  by  Medley 
v.  Ins.  Co.,  55  W.  Va.  342,  47  S.  E.  101 
(sole  o^\Tle^ship). 


208 


GENERAL    PRINCIPLES   OF    INSURANCE    LAW 


verdict  for  the  plaintifT  was  afTirmed  by  the  circuit  court  of  appeal:, 
on  the  ground  of  waiver,  Judge  Sanborn  writing  a  powerful  dissent- 
ing opinion;  but  tiie  judgments  were  reversed  by  the  United  States 
Supreme  Court  by  a  vote  of  six  to  three,  in  a  decision  of  perhaps 
greater  practical  moment  than  any  other  rendered  in  the  law  of 
insurance  within  a  half  century;  the  court  holding  that  the  plaintiff's 
conversation  with  the  agent,  at  variance  with  the  policy,  was  inad- 
niissi))le  and  should  have  been  rejected.^ 

The  recently  expressed  views  of  many  state  courts  in  opposition 
to  the  federal  court  lack  consistency  and  cohesion;  and,  remarkable 
to  relate,  nowhere  among  their  opinions  is  tlie  vital  question  satis- 
factorily met  and  answered,  whether  the  desirable  result,  sought  to 
be  accomplished  by  the  doctrine  (jf  parol  waivers,  might  not,  as  in 
all  other  cases,  be  better  worked  out  in  the  equity  branch  of  the 
courts.  Indeed,  the  opinion  of  the  West  Virginia  court,  though  not 
having  that  object  in  view,  is  a  cogent  argument  in  favor  of  sending 


1  Xorthern  Assur.  Co.  v.  Grand  View 
Bldg.  Asso.,  183  U.  S.  308,  22  S.  Ct. 
133,  46  L.  p:d.  213,  in  which  the  court 
by  Justice  tihiras  sums  up  as  follows: 
"What,  then,  are  the  principles  sus- 
tained by  the  authorities,  and  ap- 
plicable to  the  case  in  hand?  They 
may  be  briefly  stated  thus:  That  con- 
tracts in  writing,  if  in  unambiguous 
terms,  must  be  permitted  to  speak 
for  themselves,  and  cannot  by  the 
courts,  at  the  instance  of  one  of  the 
parties,  be  altered  or  contradicted 
by  parol  evidence,  unless  in  case  of 
fraud  or  mutual  mistake  of  facts; 
that  this  principle  is  applicable  to 
cases  of  insurance  contracts  as  fully 
5is  to  contracts  on  other  subjects; 
that  provisions  contained  in  fire  in- 
surance policies,  tliat  such  a  policy 
shall  be  void  and  of  no  effect  if  other 
insurance  is  placed  on  the  property 
in  other  companies  without  the  knowl- 
edge and  consent  of  the  company, 
are  usual  and  reasonable;  that  it  is 
reasonable  and  competent  for  the 
parties  to  agree  that  such  knowledge 
and  consent  shall  be  manifested  in 
writing,  either  by  indorsement  upon 
the  policy  or  by  other  writing;  that 
it  is  competent  and  reasonable  for 
insurance  companies  to  make  it  a 
matter  of  condition  in  their  policies 
that  their  agents  shall  not  be  deemed 
to  have  authority  to  alter  or  contra- 
dict the  express  terms  of  the  policies 
as  executed  and  delivered;  that  where 
fire    insurance    policies    contain    pro- 


visions whereby  agents  may,  by 
writing  indorsed  upon  the  policy  or 
by  writing  attached  thereto,  express 
the  company's  assent  to  other  in- 
surance, such  limited  grant  of  authority 
is  the  measure  of  the  agent's  power 
in  the  matter,  and  where  such  limita- 
tion is  expressed  in  the  policy,  ex- 
ecuted and  accepted,  the  insured  is 
presumed,  as  a  matter  of  law,  to  be 
aware  of  such  limitation;  that  in- 
surance companies  may  waive  for- 
feitures caused  by  non-observance 
of  such  conditions;  that,  where  waiver 
is  relied  on,  the  plaintiff  must  show 
that  the  company,  with  knowledge  of 
the  facts  that  occasioned  the  for- 
feiture, dispensed  with  the  observa- 
tion of  the  condition;  that  where 
the  waiver  relied  on  is  an  act  of  the 
agent,  it  must  be  shown  either  that 
the  agent  had  express  authority  from 
the  company  to  make  the  waiver,  or 
that  the  company  subsequently,  with 
knowledge  of  the  facts,  ratified  the 
action  of  the  agent.  .  .  .  The  plain- 
tiff's case,  at  its  best,  is  based  on  the 
alleged  fact  that  the  agent  had  been 
informed,  at  the  time  he  delivered 
the  policy  and  received  the  premium, 
that  there  was  other  insurance.  The 
only  way  to  avoid  the  defense  and 
escape  from  the  operation  of  the  con- 
dition, is  to  hold  that  it  is  not  compe- 
tent for  fire  insurance  companies  to 
protect  themselves  by  conaitions  of 
the  kind  contained  in  this  policy, 
So  to  hold  would,  as  wo  have  seen. 


RESTRICTIONS    UPON  AUTHORITY   OF   AGENTS,    ETC. 


209 


>liis  class  of  complainants  into  equity  for  reformation  of  their  con- 
tracts.^ 

The  Iowa  court  frankly  has  this  to  say:  "The  doctrine  is  peculiar 
to  the  law  of  insurance,  and  is  founded  on  the  laudable  design  of 
preventing  the  perpetration  of  a  fraud  through  obtaining  a  premium 
by  the  issuance  of  a  policy  known  to  be  void  ab  initio.  As  an  original 
proposition,  it  would  be  difficult  to  defend  this  exception  to  the  gen- 
eral rule  that  he  who  becomes  a  party  to  a  contract  is  presumed  to 
have  knowledge  of  its  contents  and  is  bound  thereby,  unless  pre- 
vented from  ascertaining  them  by  some  artifice  or  deception.  But 
such  contracts  are  so  common  and  of  such  universal  use  in  the  busi- 
ness world  that  they  are  ordinarily  spoken  of  as  commodities  rather 
than  individual  agreements.    Insurance  is  bought  and  sold,  accord- 


entirely  subvert  well-settled  princi- 
ples declared  in  the  leading  English 
and  American  cases,  and  particularly 
in  those  of  this  court.  This  case  is 
an  illustration  of  the  confusion  and 
uncertainty  which  would  be  occasioned 
by  permitting  the  introduction  of 
parol  evidence  to  modify  written 
contracts,  and  by  approving  the 
conduct  of  agents  ana  persons  ap- 
plying for  insurance  in  disregarding 
the  express  limitations  put  upon  the 
agents  by  the  principal  to  be  affected. 
It  should  not  escape  observation  that 
preserving  written  contracts  from 
change  or  alteration  by  verbal  testi- 
mony of  what  took  place  prior  to 
and  at  the  time  the  parties  put  their 
agreements  into  that  form,  is  for  the 
benefit  of  both  parties.  In  the  present 
case,  if  the  witnesses  on  whom  the 
plaintiff  relied  to  prove  notice  to  the 
agent  had  died,  or  had  forgotten  the 
circumstances,  he  would  thus,  if  he  had 
depended  to  prove  his  contract  by 
evidence  extrinsic  to  the  written  in- 
strument, have  found  himself  unable 
to  do  so.  So,  on  the  other  side,  if 
the  agent  had  died,  or  his  memory 
failed,  the  defendant  company  might 
have  been  at  the  mercy  of  unscrupu- 
lous and  interested  witnesses."  In 
the  lower  court  Judge  Sanborn,  dis- 
senting, closed  with  the  following  terse 
statements:  "There  seems  to  me  to 
be  no  ground  for  waiver,  by,  or  an 
estoppel  of,  the  insurance  company 
in  this  case,  for  several  reasons:  1.  Be- 
cause the  company  expressly  limited 
the  power  of  its  solicitor  to  make 
waivers  or  work  estoppels  of  the  char- 
acter here  invoked  to  those  made  in 

11 


writing  by  indorsements  upon  the 
policy,  and  it  brought  notice  of  this 
limitation  home  to  the  insured  by  an 
express  stipulation  in  the  policy,  which 
the  insured  accepted.  2.  Because  an 
indispensable  element  of  an  estoppel 
is  some  act,  statement,  or  representa- 
tion which  tends  to  deceive  the  in- 
sured, and  thereby  induces  it  to  adopt 
a  course  of  action  or  a  state  of  inac- 
tion that  it  Avould  not  otherwise  have 
taken,  and  this  case  contains  no  such 
elements.  The  insured  knew  that 
there  was  other  insurance.  It  knew 
that  it  was  not  indorsed  on  the  policy. 
It  knew  that  the  solicitor  had  no  power 
to  deliver  a  valid  policy  without  such 
an  indorsement,  and  it  knew  that  it 
agreed  that,  without  this  indorsement, 
its  policy  should  be  void;  for  all  these 
things  were  written  in  the  contract 
and  the  insured  was  charged  with 
knowledge  of  its  contents.  3.  Because 
there  can  be  no  waiver  without  an 
intent  to  waive,  and  no  intent  to  waive 
can  be  deduced  or  inferred  from  the 
mere  fact  of  knowledge,  in  the  face 
of  an  express  written  stipulation  to 
the  contrary,  made  and  delivered  at 
the  time.  4.  Because  no  estoppel  or 
waiver  based  on  acts  or  knowledge 
prior  to,  or  contemporaneous  with, 
the  making  of  an  express  written 
agreement  on  the  subject,  can  prevail 
over  the  express  terms  of  that  con- 
tract, which  as  conclusively  merges 
and  supersedes  all  prior  and  con- 
temporaneous negotiations  and  un- 
derstandings by  estoppel  and  by  waiver 
as  bv  words." 

1  Medletj  v.  7ns.  Co.,  55  W.  Va.  342. 
47  8.  E.  101. 


210  GENERAL   PRINCIPLES   OF  INSURANCE   LAW 

ing  to  the  speech  of  the  people.  To  omit  reading  the  application 
before  signing  it  or  the  policy  upon  its  receipt  is  not  deemed  negli- 
gence Jis  nuittcr  of  law,  as  would  be  the  case  with  other  instruments."^ 

If  this  opinion  is  to  prevail,  there  is  little  left  to  those  many  rea- 
sonable i-equirements  of  the  American  statutory  policies  which  are 
laid  upon  the  insured  for  the  protection  of  the  underwriter  and  the 
safety  of  the  public.  It  is  submitted  that  "the  universal  use"  of 
the  standard  policy,  mentioned  by  the  court,  might  seem  to  be  an 
added  reiison  for  presuming  that  the  insured  is  acquainted  with  its 
contents,  rather  than  an  excuse  for  ignorance  and  carelessness;  and 
such  is  the  declaration  of  a  neighboring  court  in  the  west.- 

The  New  York  court  differs  Avidely  from  the  Iowa  court  and  con- 
clusively presumes  that  the  insured  is  acquainted  wdth  the  policy 
provisions  regarding  waivers  as  from  the  time  when  he  receives  the 
policy;  but,  in  the  interest  of  fair  dealing,  refuses  to  apply  his  knowl- 
edge or  his  stipulations  to  forfeitures  known  to  the  countersigning 
agent  at  the  inception  of  the  contract.^  No  matter  how^  many 
standard  policies  the  insured  may  have  received  previously;  no  mat- 
ter how  familiar  he  or  his  broker  may  in  fact  be  with  all  its  contents; 
no  matter  though  the  alleged  fact  of  the  agent's  knowledge,  shown 
by  parol,  be  in  dispute  and  contradicted  by  the  agent  as  well  as  by 
the  written  contract;  no  matter  though  the  home  office  have  no 
knowledge  of  the  ground  of  forfeiture;  such  forfeitures,  if  found  by 
the  jury  to  have  been  known  to  the  agent,  the  company  is  held  to 
have  w^aived  by  the  issuance  of  its  policy  or  receipt  of  the  premium.** 

In  one  of  the  five  New  York  cases  last  cited  the  insured  was  a 
corporation.  In  all  the  others  the  insured  were  business  men,  the 
policies  in  every  case  being  upon  their  business  properties.  There 
was  no  claim  in  any  of  the  cases  that  the  insured  had  had  no  previous 
acquaintance  with  the  New  York  standard  policy.  For  aught  that 
appeared,  every  one  of  them  had  taken  out  many  such  policies  for 
a  series  of  years.  No  point  was  made  by  the  court  in  any  of  these 
cases  that  the  insured  in  fact  lacked  familiarity  with  the  terms  of 
the  contract.  Nor  was  there  any  claim  that  the  insurer  had  any 
knowledge  of  the  ground  of  forfeiture  other  than  the  imputed  knowl- 
edge of  a  local  agent.     Nevertheless,  in  all  the  cases,  important 

1  Chesmore   v.    Anchor   F.   Ins.    Co.  142  N.  Y.  382,  37  N.  E   615   25  L   R 

(la.,  1906),  108  N.  W.  230.  A.  637;  Wood  v.  Am.  Fire  hiR    Co' 

^Straker   v.    Phoenix   Ins.    Co.,   101  149  N.  Y.  382,  44  N    E    80    52  Am' 

Wis.  413,  419.  St.  R.  733;  Bobbins  v.  Sprimijield  F.  & 

^  Lewis  V.  Guardian  F.  &  L.  his.  Co.,  M.  Ins.  Co,  149  N    Y   477    44  N    E 

181  N.  Y.  392,  74  N.  E.  224.  159;  Wisotzkey  v.  Niagara  F  Ins   Co  ' 

*  Forward    v.    Contimninl   Ins.    Co..  112  App.  Div.  .599,  98  N.  Y.  Svipp.  760.' 


RESTRICTIONS   UPON   AUTHORITY    OF   AGENTS,    ETC.  211 

\rarianties  of  the  statutory  policy,  upon  which  the  insurers  had 
rehed,  were  annulled  by  oral  testimony.  The  real  explanation  of  the 
attitude  of  the  courts  in  these  and  similar  cases  can  only  be  found 
in  the  narrow  and  illiberal  methods  of  certain  insurers  in  the  past, 
which  have  aroused  antagonism  on  the  part  of  judges,  juries,  and 
public,  and  which,  unfortunately  for  this  branch  of  the  law,  have 
invited  reprisals. 

The  Virginia  court  takes  a  middle  ground  and  forcefully  defends 
it,  holding  that  the  policy  stipulations  regarding  the  limit  of  the 
agent's  authority  to  waive  will  apply  even  to  forfeitures  known  to 
the  agent  at  the  inception  of  the  contract,  provided  the  insurer  can 
affirmatively  show  that  the  policy  restriction  had  actually,  and  not 
merely  constructivel}',  been  brought  to  the  attention  of  the  insured 
at  that  time.^ 

The  Missouri  court  concludes  that  a  local,  countersigning  agent 
with  the  usual  authority,  including  the  power  to  give  written  per- 
mits, is  the  alter  ego  of  the  principal,  and  that,  as  the  principal  has 
inherent,  inalienable  power  to  waive  either  orally  or  in  writing,  so 
has  its  agent.'  Doubtless  such  an  agent  is  the  alter  ego  of  the  principal 
in  accepting  or  rejecting  the  risk,  and  in  fixing  a  rate  of  premium 
and  in  performing  other  authorized  acts,  but  where  his  actual  in- 
structions, as  well  as  the  statutory  form  of  policy  delivered  to  the 
insured,  expressly  limit  the  scope  of  the  agent's  activities  to  the  use 
of  written  permits,  it  is  difficult  to  understand  how  a  court  can  find 
an  extension  of  his  power  as  matter  of  law,  or  simply  by  virtue  of  his 
position. 

The  New  Hampshire  court  falls  back  on  the  doctrine  of  essential 
justice  with  these  remarks:  "If  the  rule  thus  followed  conflicts  with 
the  rule  which  prevents  a  written  instrument  from  being  controlled 
by  parol  testimony,  it  has  been  so  generally  adopted  and  become  so 
firmly  fixed  in  the  law  of  insurance  that  it  must  be  regarded  as  an 
exception  to  the  latter  rule.  It  has  the  great  merit  of  working  justice 
in  cases  of  this  kind,  and  undoubtedly  arose  from  the  necessity  of 
the  situation  in  order  to  accomplish  that  result."  '"'  But  however  it 
may  have  been  in  dealing  with  the  unfair  and  varied  forms  of  policies 
formerly  in  use,  is  it  demonstrated  to  be  of  advantage  to  the  public 
to  give  to  all  claimants,  many  of  whom  are  either  forgetful  or  dis- 
honest, the  power  of  evading  the  provisions  of  a  standard  policy  by 

1  Virginia    F.    cfe    M.    Ins.    Co.    v.  2  Thompson    v.    Traders'    Ins.     Co., 

Richmond  Mica  Co.,  102  Va.  429,  46      109  Mo.  12,  68  S.  W.  889. 
S.  E.  463,  102  Am.  St.  R.  846.  ^  Spalding    v.    Neio    Hampshire    F. 

Ins.  Co.,  71  N.  H.  441,  52  Atl.  858. 


212  GENERAL    riU-NCll'LES    OF    LN.SLHAiNCE    LAW 

oral  testimony,  in  actions  at  law  on  the  contract?  The  United  State; 
Supreme  Court  thinks  that  such  a  practice  is  detrimental  to  the 
general  welfare,  and  many  lower  federal  courts  have  since,  with  cor- 
dial approval,  applied  the  rule  laid  down  by  the  highest  court,  the 
rule  always  stoutly  advocated  by  the  courts  of  New  Jersey  and 
Massachusetts,  and  formerly  in  several  cases  by  the  highest  court  of 
New  York. 

There  seems  unfavorable  prospect  of  securing  any  measure  of  uni- 
forniity  in  this  branch  of  the  law,  the  country  over,  for  many  years 
to  come.'  Nor  is  it  easy  to  harmonize  the  recent  decisions  in  the 
Empire  State  alone.  Where  the  solicitor  of  a  life  company,  knowing 
the  facts,  writes  answers  incorrectly  into  the  application,  it  has  re- 
peatedly been  held  in  that  state  that  the  restriction  upon  his  au- 
thority stated  in  the  application  will  control.  In  those  cases 
apparently  the  knowledge  of  the  agent  was  not  imputed  to  the 
company  although  he  was  conducting  an  employment  authorized  by 
it  and  relating  to  the  inception  of  the  contract.^ 

But,  on  the  other  hand,  New  York  as  well  as  other  state  courts, 
notwithstanding  a  contract  stipulation  limiting  waivers  to  written 
permits,  seems  to  stand  for  the  proposition  that  knowledge  of  forfei- 
ture possessed  even  by  a  partner,^  or  by  a  clerk,  of  the  countersigning 
agent,  or  by  any  subagent  of  the  company,  if  obtained  in  the  per- 
formance of  some  authorized  act  for  the  company,  may  be  the  basis 
of  an  estoppel,  provided  such  knowledge  is  acquired  before  the 
policy  issues,  although  the  knowledge  be  not  communicated  to  the 
agent  signing  the  policy.^ 

1  In  a  recent  case,  Maupin  v.  Scot-         *  For   example,    Forward   v.    Conti- 

tish  U.  &  N.  Ins.  Co.,  53  W.  Va.  557,  ne7ital  Ins.  Co.,  142  N.  Y.  382,  388,  37 

45    S.    E.    1003,    Brannon,    J.,    says:  N.  E.  615,  25  L.  R.  A.  637;  Carpenter 

"Upon   this  subject  of  the  power  of  w  German- Am.  Ins.  Co.,  135  N.  Y.  29S, 

agents   to   waive   conditions   imposing  31  N.  E.   1015;  Arff  v.  .Star  Fire  In.s. 

on  the  party  insured  duties  proper  for  Co.,  125  N.  Y.  57,  25  N.  E.  1073,  21 

the   protection   of   the   insuring   com-  Am.  St.  R.  721,  10  L.  R.  A.  609;  Ins 

pany,  there  is  a  world  of  decisions,  and  Co.  v.  Randle,  81  Miss.  720,  33  So.  500; 

they   are    a    wihlerness    of   conflicting  Pollock   v.    German   F.    Ins.    Co.,    127 

cases."  Mich.  460;  Steele  v.  Ins.  Co.,  93  Mich 

^  McCoUum   \.   Mut.   Life  his.   Co.,  84,  .53  N.  W.  514.     But  see  the  more 

55  Hun  (N.  Y.),  103,  8  N.  Y.  Supp.  recent  decision  as  to  a  Hfe  insurance  so- 

249,  aff'd  124  N.  Y.  642,  27  N.  E.  412;  licitor  in  Butler  v.  Mich.  Mut    L    Ins 

Kenyonv.  K    T.  &M.  M.  A.  As.soc,  Co.,  184  N.  Y.  .337,  reversing  93  App. 

122  N.  ^.24/,  25  N.  E.  299;  Bernard  Div.    619.      The    difficulty    of    recon- 

''■^jy'f^'^  Life  A.'<.^n.,U  App.  Div.U2,  ciUng    the    New    York    cases    in    this 

i,       r\-  ^"PP-   ^'^"''  f^cf^^'lton  V.  F.  regard    is    alluded    to    by    the    New 

Mut.  Life   ■2t\pp.Dh:  480,  50  N.Y.  York     Supreme    Court     in     Blass     v. 

bupp    526;  Hcntt  v.  Am.   Union  Life  Aqricultural   Ins.    Co,    18    App     Div 

«    •  ^ooo^^  "^PP-  ■^'''-  -^^'  ^^  ^-  ^'-      '*^^'  ^""^  by  the  Federal  Supreme  Covirt 
&upp.  Z62.  in  Northern  Assur.  Co.  v.  Grand  Vieic 

NT  V  '^o^':7?x?'"i'''o/-  ^'''-  ^''■'  1^1      ^^^-  ^««^-'  183  U.  S.  308  at  p.  329 
XM.    I.  S'dz,  74  IN.  E.  224. 


CONCLUSION  213 

§  174.  Conclusion. — Upon  a  careful  review  of  the  many  conflict- 
ing decisions  and  opinions  adverted  to  in  the  last  section,  we  may 
well  conclude  with  a  Wisconsin  jurist,  that  as  an  original  proposition 
it  would  be  difficult  to  justify  the  special  and  exceptional  favor 
shown  by  the  courts  to  policyholders.^  We  may  also  perhaps  go 
further  and  conclude  that  the  weight  of  reason  is  with  the  federal 
courts  and  those  of  Massachusetts,  New  Jersey,  and  England,  con- 
vinced that  the  meaning  and  effect  of  a  policy  of  insurance  should 
not  depend  upon  the  uncertainties  of  oral  testimony,  and  that  their 
determination  should  not  be  left  to  the  bias  or  caprice  of  a  jury.  In 
the  law  of  insurance  as  in  other  branches  of  the  law,  it  may  seem  to 
us  to  be  more  just  and  more  expedient  to  adhere  to  the  fundamental 
and  long-established  rule  of  evidence  that  except  in  cases  of  fraud 
or  mutual  mistake,  for  which  relief  may  be  obtained  only  in  an  equity 
forum,  and  within  equity  rules  of  procedure,  the  rights  of  the  parties 
are  to  be  governed  by  the  plain  terms  of  the  contract  as  written. 
Although  in  a  suit  to  reform  the  contract  the  burden  of  proof  rests 
heavily  upon  the  plaintiff,'  nevertheless  a  chancellor  or  judge  sitting 
in  equity  has  abundant  power  to  grant  adequate  relief,  and  in  most 
jurisdictions  speed}'  relief,  to  an  honest  claimant  who  has  been  de- 
frauded, deceived,  or  misled  by  the  representatives  of  an  insurance 
company;^  and  none  other  should  seek  to  evade  his  written  engage- 
ments. 

1  Welch  V.  Fire  Asso.  of  Phila.,  120  criticises  wi^h  evident  feeling  the  de- 
Wis.  456,  468,  98  N.  W.  227,  231  (but  cision  of  the  federal  court;  and  this 
Wisconsin  stands  with  the  majority  of  recovery  based  on  reformation  was 
the  state  courts  on  the  subject  of  subsequently  left  undisturbed  by  the 
waiver).  United  States  Suoreme  Court,  203  U.  S. 

2  See  §  85.  106,  27  S.  Ct.  27.  The  plaintiff  might 
■  ^  Fitchner  v.  Fidelity  Mut.  F.  Asf<oc.,  well  have  sought  that  form  of  remedv 
103  Iowa,  276,  72  N.  W.  530  (cited  in  in  the  first  instance.  That  the  sanction 
183  U.  S.  25,  39);  Kelly  v.  Citizens'  of  the  contract  as  written  may  be  of 
Mut.  F.  Assn.,  96  Minn.  477,  105  value  to  the  insured  is  well  illustrated 
N.  W.  675;  Gwaltney  v.  Prov.  Sav.  by  the  Van  Tassel  case  in  which  a 
Life  Assur.  Soc.,  132  N.  C.  925,  44  written  binder,  and  a  letter  of  the 
S.  E.  659;  Medley  v.  German  Alliance  company,  claimed  to  be  a  cancellation 
Ins.  Co.,  55  W.  Va.  342,  47  S.  E.  101.  of  the  binder,  were  before  the  court  for 
The  sequel  to  the  famous  Northern  construction.  First  trial  was  short  and 
A.'isur.  Co.  case  (183  U.  S.  308)  is  in-  simple  and  on  appeal  the  highest  court 
structive.  After  being  defeated  by  the  decided  in  favor  of  the  plaintiff  that 
United  States  Supreme  Court  in  an  the  binder  was  equivalent  to  a  policy 
action  on  the  contract  the  plaintiff  and  that  the  notice  was  not  so  worded 
went  home  to  Nebraska,  instituted  a  as  to  be  effective.  On  a  subsequent 
fresh  action,  this  time  for  reformation  appeal  the  Court  of  Appeals  by  a  vote 
of  the  policy,  was  allowed  to  recover  in  of  four  out  of  seven  judges  concluded 
the  state  court  notwithstanding  the  to  let  in  parol  evidence  of  custom  and 
expiration  of  the  one-year  limitation  con  v^ersations.  There  were  six  trials 
of  the  policy.  Grand  View  Bldy.  Assoc,  of  this  case  at  circuit  and  ten  hearings 
v.  Northern  Assur.  Co.  (Neb.),  102  on  the  merits  on  appeal.  The  last 
N.  W.  246,  in  which  the  state  court  printed  record  covered  more  than  400 


214  GENERAL   PRINCIPLES   OF   INSURANCE   LAW 

It  would  scorn,  at  least,  as  though  a  form  of  contract  prescribed 
by  statuU'  ought,  in  the  absence  of  fraud  or  mutual  mistake,  to  be 
enforced  according  to  its  written  terms.'  The  statutes  providing 
for  a  stanciard  fire  policy  give  notice  binding  upon  everybody  that 
a  prime  purpose  of  the  legislature  is  to  secure  "a  uniform  policy," 
not  a  form  of  contract  depending  upon  the  individual  discretion  or 
caprice  of  local  agents.^  The  provisions  of  the  poHcy  also  amount 
to  explicit  agreement  that,  for  the  benefit  of  both  parties,  oral  testi- 
mony shall  not  avail  to  disturb  the  contract,  and  that  no  representa- 
tive of  the  company  below  the  board  of  directors  shall  be  deemed 
to  have  authority  to  give  oral  permits  or  make  oral  changes.  By  its 
terms  an}'  proper  modifications  of  the  contract  may  be  made,  if  in 
vvriting,'"'  and  such  a  business-like  provision  would  seem  to  constitute 
iio  illegal  restriction  upon  corporate  action  ^  as  many  courts  infer; 
nor  is  it  quite  correct  to  say  that  the  local  agent  in  dealing  with  such 
a  policy  is  "clothed  with  the  power  to  make  contracts"  as  the  Miss- 
issippi and  other  courts  declare.^  His  authority  rather  would  seem 
to  be  limited  to  countersigning  a  statutory  form  of  policy  already 
printed  and  executed  b}'  higher  officers  in  blank,  and  to  granting 
permits,  but  only  written  permits. 

Moreover,  many  provisions  of  the  standard  policy  are  precau- 
tionary in  their  character,  and  calculated  to  prevent  arson  and  to 
encourage  care  in  the  management  of  an  element  always  dangerous 
in  a  thickly  settled  community.*^  The  insured  public,  in  the  last 
analysis,  nmst  pay  for  losses  insured,  and  the  entire  community  are 
interested,  though  they  may  not  appreciate  it,  in  compelling  a  rea- 
sonable enforcement  of  such  warranties,  approved  as  they  are  by 
many  of  our  state  legislatures.'^ 

pages  Meanwhile  plaintiff  had  died  that  they  have  a  diversified  meaning 
and  the  defendant  had  gone  out  of  and  effect  and  may  be  far  from  con- 
business.      See  among  other  citations  current. 

of  this  case.  72  Hun,  141,  151  N.  Y.  'i  Xelsmi   v.    Traders'   Im.    Co      181 

130,  4.5  N.  E.  365,  28  App.  Div.  163,  N.    Y.    472,    74    i\.    E.    421;    Straker 

161  N.  \.  413.  .55  N.  E.  936,  54  App.  v.    Phoenix    Inx.    Co.,    101    Wi^     413 

Div.  386.  6()  App.  Div.  531,  103  App.  419. 

Div  610.  184  N.  Y.  607.  4  See  cases  §  161.  Though  a  more 
iA'el.wn  v.  I  raders'  /n.s.  Co.,  181  'general  provision  that  no  representa- 
A.  \  .  472,  74  N.  E.  421  (vmreasonable  tive  had  power  to  alter  the  contract  by 
features  of  older  form  of  policy  have  any  method  might  easily  be  so  con- 
largely  disappeared);  5rmA:pr  v.  P/icem'.c  strued.  Home  Ins.  Co.  v  Gibson  72 
Ins.  Co.,  101  Wis.  413,  77  N.  W.  752  Miss.  58,  17  So.  13. 
(every  man  knows  he  is  contract-  5  Western  Assur.  Co.  v  Phelps  77 
ing  for   standard   policy  and  nothing  Miss.  625,  640,  27  So.  745. 

^^^fiv    ,        ,       ,        .  ®'I''^<5  ^^^  loss  in  this  country  for 

-  Under  the  doctrine  ot   waiver  th(-  1906  exclusive  of   the    San    Francisco 

insured  with  several  policies  in  identi-  conflagration   was   above   normal 

cal    terms  upon  one    risk  finds    often  ?  See  .\ppendix,  ch.  I 


SUBSEQIENT    TAKOJ.    WAIVERS  21') 

§  175.  Present  Knowledge  of  Existing  Facts  which  will  Shortly 
Constitute  Breach. — The  rule  that  issuing  the  policy  with  knowl- 
edge of  a  ground  of  forfeiture  constitutes  a  waiver  has  been  extended 
to  the  case  where  the  general  or  countersigning  agent  knew  at  the 
inception  of  the  contract  that  the  property  was  unoccupied,  and 
understood  that  the  unoccupancy  was  likely  to  continue  for  more 
than  the  stipulated  period  of  ten  days.^ 

Thus,  where  on  account  of  the  great  coal  strike  of  1905  the  tenant 
of  the  insured,  just  before  issuance  of  policy,  had  left  his  furniture  and 
personal  effects  in  the  insured  house  in  the  countr}^  and  had  moved 
to  a  New  York  City  hotel  with  his  family  for  a  few  weeks,  the  com- 
panj^'s  local  countersigning  agent,  his  near  neighbor,  being  at  all 
times  fully  cognizant  of  the  facts,  the  company  was  held  estopped.^ 
But  knowledge  liy  the  agent  of  present  vacancy  will  not  avail  to 
aid  the  insured  if  the  agent  has  no  reason  to  suppose  that  it  will 
continue  beyond  the  permitted  period. •'* 

§  176.  The  Same — Subsequent  Parol  Waivers. — By  the  over- 
whelming weight  of  authority  the  policy  restriction  upon  the  au- 
thority of  the  countersigning  agent  is  conclusive  as  regards  the  effect 
of  his  knowledge,  declarations,  and  acts  after  the  policy  is  issued, 

1  Mil.  Mechanics'  Ins.  Co.  v.  Brown,  be  used  again,  Hartley  v.  Penn.  F.  Ins. 
3  Kan.  App.  225,  44_Pac.  3.5;  Queen  Co.,  91  Minn.  382,  98  N.  W.  198.  And 
Ins.  Co.  V.  Kline,  17  Ky.  L.  Rep.  619,  so  as  to  any  prohibited  use,  Orient  Ins. 
32  S.  W.  214;  Chamberlain  v.  Brit.-Am.  Co.  v.  McKnight,  197  111.  190,  64  N.  E. 
Assnr.  Co.,  80  Mo.  App.  589;  Blass  v.  339;  Mjrs.  &  Merchants'  Ins.  Co.  v. 
Agricultural  F.  Ins.  Co.,  18  App.  Div.  Armstrong,  145  lU.  469,  34  N.  E.  553 
481,  46  N.  Y.  Supp.  392,  aff'd  162  N.  Y.  (company  knew  that  sprinkler  equip- 
639;  Cross  v.  Nat.  F.  Ins.  Co.,  132  N.  Y.  ment  could  n(.)t  be  installed  within  the 
133,  30  N.  E.  390;  Short  v.  Home  his.  sixty  days  named).  So  also  if  agent 
Co.,  90  N.  Y.  16,  43  Am.  Rep.  138;  knows  of  other  insurance  though  he 
Cone  V.  Niagara  F.  Ins.  Co.,  60  N.  Y.  may  not  know  it  to  be  outstanding  at 
619;  Bear  v.  Ins.  Co.,  34  Misc.  613,  70  the  precise  moment  when  defendants' 
N.  Y.  Supp.  581.  policy  issues.  Wenzel  v.  Property  Mut. 

2  .V.  Y.  Mut.  Savings  &  Loan  Assn.  Ins.  Assn.  (Iowa,  Jan.,  1906),  35  Ins. 
V.  Westchester  Fire  his.  Co.,  110  App.  L.  J.  115.  But  the  rule  in  the  federal 
Div.  760,  97  N.  Y.  Supp.  436.  Simi-  and  other  courts  is  different,  Kentucky, 
larly  where  agent  knew  that  the  mill  etc.,  Co.  v.  Norivich  Union  F.  Ins.  Co., 
was  likely  to  cease  operations  for  more  146  Fed.  695. 

than   ten   days,   Waukan   Milling   Co.  ^  Ranspach  v.   Teutonia  F.  Ins.  Co., 

V.   Citizens'  Mut.  F.   his.  Co.    (Wis.),  109  Mich.  699.  67  N.  W.  967;  Moore  v. 

109  N.  W.  937   (citing  many  cases);  Niagara  F.  his.  Co.,  199  Pa.  St.  49,  48 

Ladd  V.  Mna  Ins.  Co.,  147  N.  Y.  478,  Atl.  869,  85  Am.  St.  R.  771;  Queen  Ins. 

42  N.  E.  197.    So  also  if,  under  similar  Co.  v.  Chndivick.  13  Tex.  Civ.  App.  318, 

circumstances,  the  agent  promises   to  35   S.   W.    26;    Conn.    F.   Ins.    Co.    v. 

indorse  permit  but  does  not,  Q?/een  7n.-.  Tilley,  88  Va.   1024,   14  S.  E.  851,  29 

Co.  V.  Strauqhan.  70  Kan.  186,  78  Pac.  Am.  St.  R.  770;  England  v.  Westchester 

447;   and  see  Dupuy  v.   Ins.   Co.,   63  F.  Ins.  Co.,  81  Wis.  583,  51  N.  W.  954, 

Fed.  680.    So  also  if  agent  knows  that  29  Am.  St.  R.  917. 
gasoline  has  been  used  and  is  likely  to 


2  Hi 


GENERAL    PRINCIPLES    OF   INSURANCE    LAW 


unless  the  assured  can  show  an  actual  authority  of  broader  extent, 
whicii  in  most  instances  it  is  difficult  to  do.^ 

Thus,  where  during  the  term  of  a  standard  policy  the  assured  in- 
formed the  general  agent  of  a  change  of  ownership  and  got  the  reply, 
"I  will  see  that  the  insurance  is  all  right,"  held,  no  waiver,  because 
no  written  consent  was  indorsed. - 

But  (he  distiiu'tions  drawn  are  sometimes  fine.  Thus,  it  was  held 
that  the  company  was  estopped  where  the  general  agent,  knowing 
that  the  j)()licy  was  not  in  possession  of  the  assured,  had  promised 
the  vendee  to  go  to  the  mortgagee,  a  bank  in  possession,  and  make 
indorsement  consenting  to  change  of  title. ^  This  case  was  clearly 
sound.  The  action  was  brought,  not  on  the  original  contract,  but 
by  the  transferee  and  based  u|:)on  the  subsequent  oral  contract  made 
with  him.     But  in  a  similar  case  where  action  was  brought  upon 


1  Iowa  Life  Ins.  Co.  v.  Lewis,  187 
U.  S.  335,  348,  23  S.  Ct.  126;  Northern 
Assur.  Co.  V.  Grand  View  Bldg.  Asso., 
183  U.  S.  308,  22  S.  Ct.  133;  Lippmnn 
V.  .'Etna  Ins.  Co.,  120  Ga.  247,  47  S.  E. 
593;  Kirkman  v.  Farmers^  Ins.  Co.,  90 
Iowa,  457,  57  N.  W.  952,  48  Am.  St.  R. 
454;  Sutherland  v.  Ins.  Co..  110  Mich. 
668,  68  N.  W.  985;  Gould  v.  Dwellinq 
House  Ins.  Co.,  90  Mich.  302,  51  N.  W. 
455;  Ermentrout  v.  Girard  F.  &  M.,  63 
Minn.  305,  65  N.  W.  635;  Travelers' 
Ins.  Co.  V.  Mtjers,  62  Ohio  St.  529. 
57  N.  E.  458,  460;  Hartford  Ins.  Co.  v. 
Post,  25  Tex.  Civ.  App.  428;  Oshkosh 
Match  Works  v.  Manchester  F.  As.'^ur. 
Co.,  92  Wis.  510,  66  N.  W.  525.  The, 
court  .should  instruct  the  jury  that  a 
written  agreement  of  waiver  is  essential, 
Sullivan  v.  Met.  Life  Ins.  Co.  (Mont., 
Jan.,  1907),  36  Ins.  L.  J.  314.  Contra. 
for  example.  Orient  Ins.  Co.  v.  Mc- 
Knight,  197  III.  190,  64  N.  E.  .339  (an- 
ticipated increase  of  hazard);  Spring- 
field, etc..  Co.  v.  Trader.^'  /n.s'.  Co..  151 
Mo.  90,  52  S.  W.  238,  74  Am.  St.  R. 
521;  Wihon  v.  Assur.  Co.,  51  S.  C.  540, 
29  S.  E.  245,  Chief  Justice  dissenting 
(vacancy). 

^  Noriham.  v.  Dutchess  Co.  Ins.  Co., 
166  N.  Y.  319,  322,  .59  N.  E.  912,  82 
Am.  St,  R.  655.  Similarly  as  to  other 
insurance  coupled  with  the  agent's 
reply  "all  right  I  will  attend  to  it," 
Baumgartel  v.  Prov.  Wa.sh.  Ins.  Co., 
136  N.  Y.  547,  32  N.  E.  990;  Frank- 
furter V.  Home  Ins.  Co.,  10  Misc.  157. 
31  N.  Y.  Supp.  3;  German  Ins.  Co.  v. 
Heiduk,  30  Neb.  288,  46  N.  W.  481, 
27  Am.  St.  R.  402.     Similarly  as  to 


vacancy,  O'Brien  v.  Prescott  Ins.  Co., 
134  N.  Y.  28,  31  N.  E.  265.  Change  of 
posesssion,  Carey  v.  German-Am.  Ins. 
Co.,  84  Wis.  80,  54  N.  W.  18,  36  Am. 
St.  R.  907,  20  L.  R.  A.  267.  Increase 
of  hazard  from  new  adjacent  building, 
Straker  v.  Pha:nix  Ins.  Co.,  101  Wis. 
413,  77  N.  W.  752.  Commencement  of 
foreclosure  proceedings  coupled  with 
assurance  of  the  agent  that  no  harm 
would  ensue  therefrom,  Quinlan  v. 
Prov.  Wash.  Ins.  Co.,  133  N.  Y.  356, 
31  N.  E.  31,  28  Am.  St.  R.  645;  Moore 
V.  Hartford  F.  Ins.  Co.,  141  N.  Y.  219 
("standard  policy  was  compelled  to 
remedy  existing  evils  of  parol  waivers"). 
Likewise,  an  oral  promise  of  the  agent 
to  indorse  permit  for  removal  of  prop- 
erty to  another  location  does  not  bind 
the  company  under  the  standard  policy 
unless  the  written  consent  is  actually 
indorsed,  Parker  v.  Rochester  German 
Ins.  Co.,  162  Mass.  479.  39  N.  E.  179; 
Connecticut  Fire  Itis.  Co.  v.  Smith,  10 
Colo.  App.  121,  51  Pac.  170.  But 
where  the  countersigning  agent  actu- 
ally received  the  policy  for  indorse- 
ment, collected  pay  for  it  and  repre- 
.sented  to  the  assured,  who  did  not 
have  the  policy,  that  permit  had  been 
indorsed,  the  company  Avas  held  es- 
topped, Morgan  v.  III.  Ins.  Co.,  130 
Mich.  427,  90  N.  W.  40.  If  the  in- 
sured gets  a  written  permit  he  may 
attach  it  at  any  time  to  the  policy, 
Bennett  v.  Western  Underwriters,  130 
Mich.  216,  89  N.  W.  702. 

3  Manchester  v.  Guardian  Assur.  Co  . 
151  N.  Y.  88,  45  N.  E.  381,  56  Am.  St 
R.  600. 


OVERT  ACT   WITH    AUTHOKITY    TO    PERFORM    THE    ACT  217 

the  policy,  held,  that  the  transferee  could  not  recover.'  And  if,  as 
matter  of  fact,  the  plaintiff  can  show  that  the  agent  has  express 
authority  to  disregard  the  provisions  of  the  policy  and  give  oral 
permits,  such  oral  permit  will  be  effective.-  Or  if  knowledge  of  the 
situation  is  transmitted  to  superior  officers  or  agents  with  more  gen- 
eral powers  and  they  by  affirmative  acts  within  the  scope  of  their 
authority  recognize  the  continued  validity  of  the  policy,  it  has  been 
held  that  waiver  is  estabhshed  under  the  standard  policy.^ 

§  177.  Overt  Act  with  Authority  to  Perform  the  Act. — Many 
courts  draw  a  distinction  betM'een  a  mere  declaration  or  promise 
made  by  the  countersigning  or  other  agent  and  an  overt  act  done 
by  him  with  authority,  if  such  act  is  consistent  only  with  the  con- 
tinued validity  of  the  policy.  Under  these  circumstances  it  has  been 
held  that  where  the  assured  relies  upon  the  act  to  his  prejudice  an 
estoppel  is  established  as  a  paramount,  inexorable  inference  of  law, 
no  matter  what  the  policy  provides  in  respect  to  the  agent's  au- 
thority to  waive  or  to  the  method  of  waiver.  Thus  where  an  agent, 
whose  duty  it  is  to  collect  premiums,  and  make  written  indorsements, 
actually  collects  a  premium  or  makes  an  indorsement  with  knowledge 
of  previous  forfeitures  for  which  no  written  consent  is  given,  the 
company  is  held  to  be  estopped."* 

1  Xartham  v.  Dutchess  Co.  Mut.  Ins.  61  N.  Y.  Siipp.  45,  aff'd  165  N.  Y.  666, 
Co..  177  N.  Y.  73,  69  N.  E.  222.  59  N.  E.  1127;  .'Etna  Life  Ins.  Co.  v. 
Compare,  however,  Northam  v.  In-  Falloio,  110  Tenn.  720,  77  S.  W.  937 
ternational  his.  Co.,  45  App.  Div.  177,  (citing  numerous  cases);  Northwestern 
61  N.  Y.  Supp.  45,  aff'd  165  N.  Y.  666,  Mut.  L.  Ins.  Co.  v.  Freeman,  19  Tex. 
59  N.  p];  1127,  in  which  recovery  was  Civ.  App.  632;  and  see  Bigelow  v. 
allowed  because  agent  collected  pre-  Granite  State  Ins.  Co.,  94  Me.  39,  46 
niium  with  knowledge.  Applying  the  Atl.  808.  The  same  rule  applies 
same  distinction  to  a  recent  Texas  though  the  premium  is  not  collected 
case,  Home  Mut.  Ins.  Co.  v.  Nichols  until  after  loss,  Mechanics'  ifc  T.  Ins. 
(Tex.  Civ.  App.,  1903),  72  S.  W.  440,  Co.  v.  Smith,  79  Miss.  142,  30  So.  362 
we  reach  the  conclusion  that  the  judg-  (tender  back  after  trial  begun  is  too 
ment  was  right  but  that  the  plaintiff  late);  Phoenix  Ins.  Co.  v.  Covey,  41 
should  have  set  up  as  his  cause  of  ac-  Neb.  724,  60  N.  W.  12.  And  see  Hart- 
tion  the  subsequent  new  parol  con-  /orrf  F.  7ns.  Co.  v.  Orr,  56  111.  App.  629; 
tract.  Frasier  v.   Neiv  Zealand  Ins.   Co.,  39 

2  Continental  F.  Ins.  Co.  v.  Brooks,  Ore.  342,  64  Pac.  814  (as  to  vacancy, 
131  Ala.  614,  30  So.  876  (the  agent,  citing  many  cases);  AfiVA-wmri  v.  Uniteil 
no  longer  in  company's  employ,  testi-  Mut.  Ins.  Co.,  20  R.  I.  10,  36  Atl.  1121. 
fied  on  this  point  for  plaintiff);  West.  But  if  the  whole  premium  is  due 
Assur.  Co.  V.  Williams,  94  Ga.  128,  21  despite  the  breach  the  rule  is  other- 
S.  E.  370;  German  Ins.  Co.  v.  Gra]j,  43  wise,  German  Ins.  Co.  v.  Emporia,  etc., 
Kan.  497,  23  Pac.  637,  8  L.  R.  A.  70,  Assoc,  9  Kan.  App.  803,  59  Pac.  1092; 
19  Am.  St.  R.  150;  Niagara  Ins.  Co.  v.  Cohen  v.  Continental  F.  Ins.  Co.,  67 
Lee,  73  Tex.  641,  11  S.  W.  1024.  Tex.  325,  3  S.  W.  296,  60  Am.  Rep.  24; 

s  Hunt  V.  State  Im.  Co.,  6(^l>ieh.  121.  Joliffe  v.  Madison  Mut.  Ins.  Co.,  39 

92  N.  W.  921.  Wis.  Ill,  20  Am.  Rep.  35.     And  see 

*  For    example,    Northam,    v.    Inter-  Burner  v.   German-Am.  Ins.   Co.,    103 

national  Ins.  Co.,  45  App.   Div.   177,  Ky.  370,  45  S.  W.  109.     The  United 


2is 


(;k.\ki<ai.  I'HixcirLKs  ok  ixsikaxck  i.aw 


The  Cotiiicclicuf  courf,  clcfiiics,  in  no  uncertain  terms,  the  binding 
clTcct  of  a  warranty  in  the  law  of  insurance.^  Nevertheless,  it  also 
rccofiuizes  that,  despite  the  policy  stipulation  of  the  necessity  of  a 
written  ;.,irreeinent  to  effect  waiver,  the  collection  of  premiums  will 
cstnp  the  company  from  insisting  upon  a  prior  known  forfeiture.^ 

s<  178.  As  to   Provisions  Relating   to   Proceedings  After  Loss. — 

The  provisions  of  the  ])()licy  relatinji;  to  proofs  of  loss  and  adij:"l- 
ment  are  held  to  ])e  more  readily  waived.''  But  l)y  the  better  reason 
and  autliority  the  countersigning  agent  has  no  authority  under  the 
standard  jiolicy  to  waive  b}^  parol  the  service  of  proofs  altogether,'* 
unless  it  affirmatively  appear  that  express  authority  has  been  granted 
him  to  do  so.^     But  other  courts  hold  to  the  contrary.® 

The  countersigning  agent  has  apparent  authority  to  receive  proofs 
and  therefore  to  waive  matters  of  merely  technical  character,  for 


States  Supreme  Court  say.s:  "It  is  true 
that  where  an  agent  is  charged  with  the 
collection  of  premiums  upon  policies, 
it  will  be  presumed  that  he  informs 
the  company  of  any  circumstances 
coming  to  his  knowledge  affecting  its 
lial)ility,  and  if  subsequently  the 
premiums  are  received  by  the  com- 
pany without  objection  any  forfeiture 
incurred  will  be  presumed  to  be 
waived,"  Globe  Mut.  Ins.  Co.  v.  Wolff, 
95  U.  S.  326,  332,  24  L.  Ed.  387;  Mc- 
Gurk  V.  Met.  L.  Ins.  Co.,  56  Conn.  528, 
540,  16  Atl.  263,  1  L.  R.  A.  563;  Ger- 
mania  Fire  Ins.  Co.  v.  Hick,  125  111. 
361,  7  N.  E.  792,  8  Am.  St.  R.  384,  in 
which  the  court  says:  "An  insurance 
company  that  takes  a  premium  for  a 
policy  under  conditions  in  respect  to 
matters  known  to  exist,  that  would 
render  the  policy  invalid,  will  not  be 
permitted  to  say  that  it  is  not  a  bind- 
ing contract  for  that  reason,  and  the 
company  will  be  held  as  having  the 
same  knowledge  of  the  condition  and 
situation  of  the  property  as  that  pos- 
sesseil  by  the  agent  transacting  the 
business  for  it."  This  language  is 
adopted  and  approved  in  Vesey  v. 
Commercial  Union  Assiir.  Co.,  18  So. 
Dak.  6.32,  101  N.  W.  1074,  citing  many 
other  authorities.  Wing  v.  Harvey,  5 
De  G.,  M.  &  G.  265;  Armstrong  v. 
Turquand,  9  Ir.  C.  L.  R.  32. 

'  Fell  v.  John  Hancock  Life  Ins.  Co. , 
76  Conn.  494,  57  Atl.  175  (occupation 
of  lockmaker  and  no  prior  applica- 
tion for  life  insurance  incorrectly 
warranted;  policy  avoided). 


"  Hennessy  v.  Met.  Life  Ins.  Co., 
74  Conn.  699,  52  Atl.  490.  See  also 
dictum,  of  English  court  to  same  effect, 
Biqgar  \.  Rock  Life  Assur.  Co.  (1902), 
1  k.  B.  516. 

3  See  §  144,  .<iupra. 

*  For  example,  Burlington  Ins.  Co.  v. 
Kennerly,  60  Ark.  532,  31  S.  W.  155; 
Ruthven  v.  Am.  Ins.  Co.,  92  Iowa,  316, 
60  N.  W.  663;  Kirkmcin  v.  Farmers' 
Mut.  F.  Ins.  Co.,  90  Iowa,  457,  57 
N.  W.  952,  48  Am.  St.  R.  454;  Lohnes 
V.  Ins.  Co.  of  No.  Am.,  121  Mass.  439; 
Wadhams  v.  West.  Assur.  Co.,  117 
Mich.  514.  76  N.  W.  6;  Lumber  Co.  v. 
Citizens'  Ins.  Co.,  136  Mich.  42,  98 
N.  W.  761;  Ermentrout  v.  Girard  F.  & 
M.  Ins.  Co.,  63  Minn.  305,  65  N.  W. 
635,  56  Am.  St.  R.  485,  30  L.  R.  A. 
346;  Gould  v.  Dwelling  House  Ins.  Co. 
90  Mich.  302,  51  N.  W.  455;  Hicks  v. 
Brit.- Am.  Ins.  Co.,  162  N.  Y.  284,  56 
N.  E.  743,  48  L.  R.  A.  424;  Travelers' 
Ins.  Co.  V.  Myers,  62  Ohio  St.  529,  57 
N.  E.  458,  460,  49  L.  R.  A.  760;  Smith 
V.  Ins.  Co.,  60  Vt.  682,  15  Atl.  353; 
Oshkosh  Match  Works  v.  Manchester  F 
Assur.  Co.,  92  Wis.  510,  66  N.  W.  525. 

5  O'Leary  Bros.  v.  Ins.  Co.,  100  Iowa, 
390,  69  N.  W.  686. 

^Indian  River  State  Bank  v.  Hart- 
ford Ins.  Co.,  46  Fla.  283,  35  Jo.  228; 
Citizens'  Ins.  Co.  v.  Sto^>lard,  197  111' 
330,  64  N.  E.  355;  Fcr-  is.  Co.  v. 
Munger,  49  Kan.  178,  Sv.  Pac.  120; 
Nickell  V.  Phmnix  Ins.  Co.,  144  Mo 
420,  46  S.  W.  435;  Snyder  v.  Dwelling 
Hou.'ie  Ins.  Co..  59  N.  J.  L.  544,  37  Atl 
1022,  59  Am.  St.  R.  625. 


AD.JXJSTEKS — OTHER    SPECIAL   AGENTS  219 

example,  to  extend  the  time  of  service  and  to  excuse  informality  in 
their  contents/  and,  according  to  some  courts,  to  extend  time  for 
bringing  suit.- 

§  179.  Special  Soliciting  Agents — Fire. — Solicitors  for  fire  insur- 
ance have  no  authority  to  waive  conditions  or  forfeitures,  but  only 
to  receive  proposals,  forward  them  and  do  various  other  acts.'"*  The 
same  rules  apply  in  general  as  are  applicable  to  solicitors  for  life 
insurance  and  the  same  contrariety  of  views  among  the  courts  is 
found.''  If  they  are  intrusted  with  the  closing  of  a  contract  of  in- 
surance, and  allowed  to  make  a  delivery  of  the  policy,  it  has  been 
held  that  they  have  implied  authority  to  determine  how  the  premium 
shall  be  paid,  and  if  they  give  credit  the  policy  will  still  be  binding, 
though  in  contradiction  to  its  terms; "''  but  not  so,  in  the  opinion  of 
some  courts,  if  the  policy  expressly  provides  that  the  agent  has  no 
such  power.^ 

§  180.  Adjusters — Other  Special  Agents. — A  special  agent  ap- 
pointed to  investigate  the  amount  and  character  of  a  loss  and  report 
thereon  has  no  implied  authority  to  waive  by  parol  an  essential 
condition  of  the  contract  or  a  forfeiture,  especially  where,  as  is  usual, 
the  policy  denies  this  power.^  And  if  the  policy  expressly  denies 
his  power  he  cannot  waive  service  of  proof  of  loss.^     By  virtue  of  his 

1  Schloss  V.  Westchester  F.  Ins.  Co.  ers'  M.  F.  I.  Co.,  69  N.  H.  666,  45  Atl. 
141  Ala.  566,  37  So.  701;  Indian  River  479.  But  see  State  Mut.  Ins.  Co.  v. 
State  Bk.  v.  Hartford  Ins.  Co.,  46  Fla.  La  Tourette.  71  Ark.  242,  74  S.  W 
283,  35  So.  228  (1903);  Pheni.v  Ins.  Co.  300,  Bunn,  C.  J.,  dissenting;  Citizens' 
V.  Munger,  49  Kan.  178,  30  Pac.  120,  Ins.  Co.  v.  Crist,  22  Ky.  L.  R.  47,  56 
33  Am.   St.  R.  360;   Walker  v.  Lan-  S.  W.  658. 

cashire   Ins.    Co.,    188   Mass.    560,    75  4  See    §§165-171. 

N.  E.  66;  Harnden  v.  Mill.  &  Mech.  5  Bodine  v.  Excliange  Fire  Ins.  Co., 

7ns.  Co.,  164  Mass.  382,  41  N.  E.  658,  51    N.    Y.    117,    10    Am.    Rep.    566; 

49  Am.  St.  R.  467;  Farmers'  F.  Ins.  Boehen  v.  Willinmsburgh  City  his.  Co., 

Co.  V.  Baker,  94  Md.  545,  51  Atl.  184;  35  N.  Y.  131,  90  Am.  Dec.  787. 

Thompson    v.    Traders'    Ins.    Co.,    169  ^  Russell  v.  Prudential  Ins.  Co.,  176 

Mo.    12    (informal    proofs);    Vesey   v.  N.  Y.  178,  68  N.  E.  252,  98  Am.  St.  R. 

Commercial   Union,   18  So.   Dak.   632,  656. 

101  N.  W.  1074.  7  Northern  Assur.  Co.  v.  Grand  View 

2  Firemen's  Fund  Ins.  Co.  v.  West-  Bldg.  Assn.,  183  U.  S.  308,  22  S.  Ct. 
em  Refrig.  Co..  162  111.  322,  44  N.  E.  133;  M^eed  v.  London  &  L.  Fire  Ins. 
746.  Co.,  116  N.  Y.  106,  22  N.  E.  229;  Mar- 

3  Cassimus  v.  Scottish  Union  &  Nat.  vin  v.  Universal  Life  Ins.  Co.,  85  N.  Y. 
7.  Co.,  135  Ala.  256,  33  So.  163;  Lo/mes  278,  39  Am.  Rep.  657.  But  see 
V.  7ns.  Co.  of  N.  A.,  121  Mass.  439;  Georgia  Home  Ins.  Co.  v.  Allen,  128 
Tate    V.    Citizens'    Mut.    Ins.    Co.,    13  Ala.  451,  30  So.  537. 

Gray   (Mass.),   79;  Elliott  v.   Farmers'  ^  Kirkman  v.  Farmers'  Ins.  Co.,  90 

7ns.  Co.,  114  Iowa,  153,  86  N.  W.  224;  Iowa,  457,  57  N.  W.  952,  48  Am.  St.  R. 

Hausen  v.  Citizens'  Ins.  Co.,  66  Mo.  454;  Contra,  Reed  v.   Continental  Ins. 

App.  29;  Tahor  v.  Rockingham  Farm-  Co.  (Del.),  65  Atl.  569. 


220  GENERAL    ]'1!1\(  II'I.KS    oi     IXSURANX'E    LAW 

position,  however,  he  may  have  apparent  authority  to  waive  the 
time  of  service.* 

If  an  adjuster,  as  is  not  infrequently  the  case,  is  given  power  not 
only  to  adjust  the  amount  of  loss  and  report  complications,  but  to 
dispose  of  the  whole  matter  by  giving  a  draft  upon  the  company 
in  settlement,  at  his  sole  discretion,  it  has  been  held  that  he  has 
actual  power  after  loss  to  waive  forfeitures  under  the  standard  or 
any  policy.'  This  subject  has  occupied  the  attention  of  the  highest 
court  in  Connecticut  in  connection  with  an  elaborate  citation  of 
authorities. •'' 

The  authority  of  clerks  of  agents  or  of  insurers  is,  as  a  rule,  limited 
to  the  performance  of  ministerial  and  clerical  acts,  and  they  are  not 
to  be  allowed  to  disturb  or  alter  the  terms  of  the  policy,  unless  such 
a  result  is  naturally  involved  in  the  proper  performance  of  the  par- 
ticular act  which  they  are  employed  to  do.'* 

1  Serqent  v.  />.  it  L.  &  G.  Ins.  Co..  his  knowledge  would  postpone  suit 
155  N.  Y.  ;^49.  ."ioo,  49  N.  E.  935.  until  after  the  lapse  of  the  year's  lim- 

2  Georgia  Home  Ins.  Co.  v.  Allen,  119  itation  for  beginning  action,  held,  that 
Ala.  436,  24  So.  399;  Germania  Fire  the  company  was  estopped  from  set- 
Ins.  Co.  V.  Pitcher,  160  Ind.  392,  64  ting  up  the  forfeiture,  Dibbrell  v. 
N.  E.  921,  66  N.  E.  1003;  Dobson  v.  Georgia  Home  Ins.  Co.,  110  N.  C.  193, 
Hartford  Fire  Ins.  Co..  86  App.  Di^•.  14  S.  E.  783.  28  Am.  8t.  R.  678,  Merri- 
115,  121,  83  N.  Y.  Supp.  4.56,  aff'd  179  man,  C.  J.,  dissenting. 

N.  Y.  557,  71  N.  E.  1130;  Smaldose  v.  3  Bernhard  v.  Rochester  German  Ins. 

Ins.  Co.  of  Xorth  Am.,  162  N.  Y.  580,  Co.    (Conn.   Dec,   1906),  65  Atl.    134. 

57  N.  E.  168.    Where  the  adjuster  con-  *  Waldman  v.   North  British  &   M. 

tinued  to  make  demands  for  dupHcate  7ns.  Co.,  91  Ala.  170,  24  Am.  St.  R. 

vouchers  a  comphance  with  which  to  883. 


CHAPTER  IX 
Gexer/  X  Principles — Continued 
'  Marine  Insurance 

§  181.  Wliat  is  Marine  Insurance. — The  law  of  marine  insurance 
is  in  so  many  particulai-s  peculiar  to  that  branch  of  insurance  that 
it  will  be  convenient  to  present  by  themselves  some  of  the  principles 
relating  to  it.^ 

Marine  insurance  is  !in  insurance  against  risks,  connected  with 
navigation,  to  which  a  ship,  cargo,  freight,  profits,  or  other  insurable 
interest  may  be  exposed  during  a  certain  voyage  or  a  fixed  period  of 
time.^ 

§  182.  Implied  Warranties. — There  are  three  warranties  which 
are  understood  in  every  contract  of  marine  insurance,  and  are  as 
efficacious  as  though  they  were  written  upon  the  face  of  the  policy. 
These  relate  to  seaworthiness,  deviation,  and  the  legality  of  the  ad- 
venture. The  last  is  sometimes  classed  as  a  condition  rather  than  a 
warranty.^ 

§  183.  Warranty  of  Seaworthiness. — In  every  voyage  policy  upon 
ship,  freight,  cargo,  or  other  interest,  a  warrant}'  is  implied  that,  at 
the  commencement  of  the  voyage,  the  ship  shall  be  seaworthy  for 
the  purpose  of  the  particular  adventure  insured:  •*  otherwise  the 

1  Insurable     interest,     concealment,  liability  of  shipo^^•ner  under  contract 

representations,     express     warranties,  to  carry,  Cunard  Co.  v.  Marten  (1902), 

and  other  matters,  affecting  the  rights  2  K.  B.  624  (1903),  2  K.  B.  511;  or 

of  the  parties  to  the  marine  policy,  liability  for  colliding  with  another  ship, 

have    already   received    consideration.  Tatham  v.  Burr  (1898),  App.  Cas.  385. 

See  ch.  II-V.  3  There   is  no   implied  warranty  as 

^  Scelbcrq  v.  Western  Assur.  Co..  119  to  the  nationality  of  a  ship,  or  that 

Fed.  23.  28,  55  C.  C.  A.  601.     Policy  her  nationality  shall  not   be  changed 

sometimes  covers  the  goods  on  shore,  during  the  risk.  Dent  v.  Smith.  L.  R.  4 

Pellu  V.  Roval  Exch.  Assur.  Co.  (1757),  Q.  B.  414  (British  ship  transferred  to 

1    Burr.    341.      Or    on    quay,    Ide    v.  Russian  o\^Tiers.     Policy  on  gold.). 

Chalmers  (1900),  5  Com.  Cas.  212.    Or  *  Richelieu  <{•  O.  Xav.  Co.  v.  Boston 

on  voyage  partly  by  water  and  partly  M.  Ins.  Co.,  136  V.  S.  408.  10  S.  Ct. 

by  land,  see   §22.'    Liabihty  confers  93-1.  34  L.Ed.  398;  Long  Dock  Mills  & 

insurable    interest,    see     §33.      Thus.  EL  Co.  v.  Mannheim  Ins.  Co.,  116  Fed. 

[221] 


222 


GENERAL    I'lilXClFI.ES    OK    IXSU'RANCE    LAW 


policy  does  not  attach.'  At  best  the  dangers  of  ocean  travel  are 
manifold  and  serious.  The  underwriter  who  is  asked  to  assume  lia- 
bility for  them  is  entitled,  when  he  fixes  the  amount  of  his  premium, 
to  reckon  on  a  suitable  ship,  properly  manned,  equipped,  and  sup- 
plied, with  due  regard  to  the  character  of  the  adventure  proposed.^ 
An  element  of  public  policy  also  is  manifestly  involved  in  the  re- 
quirement that  the  warranty  of  seaworthiness  must  be  observed, 
and  that  the  safety  of  all  on  board  must  be  thereby  to  that  extent 
secured. 

Where  a  vessel  is  lost  by  an  undisclosed  cause,  the  burden  of  proof 
on  the  issue  of  unseaworthiness  may  become  an  important  factor  in 
the  litigation  between  insurers  and  insured.  If  soon  after  sailing, 
the  ship  founders  or  becomes  so  leaky  or  disabled  as  to  be  unable  to 
proceed,  and  this  cannot  be  explained  by  any  stress  of  weather,  or 
other  known  cause,  the  proper  inference  is  that  she  was  unsea- 
worthy.^  The  question  whether  a  vessel  insured  was  seaworthy  is, 
however,  ordinarily  one  of  fact  for  the  jury;  and  although  the  cause 


886,  aff'd  123  Fed.  861;  Walsh  v. 
Washington  Ins.  Co.,  32  X.  Y.  427; 
Greenock  S.  S.  Co.  v.  Marit.  Ins.  Co. 
(1903),  2  K.  B.  6.57;  Dixon  v.  'Sadler, 
5  M.  &  W.  405. 

1  But  .see  §  114.  Where  the  policy  at- 
taches while  the  ship  is  in  port,  there 
is  also  an  implied  warranty  that  she 
shall,  at  the  commencement  of  the 
risk,  be  reasonal)ly  fit  to  encounter  the 
ordinary  perils  of  the  port,  Haughton 
V.  Empire  Mar.  Ins.  Co.,  L.  R.  1  Exch. 
206;  Quebec  Mar.  Ins.  Co.  v.  Commercial 
Bank,  L.  R.  3  P.  C.  241;  Paddock  v. 
Franklin  Ins.  Co.,  11  Pick.  (Mass.)  227. 

2  In  a  case  between  carrier  and  ship- 
per, the  United  States  Supreme  Court 
says,  by  Justice  CUfford:  "A  carrier's 
first  duty,  and  one  that  is  implied  by 
law,  when  he  is  engaged  in  transporting 
goods  by  water,  is  to  provide  a  sea- 
worthy vessel,  tight  and  stanch,  and 
well  furnished  with  suitable  tackle, 
sails,  or  motive  power,  as  the  case  may 
be,  and  furniture  necessary  for  the  voy- 
age. She  must  also  be  provided  with  a 
crew,  adequate  in  number  and  suffi- 
cient and  competent  for  the  voyage, 
with  reference  to  its  length  and  other 
particulars,  and  with  a  competent  and 
skillful  master,  of  sound  judgment  and 
discretion;  and  in  general,  especially  in 
steamships  and  vessels  of  the  larger 
size,  with  some  person  of  sufficient 
ability  and  experience  to  supply  his 
place  temporarily  at  least,  in  case  of  his 


sickness  or  physical  disciualification," 
Propeller  Xiagara  v.  Cordes,  21  How. 
(U.  S.)  7,  23,  16  L.  Ed.  41.  Lord 
Cairnes  says:  "By  'seaworthy,'  my 
lords,  I  do  not  desire  to  point  to  any 
technical  meaning  of  the  term,  but  to 
express  that  the  ship  should  be  in  a 
condition  to  encounter  whatever  perils 
of  the  sea  a  ship  of  that  kind,  and  laden 
in  that  way,  may  be  fairly  expected  to 
encounter  in  crossing  the  Atlantic," 
Steel  V.  State  Line  S.S.  Co.,  3  App.  Cas. 
72.  And  see  §  18.5.  The  issue  of  sea- 
worthiness often  arises  in  cases  be- 
tween shipper  and  shipowner.  A  ship 
may  be  seaworthy,  as  between  ship- 
owner and  insurer  on  ship,  though  un- 
seaworthy  as  between  shipowner  and 
shipper  of  a  particular  cargo,  Chalmers 
&  Owen,  Ins.  (1907),  58. 

'•>  Bullard  v.  Insurance  Co.,  1  Curt. 
148,  Fed.  Cas.  No.  2,122;  De  Hart  & 
Simey,  Ins.  (1907),  51,  citing  Arnould, 
§  725;  Pickup  v.  Thames  Ins.  Co. 
(1878),  3  Q.  B.  D.  .594,  47  L.  J.  Q.  B. 
749;  Ajum  Goolam  Hassen  v.  Union 
Mar.  Ins.  Co.  (1901),  App.  Cas.  362, 
70  L.  J.  P.  C.  34.  Mr.  Justice  Wash- 
ington stated  broadly  that  every  war- 
ranty in  the  policy  whether  express  or 
implied  is  a  condition  precedent  to  a 
right  of  recovery  and  that  the  insured 
cannot  recover  without  first  averring 
and  proving  performance,  Craig  v, 
U.  S.  Ins.  Co.,  1  Pet.  C.  C.  410,  Fed. 
Cas.  No.  3,340.     See  §  117,  supra. 


WARRANTY    OF   SEAWORTHINESS 


223 


of  loss  be  not  proved,  yet  if  there  is  evidence  showing  seaworthiness 
in  the  vessel  at  the  inception  of  the  voyage,  and  if  it  appear  that  she 
subsequently  encountered  marine  perils  such  as  might  disable  a 
stanch  and  well  manned  vessel,  the  jury  may  attribute  the  loss  to 
the  perils  insured  against.^ 

In  a  voyage  policy  on  goods  or  other  movables  there  is  an  implied 
warranty,  that,  at  the  commencement  of  the  voyage,  the  ship  is  not 
only  seaworthy  as  a  ship,  but  also  that  she  is  reasonably  fit  to  carry 
the  goods  or  other  movables  to  the  destination  contemplated  by  the 
policy.^  The  fitness  of  the  ship  to  carry  the  goods,  however,  should 
be  decided  with  reference  to  the  perils  insured  against  by  the  policy. 
For  example,  where  cattle  are  insured  against  mortality,  the  war- 
ranty is  not  satisfied  when  the  appliances  for  ventilation  are  insuffi- 


1  Walsh  V.  Washington  Mar.  his.  Co. , 
32  N.  Y.  427.  See  many  cases  on  bur- 
den of  proof  in  this  section  infra.  The 
underwriter  may  waive  the  breach  of 
the  impUed  warranty  of  seaworthiness 
or  estop  himself  from  insisting  upon  it, 
Thebaud  v.  Insurance  Co.,  155  N.  Y. 
516,  50  N.  E.  284.  An  acceptance  of  a 
notice  of  abandonment  is  a  waiver  of  a 
known  forfeiture,  Provincial  Ins.  Co. 
V.  Ledvc  (1874),  L.  R.  6  P.  C.  224,  43 
L.  J.  P.  C.  49;  Arnould,  §  690;  De 
Hart  &  Simey,  Ins.  (1907),  43,  note  (e). 

2  The  Maori  King  (1895),  2  Q.  B. 
550,  558  (frozen  meat).  EngHsh  and 
other  courts  hold  that  the  burden  is  on 
the  underwriter  to  establish  unsea- 
worthiness, Ajinn,  Goolam  &  Co.  v. 
Union  Mar.  Ins.  Co.  (1901),  App.  Cas. 
362;  Pickup  v.  Thames,  etc.,  Ins.  Co.,  3 
Q.  B.  D.  594;  Earnmoor  v.  Cal.  Ins. 
Co.,  40  Fed.  847;  Guy  v.  Citizens'  Mut. 
Ins.  Co.,  30  Fed.  695;  Perry  v.  Cobb,  88 
Me.  435,  34  Atl.  378.  49  L.  R.  A.  389. 
Other  cases,  more  logically  perhaps 
(see  Hennessey  v.  Met.  L.  Ins.  Co.,  74 
Conn.  699),  but  less  conveniently,  hold 
that  the  insured  nuist  furni.sh,  in  the 
first  in.stance,  at  least,  .some  general 
proof  of  seaworthiness,  T  id  marsh  v. 
Washim/to7i  F.  &  M.  Ins.  Co.,  4  Mason 
(I*.  S.y,  439,  Fed.  Cas.  No.  14,024; 
Lnnt  V.  Boston  Mar.  Ins.  Co.,  6  Fed. 
562,  567;  Xome  Beach  Co.  v.  Munich 
Assiir.  Co.,  123  Fed.  820;  Berwind  v. 
Greenwich  Ins.  Co.,  114  N.  Y.  231,  234, 
21  N.  E.  151;  Van  Wickle  v.  Mech.  & 
T.  Ins.  Co.,  97  N.  Y.  350;  Moser  v.  Sun 
Mut.  Ins.  Co.,  1  Denio  (N.  Y.),  176. 
Duer,  J.;  and  see  The  Sonthwark,  191 
U.  S.  1,  24  S.  Ct.  1;  The  Edwin  L. 
Morrison,  153  V.  S.  199,  210,  14  S.  Ct. 


823.  It  has  been  held,  however,  that 
upon  the  whole  case  the  insurer  must 
establish  unseaworthiness  by  prepon- 
derance of  evidence,  Lnnt  v.  Boston 
Mar.  Ins.  Co.,  6  Fed.  562;  Nome  Beach 
Co.  V.  Munich  Assur.  Co.,  123  Fed. 
820;  Bullard  v.  Roger  Williams  Ins. 
Co.,  Fed.  Cas.  No.  2,122;  Adderly  v. 
Am.  Mut.  Ins.  Co.,  Fed.  Cas.  No.  75; 
and  see  Richelieu,  etc.,  Co.  v.  Boston 
Mar.  Ins.  Co.,  136  U.  S.  408,  428,  10 
S.  Ct.  934;  but  it  has  also  been  held 
that  w'here  rottenness,  inherent  de- 
fects, and  other  unseaworthiness,  are 
expressly  excepted,  the  burden  is  upon 
the  insured  to  show  that  his  loss  is  not 
within  the  exception,  Reilly  v.  Ins.  Co., 
81  App.  Div.  314,  81  N.  Y.  Supp.  59. 
Last  editors  of  Arnould  (7tli  ed.)  give 
rule  as  to  burden  of  proof  one  way. 
Arnould  gave  it  the  other,  §  1277.  As 
to  what  subsequently  discovered  de- 
fects do  or  do  not  create  presumption 
of  unseaworthiness  at  time  of  sailing, 
and  when  issue  is  for  jury,  see  Voisin 
V.  Prov.  TTV/.s/i..  Ins.  Co.,  51  App.  Div. 
553,  557,  65  N.  Y.  Supp.  333;  AStar- 
huck  v.  Phieni.v  Ins.  Co.,  47  App.  Div. 
621 ,  62  N.  Y.  Supp.  264,  34  App.  Div. 
293,  54  N.  Y.  Supp.  293;  Singleton  v. 
Phu-nix  Ins.  Co.,  132  N.  Y.  298,  30 
N.  E.  839;  Thebaud  v.  Great  West.  Ins. 
Co.,  155  N.  Y.  516,  50  N.  E.  284; 
Morse  V.  St.  Paul  F.  &  M.  Ins.  Co.,  124 
Fed.  451 ,  122  Fed.  748;  Long  Dock  Mills 
&  El.  Co.  V.  Mannheim  Ins.  Co.,  123 
Fed.  861.  As  to  how  warranty  of  sea- 
worthiness is  affected  by  Harter  Act 
see  The  Irrawaddy,  171  IT.  S.  187,  18 
S.  Ct.  831;  Nord-Deutscher  Lloyd  v. 
Prrsident,  etc.,  of  Ins.  Co.,  110  Fed. 
420,  424-428,  49  C.  C.  A.  1. 


224  GENERAL    I'KINCIPLES   OF   INSURANCE   LAW 

cient;  ^  but  if  cattle  were  insured  against  war  risks  only,  it  has  been 
suggested  that  the  ventilation  of  the  hold  would  be  immaterial. ^ 

§  184.  Warranty  of  Seaworthiness— Time  Policies. — After  much 
discussion  it  has  been  settled  by  the  English  courts  that  no  warranty 
of  seaworthiness  is  to  be  implied  in  a  time  policy.  But  where  with 
the  privity  of  the  assured  the  ship  is  sent  to  sea  in  an  unseaworthy 
state,  the  insurer  is  not  liable  for  any  loss  attributable  to  unsea- 
worthiness.^ This  distinction  is  placed  by  those  courts  upon  the 
ground  that  the  warranty  of  seaworthiness  attaches,  if  at  all,  at  the 
time  of  the  commencement  of  the  risk,  and  that  to  imply  such  a 
warranty  in  a  time  policy,  which  might  begin  to  run  when  the  vessel 
is  in  mid-ocean,  would  be  inconvenient  and  unreasonable. 

In  the  United  States,  upon  the  question  whether  or  not  a  warranty 
of  seaworthiness  is  implied  in  time  policies,  the  decisions  are  not  in 
harmony.  The  Connecticut  court  has  decided  that  no  distinction  in 
this  respect  exists  between  voyage  and  time  policies,^  but  the  opinion 
of  the  court  in  that  case  can  hardly  be  said  to  have  considered  or  dis- 
posed of  all  the  difficulties  attaching  to  such  a  rule.  By  another  court, 
it  has  been  held,  that  the  warranty  is  at  any  rate  to  be  implied  in  those 
cases  where  the  vessel  insured  by  the  time  policy  is,  at  the  time  of 
the  commencement  of  the  risk,  at  a  port  where  repairs  could  be  made.^ 
In  a  more  recent  case,  however,  the  Illinois  court  has  decided  to  abide 
by  the  English  rule.^  In  a  still  later  case,  the  Federal  Supreme  Court 
uses  the  following  language  with  regard  to  this  subject:  "In  the  in- 
surance of  a  vessel  by  a  time  policy,  the  warranty  of  seaworthiness 
is  complied  with  if  the  vessel  be  seaworthy  at  the  commencement  of 
the  risk;  and  the  fact  that  she  subsequently  sustains  damage,  and  is 
not  properly  refitted  at  an  intermediate  port,  does  not  discharge  the 
insurer  from  subsequent  risk  or  loss,  provided  such  loss  be  not  the 
consequence  of  the  omission.  A  defect  of  seaworthiness  arising  after 
the  commencement  of  the  risk,  and  permitted  to  continue  from  bad 

i  Sleigh  v.  Tyser  (1900),  2  Q.  B.  333,  C.  L.  Rep.   171;  Gibson  v.  S7nall,  24 

69  L.  J.  Q.  B.  626.    So  also  seaworthi-  Eng.  Law  and  Eq.   17,  4  H.  L.  Cas. 

ness  of  a  vessel  engaged  in  the  dressed  353,  17  Jur.  1131. 

meat  trade  extends  to  the  refrigerating  4  Hoxie  v.  Home  Ins.  Co.,  32  Conn, 

apparatus  needful  for  the  preservation  21,  85  Am.  Dec.  240.     So,  also,  Mer- 

of  the  meat  during  transportation,  The  chants'  Mut.  Ins.  Co.  v.  Sweet   6  Wis 

Southwark,  191  U.  S.  1,  24  S.  Ct.  1.  670. 

2  De  Hart  &  Simey,  Ins.  (1907),  52.  ^  Hoxie  v.  Pacific  Mutual  Ins.  Co., 

3  Dudgeon  v.  Pembroke,  L.  R.  2  App.  7  Allen  (Mass.),  211,  Bigelow,  C.  J  •  Ca- 
Cas.  284,  46  L.  J.  Q.  B.  409,  36  L.  T.  pen  v.  Washington  Ins.  Co.,  12  Cush 
382,  2  Asp.  M.  C.  323;  Thompson  v.  (Mass.)  517. 

Hopper,  34  Eng.  Law  and  Eq.  266,  27         6  Merchants'  his.   Co.   v.    Morrison 
L.  J.  Q.  B.  441,6E.  &B.  173,  88Eng.      62  111.  242,  14  Am.  Rep.  93. 


SEAWORTHINESS   IS   WHAT 


225 


faith  or  want  of  ordinary  prudence  or  diligence  on  the  part  of  the 
insured  or  his  agents,  discharges  the  insurer  from  Hability  for  any  loss 
which  is  the  consequence  of  such  bad  faith  or  want  of  prudence  or 
diligence,  but  does  not  affect  the  contract  of  insurance  as  to  any  other 
risk  or  loss  covered  by  the  policy  and  not  caused  or  increased  by  such 
particular  defect."  ^  The  learned  revisers  of  Arnould's  work  on 
marine  insurance,  in  a  treatise  of  their  own,  with  reference  to  a  time 
policy,  have  this  to  say:  "The  authorities  support  the  view  that  in 
order  to  prevent  the  assured  from  recovering,  his  conduct  in  sending 
the  ship  to  sea  in  an  unseaworthy  state  must  amount  to  willful  mis- 
conduct." '  This  states  the  rule  more  liberally  to  the  insured  than 
do  most  of  the  American  authorities.^ 


§  185.  Seaworthiness  is  what. — A  ship  is  seaworthy  when  reason- 
ably fit,  in  all  respects,  to  encounter  the  ordinary  perils  of  the  seas, 
incident  to  the  adventure  insured.^ 


1  Union  Ins.  Co.  v.  Smith,  124  U.  S. 
405,  8  Sup.  Ct.  534,  31  L.  Ed.  497, 
Blatchford,  J.  The  New  York  court, 
without  however  citing  any  of  the  late 
cases,  has  stated  the  rule  in  the  follow- 
ing words:  "In  every  case  of  marine 
insurance  by  a  general  policy  covering 
all  perils  of  the  sea,  where  the  vessel 
insured  is  in  port,  there  is  an  implied 
warranty  that  the  vessel  is  seaworthy 
at  the  inception  of  the  policy.  It  is  a 
condition  precedent  to  the  risk,  and. if 
the  vessel  is  not  seaworthy  the  policy 
does  not  attach.  In  an  action  to  re- 
cover for  a  loss  upon  such  a  policy, 
where  the  fact  of  seaworthiness  at  the 
time  of  issuing  the  policy  is  shown,  it  is 
immaterial  what  the  vessel's  condition 
is  thereafter  during  the  voyage,  as  loss 
from  unseaworthiness  is  among  the 
perils  insured  against.  The  plaintiffs, 
under  such  a  policy,  make  out  a  prima 
facie  case  by  showing  seaworthiness  at 
the  inception  of  the  risk.  But  in  time 
policies  there  is  implied  a  warranty 
that  the  vessel  will  be  kept  in  repair 
and  made  seaworthy  at  all  times  during 
the  continuance  of  the  risk,  so  far  as 
that  is  reasonably  possible,  and  this 
implied  covenant  imposes  upon  the 
insured  the  duty  of  active  diligence  to 
keep  the  vessel  in  good  order  and  in  a 
seaworthy  condition,"  Benvind  v. 
Greenwich  Ins.  Co.,  114  N.  Y.  231,  234, 
23  N.  Y.  St.  R.  93,  21  N.  E.  151, 
Brown,  J.  This  language,  probably, 
must  be  understood  in  a  sense  some- 
what   similar    to    that    employed    bv 

15 


Mr.  Justice  Blatchford  in  the  case  of 
the  Union  Ins.  Co.  v.  Smith,  124  U.  S. 
405,  8  S.  Ct.  534,  31  L.  Ed.  497,  since 
it  is  not  to  be  supposed  that  the  court 
could  spell  out  of  a  policy,  insuring 
even  against  barratry,  an  absolute  and 
continuous  warranty,  obligatory  upon 
the  assured  and  his  agents  during  the 
voyage  and  in  foreign  ports,  to  keep 
the  ship  as  seaworthy  as  possible. 
Where  at  the  time  of  the  commence- 
ment of  the  risk  a  ship  was  not  in  port, 
but  off  on  a  distant  voyage,  it  was  held 
that  the  implied  warranty  of  sea- 
worthiness was  not  applicable,  Jones 
V.  7ns.  Co.,  2  Wall.,  Jr.  (U.  S.),  278, 
Fed.  Cas.  No.  7,470,  distinguished  in 
Rouse  V.  Insurance  Co.,  3  Wall.,  Jr. 
(U.  S.),  367,  Fed.  Cas.  No.  12,089. 

2  De  Hart  &  Simey,  Ins.  (1907),  48, 
citing  Thompson  v.  Hopper  (1858), 
E.  B.  &  E.  1038;  Dudgeon  v.  Pembroke 
(1877),  2  App.  Cas.  284;  Trinder  v. 
Thatnes  &  M.  Mar.  Ins.  Co.  (1898),  2 
Q.  B.  114. 

3  Capen  v.  Washington  Ins.  Co.,  12 
Cush.  (Mass.)  517. 

i  The  Southwark,  191  U.  S.  1,  8,  24 
S.  Ct.  1;  Thebaud  v.  Great  West.  Ins. 
Co.,  155  N.  Y.  516,  519,  50  N.  E.  284; 
Bouillon  V.  Lupton  (1864),  .33  L.  J. 
C.  P.  43.  Illustrations  from  Chalmers 
&  Owen,  Ins.  (1907):  (1)  Policy  on  ship 
from  Montreal  to  Halifax.  At  the  time 
the  ship  sailed  there  was  a  defect  in  her 
boiler.  The  defect  did  not  appear  in 
the  river,  but  disabled  her  when  she 
got  out  to  sea.    She  put  back  to  port, 


226  (;enkkal  fhinx'iples  of  insurance  law 

This  requires  that  the  ship  on  sailing  should  be  tight  and  stanch 
in  hull,  properly  rigged  and  laden.  She  must  also  be  equipped  and 
furnished  with  the  requisite  appurtenances,  such  as  ballast,  cables, 
anchors,  cordage  and  sails,  food,  water,  fuel  and  lights,  and  other 
necessary  or  proper  stores  and  implements  for  the  voyage;  ^  and 
also  provided  with  a  competent  master,  a  sufficient  number  of  com- 
petent officers  and  seamen,^  as  well  as  with  a  pilot,  when  required 
by  law  or  custom.^  In  a  recent  English  treatise  the  statement  is 
made,  "as  regards  the  pilot,  the  result  of  the  authorities  seems  to  be 
that,  generally  speaking,  a  ship  is  not  seaworthy  at  the  outset  of 
the  voyage,  or  on  leaving  an  intermediate  port  (treating  this  as  a 
new  stage),  without  a  pilot,  where  one  is  required  by  law  or  usage 
for  safe  navigation;  but  that  it  is  not  a  breach  of  the  warranty  to 
enter  a  port  without  a  pilot."  ■*  Custom,  or  statute,  however,  may 
control.  And  it  is  manifest  that  even  for  inland  marine  transit  a 
ship  must  be  provided  with  a  good  and  reliable  compass.^  A  con- 
crete example  will  make  clearer  the  application  of  the  doctrine  re- 
lating to  seaworthiness. 

The  schooner  Caroline  Mills  was  insured  in  California  for  one 
year,  subject  to  the  provisions  of  the  California  Civil  Code,  "to  be 
engL'ged  as  an  inter-island  trader  among  the  Sandwich  Islands." 
The  Code  provides  that,  when  the  insurance  is  for  a  specified  length 

and  the  defect  was  repaired.     After-  Wis.  163,  6  N.  W.  505.    As  to  quantity 

wards  she  proceeded  on  her  voyage  and  of  water  required  see  Warren  v.  Manu- 

was  lost  in  bad  weather,     i/e/rf,  that  she  facturers'    Ins.    Co.,    13    Pick.    (Mass.) 

was   unseaworthy   at    the   commence-  518,  522,  25  Am.  Dec.  341;  Deshon  v. 

ment  of  the  voyage,  and  that  the  in-  Merchants'  Ins.  Co.,  11   Mete.   (Mass.) 

surer  was  not  liable,  Quebec  Mar.  Ins.  199.     And  as  to  equipment  generally 

Co.  V.  Commercial  Bk.,  L.  R.  3  P.  C.  see  Tidmarsh  v.  Washington  F.  &  M. 

234.      (2)    Steamer    built     for    inland  Ins.  Co.,  4  Mason  (U.  S.  C.  C),  439, 

navigation  in  Trinidad  is  insured  from  Fed.  Cas.  No.  14,024. 

Clyde  to  Trinidad.     In  a  rather  heavy  '^  M'LanaImn  v.  Universal  Ins.  Co.,  1 

sea  in  the  Atlantic  she  breaks  asunder  Pet.  (U.  S.)  170. 

and  is  lost.     With  the  exercise  of  rea-  3  Whitney  v.  Ocean  Ins.  Co.,  14  La. 

sonable  care  she  might  have  been  made  485,  33  Am.  Dec.  595,  and  note  599- 

more  fit  for  the  ocean  transit.     The  601.     Wanf   3f  a  licensed  pilot  (under 

insurer  is  not  liable,  Tnrnbull  v.  Jan-  par.  4463,  Rev.  Stat.  U.  S.,  1869)  is  no 

son    (1877),    3    Asp.    Mar.    Cas.    433.  defense    unless    averred    and    proved. 

Otherwise  if  all  reasonable  means  had  Old   Dominion   Ins.    Co.    v.    Frank,   2 

been    used,    Clapham    v.    Langton,    n  Ohio  Dec.  93,  7  Ohio  Dec.   (reprint), 

B.  &  S.  729.  302.    As  to  pilot  in  coasting  trade  see 

1  Merchants'  Ins.  Co.  v.  Morrison,  62  Cox  v.  Charleston  F.  <fc  M.  Ins    Co  ,  3 

111.  242,  246,  14  Am.  Rep.  93;  see  also  Rich.  L.  (S.  C.)  331,  45  Am.  Dec   771 

Hutchins  v.  Ford,  82  Me.  363,  370,  19  4  De  Hart  &  Simey,  Ins.  (1907),  49, 

Atl.  833.     The  ship  must  have  suffi-  citing  Arnould,  §§  702,  704,  724;  Phil- 

cient     ground     tackle     and     anchors,  li-ps  v.  Headlam  (1831),  2  B.  &  Ad.  380. 

Wilkie   V.    Geddes,   3   Dow.    57.      Also  ^Richelieu  &  Ont.  Nav.  Co.  v.  Bos- 

firewood,  oil,  and  candles,  Fontaine  v.  ton  Mar.  Ins.  Co.,  136  U.  S.  408,  429 

Phanix  Ins.  Co.  of  N.   Y.,  10  Johns.  10  S.  Ct.  934,  34  L.  Ed.  398  (ship  un- 

(N.  Y.)  58;  also  cables  and  anchors.  sea\\orthy,  though  defect  in  compass 

Ixiioton  v.  Roynl  Canadian  Ins.  Co.,  50  was  not  known). 


SEAWORTHINESS    IS   WHAT  227 

of  time,  there  is  an  implied  warranty  that  the  ship  shall  be  seaworthy 
at  the  commencement  of  every  voyage  she  may  undertake  during 
that  time.  Before  the  vessel  started  on  her  voyage,  the  owners, 
knowing  that  the  chain  cables  attached  to  her  anchor  were  old  and 
weak,  had  them  reenforced  with  six-inch  hawsers.  This,  however, 
the  experts  on  the  trial  showed  to  be  an  improper  and  unskillful 
method  of  strengthening  iron  cables  for  use  among  the  coral  reefs  of 
the  Hawaiian  islands,  because  rope  hawsers  are  liable  to  become 
chafed  and  cut  by  the  rocks  on  the  bottom.  During  a  heavy  swell, 
but  without  the  existence  of  any  storm  or  extraordinary  violence 
of  the  elements,  when  anchoring  a  couple  of  miles  off  Honokoa,  the 
chains  and  hawsers  on  both  anchors  of  the  vessel  parted,  as  she  surged 
upon  them,  impelled  by  the  swell,  and  thereupon  she  was  driven 
ashore  by  the  wind  and  totally  lost.  Judge  Hoffman  decided  that 
the  warranty  of  seaworthiness  was  not  fulfilled  and  dismissed  the 
libel  on  the  policy  of  insurance.^ 

The  requirement  as  to  competent  officers  and  crew  has  reference 
to  the  particular  voyage,  whether,  for  example,  a  short  coasting 
voyage,  or  a  long  sea  voyage.^  The  ship's  cargo  also  must  be  properly 
stowed,  and  the  weight  of  it  not  in  excess  of  the  vessel's  safe  carrying 
capacity.^ 

The  underwriters,  however,  are  liable  for  injudicious  acts  of  the 
master  and  crew  in  rendering  a  vessel  unseaworthy  during  the  voyage, 
for  instance,  by  throwing  overboard  a  part  of  the  ballast,  since  the 
assured  gives  no  warranty  that  the  vessel  shall  continue  seawortlw, 
or  that  the  master  or  crew  shall  do  their  duty.^  Accordingly,  it  may 
be  said  in  general,  that  the  implied  warranty  of  seaworthiness  is  not 
broken  merely  because  the  vessel  becomes  unseaworthy  during  her 

1  Pope  V.  Swiss  Lloyd  Ins.  Co.,  4  P.  C.  N.  S.  1,  3  L.  R.  P.  C.  234,  39  L.  J. 
Fed.  153.  P.  C.  53. 

2  Hutchins  v.  Ford,  82  Me.  363,  370,  3  Foley  v.  Tabor,  2  Post.  &  Fin.  663, 
19  Atl.  832;  Louisville  Ins.  Co.  v.  672;  Cincinnati  Mut.  Ins.  Co.  v.  May, 
Monarch,  99  Ky.  578,  18  Ky.  L.  Rep.  20  Ohio  St.  211,  225-227.  That  con- 
444,  36  S.  W.  563.  Thus,  cattle  ship  dition  is  implied  that  cargo  will  be 
must  have  proper  ventilation  and  stowed  in  safe  and  proper  manner  and 
enough  attendants,  Sleiqh  v.  Tyser  that  policy  is  vitiated  by  breach  of 
(1900),  2  Q.  B.  333,  82  Law  T.  N.  S.  implied  warranty  that  ship  is  sea- 
804.  Compass  must  be  safe  and  suit-  worthy,  see  Leitch  v.  Atlantic  Mid.  Ins. 
able,  Richelieu  &  O.  Nav.  Co.  v.  Boston  Co.,  66  N.  Y.  100,  108.  Breach  of  a 
M.  Ins.  Co.,  136  U.  S.  408,  34  L.  Ed.  clause  "warranted  no  iron  .  .  .  ex- 
398,  10  S.  Ct.  934.  And  machinery  of  ceeding  net  registered  tonnage,"  Hart 
steam  vessels  must  be  properly  con-  v.  Standard  Mar.  Ins.  Co.,  L.  R.  22 
etructed,  M?'ersv.  The  Girard  Insurance  Q.  B.  Div.  499,  6  Asp.  M.  C.  368.  See 
Co.,  26  Pa.  St.  192,  193.  Boilers  must  Reck  v.  Phoenix  Ins.  Co.,  130  N.  Y. 
not  be  defective,  Quebec  Mar.  Ins.  Co.  160,  29  N.  E.  137. 

V.  Commercial  Bk.  of  Canada,  7  Moore         *  Dixon  v.  Sadler,  5  Mees.  &  Wels. 

405,  aff'd  8  Mees.  &  Wels.  895 


228  GENERAL  PRINCIPLES  OF   INSURANCE   LAW 

voyage;  ^  or  because  a  competent  master  becomes  incompetent  at 
a  foreign  port.^ 

In  the  case  of  an  insurance  being  effected  on  cargo  which  is  of  such 
a  nature  or  so  stowed  as  to  render  the  vessel  unsea worthy,  it  will  be 
no  extenuation  to  show  that  in  case  of  need  the  cargo  can  be  readily 
jettisoned,  for  instance  cargo  stowed  on  deck,  for  the  warranty  of 
seaworthiness  is  to  be  considered  in  relation  to  the  subject-matter 
insured,  and  cannot  be  taken  to  contemplate  the  destruction  of  that 
very  cargo  which  it  is  designed  to  protect.^ 

Neither  the  ignorance  nor  the  innocence  of  the  insured  will  avail 
to  relieve  him  from  the  consequence  of  a  breach  of  the  warranty, 
though  all  reasonable  precautions  were  taken  to  secure  the  seaworthi- 
ness of  the  vessel  on  sailing,  and  her  unseaworthy  condition  arose 
from  a  latent  defect,  since  an  actual  fulfillment  of  the  implied  con- 
dition is  indispensable.''  Upon  the  same  principle,  an  insurance  on 
cargo  is  invalidated  if  the  vessel  sail  unseaworthy,  though  the  assured 
be  ignorant  of  her  state,  or  powerless  to  alter  it.^  For  example,  in  an 
action  for  salvage,  it  appeared  that  a  steamship  laden  with  cargo 
had  become  disabled  at  sea  in  consequence  of  the  breaking  of  her 
crank  shaft.  Although  the  breakage  was  caused  by  a  latent  defect 
in  the  shaft,  arising  from  a  flaw  in  the  welding,  which  it  was  impossible 
to  discover,  nevertheless  the  court  held  that  the  implied  warranty  of 
seaworthiness  had  been  violated.®  A  temporary  defect,  however,  due 
to  the  neglect  of  some  precaution  at  the  time  of  sailing  is  not  unsea- 
worthiness, if  the  state  of  the  ship  be  such  that,  if  the  master  and 
crew  do  their  duty,  no  extra  danger  will  be  incurred.  Thus  the  ship 
is  not  unseaworthy  because  a  port-hole  has  been  improperly  left 
open,  unless  (as  where  the  cargo  has  been  piled  up  against  it)  it  could 
not,  if  bad  weather  came  on,  be  readily  closed  at  sea.^ 

The  implied  condition  of  seaworthiness  is  to  be  confined  to  the 
ship  by  which  the  insurance  is  effected,  and  cannot  be  extended  to 
lighters  employed  to  land  the  cargo. ^ 

1  Capen  v.  Washington  Ins.  Co.,  12  diligence    has    been    employed,     T?ie 

Cush.  (Mass.)  517;  Deblois  v.  Ocean  Ins.  Irravaddy,  171  U.  S.  187,  18  S.  Ct.  831. 

Co.,  16  Pick.  (Mass.)  303.    But  it  is  said  &  Oliver  v.  Cou-ley,  Park,  Ins.  470. 

to  be  the  duty  of  the  insured  to  keep  ^  The  Glen f ruin  (1885),  10  Prob.  Div. 

the  vessel  seaworthy  during  the  risk  if  103,  54  L.  J.  Adm.  49. 

practicable  to  do  so,  Paddoc'-  v.  Frank-  ^  De  Hart  &  Simey,  Ins.  (1907),  50, 

lin  Ins.  Co.,  11  Pick.  (Mass.)  227.  citing  Steel  v.  State  Line  SS.  Co.  (1877), 

^  CovelanJd  v.  Nevj  England  Mar.  Ins.  3   App.   Cas.    72;   Hedley   v.    Pin  vey 

Co.,  2  Mete.  (Mass.)  432.  (1892),  1  Q.  B.  58,  61  L.  J.  Q.  B.  179; 

3  Daniels  v.  Harris,  L.  R.  10  C.  P.  1,  Gilroy  v.  Price  (1893),  App.  Cas.  56. 
2  AsD.  M.  C.  413  (wine  stored  on  deck).  8  Lane  v.  Nixon,  L.  R.  1  C.  P.  412. 

4  The  Sovth'iark,  191  U.  S.  1,  6,  24  35  L.  J.  C.  P.  243;  see  Van  Val  en- 
S.  Ct.  1.  But  note  the  effect  of  the  burgh  v.  The  Astor  Mut.  Ins.  Co.,  1 
Harter  Act  on  latent  defect  where  due  Bosw.  (N.  Y.)  61 


SEAWORTHINESS   IS  WHAT  229 

In  a  policy  on  goods  or  other  movables  there  is  no  implied  war- 
ranty that  the  goods  or  movables  are  seaworthy.^  This  question  was 
disposed  of  by  an  English  case  in  which  cocoanut  oil,  value  to  include 
ten  per  cent  advance  on  invoice  and  charges,  was  insured  at  and 
from  any  port  or  ports  in  Cochin,  to  Marseilles.  The  insurer  defended 
the  action  brought  on  the  policy  for  a  total  loss  with  a  plea  that  the 
goods  insured  were  not  seaworthy  for  the  voyage  at  the  time  the  ship 
set  sail.  To  this  plea  the  plaintiff  demurred  on  the  grounds,  "that 
there  is  no  implied  warranty  of  the  seaworthiness  of  the  goods  insured 
by  a  policy;  and  that  the  plea  does  not  allege  that  the  loss  was  at- 
tributable to  the  condition  of  the  goods."  The  demurrer  was  sus- 
tained and  judgment  rendered  for  the  plaintiff.^ 

The  standard  of  seaworthiness  required  to  satisfy  the  warranty  is 
not  uniform  in  every  case,  but  variable  according  to  circumstances. 
Thus,  where  the  policy  relates  to  a  voyage  which  is  performed  in 
different  stages,  during  which  the  ship  requires  different  kinds  of  or 
further  preparation  or  equipment,  there  is  an  implied  w^arranty,  that 
at  the  commencement  of  each  stage  the  ship  is  seaworthy  in  respect 
of  such  preparation  or  equipment  for  the  purposes  of  that  stage.^ 
For  instance,  in  a  policy  "at  and  from,"  the  risk  is  divisible  into  two 
distinct  parts,  the  risk  in  port  and  the  risk  at  sea,  and  a  different 
degree  of  seaworthiness  is  required  at  the  commencement  of  each  of 
these  sections.'*  For  purposes  of  coaling  steamships,  or  renewal  of 
any  consumable  stores,  of  which  a  sufficient  supply  for  the  whole 
voyage  cannot  be  taken  on  board  at  the  start,  it  may  be  appropriate 
to  consider  the  voyage  as  divided  into  stages;  and  it  may  be  a  matter 
of  proof  as  to  where  the  necessity  of  the  case  requires  each  stage  to  be.^ 

So  where  the  voyage  consists  partly  of  river  and  partly  of  sea 
navigation,  and  requires  a  different  state  of  equipment  for  each 
stage,^  if  the  vessel  be  unseaworthy  for  any  distinct  stage  of  the 
adventure  on  entering  upon  it,  the  policy,  it  has  been  held,  will  be 
avoided,  and  no  subsequent  loss  will  be  recoverable,  though  the  de- 

1  Koebel  v.  Saunders,  17  C.  B.  N.  S.  s  The  Vortigern  <1899),  p.  140,  68 
71,  33  L.  J.  C.  P.  310  (cocoanut  oil).  L.  J.  P.  49;  Greenock  SS.  Co.  v.  Marit. 

2  Koebel  v.  Saunders,  17  C.  B.  N.  S.  7ns.  Co.  (1903),  2  K.  B.  657,  72  L.  J. 
71.  If,  however,  the  loss  had  been  K.  B.  868.  "If  the  ship  be  not  sea- 
alleged  and  shown  to  have  been  due  to  worthy  at  the  commencement  of  an 
inherent  vice  in  the  goods,  the  insurer  early  stage,  it  seems  to  follow  ... 
would  not  have  been  liable.  that  the  policy  is  avoided  from  that 

3  The  Vortigern  (1899),  P.  140  time,  so  that  the  insured  cannot  re- 
(coals).  cover  for  a  loss  on  a  later  stage,  on 

*  Greenock  Steamship   Co.   v.   Mari-  which  the  ship  sailed  in  a  seaworthy 

fime/ns.  Co.,  L.  R.  (1903)  2  K.  B.  657  condition,"   De   Hart   &   Simey,   Ins. 

(insufficient  coal);  McLanahan  v.  Uni-  (1907),  51. 

versal  Ins.   Co.,   1   Pet.    (U.    S.)    170,  »  Bouillon  v.  Lupton,  33  L.  J.  C.  P. 

184.  37,  15C.  B.  N.  S.  113. 


230  GENERAL   PRINCIPLES  OF   INSURANCE  LAW 

feet  may  have  been  remedied  before  loss,  and  the  loss  have  occurred 

irrespective  of  it.'  .  xu    • 

The  warranty  of  seaworthiness  in  general  only  attaches  at  the  m- 
ception  of  the  risk;  so  that  in  the  case  of  an  insurance  out  and  home 
if  the  risk  be  one  and  in.livisiblc,  the  starting  of  the  vessel  outward 
in  a  seaworthy  state  will  satisfy  the  warranty,  and  there  will  be  no 
breach,  though  the  vessel  should  be  unseaworthy  upon  sailmg  on  her 
homeward  passage  or  from  any  intermediate  port. 

The  standard  of  seaworthiness  may,  also,  have  a  relation  to  the 
character  of  the  ship  insured,  and  if  an  insurer  agrees  with  full  knowl- 
edge of  the  fads  to  insure  a  vessel  incapable,  from  size  or  construc- 
tion, of  being  l)r()Ught  up  to  the  ordinary  standard  of  seaworthiness, 
the  implied  warranty  will  be  satisfied  if  the  vessel  is  made  as  sea- 
worthy as  her  capacity  will  admit  of.^ 

For  example,  where  both  parties  know  that  the  vessel  is  not  sea- 
going but  constructed  for  river  service.^  The  steamer  Dos  Hermanos, 
when  the  policy  issued,  Avas  in  process  of  construction  at  Philadelphia, 
for  use  as  a  river  steamer  near  Frontera,  Mexico.  The  voyage  from 
Philadelphia  to  Frontera  was  insured,  and  the  use  for  which  the 
vessel  was  designed  was  made  known  to  the  underwriters.  Though 
provided  with  suitable  crew  and  proper  equipment  for  the  voyage, 
the  steamer  was  not,  in  the  character  of  her  construction,  seaworthy 
for  ocean  transit.  After  leaving  the  port  of  Philadelphia,  she  took 
the  inside  course  through  canals  and  bays  as  far  as  possible,  but  below 
Fort  Macon  it  became  necessary  to  go  outside  upon  the  open  sea,  and 
shortly  afterwards  the  vessel  was  lost.  The  verdict  of  the  jury  in 
favor  of  the  insured  was  sustained  on  appeal.'* 

But  as  a  general  rule,  the  character  of  the  voyage,  rather  than  the 
purpose  for  which  the  ship  was  originally  constructed,  must  deter- 
mine the  question  whether  this  warranty  has  been  kept.^ 

It  may  not  always  be  easy  to  draw  the  line  with  precision  between 
certain  doctrines,  relating  to  the  warranty  of  seaworthiness,  which  in 
their  nature  are  somewhat  inharmonious;  thus  on  the  one  side,  the 
general  rules  that  the  warranty  applies  only  to  the  condition  of  the 
vessel  at  the  time  of  the  inception  of  the  risk,  or  time  of  starting,  and 

i  Quebec  Marine   Ins.    Co.   v.    Com.  Thebaud  v.  Phoenix  Ins.  Co.,  52  Hun, 

Ban'c    of    Canada,    L.    R.    3    P.    C.  495,  5  N.  Y.  Supp.  619. 

234.  s  Thebaud  v.    Phoenix  Ins.    Co.,   52 

2  Burges  v.  WicLham,  33  L.  J.  Q.  B.  Hun  (N.  Y.),  495.  23  N.  Y.  St.  R.  814, 
17.  5  N.  Y.  Supp.  619.    Seaworthiness  ap- 

3  Thebaud  v.  Great  West.  Ins.  Co.,  155  plies  to  the  intended  purposes  to  which 
N.  Y.  516,  50  N.  E.  284.  the  vessel  is  to  be  applied,  Paddod-  v. 

<  Thebaud  v.  Great  Western  Ins.  Co.,  Franklin  Ins.  Co.,  11  Pick.  (Mass.) 
155  N.  Y.  516,  50  N.  E.  834.    Compare      227. 


IMPLIED    WARRANTY  —  DEVIATION  231 

that  the  underwriter  may  be  held  liable  for  results  of  negligence  or 
even  of  barratry  by  master  or  mariner  during  the  voyage;  on  the 
other  side,  the  doctrines  by  virtue  of  which  the  voyage  is  divided 
into  stages  for  various  purposes,  and  the  warranty  of  seaworthiness 
on  the  part  of  the  insured  is  extended  so  far  as  to  make  it  applicable 
to  acts  of  master  and  mariners  or  other  representatives  of  the  owners, 
during  the  pendency  of  the  voyage. 

Where  the  nationality  or  neutrality  of  a  ship  or  cargo  is  an  express 
warranty,  it  is  imj)lied  by  the  warranty  of  seaworthiness  that  the 
ship  will  carry  the  requisite  documents  to  show  such  nationality  or 
neutrality.^ 

§  186.  Implied  Warranty — Deviation. — There  is  a  second  implied 
warranty  in  marine  insurance,  namely,  that  there  shall  be  no  devia- 
tion.2  j^  deviation  is  a  voluntary  departure,  without  necessity  or 
reasonable  cause,  from  the  usual  and  regular  course  of  the  voyage 
contemplated  by  the  policy.^  Whether  an  increase  of  the  risk  is 
occasioned,''  or  whether  the  ship  may  have  regained  her  route  before 
loss,  or  whether  the  deviation  may  have  contributed  to  the  loss,  is 
immaterial,^  the  insurer  is  discharged  from  liability  as  from  the  time 
of  deviation.^ 

Thus,  in  a  leading  case  in  which  reformation  of  the  policy  was 
prayed  for,  a  policy  in  favor  of  Hearne  for  $5,000  insured  the  bark 
Maria  Henry,  under  his  charter-party,  valued  at  $16,000,  "at  and 
from  Liverpool  to  port  in  Cuba,  and  at  and  thence  to  port  of  dis- 
charge in  Europe."  The  insured  vessel,  loaded  with  coal,  proceeded 
to  St.  lago  de  Cuba  and  discharged  her  outward  cargo  there.  Thence 
she  went  to  Manzanillo,  another  port  in  Cuba,  where  she  took  on 


1  Elting    v.    Scott,    2    Johns.     157;  Dec.   .592;  Snyder  v.   Atlantic  Mutual 
Christie  v.  Secretan,  8  T.  R.  192.  Ins.  Co.,  95  N.  Y.  196,  47  Am.  Rep. 

2  See  English  codification  of  law  of  29;    Coffin  v.  Insurance   Co.,  9    Mass. 
deviation  and  excuses  therefor,  Mar.  436. 

Ins.  Act  (1906),  c.  41,  §§  46-49.  ^Burgess  v.    Equitable  Marine  Ins. 

^Hosteller  v.  Park,  137  U.  S.  30,  40,  Co.,  126  Mass.  70,  30  Am.  Rep.  654; 

11  S.  Ct.  1;  Martin  v.  Ins.  Co.,  2  Wash.  Davis  v.  Garrett  (1830),  6  Bing.  716; 

(C.  C.)  254;  Coffin  v.  Newburyport,  etc.,  Thompson  v.  Hopper  (1856),  6  E.  &  B. 

Ins.  Co.,  9  Mass.  436,  447;  Kettell  v.  948,  26  L.  J.  Q.  B.  22. 

Wiqqin,     13    Mass.     68;     Thebaud    v.  o  Illustration  from  Chalmers  &  Owen, 

Great  Western  Ins.  Co.,  155  N.  Y.  516,  Ins.     (1907):     Insurance    on     salvage 

522,  50  N.  E.  284  (in  which  it  is  said:  pumps  from  A.  to  the  SS.  Alexandra 

"whether  the  departure  amounts  to  a  ashore  in  the  neighborhood  of  D.  "and 

deviition  must  be  determined  by  the  while  there  engaged  at  the  wreck  and 

motive,     consequences,     and     circum-  until    again    returned    to    A."      The 

stances  of  the  act")-  pumps  are  lost  on  the  wreck  while  it  is 

*  Mariiand    Ins.    Co.    v.    Leroy,    7  being  towed  to  N.,  a  port  of  safety. 

Cranch,  26,  3  L.  Ed.  257;  Natchez  Ins.  This  is  a  deviation,  WiJigate  v.  Fostei 

Co.  V.  Stanton    10  Miss.  340,  41  Am.  (1878),  3  Q.  B.  D.  582. 


2'62  UENERAL   PRINCIPLEy   UF   INSURANCE   LAW 

board  a  cargo  of  native  woods.  On  the  homeward  voyage  she  was 
lost  by  perils  of  the  sea.  The  company  refused  to  pay  the  charterer 
upon  tlie  ground  that  the  voyage  from  St.Iago  de  Cuba  to  Manza- 
nillo  was  a  deviation  from  the  voyage  described,  inasmuch  as  the 
policy  specified  "port"  and  not  "ports."  The  court  sustained  the 
defense  and  also  held  that  the  testimony  produced  by  the  plamtiff 
tending  to  show  a  trade  usage  incident  to  such  voyages  to  go  to  two 
ports  in  Cuba,  one  for  discharge  of  outward  cargo,  and  another  for 
shipping  a  return  cargo,  was  not  sufficient  to  establish  a  mutual  mis- 
take of\he  parties  in  the  contract  as  written,  and  would  not  avail 
for  reformation  of  the  policy.^ 

The  Massachusetts  court  furnishes  an  instructive  illustration.  A 
vessel,  named  Christie  Johnstone,  was  insured  "at  and  from  Plym- 
outh to  the  Banks,  cod-fishing,  and  at  and  thence  back  to  Plym- 
outh." She  took  the  usual  quantity  of  bait,  insufficient,  however, 
for  the  trip,  the  practice  being  to  rely  principally  on  catching  squid 
on  the  Banks  to  use  for  bait.  This  year  the  squid,  though  formerly 
plenty,  were  very  scarce,  and,  in  order  to  procure  bait,  the  master 
was  obliged  to  go  one  hundred  miles  from  the  Banks  to  the  port  of 
St.  Peters,  the  trip  thither  with  return  to  the  Banks  occupying  about 
a  week.  Subsequently  while  fishing  on  the  Banks,  the  vessel  sprung 
a  leak  in  a  severe  gale  and  was  totally  lost.  The  insurance  company 
claimed  that  the  number  of  fish  taken  on  the  trip  was  of  no  concern 
to  it,  and  that  if  the  insured  proposed  either  to  fish  or  catch  bait  in 
other  waters  than  those  specified,  he  should  have  insured  the  fresh 
adventure.  The  court  held  that  while  the  plaintiff's  vessel  might 
have  delayed  for  any  reasonable  time  upon  the  Banks  for  the  purpose 
of  the  voyage,  including,  for  example,  the  occupations  of  fishing  or 
getting  bait,  without  being  guilty  of  deviation,  yet  to  depart  from 
the  specified  route,  though  necessary  to  the  success  of  the  fishing 
adventure,  was  an  unwarranted  deviation  which  avoided  the  policy 
in  suit.^ 

Trade  usage  plays  an  important  part  in  fixing  the  proper  course;  ^ 
but  a  deviation  from  the  direct  course  of  the  voyage  insured,  though 
in  conformity  with  usage,  will  not  be  covered  unless  made  in  further- 

1  Hearne  v.  Maiine  Ins.  Co.,  20  Wall.  3  Hostetter  v.  Park,  137  U.  S.  30,  11 
488.  22  L.  Ed.  395.  The  plaintiff,  how-  S.  Ct.  1 ;  Parsons  v.  Manvfacturers'  Ins. 
ever,  succeeded  in  getting;  a  judgment  Co.,  16  Gray  (Mass.),  463,  465;  and  see 
reforming  a  policy  issued  by  another  §  89.  But  custom  is  not  admissible  to 
company  upon  the  same  charter-party,  disturb  an  unambiguous  description  of 
Equitable  Safet'i  Ins.  Co.  v.  Hearne,  20  prohibited  waters,  Odiorne  v.  New  Eng- 
Wall.  (U.  S.)  494,  22  L.  Ed.  398.  land  Mut.  Mar.   Ins.  Co.,   101    Mass. 

2  Burgess  v.  Equitable  Mar.  Ins.  Co.,  551,  3  Am.  Rep.  401. 
126  Mass.  70,  30  Am.  Rep.  654. 


IMPLIED   WARRANTY — DEVIATION  233 

ance  of  the  adventure  to  which  the  poUcy  relates;  ^  and  if  the  course 
of  saiHng  between  the  places  named  is  not  fixed  by  mercantile  usage, 
such  a  course  must  be  pursued  as  would  appear  reasonably  direct 
and  advantageous  to  a  master  of  ordinary  skill  and  discretion.^  But 
no  voyage  for  any  lawful  purpose  is  a  deviation  under  a  time  policy 
"to  all  places  on  the  globe."  ^ 

If  a  vessel  is  insured  to  or  from  a  district  containing  several  ports 
not  mentioned  by  name  in  the  policy,  she  must  visit  them  in  their 
natural  or  geographical  order;  "*  but,  if  the  ports  are  designated  by 
name,  they  must  be  visited  in  the  order  in  which  they  are  mentioned 
in  the  policy.^  It  is  not  essential,  however,  that  a  vessel  thus  insured 
should  proceed  to  all  the  ports  named.  She  may  go  to  one  or  more 
and  omit  the  rest.  But  such  ports  as  she  does  call  at  must  be  visited 
in  the  order  above  described,  and  it  is  not  lawful  for  her  to  revisit 
any.^  This  rule  is  binding  unless  the  departure  is  warranted  by 
recognized  usage.' 

A  mere  plan  or  intention  to  deviate  without  the  overt  act  does  not 
avoid;  *  until  the  deviation  begins  the  policy  is  still  in  force.^  But  a 
mere  deviation,  with  intention  to  return  to  the  course  and  complete 
it,  must  be  distinguished  from  a  change  of  voyage,  since  the  rules  of 
law  applicable  are  not  precisely  the  same  in  both  cases.  There  is  a 
change  of  voyage,  where,  after  the  commencement  of  the  risk,  the 

1  Pearson  v.  Commercicl  Union  Assur.  s  Beatson  v.  Haworth,  6  T.  R.  533,  3 

Co.,  L.  R.  1  App.  Cas.  498.    Where  the  Rev.  R.  258;  Marsden  v.  Reid,  4  East, 

course  is  defined  by  names  of  places  in  576. 

a  general  printed  bill  of  lading,  it  may  6  Marsden  v.  Reid,  3  East,  576. 

be  a  deviation  to  adhere  to  such  defini-  7  McCall  v.  Sun  Mutual  Ins.  Co.,  66 

tion  if  the  character  of  the  adventure  N.    Y.    505.      A    departure    to    learn 

demands  a  more  direct  route,  Marget-  whether  a  port  not  of  destination  is 

son  V.  GZynn,  1  Q.  B.  337  (1892).    Even  blockaded    is    a    deviation,    Maryland 

a  liberty  to  deviate  may  not  authorize  Ins.  Co.  v.  Woods,  6  Cranch  (U.  S.),  29. 

an  independent  voyage  for  a  different  Or  to  stop  at  intermediate  ports  be- 

object,  Seccomb  v.  Provincial  Ins.  Co.,  tween  two  specified  ports  in  the  ab  • 

10  Allen  (Mass.),  305.  sence  of  necessity  or  custom,  Mann- 

^  Hearne    v.    Marine    Ins.    Co.,    20  heiyn  Ins.  Co.  v.  Atlantic  &  L.  S.  R. 

Wall.    (U.    S.)    488,   22    L.    Ed.    395;  Co.,  Rap.   Jud.   Queb.    11    B.   R.   200 

Commonwealth  Ins.  Co.  v.  Cropper,  21  (1902),  11  K.   B.   200.    Compare  Mc- 

Md.  311;  Turner  V.  Protection  Ins.  Co.,  Call  v.  Sun  Mut.  Ins.  Co.,  66  N.  Y. 

25  Me.  515,  43  Am.  Dec.  294;  Reade  v.  505. 

Commercial  Ins.  Co.,  3  Johns.  352,  3  ^Arnold  v.  Pac.  Mut.  Ins.  Co.,  78 

Am.  Dec.  495.    If  repairs  become  nee-  N.  Y.  7;  Thellusson  v.  Ferguson  (1780), 

essary    the    master   need    not    always  1  Dougl.  361; /vewZey  v. /?ran  (1794),  2 

select     the     nearest     available     port,  H.  Bl.  343;  Hesclton  v.  Allnut  (1813), 

Phelps,  James   &   Co.  v.  Hill,  1  Q.  B.  1  M.  &  S.  46;  Hare  v.  Travis  (1827),  7 

605,  617  (1891).  B.  &  Cr.  14. 

^  EUery  v.  New  England  Ins.  Co.,  8  ^Marine    Ins.     Co.     v.     Tucler,    3 

Pick.  (Mass.)  14.  Cranch,  357,  2  L.  Ed.  466;  Beams  v. 

i  Metcalfe  v.   Parry,  4  Camp.    123;  Columbian  Ins.  Co.,  48  Barb.  (N.  Y.) 

Clason  v.  Simmonds  (1741),  6  T.  R.  445. 
533.  n. 


234 


GENEUAL   PRINCIPLES   OF   INSURANCE   LAW 


destination  of  the  ship  is  voluntarily  changed  from  the  destination 
contemplated  by  the  policy;  and,  in  the  latter  case,  according  to  the 
law  of  Great  Britain,'  the  insurer  is  discharged  from  Uability  as  from 
the  time  when  the  determination  to  change  is  manifested,  although 
the  ship  may  not  in  fact  have  left  the  regular  course  when  the  loss 
occurs.'  The  same  distinction  seems  to  be  recognized  in  this  coun- 
try.' If  the  ship  originally  set  sail  from  a  place  of  departure,  or  to  a 
destination,  other  than  that  specified  in  the  policy,  the  risk  does  not 
attach  at  all,  since  the  insurance  is  then  avoided  from  the  inception 
of  the  contract.'* 


§  187.  Deviation  by  Delay. — Unjustifiable  delay  in  the  prosecu- 
tion of  the  adventure  under  a  voyage  policy  amounts  to  a  deviation, 
and  the  insurer  is  discharged  from  liability  as  from  the  time  when 
the  delay  becomes  unreasonable.^ 

This  rule  is  exemplified  by  a  case  in  a  low^er  Federal  court,  in  which 

iMar.  Ins.  Act  090G^,  §45. 

2Arnould,  §§380,  3S1,  386;  Tasker 
V.  Cunningham  (1819),  1  Bligh,  87. 

3  Merrill  V.  Bovlston  F.  &  M.  Ins.  Co., 
3  Allen  (Mass. ) ,  247.  Compare  Beams  v. 
Columbian  Ins.  Co.,  48  Barb.  (N.  Y.) 
445  (intent  to  deviate  is  not  deviation); 
Simp.=ion  S.  Co.  v.  Premier,  etc.,  As.^n. 
(1905),  10  Com.  Cas.  198,  201  ("an  in- 
tention to  commit  a  breach  of  course 
does  not  itself  constitute  a  breach,"  by 
Bingham,  J.). 

*  Way  v.  Modigliani  (1787),  2  T.  R. 
30;  Simon  v.  Sedgwick  (1893),  1  Q.  B. 
303.  Where  a  policy  on  goods  covered 
both  sea  transit  and  subsequent  land 
transit,  the  court  held  that  to  deter- 
mine whether  the  risk  attached,  the 
terminus  of  the  sea  voyage  only  had  to 
be  considered,  Simon  v.  Sedgwick 
(1893),  1  Q.  B.  303,  62  L.  J.  Q.  B.  163. 

^Arnold  v.  Pac.  Mut.  Ins.  Co.,  78 
N.  Y.  7;  Audenreid  v.  Mercantile  Mut. 
Ins.  Co.,  60  N.  Y.  482.  Illustration 
from  Chalmers  &  Owen,  Ins.  (1907): 
A  ship  is  insured  from  England  to  the 
coast  of  West  Africa  and  "during  her 
stay  and  trade  there"  and  back  to 
England.  After  completing  her  cargo 
for  homeward  voyage,  she  delays  sail- 
ing for  a  month  to  salve  the  cargo  of 
another  ship  v/hich  has  been  wrecked. 
On  the  way  home  she  is  lost.  The 
assured  cannot  recover.  Company  of 
African  Merchants  v.  Brit.  his.  Co 
(1873),  L.  R.  8  Exch.  154.  In  apply- 
ing this  rule  there  must  be  kept  in 
view   the   object  of  the   voyage,   the 


cause  for  the  delay,  the  usage  of  trade, 
and  whether  the  act  was  done  in  the 
exercise  of  good  faith  and  sound  dis- 
cretion or  otherwise.  No  certain  or 
fixed  time  can  be  said  to  be  reasonable 
or  unreasonable,  Foster  v.  Jackson  Ins. 
Co.,  1  Edm.  Sel.  Cas.  (N.  Y.)  290,  305; 
New  Jersey  Lighterage  Co.  v.  New  York 
Mut.  Ins.  Co.,  17  Jones  &  S.  (N.  Y.) 
165,  168;  Phillips  v.  Irving,  7  Man.  & 
Gr.  325,  327.  See  Grant  v.  King,  4 
Esp.  175,  176,  the  question  here,  how- 
ever, was  whether  the  delay  voided 
the  policy  or  whether  there  was  an 
abandonment  of  the  original  voj'age. 
See  §  186,  supra.  I'nreasonable  delay 
in  starting  from  initial  port  may  pre- 
vent policy  from  attaching.  Maritime 
Ins.  Co.  V.  Stearns  (1901),  2  K.  B.  912. 
Where  a  policy  of  insurance  was  ef- 
fected on  a  ship,  at  and  from  Montreal 
to  Montevideo,  and  a  delay  occurred  in 
the  arrival  of  the  vessel  at  Montreal, 
which,  by  converting  the  voyage  from 
a  summer  into  a  winter  one,  materially 
affected  the  risk  and  rate  of  premium, 
it  was  held  that  the  policy  would  not 
attach,  De  Wolf  v.  Archangel  Mar. 
Bank  &  Ins.  Co. ,  2  Asp.  Mar.  L.  C.  273. 
Delay  occasioned  by  seizure  for  debts 
for  repairs  is  not  excusable,  Augusta 
Ins., etc.,  Co.  v.  Abbott,  12  Md.  348. 
Nor  delay  by  the  master  for  his  own 
purposes,  Mount  v.  Larkijis,  8  Bine. 
108,  21  E.  C.  L.  241  (and  cases  cited). 
Nor  unnecessary  delay  waiting  for 
documents,  Himely  v.  Ins.  Co.,  1  Mill 
Const.  (S.  C.)  154,  12  Am.  Dec.  623. 


DEVIATION,   WHEN   PROPER  235 

the  defendant  had  insured  the  plaintiff  $500,  by  valued  policy,  "on 
his  commissions  as  supercargo  of  the  Leonidas  from  Alexandria  to 
Pernambuco,  until  landed."  The  vessel  arrived  off  Pernambuco  at 
9  A.  M.,  but  instead  of  going  directly  into  port  she  came  to  anchor 
in  the  outer  roadstead,  while  the  master  went  to  town  for  several 
hours  to  inquire  about  the  market.  A  storm  came  on;  the  anchor 
dragged,  and  the  vessel  drifted  ashore.  The  court  instructed  the 
jury  that  if  the  vessel  could  have  proceeded  to  port  without  coming 
to  anchor  in  the  outer  road,  the  stopping  there  was  a  deviation  which 
discharged  the  underwriters.  The  insurance  company  got  a  verdict 
from  the  jury.^  In  the  following  instances,  on  the  other  hand,  the 
delay  was  held  to  be  justifiable:  where  a  ship  was  detained  for  six 
weeks  by  a  belligerent  cruiser;  ^  where  an  American  ship  was  delayed 
because  of  the  impossibility  of  getting  an  American  crew  in  a  French 
port ;  ^  where  a  ship  was  detained  more  than  four  months  for  repairs, 
and  by  insufficient  depth  of  water  to  cross  the  bar;  '^  where  a  ship 
was  delayed  at  an  intermediate  port  to  make  it  seaworthy  for  the 
next  stage  of  the  voyage;  ^  where,  in  pursuance  of  a  known  usage 
of  the  trade,  the  ship  stopped  a  reasonable  time  for  selling  out  her 
cargo.* 

§  188.  Deviation,  when  Proper. — A  deviation  is  justifiable,  and 
does  not  exonerate  the  insurers,  if  it  is  necessitated  either  by  physical 
or  by  moral  force.'  The  compulsion,  however,  must  be  real  and  not 
unsubstantial  or  imaginary. 

Thus,  in  an  early  case,  the  insurance  was  on  goods  on  board  the 
Margaret  and  Anne  from  Iceland  to  England.  A  total  loss  happened 
by  fire;  but  prior  to  the  loss,  while  the  vessel  still  lay  at  Iceland,  the 
captain  of  an  English  warship  lying  near  by  ordered  the  master  of 
the  Margaret  and  Anne  to  go  out  to  sea  to  examine  a  strange  sail. 
No  violence  or  threats  accompanied  the  order,  but  the  master  with- 
out remonstrance  or  protest,  perhaps  with  a  hope  of  sharing  prize 

^West    V.    Columbian    Ins.    Co.,    5  7  The  necessity  is  not  to  be  tested 

Cranch    (C.  C),   309,    Fed.    Cas.    No.  by  the  event  but  by  all  the  circum- 

17,421.  stances  attending  the  case,  Byrne  v. 

"i  Scott  V.  Thompson  (1805),  1  B.  &  Louisiana  State  Ins.  Co.,  7  Mart.N.  S. 

P.  N.  R.  181.  (La.)  126.     See  also  StocJ er  v.  Harris, 

3 Grant  v.  King  (1802),  4  Esp.  175.  3  Mass.  409,  418,  where  it  is  declared 

'i  Smith  V.  Surridge  (1801),  4  Hsp.  25.  that  the  necessity  must   be  real   and 

^Bouillon     V.     Lupton     (1863),     15  irapevious,  Burgess  v.  Equitable  Marine 

C.  B.  N.  S.  113,  33  L.  J.  C.  P.  37.  Ins.  Co.,  126  Mass.  70,  79,  80,  30  Am. 

6  Columbian  Ins.   Co.   v.   Catlett,   12  Rep.  654;  Riggin  v.  Patapsco  Ins.  Co., 

Wheat.  383,  6  L.  Ed.  664.     So  also  7  Hur.  &  J.   (Md.)  279,  289,  10  Am. 

where  ship  stopped  to  take  on  water,  Dec.  302;  Kettell  v.  Wiggin,  13  Mass 

Wood    V.    Pleasants,    Fed.    Cas.    No.  68,  72. 

17,961,  3  Wash.  C.  C.  201. 


230  GENERAL   PRINCIPLES   OF   INSURANCE    LAW 

money,  put  out  to  sea,  fired  two  guns  at  the  strange  sail,  and,  upon 
discovery  that  she  was  a  neutral,  returned  to  his  moorings.  Lord 
Ellenborough  decided  that  there  was  no  duress,  either  physical  or 
moral,  exercised  l)y  the  naval  commander  or  his  crew;  and  that, 
however  laudable  might  have  been  the  purpose  of  the  master  in  obey- 
ing the  direction  of  the  captain  of  the  warship,  the  deviation  being 
without  legal  excuse,  the  voyage  insured  was  at  an  end,  and  the 
policy  forfeited.* 

But  in  another  case  the  motive  for  the  departure  was  quite  differ- 
ent, and  the  insured  was  held  entitled  to  recover  the  loss  of  his  ship 
by  capture.  The  policy  was  upon  the  Samuel  Gumming,  at  and  from 
Jamaica,  and  Trinidad  in  the  island  of  Cuba,  to  any  port  or  ports  of 
her  discharge  in  the  United  Kingdom.  In  an  unsuccessful  quest 
for  convoy  the  captain  deviated  slightly  from  the  regular  course, 
went  around  near  Havana,  and  made  a  call  of  an  hour  at  Moro  Castle. 
Chief  Justice  Gibbs  said  that  whatever  is  necessary  for  the  safety  of 
the  ship,  the  captain  may  do  as  agent  to  the  underwriters;  and  that 
it  may  be  as  justifiable  to  seek  convoy  as  to  avoid  an  enemy. ^ 

If  a  vessel  is  forcibly  diverted  from  her  course  by  stress  of  weather,^ 
the  compulsion  of  an  enemy  in  time  of  war,^  or  the  violence  of  a 
mutinous  crew,^  or  refusal  of  the  crew  to  proceed  on  the  voyage,* 
such  a  deviation  is  excusable. 

If  a  vessel  put  into  a  port  outside  the  ordinary  course  for  repairs  ^ 
or  necessary  supplies,*  or  to  set  her  cargo  in  order,  or  to  procure 
proper  officers,  or  to  recruit  the  crew  for  the  navigation,^  or  if  she 
remain  in  her  port  of  lading  to  avoid  a  capture,*^  or  depart  from  the 
usual  course  from  the  same  motive,  the  divergence  is  excusable.** 

I  Phelps  V.  Auldjo  (1809),  2  Camp.  ship   was   delayed   by   adverse   winds 

350.  and  danger  and  put  into  a  place  of 

^D'Aguilar   v.    Tobin   (1816),   Holt  safety  on  its  course  and  sent  ashore 

N.  P.  185.     So  also  where  there  was  a  for    provisions    and    the    policy    gave 

deviation  to  avoid  capture,  O'Reilly  v.  liberty  to  touch  and  stay.    See  Coles  v. 

Gonne  (1815),  4  Camp.  249.  Marine  Ins.  Co.,  3  Wash.  (U.  S.  C.  C.) 

3  Graham  v.  Commercial  Ins.  Co.,  11  159,  163,  per  Washington,  J.;  Wood  v 

Johns.   (N.  Y.)  352;  Delaney  v.  Stod-  Pleasants,  3  Wash.  (U.  S.  C    C)  201, 

dart,  1  Term  Rep.  22,  1  Rev.  Rep.  139.  Fed.  Cas.  No.  17,961. 

^•&ee  Scott  \\  Thompson,!  Bos.  &V.  ^Winthrop    v.    Union    Ins.    Co.,    2 

N.  R.  181  (ship  detained  six  weeks  by  Wash.   (U.  S.  C.  C.)  7,  17,  Fed    Cas. 

a  hostile  cruiser).  No.  17,901;  Fernandez  v.  Great  Western 

5  See  Elton  v.   Brogden,  2  Strange,  In.^.  Co.,  3  Robb.  (26  N.  Y.  Super.  Ct. 

^^*^1;  .      „        „  '^^'>  475,  per  Morrell,  J.,   case  is  re- 

«Driscoll  V.  Bovil,  1  Bos.  &  P.  313.  versed  48  N.  Y.  571,  8  Am.  Rep   ,571. 

T  Turner  v.   Protection  Ins.   Co.,  25  ^'^  Whitney  v.  Haven,  13  Mass    172 

Me.  515,  43  Am.  Dec.  294;  Hall  v.  7ns.  u  Po.'^t  v.  Phcenix  Ins.  Co.,  10  .Johns 

Co.,  9  Pick.   (Mass.)  466;  Sillo^'av  v.  (N.Y.)  78;  Go-on  v.  Plea.mnts,  3  Wash 

Neptune  Ins.  Co.,  12  Gray  (Mass.),  73.  (U.  S.  C.  C.)  241,  Fed.  Cas.  No   5  647* 

8  Thomas  v.   Royal  Exchange  Assiir-  Illustration   from   Chalmers   &   Owen 

ance,  1  Price,  195.     In  this  case  the  Ins.  (1907):  Ship  insured  from  Lyons 


DEVIATION,    M'HEN  PROPER  237 

A  deviation  is  also  proper  when  caused  by  circumstances  over  which 
neither  the  master  nor  the  owner  of  the  ship  has  any  control/  or 
when  necessary  to  comply  with  a  warranty,^  or  to  avoid  a  peril 
whether  insured  against  or  not,^  or  when  caused  by  barratrous  con- 
duct of  master  or  crew  if  barratry  be  insured  against,^  or  when  made 
in  good  faith  for  the  purpose  of  saving  human  life,  as,  for  example, 
for  necessary  treatment  of  a  sick  or  wounded  seaman,^  or  relieving 
another  vessel  in  distress.® 

A  departure  from  an  ordinary  course  of  the  voyage  with  the  object 
of  saving  persons  whose  lives  are  in  jeopardy  is  allowed  on  the  ground 
of  humanity,  but  the  same  immunity  will  not  be  extended  in  favor 
of  a  deviation  made  solely  for  the  purpose  of  saving  property^ 

Thus,  in  an  English  case,  the  plaintiffs  chartered  the  defendants' 
steamship  Olympias  to  carry  a  cargo  of  wheat  from  Cronstadt  to  the 
Mediterranean.  Whilst  on  her  voyage  thither  the  defendants'  cap- 
tain sighted  the  Arion  in  distress,  and  for  £1,000  agreed  to  tow  her 
into  the  Texel,  which  was  out  of  his  direct  course.  Whilst  so  doing, 
the  Ohjmpias  stranded,  and  ultimately  with  her  cargo  was  totally 
lost.  To  save  the  Arion  and  her  cargo,  it  was  necessary  to  take  her 
to  the  Texel;  but  the  deviation  was  not  necessary  to  the  safety  of 
those  on  board  her.  Consequently  it  was  held  that  there  was  a  fatal 
deviation  and  that  the  plaintiffs  were  entitled  to  recover  the  value 
of  their  cargo  against  the  defendants  as  owners  of  the  ship  in  fault.* 

When  the  cause  excusing  the  deviation  or  delay  ceases  to  operate, 

to  Galatz.     She  starts  from  Lyons  on  4  Ross  v.  Hunter,  4  T.  R.  33. 

July  24,  properly  equipped  for  the  river  ^  The   Iroquois,   194    U.    S.   240,  24 

voyage.      She    is    detained    for    three  S.  Ct.  640.     See  also  Perkins  v.   Au- 

weeks  at  Marseilles  to  equip  herself  for  gusta  Ins.  &  Big.  Co.,  10  Gray  (Mass.), 

the  open  sea  voyage.     This  delay  is  312,  71  Am.  Dec.  654. 

justifiable.  Bouillon  v.  Lupton  (1863),  ^Schooner  Boston,  1   Sumn.  328. 

15  C.  B.  N.  S.  113.  7  Co.  of  African  Merchants  v.  Brit- 

1  "If  a  degree  of  force  was  exercised  ish  &  Foreign  Marine  Ins.  Co.,  L.  R. 
towards"  the  master  "which  either  8  Exch.  154.  See  also  Settle  v.  Per- 
physically  he  could  not  resist,  or  petual  Ins.  Co.,  7  Mo.  379.  But  com- 
morally  as  a  good  subject  he  ought  pare  Woolf  v.  Claggett,  3  Esp.  257,  258, 
not  to  have  resisted,  the  deviation  is  6  Rev.  R.  830.  If  the  paramount 
justified,"  otherwise  not.  Phelps  v.  motive  is  to  save  life,  and  the  saving  of 
Auldjo,  2  Camp.  350,  351,  per  lord  property  is  incidental,  the  under- 
EUenborough.  Cal.  Civ.  Code,  §  2G95,  writer  is  liable,  Williams  v.  Box  of 
subd.  1.  Bullion,  1  Spr.   (U.  S.)  57,  Fed.  Cas. 

2  Going  out  of  course  to  procure  a  No.  17,717;  Crocker  v.  JacI son,  1  Spr. 
pilot  is  not  a  deviation,  Pouverin  v.  (U.  S.)  141,  Fed.  Cas.  No.  3,398; 
Louisiana  State  Mar.  &  F.  Ins.  Co.,  4  Scaramaaga  v.  Stamp,  5  C.  P.  Div. 
Rob.  (La.)  234.  295. 

3  See  Lee  v.  Gra^i,  7  Mass.  349;  » Scaramanga  v.  Stamp  (1880),  5 
Robinson  v.  Marine  Ins.  Co.,  2  Johns.  C.  P.  D.  295,  49  L.  J.  C.  P.  674  (no 
(N.  Y.)  89;  Scott  v.  Thompson,  1  Bos.  question  of  insurance  was  directly  in- 
&  P.  N.  R.  181;  Cal.  Civ.  Code,  §  2695,  volved). 

subd.  2. 


23S 


GENERAL   PRINCIPLES  OF   INSURANCE   LAW 


the  ship  must  resume  her  course  and  prosecute  her  voyage,  with 
reasonable  dispatch.' 

In  time  policies,  especially  on  voyages  in  inland  waters,  a  devia- 
tion from  the  permitted  course  has  been  held  to  suspend  and  not  to 
avoid  the  policy;  ^  but  these  decisions  are  of  very  questionable  sound- 
ness, and  are  not  in  accord  with  the  current  of  authority.^  No  such 
doctrine  is  recognized  by  the  English  common  law,^  or  by  the  English 
codification  of  marine  insurance  law.^ 


§  189.  Illegality. — There  is  a  third  implied  warranty,  that  the 
adventure  insured  is  a  lawful  one  and  that  so  far  as  the  insured  can 
control  the  matter  the  adventure  shall  be  carried  out  in  a  lawful 
manner.*^  Illegality  in  any  part  of  an  integral  voyage  has  been  held 
to  make  the  whole  voyage  illegal;^  but  mere  knowledge  that  there  is 
some  illegality  in  the  performance  of  the  voyage  does  not  make  the 
insured  a  party  to  the  illegality  when  he  has  no  control  over  the  navi- 
gation of  the  ship.* 

The  lawfulness  of  an  American  adventure  or  an  American  insur- 
ance, as  the  question  comes  before  an  American  court,  is  determined 
by  American  law.^    In  relation  to  an  American  policy,  an  adventure  is 


lEng.  Mar.  Ins.  Act  (1906),  §49. 
Preliminary  trial  trips  up  and  down 
a  river  by  a  new  craft  to  test  the  ves- 
sel's capacity  to  make  an  ocean  voyage 
may  not  be  deviations,  Thebaud  v. 
Great  Western  Ins.  Co.,  155  N.  Y.  516, 
50  N.  E.  284.  Compare  Fernandez  v. 
Great  Western  Ins.  Co.,  48  N.  Y.  571,  8 
Am.  Rep.  571. 

2  Greenleaf  v.  St.  Louis  Ins.  Co. ,  37 
Mo.  25;  Hennessey  v.  Manhattan  Fire 
Ins.  Co.,  28  Hun  (N.  Y.),  98;  WiV.ins 
V.  Ins.  Co.,  30  Ohio  St.  317.  Question 
of  deviation  often  turns  upon  the 
phraseology  or  stipulation  of  the 
policy. 

3  Cogswell  v.  Chuhh,  1  App.  Div.  93, 
36  N.  Y.  Supp.  1076,  aff'd  157  N.  Y. 
709;  Odiorne  v.  New  England  Mut. 
Mar.  Ins.  Co.,  101  Mass.  551,  3  Am. 
Rep.  401;  Stetson  v.  Mass.  Mid.  Fire 
Ins.  Co.,  4  Mass.  330,  3  Am.  Dec.  217. 
See  §  114. 

•iArnould,  §§376,  377. 

5  Mar.  Ins.  Act  (1906).  §  46  (1). 

6  Redmorul  v.  Smith,  7  M.  &  G.  457. 
As  to  illicit  voyages:  (1)  Where  the 
sovereign  of  a  country  to  which  the 
ship  belongs  prohibits  his  subjects 
from  trading  with  a  foreign  country  or 
port,  whether  the  prohibition  be  a  con- 
sequence of  his  declaring  war  against 


the  foreign  country,  or  be  made  by 
express  ordinance  for  any  cause  at  the 
will  of  the  sovereign.  (2)  Voyages 
prohibited  by  the  trade  laws  of  a 
foreign  state.  (3)  Transportation  by  a 
neutral  of  goods  contraband  of  war 
and  the  law  of  nations  and  (4)  a  trade 
illicit  lege  loci  and  a  trade  illicit  jure 
belli,  see  Richardson  v.  Marine  Ins.  Co., 
6  Mass.  102,  111-115,  4  Am.  Dec.  92, 
per  Parsons,  C.  J.  But  noncompliance 
with  law  of  Congress  requiring  a  cer- 
tain quantity  of  water,  well  secured  un- 
der deck,  does  not  render  the  voyage 
illegal,  so  as  to  avoid  insurance,  War- 
ren v.  Mfrs.  Ins.  Co.,  13  Pick.  (Mass.) 
518,  25  Am.  Dec.  341. 

7  Clark  V.  Protection  his.  Co. ,  1 
Story,  109,  Fed.  Cas.  No.  2,832;  De 
Hart  &  Simey,  Ins.  (1907),  53;  Ar- 
nould,  §§  735-739. 

8  De  Hart  &  Simey,  Ins.  (1907),  53; 
Cunard  v.  Hyde  (1858),  27  L.  J.  Q.  B. 
408;  Arnould,  §  745. 

9  So  also  an  insurance  in  England 
either  on  enemies'  goods  or  against 
British  capture  was  held  illegal  by 
British  court,  Kellner  v.  Le  Mesurier 
(1S03),  4  East,  402,  403;  Gamba  v.  Le 
Mesurier,  4  East,  407.  Illustrations  of 
illegality  from  Chalmers  &  Owoii,  Ins. 
(1907):  (1)  Time  policy  on  ship.    The 


ILLEGALITY 


239 


illegal  which  contravenes  the  laws  or  the  war  policy  of  this  country. 
Thus,  an  insurance  on  an  adventure  prohibited  by  a  United  States 
revenue  law,  or  on  an  enemy's  property,  or  on  an  American  subject's 
unlicensed  trade  with  an  enemy,  is  void.^  So  also  the  carriage  of 
contraband  goods  to  an  enemy  of  this  country,  or  a  voyage  in  breach 
of  an  American  blockade  would  be  an  illegal  adventure." 

Smuggling  voyages,  trading  adventures  to  an  enemy's  port,  and 
all  other  enterprises  prohibited  by  the  law  of  the  land  or  by  the  law 
of  nations,  being  illegal,  no  policy  of  insurance  will  be  upheld  if 
effected  with  the  intent  to  cover  them;  but  this  prohibition  has  been 
held  not  to  apply  to  trading  adventures  undertaken  in  violation  of 
the  revenue  laws  of  other  nations.^  It  has  been  urged,  however,  that 
a  sound  regard  for  international  ethics  must  ultimately  eliminate 
the  exception,  although  now  recognized  both  in  England  and  Amer- 
ica.^ But  the  reasons  favoring  the  deliberate  conclusions  of  the  courts 
on  this  question  are  weighty,  and  are  not  likely  to  be  ignored  in  the 
future.  To  learn  all  the  laws  of  his  home  country  furnishes  a  suffi- 
cient task  for  the  average  person  insured.  Any  rule  fastening  upon 
the  insured  a  sweeping  obligation  to  make  himself  familiar  in  addition 
with  the  local  laws  and  regulations  of  all  foreign  nations  would  be 

1  A.  &  E.  1.  And  see  Parker  v.  Jones, 
13  Mass.  173;  Siadmore  v.  Destoitj/,  2 
Johns.  Cas.  77  (insurance  sustained 
upon  goods  contraband  of  war,  though 
captiu-ed  by  a  British  cruiser  and  con- 
demned). The  United  States  Circuit 
Court  held  with  the  courts  of  England 
and  Massachusetts  "that  a  denial  of 
entry  or  an  interdiction  of  commerce 
at  the  port  of  destination  is  not  a  risk 
within  the  common  policy,"  though  a 
risk  that  could  be  expressly  under- 
taken, Andrews  v.  Ins.  Co.,  3  Mason,  6, 
citing  to  the  different  doctrine,  to  wit, 
that  the  risk  would  fall  within  the 
common  policy,  the  following  New 
York  cases,  Suydum  v.  Mar.  Ins.  Co.,  1 
John.  181;  Schmidt  v.  Ins.  Co.,  1  John. 
249;  Craig  v.  Ins.  Co.,  6  John.  226. 

3  Fracis  v.  Sea  Ins.  Co.,  8  Asp.  Mar. 
Cas.  418  (edict  Persian  government); 
Lever  v.  Fletcher,  Park,  Ins.  (8th  ed.), 
506.  But  policy  would  be  void  if  as- 
sured concealed  any  material  fact 
which  he  was  bound  to  disclose,  Parler 
V.  Jones,  13  Mass.  173.  Insurance 
against  loss  by  a  breach  of  foreign 
trade  laws  is  legal,  Parler  v.  Jones,  13 
Mass.  173;  Richardson  v.  Maine  F.  & 
M.  Im.  Co.,  6  Mass.  102,  4  Am.  Dec. 
92. 

^'Hughes,  Admiralty,  66. 


master  with  the  connivance  of  the 
owner,  engages  in  smuggling.  The 
ship  is  arrested  in  England.  The  in- 
surer is  not  liable,  Pipon  v.  Cope,  1 
Camp.  434.  But  smuggling  or  other 
illegal  conduct  without  owner's  con- 
nivance is  barratry  and  covered,  Cory 
v.  Burr  (1883),  8  App.  Cas.  399. 
(2)  Policy  on  a  French  ship  effected 
in  England,  capture  being  insured 
against.  After  policy  is  effected  war 
breaks  out  between  France  and  Eng- 
land and  the  ship  is  captured  by  a 
British  cruiser.  The  assured  cannot 
recover  on  the  policy,  Kellner  v.  Le 
Mcsurier  (1803),  4  East,  396. 

1  Likewise  Mr.  Justice  Washington 
held  tliat  sailing  under  a  British  license 
during  war  between  this  country  and 
England  was  illegal,  Craig  v.  United 
States  Ins.  Co.,  1  Pet.  C.  C.  410,  Fed. 
Cas.  No.  3,340.  But  see  Hayicard  v. 
Bla'e,  12  Mass.  176. 

2De  Hart  &  Simey,  Ins.  (1907),  53, 
where  it  is  also  said:  "The  English 
courts  pay  no  attention  to  the  revenue 
laws  of  foreign  states,  and  in  case  of  a 
war  between  foreign  states  they  do  not 
regard  blockade  running  or  the  car- 
riage of  contraband  of  war  as  illegal," 
citing  Ex  parte  Abavasse  (1865),  34 
L.  J.  Bk.  17;  The  Helen  (1865),  L.  R. 


240  GENERAL   PRINCIPLES   OF   INSURANCE   LAW 

onerous  and  would  work  injustice  in  many  instances.  To  thus  mul- 
tiply, in  favor  of  the  underwriters,  the  grounds  for  forfeiting  the 
insurance  moneys  which  they  have  agreed  to  pay  in  case  of  loss, 
would  result  in  serious  misfortune,  and  not  infrequently  would  bring 
ruin  to  innocent  parties. 

Policies  upon  risks  which  contravene  either  the  statutes  enacted 
to  regulate  trade  and  navigation,  or  the  commercial  treaties  entered 
into  with  other  countries,  are  void  equally  with  those  which  run 
counter  to  the  revenue  laws,  subject,  however,  to  the  exception, 
that,  if  the  adventure  can  be  carried  on  without  violating  the  law, 
:in  illegal  act  performed  in  the  prosecution  of  it  will  not  invalidate 
the  policy  unless  committed  by  or  with  the  concurrence  of  the  as- 
sured.^ 

Thus,  where  the  defendant  insured  Means  &  Clark,  for  whom  it 
might  concern,  in  the  sum  of  $20,000,  on  the  ship  Avon,  valued  at 
$28,000,  for  one  year.  She  sailed  from  Maine  to  New  Orleans,  thence 
to  Natchez  and  on  her  passage  thence  for  Liverpool  was  totally  lost 
by  perils  of  the  seas.  The  master,  Arthur  Child,  was  employed  for 
the  owners  to  obtain  certain  rigging  and  equipment  for  the  ship.  It 
was  his  intention  to  change  a  hempen  cable  for  one  of  iron.  While  at 
New  Orleans,  Child,  without  privity  of  the  owners,  substituted  for  the 
hempen  cable  an  iron  cable,  worth  more  than  $400,  which  had  been 
smuggled  in  and  secretly  put  aboard  the  Avon  at  night.  Child's  object 
being  to  avoid  payment  of  duties  to  the  United  States.  Justice 
Story  decided  that,  inasmuch  as  the  policy  was  founded  in  no  il- 
legality at  its  inception,  the  plaintiffs  were  entitled  to  recover 
$20,000  for  a  total  loss.^ 

§  190.  Actual  Total  Loss. — A  loss  may  be  total  or  partial.     A 

^Wanghv.  Morris,L.  R.  8  Q.B.  202.  knowledge  of  the  owners,  and  con- 
Thus  in  a  case  where  the  master  of  a  trary  to  their  intentions,  the  policy 
vessel  in  the  timber  trade  stowed  a  was  not  vitiated  by  it,  Dud<feon  v, 
portion  of  the  cargo  on  deck  during  the  PembroI.e,  2  Asp.  Mar.  L.  C.  323,  L.  r! 
winter  season,  and,  contrary  to  statute,  9  Q.  B.  581,  1  Q.  B.  D.  96.  It  has  been 
sailed  without  a  clearance  certificate  held  that  a  policy  "for  whom  it  may 
that  the  cargo  was  below  deck,  it  was  concern"  covers  belligerent  property 
held  that  the  illegility  did  not  vitiate  unless  there  is  something  in  the  case  to 
the  policy,  it  having  been  committed  exempt  it  from  the  ordinary  import  of 
without  the  knowledge  or  privity  of  these  words,  Buck  v.  Chesapea' e  Ins 
the  owner,  Wilson  v.  Rankin,  L.  R.  1  Co.,  1  Pet.  (U.  S.)  151, 160,  7  L.  Ed.  90. 
Q.  B.  162.  Otherwise  if  owner  was  As  to  illegality  of  part  of  the  risk  see 
privy  to  the  illegality,  Cunard  v.  Hyde  Richardson  v.  Maine  Ins  Co  6  Mass 
(1860),  29  L.  J.  Q.  B.  6.  Again,  where  102,  4  Am.  Dec.  92;  Bird  v  Apple- 
a  ship  not  licensed  by  the  board  of  ton,  8  T.  R.  562,  565;  and  compare 
trade  to  carry  passengers  did  carry  Wilson  v.  Maryatt,  8  T.  R.  41  45 
them,  it  was  held,  that,  inasmuch  as  46.  •  >  > 
such  carriage  was  the  unauthorized  ^  Clark  v.  Protection  Ins  Co  1 
act  of  the  master  alone,  without' the  Story,  109,  Fed.  Cas.  No.  2  SSiz        ' 


ACTUAL  TOTAL   LOSS 


241 


total  loss  may  be  actual  or  constructive.  An  actual  total  loss  occurs 
where  the  subject-matter  insured  is  destroyed  or  irreparably  dam- 
aged, or  where  the  assured  is  irretrievably  deprived  of  it.^ 

Thus,  for  instance,  where  a  vessel  founders  in  mid-ocean  in  a  gale,^ 
or  is  captured  by  an  enemy  and  condemned  as  a  prize,^  or  where 
goods  taken  ashore  from  a  wreck  are  plundered  by  the  inhabitants 
of  The  coast.'* 

Indeed,  wherever  the  thing  insured  is  by  the  operation  of  a  peril 
insured  against  reduced  to  such  a  state  as  to  be  incapable  of  use  under 
its  original  name  or  kind,  there  is  an  actual  total  loss.  For  example, 
if  a  ship  is  so  injured  by  the  perils  of  the  sea  as  to  be  incapable  of  re- 
pair, the  loss  is  actual,^  though  her  materials  survive  ^  either  in  frag- 
ments or  bound  together  in  the  original  form.  And  again,  if  goods 
are  so  badly  damaged  as  to  become  incapable  of  use  for  the  purpose 
intended,  there  is  an  actual  total  loss.  As,  for  example,  where  dates 
were  so  impregnated  with  sewage  and  so  fermented  as  not  to  be  mer- 


i  Scelberg  v.  Western  Ass2ir.  Co.,  119 
Fed.  23,  55  C.  C.  A.  601  (ship  was  not 
lost  in  specie).  See  also  The  Blairmore 
(1898),  A.  C.  593,  87  L.  J.  P.  C.  N.  S. 
96  (ship  foundered  in  bay  and  was 
raised,  a  constructive  loss).  But  a 
wreck  incapable  of  being  brought  to 
port  is  an  actual  total  loss,  WalLer  v. 
Protection  Ins.  Co.,  29  Me.  317.  Illus- 
trations from  Chalmers  &  Owen,  Ins. 
(1907) :  (1)  Hides  are  insured  from  Val- 
paraiso to  Bordeaux.  In  consequence 
of  sea  damage  they  arrived  at  Rio  in  a 
state  of  incipient  putridity  and  are 
sold  there.  Their  state  is  such  that 
they  would  be  wholly  putrid  if  carried 
on  to  Bordeaux.  This  is  an  actual  total 
loss,  Roux  V.  Salvador,  3  Bing.  N.  C. 
266.  (2)  A  ship  is  deserted  in  a  sinking 
condition.  She  is  afterwards  towed 
into  port  by  salvors  and  sold  by  order 
of  the  court  for  less  than  the  salvage 
costs.  This  is  an  actual  total  loss, 
Grossman  v.  West  (1887),  13  App.  Cas. 
160.  If  a  ship  can  be  taken  to  a  port 
and  repaired,  though  at  an  expense 
exceeding  its  value,  it  has  not  ceased 
to  be  a  shin,  Nova  Scotia  Mar.  Ins.  Co. 
V.  Churchill,  26  Can.  S.  C.  65,  73,  cit- 
ing Barler  v.  J  arisen,  L.  R.  3  C.  P.  303; 
and  see  Burt  v.  Brewers,  etc.,  Ins.  Co., 
78  N.  Y.  400. 

^Ogden  v.  N.  Y.  Mut.  Ins.  Co.,  35 
N.  Y.  418  (total  loss  of  passage  money). 
Submersion  of  a  vessel  is  or  is  not  a 
total  loss  according  to  circumstances, 
Sewall  V.  U.  S.  Ins.  Co.,  U  Pick. 
(Mass.)  90. 

16 


'^  Rhinelander  v.  7ns.  Co.,  4  Cranch 
(U.  S.),  29;  Monroe  v.  British  F.  &  M. 
Ins.  Co.,  52  Fed.  777,  5  U.  S.  App.  179, 
3  C.  C.  A.  280;  Sawyer  v.  Maine  F.  & 
M.  Ins.  Co.,  12  Mass.  291;  Watson  v. 
Marine  Ins.  Co.,  7  Johns.  (N.  Y.)  57. 
But  not  before  sentence  of  condemna- 
tion while  there  is  a  spes  recuperandi, 
Barney  v.  Marrland  Ins.  Co.,  5  Har.  & 
J.  (Md.)  139.  If  ship  is  afloat,  or  can 
be  put  afloat,  or  at  any  expense  can  be 
repaired,  she  is  not  "an  actual  total 
loss,"  but  underwriters  by  taking 
possession  under  a  rescue  clause  may 
convert  the  loss  into  "an  actual  total 
loss,"  Carr  v.  Security  Ins.  Co.,  109 
N.  Y.  504,  17  N.  E.  369,  16  N.  Y.  St.  R. 
442.  But  it  has  been  held  that  total 
loss  of  value  in  a  ship  though  repair- 
able constitutes  "an  actual  total  loss," 
Bullard  v.  Roger  Williams  Ins.  Co.,  1 
Curt.  (U.  S.)  148. 

4  Boudrett  v.  Heutigg,  1  Holt  (N.  P.). 
149. 

5  Irving  v.  Manning,  1  H.  L.  Cas. 
287;  Murray  v.  Great  Western  Ins.  Co., 
72  Hun,  282,  aff'd  on  opinion  below 
147  N.  Y.  711,  42  N.  E.  724;  Graves  v. 
Washington  M.  Ins.  Co.,  12  Allen 
(Mass.),  391.  ^ 

6  A  mere  congeries  of  materials  use- 
able as  a  coal  barge  is  not  a  ship, 
Merchants'  S.  Co.  v.  Commercial  Mut. 
Ins.  Co.,  51  N.  Y.  Sup.  Ct.  444;  and  see 
Cambridge  v.  Anderton,  2  Barn  &  C. 
691. 


242 


GENERAL   PRINCIPLES   OF  INSURANCE   LAW 


charitable  as  dates.'  So  also  where  perishable  goods  are  so  much 
damaged  that  it  is  impossible  for  them  to  arrive  at  destination,  and 
therefore  they  are  justifiably  sold  at  a  port  of  distress,  there  is  an 
absolute  total  loss.' 

In  the  case  of  an  actual  total  loss,  no  notice  of  abandonment  need 
be  given.'  And  where,  after  the  lapse  of  a  reasonable  time,  no  news 
of  the  ship  has  been  received,  an  actual  total  loss  may  be  presumed.'* 

§  191.  Constructive  Total  Loss— What  Constitutes.— It  may  be 


i  Aslar  &  Co.  v.  Blunddl  (1S9G),  1 
Q.  B.  123,  65  L.  J.  Q.  B.  N.  S.  138, 
73  L  T  Rep.  64S;  but  see  Williams  v. 
Canton  his.  Co.  (1901),  App.  Cas.  462. 
So  where  the  remnants  of  a  machine 
though  about  one-half  in  weight  of  the 
whole  were  of  no  vahie  as  a  machine. 
Great  Western  Ins.  Co.  v.  Foqarty,  19 
Wall.  640,  22  L.  Ed.  216.  So  where 
hides  and  skins  became  putrid  in 
mass,  De  Pe-jster  v.  Ins.  Co.,  19  N.  Y. 
272,  75  Am.  Dec.  331.  So  of  rotten 
fruit,  thrown  overboard,  Djson  v. 
Ro'.ccroft,  3  B.  &  P.  474.  It  is  held 
that  there  can  be  no  actual  total  loss 
of  a  cargo  of  goods  if  any  part  arrive 
in  specie  at  the  port  of  destination  and 
capable  of  use  for  the  purpose  in- 
tended, but  only  when  they  are  physi- 
cally destroyed,  or  their  value  ex- 
tinguished by  a  loss  of  identity,  Wash- 
burn Moen  Mj'j.  Co.  v.  Reliance  Mar. 
Ins.  Co.,  179  IJ.  S.  1,  11,  21  S.  Ct.  1, 
45  L.  Ed.  43  (cargo  of  wire);  Morean 
V.  Ins.  Co.,  1  Wheat.  (U.  S.)  219,  4  L. 
Ed.  75  (cargo  of  corn) ;  Bia>/s  v.  Ins.  Co. , 
7  Cranch  ([].  S.),  415,  3  L.  Ed.  389. 
Wallerstein  v.  Columbian  Ins.  Co.,  44 
N.  Y.  204,  4  Am.  Rep.  664  (coffee, 
total  loss  of  value  is  "a  total  loss"  if 
not  an  "actual  total  loss");  and  com- 
pare Devitt  V.  Prov.  Wash.  Ins.  Co., 
173  N.  Y.  17,  and  Corbett  v.  Spring 
Garden  Ins.  Co.,  155  N.  Y.  389,  50 
N.  E.  282.  If  any  goods  are  left  capa- 
ble of  preservation  in  specie,  an  entire 
loss  of  valvie  is  not  "an  actual  total 
loss,"  Hujq  V.  Ins.  Co.,  7  How.  (U.  S.) 
595, 12  L.  Ed.  834;  Robinson  v.  Common- 
wealth Ins.  Co.,  20  Fed.  Cas.  No.  1002; 
Williams  v.  Kennebec  Mut.  Ins.  Co.,  31 
Me.  455;  Francis  v.  Boidton  (1895),  65 
L.  J.  Q.  B.  153.  Where  goods  reach 
destination  in  specie,  but,  by  reason  of 
obliteration  of  marks,  are  incapable  of 
identification,  loss,  if  any,  is  partial, 
not  total,  Spence  v.  Union  Mar.  Ins. 
Co.  (1868),  L.  R.  3  C.  P.  427.  Jettison 
of  a  caxgo  of  cattle  does  not  create  an 


absolute  total  loss,  whether  they  were 
jettisoned  for  tlie  purpose  of  being 
saved  or  to  lighten  the  vessel,  if  in  fact 
a  part  are  ultimately  saved  and  sold  as 
salvage,  Monroe  v.  British  &  F.  M. 
Ins.  Co.,  52  Fed.  777,  3  C.  C.  A.  280, 
5  U.  S.  App.  179.  As  to  total  loss  of 
•freight  see  Sillou-ay  v.  Neptune  Ins. 
Co.,  12  Gray  (Mass.),  73;  Hubbell  v. 
Great  West.  Ins.  Co.,  74  N.  Y.  246; 
Abbott  V.  Broome,  1  Caines  (N.  Y.),  292, 
2  Am.  Dec.  187;  De  Longuemere  v. 
PhcBnix  Ins.  Co.,  10  Johns.  (N.  Y.)  127. 
As  to  total  loss  of  profits  see  Patapsco 
Ins.  Co.  V.  Coulter,  3  Pet.  222,  7  L.  Ed. 
659.  As  to  sale  by  master  see  Patapsco 
Ins.  Co.  v.  Southgate,  5  Pet.  (U.  S.)  604; 
Gardner  v.  Salvador,  1  Mood.  &  Rob. 
116;  Cambridge  v.  Anderton,  4  Dowl.  & 
Ry.  203,  2  B.  &  Cr.  691;  Martin  v. 
Cro!:att,  14  East,  465;  Nova  Scotia  Mar. 
Ins.  Co.  V.  Churchill,  26  Can.  S.  C.  65. 

^Roux  V.  Salvador  (1836),  3  Bing. 
N.  C.  266,  7  L.  J.  Exch.  328.  Likewise 
where  the  ship  was  justifiably  sold  be- 
cause not  capable  of  being  repaired 
with  profit.  Idle  v.  Royal  Exchange  Ass. 
Co.  (^1819),  8  Taunt.  755;  Gordon  v. 
Mass.  F.  &  M.  Ins.  Co.,  2  Pick.  (Mass.) 
249.  But  where  the  master  having  no 
funds  for  repairing  the  vessel,  sold  her, 
it  was  held  that  there  was  not  a  total 
loss,  Murray  v.  Hatch,  6  Mass.  465. 
Compare  Ain.  Ins.  Co.  v.  Ogden,  15 
Wend.  (N.  Y.)  532,  20  Wend.  (N.  Y.) 
287;  Neilson  v.  Columbian  Ins.  Co., 
1  Johns  (N.  Y.)  301.  Sale  because  of 
lack  of  funds  to  repair  at  port  of  desti- 
nation does  not  constitute  a  total  loss, 
Allen  v.  Commercial  Ins.  Co.,  1  Gray 
(Mass.),  154. 

^  Kaltenbach  v.  Mackenzie  (1878),  3 
C.  P.  D.  471.  Assured  though  suing 
for  total  may  recover  for  partial  loss 
if  policy  permit.  King  v.  Walker,  2 
H.  &  C.  384. 

i  Ogden  V.  N.  Y.  Mut.  Im.  Co.,  35 
N.  Y.  418;  Green  v.  Brown,  2  Strange, 
1199. 


CONSTRUCTIVE    TOTAL   LOSS — ENGLAND  243 

stated  generally  that  there  is  a  constructive  total  loss  where  the 
loss,  though  not  actually  total,  is  of  such  a  character  that  the  assured 
is  entitled,  if  he  thinks  fit,  to  treat  it  as  total  by  abandonment.^ 

§  192.  Constructive  Total  Loss — England. — In  the  codification 
of  marine  insurance  law,  recently  enacted  in  England,  constructive 
total  loss  is  thus  described:  (1)  Subject  to  any  express  provision  in 
the  policy,  there  is  a  constructive  total  loss  where  the  subject-matter 
insured  is  reasonably  abandoned  on  account  of  its  actual  total  loss 
appearing  to  be  unavoidable,  or  because  it  could  not  be  preserved 
from  actual  total  loss  without  an  expenditure  which  would  exceed  its 
value  when  the  expenditure  had  been  incurred.  (2)  In  particular, 
there  is  a  constructive  total  loss  (i)  where  the  assured  is  deprived  of 
the  possession  of  his  ship  or  goods  by  a  peril  insured  against,  and 
(a)  it  is  unlikely  that  he  can  recover  the  ship  or  goods,  as  the  case 
may  be,  or  (b)  the  cost  of  recovering  the  ship  or  goods,  as  the  case 
may  be,  would  exceed  their  value  when  recovered;  or  (ii)  in  the  case 
of  damage  to  a  ship,  when  she  is  so  damaged  by  a  peril  insured  against 
that  the  cost  of  repairing  the  damage  would  exceed  the  value  of  the 
ship  when  repaired.  In  estimating  the  cost  of  repairs,  no  deduction 
is  to  be  made  in  respect  of  general  average  contributions  to  those 
repairs  payable  by  other  interests,  but  account  is  to  be  taken  of  the 
expense  of  future  salvage  operations  and  of  any  future  general  aver- 
age contributions  to  which  the  ship  would  be  liable  if  repaired;  or 
(iii)  in  the  case  of  damage  to  goods,  where  the  cost  of  repairing  the 
damage  and  forwarding  the  goods  to  their  destination  would  exceed 
their  value  on  arrival.^ 

1  Western  Assur.  Co.  v.  Poole  (1903),  notice  of  abandonment;  (3)  the  ces- 
1  K.  B.  376,  383;  Saelherg  v.  Western  sion,  in  favor  of  insurer,  by  operation 
Assur.  Co.,  119  Fed.  23,  29,  55  C.  C.  A.  of  law,  of  whatever  remains  of  subject 
601.  One  case  held  a  constructive  insured,  when  insurer  settles  for  a  total 
total  loss  though  there  was  no  right  of  loss,  Chalmers  &  Owen,  Ins.  (1907),  90. 
abandonment,  but  this  was  based  upon  2  Mar.  Ins.  Act  (1906),  §60.  In- 
the  special  phraseology  of  the  policy,  surance  on  ship.  The  ship  gets  on  a 
Devitt  v.  Prov.  Wash.  Ins.  Co.,  173  rock  and  the  master  bona /ic?e  comes  to 
N.  Y.  17,  65  N.  E.  777.  Unless  a  dif-  the  opinion  that  she  cannot  be  saved, 
ferent  intention  appears  from  the  He  therefore  sells  her  for  £18.  The 
terms  of  the  policy,  an  insurance  buyer  gets  her  off  the  rock  and  repairs 
against  total  loss  includes  a  con-  her  at  a  cost  of  £750,  when  she  is 
structive,  as  well  as  an  actual,  total  worth  £1200.  This,  it  is  held  in  Eng- 
loss,  Af^ams  v.  Mackenzie  (1863),  13  land,  is  not  a  total  loss,  Gardner  v. 
C.  B.  (N.  S.)  446;  Sailimi  Ship  Blair-  Salvador,  1  Moo.  &  R.  116;  Rodo- 
wore  V.  Macredie  (1898),  App.  Gas.  598.  canachi  v.  Elliott  (1874),  L.  R.  9  C.  P. 
The  term  "abandonment"  is  used  in  518  (goods  in  besieged  town);  Wood- 
three  different  senses,  (1)  voluntary  side  v.  Globe  Mar.  Ins.  Co.  (1896),  1 
cession  of  remains  of  subject  insured  Q.  B.  105  (valued  policy);  Rankin  v. 
to  insurer  in  case  of  constructive  total  Potter,  L.  R.  6  H.  L.  83;  Corbett  v. 
loss;  (2),  incorrectly,  as  equivalent  to  Spring  Garden  Bank,  155  N.  Y.  389 


241 


GENERAL   PRINCIPLES  OF   INSURANCE   LAW 


§  193.  Constructive  Total  Loss— United  States.— In  the  United 
States,  for  convenience  and  certainty,  an  arbitrary  rule  has  been 
adopted  to  determine  whether  the  insured  is  entitled  to  claim  a 
constructive  total  loss.^  Where  the  cost  of  repairs  or  expenditures 
will  exceed  fifty  per  cent  of  the  value  of  the  ship  or  cargo  when  re- 
paired or  restored,  by  the  rule  prevailing  in  this  country,  a  construc- 
tive total  loss  is  established  entitling  the  assured  to  abandon.^  "The 
value  of  the  ship  when  repaired,"  as  referred  to  in  this  and  the  last 
section  is,  in  a  valued  as  well  as  in  an  open  policy,  the  real  repaired 
value.  For  this  purpose,  in  the  absence  of  agreement  otherwise,  a 
policy  valuation  does  not  govern.^ 

Whatever  the  actual  damage  to  the  thing  insured,  there  may  be  a 
constructive  total  loss,  where  circumstances  render  it  impracticable 
to  continue  the  adventure  to  its  conclusion;^  as,  for  example,  in  case 


394,  50  N.  E.  2S2.  Expense  of  future 
salvage  is  to  be  included,  Sewall  v. 
U.  S.  Ins.  Co.,  11  Pick.  (Mass.)  90; 
Kemp  V.  Halliday  (1SG6),  L.  R.  1 
Q.  B.  520.  Constructive  total  loss  as 
computed  in  England,  An^d  v.  Mer- 
chants' Mar.  Ins.  Co.  (1903),  1  K.  B. 
811  (ship  valued  at  £23,000,  total  re- 
pairs amounted  to  £22,559.  Held, 
owner  could  not  add  value  of  wreck 
to  cost  of  repairs  in  order  to  make 
constructive  total  loss);  The  Blairmore, 
07  L.  J.  P.  C.  N.  S.  9G,  100  (1898), 
App.  Cas.  593.  In  referring  to  the 
method  specified  in  the  text  of  estimat- 
ing cost  of  repairs  to  a  damaged  ship 
it  is  said:  "These  words  give  further 
effect  to  the  principle  that  the  test  of 
repairability  is  purely  a  physical  or 
material  one.  The  test  is  whether  the 
vessel  is  worth  repairing  or  not,  with- 
out any  regard  being  paid  to  the  final 
incidence  of  the  expenses  of  doing  so. 
No  deductions  from  such  expenses 
should  therefore  be  made  merely  be- 
cause some  other  interest  is  liable  to 
contribute  thereto,  by  way  of  general 
average  or  otherwise.  But  inasmuch 
as  there  may  be  in  the  future  certain 
expenses  incurred  not  merely  on  the 
ship's  account,  but  by  way  of  salvage 
on  account  of  and  for  the  benefit  of 
other  parties  as  well,  it  is  only  the 
ship's  proportion  of  such  expenses 
which  must  be  taken  as  forming  the 
cost  of  her  repairs,  the  rest  being 
deemed  to  be  incurred  on  behalf  of 
the  other  interests  thereby  benefited. 
The  words  'future  general  average 
contribution'  must  mean  contribution 
to  which  the  vessel  would  become  lia- 


ble owing  to  future  operations,"  De 
Hart  &  Simey,  Ins.  (1907),  71. 

1  Ins.  Co.  of  North  Am.  v.  Canada 
Sugar  Ref.  Co.,  87  Fed.  491,  493,  5 
U.  S.  App.  22,  31  C.  C.  A.  65,  reversed 
175  U.  S.  603,  20  S.  Ct.  239. 

2  Bradlie  v.  Maryland  Ins.  Co.,  12 
Pet.  (U.  S.)  378,  per  Story,  J.,  9  L.  Ed. 
1123;  Scelherg  v.  West.  Assur.  Co.,  119 
Fed.  23,  31;  Devitt  v.  Providence  Wa&h. 
Ins.  Co.,  173  N.  Y.  17,  21,  65  N.  E. 
777,  per  CuUen,  J.;  McConochie  v.  Sim 
Mut.  Ins.  Co.,  26  N.  Y.  477;  Louisville 
Underwriters  v.  Monarch,  99  Ky.  578, 
36  S.  W.  563;  Fulton  Ins.  Co.  v.  Good- 
man, 32  Ala.  108;  Jones  v.  West.  Assur. 
Co.,  198  Pa.  St.  206,  47  Atl.  948.  Suc- 
cessive losses  may  be  added  to  make 
up  the  amount,  Taber  v.  China  Mut. 
Ins.  Co.,  131  Mass.  239. 

s  Irving  v.  Manning  (1847),  1  H.  L. 
Cas.  287.  But  policies  often  contain  a 
clause  stipulating  that  the  agreed 
valuation  shall  be  taken  to  be  the 
repaired  value;  see  North  Atlantic  S.S. 
Co.  v.  Burr  (1904),  9  Com.  Cas.  164. 

4  Judge  Story  says:  "The  right  of 
abandonment  has  been  admitted  to 
exist,  where  there  is  a  forcible  dispos- 
session or  ouster  of  the  oAvner  of  the 
ship,  as  in  cases  of  capture;  where 
there  is  a  moral  restraint  or  detention, 
which  deprives  the  owner  of  the  free 
use  of  the  ship,  as  in  case  of  embargoes, 
blockades,  and  arrests  by  sovereign 
authority;  where  there  is  a  present 
total  loss  of  the  physical  possession  and 
use  of  the  ship,  as  in  case  of  submer- 
sion; where  there  is  a  total  loss  of  the 
ship  for  the  voyage,  as  in  case  of  ship- 
wTeck,  so  that  the  ship  cannot  be  re- 


CONSTRUCTIVE  TOTAL  LOSS — UNITED  STATES 


245 


of  an  embargo  or  capture,^  or  impossibility  of  forwarding  cargo  b}- 
a  substituted  ship/  or  breaking  up  of  the  voyage  for  the  cargo  by 
the  total  destruction  of  the  ship  without  opportunity  of  reshipment,' 
but  the  master  has  no  right  to  sell  a  wrecked  vessel  and  so  make  the 
insurers  liable  for  a  total  loss  upon  it,  unless  in  a  case  of  such  extreme 
necessity  as  to  leave  no  alternative."* 

With  respect  to  freight,  in  case  it  is  impossible  to  earn  it,  owing  to 
a  total  loss  of  ship  or  cargo,  the  loss,  as  already  shown,  is  actual 
and  can  be  recovered  without  notice  of  abandonment.  Where, 
however,  the  loss  though  probable  is  not  ascertained,  but  depends 
upon  chances  of  recovery  or  estimated  expenditure,  the  claim  falls 
within  the  category  of  constructive  total  loss,  and  requires  the  same 
kind  of  proof  as  in  the  case  of  similar  claims  upon  ship  or  cargo.^ 

If  the  ship  is  destroyed,  or  the  voyage  interrupted  by  a  peril  in- 


paired  for  the  voyage  in  the  port  where 
the  disaster  happens;  and,  lastly, 
where  the  injury  is  so  extensive,  that 
by  reason  of  it  the  ship  is  useless,  and 
yet  the  necessary  repairs  would  exceed 
her  present  value.  None  of  these  cases 
will,  I  imagine,  be  disputed.  If  there 
be  any  general  principle,  that  pervades 
and  governs  them,  it  seems  to  be  this, 
that  the  right  to  abandon  exists,  when- 
ever, from  the  circumstances  of  the 
case,  the  ship,  for  all  the  useful  pur- 
poses of  a  ship  for  the  voyage,  is,  for 
the  present,  gone  from  the  control  of 
the  owner,  and  the  time  when  she  will 
be  restored  to  him  in  a  state  to  resume 
the  voyage  is  uncertain,  or  unreason- 
ably distant,  or  the  risk  and  expense 
are  disproportioned  to  the  expected 
benefit  and  objects  of  the  voyage. 
In  such  a  case,  the  law  deems  the  ship, 
though  having  a  physical  existence, 
as  ceasing  to  exist  for  purposes  of 
utility,  and  therefore  subjects  her  to 
be  treated  as  lost,"  Peele  v.  Merchants' 
Ins.  Co.,  3  Mason,  27,  65,  19  Fed.  98. 

1  Ruys  V.  Roijal  Exch.  Assur.  Corp. 
(1897),  2  Q.  B.  135  (though  ship  was 
ultimately  released  and  returned). 

2  Canada  Sugar  Ref.  Co.  v.  Insur- 
ance Co.,  87  Fed.  491,  493,  reversed  on 
another  point,  175  U.  S.  609,  20  S.  Ct. 
239.  Where  on  destruction  of  ship, 
whaling  outfits  are  in  safety  at  a  port 
and  can  be  sold,  there  is  no  construc- 
tive total  loss  of  outfits,  though  no 
vessel  is  obtainable  within  a  reasonable 
time  for  forwarding  them,  Taher  v. 
China  Mut.  Ins.  Co.,  131  Mass.  239. 

s  Columbian  Ins.  Co.  v.  Catlett,  12 
Wheat.  (U.  S.)  383,  6  L.  Ed.  664.     A 


sale  of  ship  or  cargo  from  necessity,  as 
viewed  at  the  time,  is  a  total  loss  in 
this  countrv,  Hxirtin  v.  Phcenix  Ins. 
Co.,  12  Fed.  Cas.  1047;  Fuller  v. 
Kennebec  Mut.  Ins.  Co.,  31  Me.  325; 
Stephenson  v.  Piscataqua  F.  &  M.  Ins. 
Co.,  54  Me.  55.  Master  presumed  to 
have  done  his  duty  in  ordering  sale, 
Robinson  v.  Commonwealth  Ins.  Co., 
20  Fed.  Cas.  1002.  But  master  must 
consult  owners  or  insurers  if  practica- 
ble, Peirce  v.  Ocean  Ins.  Co.,  18  Pick. 
(Mass.)  S3,  23  Am.  Dec.  507. 

4  Gordon  v.  Mass.  F.  &  M.  Ins.  Co., 
2  Pick.  (Mass.)  249;  Hall  v.  Franllin 
Ins.  Co. ,9  Pick.  (Mass.)  4G6,  Peirce  v. 
Ocean  his.  Co.,  18  Pick.  (Mass.)  83,  29 
Am.  Dec.  567;  Taber  v.  China  Mut.  Ins. 
Co.,  131  Mass.  239. 

^  II art  V.  Delaware  Ins.  Co.,  11  Fed. 
Cas.  683;  Lord  v.  Neptune  Ins.  Co.,  10 
Gray  (Mass.),  109;  Thwing  v.  Wash. 
Ins.  Co.,  10  Gray  (Mass.),  443;  Ilub- 
bcll  V.  Great  West.  Ins.  Co.,  74  N.  Y. 
246.  As  to  constructiv^e  total  loss  of 
freight  in  England  see  Ranlin  v.  Potter 
(1873),  L.  R.  6  H.  L.  83,  102;  Popham 
V.  Ins.  Co.  (1904),  10  Com.  Cas.  31; 
Hughes  v.  Sun  Mid.  Ins.  Co.,  100 
N.  Y.  58,  63,  2  N.  E.  901,  3  N.  E.  71 
(total  loss  of  freight  defined).  A  loss 
of  more  than  half  a  cargo  of  coal  in 
specie  by  the  perils  insured  against 
authorizes  abandonment  and  claim  for 
total  loss  of  freight  under  a  valued 
policy,  Boardman  v.  Boston  Mar.  Ins. 
Co.,  146  Mass.  442,  453,  16  N.  E.  20. 
As  to  constructive  total  loss  of  profits, 
see  Canada  Sugar  R.  Co.  v.  7ns.  Co. 
175  U.  S.  609,  20  S.  Ct.  239,  44  L.  Ed! 
292. 


246  GENKHAL    I'H1N(  I  I'LKS   OF    INSURANCE   LAW 

surc-1  iiKainst,  it  is,  in  Koiiornl,  (lio  duty  of  the  master  to  transship  the 
cargo '  or  other  movables,  if  he  can,  and  send  them  on  to  their  desti- 
nation. In  case  of  jiistiliablc  t raiissliipnicnt ,  tlie  HabiUty  of  tiie  in- 
surer continues  noiwithst.nHliiiir  the  landing  or  transshipment. 

§  194.  Notice  of  Abandonment.— Where  there  is  a  constructive 
total  loss,  the  assured  mny  either  treat  it  as  a  partial  loss,  or  abandon 
the  subject-matter  insured  to  the  insvuer,  and  treat  the  loss  as  if  it 
were  an  actual  total  loss.-''  There  is  no  compulsion  upon  the  assured 
to  abandon.''  l)ut  upon  exercising  an  election  to  avail  himself  of  this 
privilege,  he  nmst,  speaking  generally,  with  reasonable  diligence 
after  receipt  of  reliable  tidings  of  the  loss,-"'  give  to  the  insurer  a  notice 
of  abandonment  so  that  the  latter  may  have  opportunity  to  take  any 
proper  steps  to  recover  the  property  or  realize  any  salvage  that  may 
be  obtainable.^  An  actual  abandonment,  however,  if  accepted  by 
the  underwriter,  dispenses  with  the  necessity  of  formal  notice  of 
abandonment.^ 

The  object  of  the  notice  is  to  bind  the  a.ssured  by  his  election,  and 
to  give  the  underwriters  opportunity'  of  making  the  most  of  the  aban- 
doned property.*  Abandonment  takes  place  in  all  cases  of  total  loss, 
actual  or  constructive,  but  notice  is  only  necessary  in  the  latter  case.* 

1  Bnant  v.  Cnmmonu-cnilli  /«,<!.  Co.,  Ins.  Co.,  120  Mich.  601,  79  N.  W.  898. 
13  Pick.  (Mass.)  543;  Center  v.  Ameri-  What  is  reasonable  time  for  abandon- 
con  Ins.  Co.,  7  Cow.  ,504,  aff'd  4  Wend.  ment  is  a  mi.xed  question  of  law  and 
(N.  Y.)  45;  Schiejfelin  v.  .V.  Y.  Ins.  fact,  Smith  v.  /?^s.  Co.,  4  Mass.  668. 
Co.,  9  Johns.  21.  Two  months,  too  late,  Taber  v.  China 

2  Chalmers  &  Owen,  Ins.  (1907),  81,  Mnt.  Ins.  Co.  131  Mass.  239.  A  httle 
and  authorities  cited.  See  Hansen  v.  short  of  one  month,  too  late,  Orrok 
Dunn  (1906),  11  Com.  Cas.  100.  "It  v.  Commonwealth  his.  Co.,  21  Pick, 
is  probable  that  the  insurer  is  liable  for  (Mass.)  456,  32  Am.  Dec.  271. 

loss  occurring  in  the  course  of  trans-  6  Ran'  in  v.  Potter,  L.  R.  6  H.  L.  83, 

shipment,  landing,   or    rcshipment,  a.s  119,  42  L.  J.  C.  P.  169,  29  L.  T.  142, 

well  as  for  losses  that  take  place  on  the  22  W.  R.  1,2  Asp.  M.  C.  65;  Roux  v. 

substituted  vessel."  Dc  Hart  it  Simey.  Salvador.   3    Ring.    N.    C.    286.      This 

Ins.  (1907),  70,  citing  Arnould,  §  468.  notice  not  only  according  to  insurance 

The  insurer  is  still  lial>le  for  the  cargo  law    but    according    to    the   universal 

which  is  of  necessity  carried  overland,  practice    of    merchants    and    under- 

bccause  of  the  damage  to  the  ship.  Bry-  writers  is  a  neccssarj'  preliminary  to  a 

077/  v.  Commonn-calth  Ins.  Co.,  13  Pick.  claim  for  a  constructive  total  loss.    It 

(Mass.)  543.  is  in  effect  an  offer  by  the  assured  to  the 

3  Western  Assur.  Co.  v.  Poole  (1903),  imderwriter  to  \('st  the  property  in  the 
1  K.  B.  376,  384;  Delaware  his.  Co.  v.  underwriter  so  that  he  may  thereafter 
Winter,  38  Pa.  St.  176.  deal  with  it  as  his  own,  West.  Assiir 

*  Ma.'^on    v.    Marine    Ins.    Co.,    110  Co.    v.    Poole    (1903)     1KB     376 

Fed.  4.52,  460,  49  C.  C.  A.  106.  383.                                             '       '          ' 

5  Roux  v.  Salvador,  3  Bing.  N.  C.  286;  ^  Canada  Sugar  Ref.  Co.  v   Ins   Co 

Gemon  v.   Ro^'al  E.rch.   A.ss?/r.   Co.,  2  175  U.  S.  609,  618,  20  S.  Ct   239 

Marsh.  88;   Taker  v.   China  Mnt.  Ins.  »  De  Hart  &  Simey,  Ins.  (1907),  73 

Co.,  131  Mass.  239;  Reunolds  v.  Ocean  citing  Kaltenbach  v  ^Mackenzie  (1878")' 

Ins.  Co.,  22  Pick.  (Ma.ss.)  191,  33  Am.  3  C.  P.  D.  480. 

Dec.  727;  Harvey  v.  Detroit  F.  &  M.  »  De  Hart  &  Simey,  Ins.  (1907),  73 


NOTICE   OF   ABANDONMENT 


247 


An  acceptance  of  an  abandonment  is  not  to  be  presumed  from  the 
mere  silence  of  the  insurers  upon  receiving  the  notice,  but  may  be 
inferred  from  their  acts  as  well  as  their  words;  that  is,  it  may  be  con- 
structive as  well  as  express,^  as,  for  example,  where  the  insurers  take 
possession  of  the  property  insured  and  do  not  return  it  within  a  rea- 
sonable time.^ 

When  notice  of  abandonment  is  accepted  the  abandonment  is 
irrevocable.  The  acceptance  of  the  notice  conclusively  admits 
liability  for  the  loss,  and  the  sufficiency  of  the  notice,^  and  where 
notice  of  abandonment  is  properly  given,  the  rights  of  the  assured 
are  not  prejudiced  by  the  fact  that  the  insurer  refuses  to  accept  the 
abandonment.^ 

Where,  however,  at  the  time  the  assured  elects  to  treat  the  claim 
as  one  of  constructive  total  loss,  there  is  no  possibility  that  the 
underwriter  could  derive  any  advantage  from  notice,  either  because 
there  is  nothing  to  abandon,"'  or  because  the  disposal  of  the  property 
was  justifiably  determined  before  the  opportunity^  to  give  notice 
occurred,  no  notice  is  essential.  For  instance,  where  the  news  of 
the  loss  of  the  ship  and  of  her  sale  reached  the  assured  at  the  same 
time,  it  was  held  that  the  underwriters  were  liable  for  a  total  loss 
without  notice  of  abandonment;*   and  the  same  conclusion  was  ar- 


citing  Arnould,  §  1045.  But  as  to  the 
situation  where  there  are  several  in- 
surers, or  where  the  subject-matter  is 
not  fully  covered,  see  Arnould,  §§  1187, 
1188,  1215,  1216.  For  purposes  of  ad- 
justment of  a  marine  loss,  the  subject- 
matter  is  considered  always  fully  cov- 
ered, either  by  the  underwriters  alone, 
or,  in  case  of  short  insurance,  by  the 
under  ^Titers  and  by  the  insured  him- 
self, who  is  a  coinsurer  for  the  defi- 
ciency, see  §§  50,  201. 

^Singleton  v.  Phoenix  Ins.  Co.,  132 
N.  Y.  298,  30  N.  E.  839;  Provincial 
Ins.  Co.  V.  Leduc,  L.  R.  6  P.  C.  224, 
43  L.  J.  P.  C.  49,  31  L.  T.  142,  2 
Asp.  M.  C.  338,  22  W.  R.  929.  See 
Canada  Sugar  Ref.  Co.  v.  Insurance 
Co.,  175  U.  S.  609,  618,  20  S.  Ct. 
239. 

2  Copelin  V.  7ns.  Co.,  9  Wall.  (U.  S.) 
461.  But  this  rule,  relating  to  posses- 
sion, does  not  apply  under  a  policy 
providing  that  the  acts  of  insurers  in 
recovering,  saving,  or  disposing  of  the 
property  insured  shall  not  be  consid- 
ored  a  waiver  or  an  acceptanre  of  an 
abandonment,  Schw  ler  v.  Phcenix  Ins. 
Co.,  134  N.  Y.  345,  32  N.  E.  25; 
Northwestern  Transp.  Co.  v.  Thames  & 


M.  Ins.  Co.,  59  Mich.  214,  26  N.  W. 
336. 

3  Richelieu  &  O.  A'av.  Co.  v.  Boston 
M.  Ins.  Co..  136  U.  S.  408,  10  S.  Ct. 
934,  34  L.  Ed.  398.  Thus  policy  on 
ship  with  warranty  not  to  be  in  Gulf 
of  St.  Lawrence  after  Nov.  15.  After 
that  date  ship  is  wrecked  in  Gulf,  but 
insurer  with  knowledge  of  fact  accepts 
notice  of  abandonment.  The  insurer  is 
liable,  Provincial  Ins.  Co.  v.  Leduc 
(1874),  L.  R.  6  P.  C.  224.  And  see 
De  Hart  &  Simey,  Ins.  (1907),  43, 
note  (e);  also  Eng.  Mar.  Ins.  Act  (1906), 
§  62  (6). 

4  See  Gould  v.  Citizens'  Ins.  Co.,  13 
Mo.  524;  McBride  v.  Marine  Ins.  Co.,  7 
Johns.  (N.  Y.)  431;  Jumel  v.  Marine 
Ins.  Co.,  7  Johns.  (N.  Y.)  412,  5  Am. 
Dec.  283. 

s  Standard  Mar.  Ins.  Co.  v.  Nome 
Beach  L.  &  T.  Co.,  133  Fed.  636,  643; 
Canada  Sugar  Ref.  Co.  v.  Ins.  Co.,  175 
U.  S.  609,  617,  20  S.  Ct.  239,  in  which 
it  is  said  "a  policy  upon  expected 
profits  does  not  seem  to  offer  anything 
upon  which  an  abandonment  can 
operate." 

^  Farnworth  v.  Hyde,  2  Mar.  L.  R. 
187,  429. 


248  OENEUAL   PRINCIPLES   OK   INSURANCE   LAW 

rivc.J  at  under  similar  circumstances  in  an  action  upon  a  p>^licy  of 

insurance  on  cargo.*  ii^„,„j  u„ 

The  notice  of  abamlonment  to  be  ciTcctive  must  also  be  followed  by 

actual  abandonment,  and  there  must  be  no  retention  of  control  by 

the  assureil.'  . 

If  the  loss  is  the  result  of  a  peril  not  insured  agamst  there  exists  no 
ri-ht  to  abandon.--*  The  right  to  abandon,  it  has  been  said  by  the 
United  States  Supreme  Court,  is  to  be  determined  by  the  situation  at 
the  time  of  the  abandonment,  and  the  rights  of  the  assured  turn  upon 
the  probal)ilitics  as  reasonably  to  be  gathered  from  the  existing  cir- 
cumstances and  not  of  necessity  upon  the  actual  result.^  In  Eng- 
land, it  is  said,  a  notice  of  abandonment,  in  order  to  be  effective, 
must  have  been  justified  by  the  state  of  affairs  existing  not  only  at 
the  time  when  it  was  given,  but  also  at  the  time  of  action  brought.^ 
But  many  American  courts  lay  controlling  emphasis  upon  the  situa- 
tion as  fairly  viewed  at  the  time  when  the  notice  is  given.^    Mr. 


1  Roux  V.  Salvador,  3  Bing.  N.  C. 
266. 

2  Louisville  Underwriters  v.  Pence,  93 
Ky.  96,  19  3.  W.  10. 

3  Richelieu  &  O.  Nov.  Co.  v.  Boston 
M  Ins.  Co.,  136  U.  S.  408,  10  S.  Ct. 
931,34  L.  Ed.  398. 

*  Sufficient  if  expense  of  recovery 
and  repairs  would  probably  exceed 
one-half  value,  Orient  Mut.  Ins.  Co.  v. 
Adams,  123  IT.  S.  67,  7.5,  31  L.  Ed.  63, 
8  S.  Ct.  68  (subsequent  result  though 
evidence  is  not  decisive);  Peele  v. 
Merchants'  Ins.  Co.,  19  Fed.  Cas.  98; 
Fulton  Ins.  Co.  v.  Goodman,  32  Ala. 
108,  127,  128  (repairs  ultimately  cost 
less  than  one-half  value  of  vessel  when 
repaired);  Fontaine  v.  Phoenix  Ins.  Co., 
11  Johns.  (N.  Y.)  293;  Louisville  Un- 
derwriters v.  Monarch,  99  Ky.  578,  36 
S.  W.  563;  Louisville  Underwriters  v. 
Pence,  93  Ky.  96,  104,  19  S.  W.  10,  40 
Am.  St.  Rep.  176.  But  in  some  cases 
it  is  held  that  where  the  underwriters 
have  refused  to  accept  abandonment, 
its  validity  must  be  determined  by  the 
actual  and  ultimate  cost  of  repairs. 
Wood  V.  Lincoln  &  K.  Ins.  Co. ,  6  Mass. 
479;  Hall  v.  Franlin  In.^.  Co..  9  Pick. 
(Mass.)  466;  Mcrmand  v.  Melledge,  123 
Mass.  173.  Or  by  the  ultimate  result, 
Mclves  V.  Henderson,  4  M.  tfe  S.  576. 
As  where  ship  was  captured  but  re- 
stored before  action  brought,  Boin- 
bridge  v.  .\eilson  (1808),  10  East,  329. 
The  underwriters  cannot  defeat  the 
effect  of  a  valid  notice  of  abandonment 


by  intervening  before  action  brought 
and  raising  and  repairing  the  vessel  at 
less  than  the  estimated  cost.  Sailing 
Ship  Blairmore  Co.  v.  Macredie  (1898), 
App.  Cas.  607;  Peele  v.  Merchants'  his. 
Co.,  3  Mason  (U.  S.),  27;  but  compare 
Massachusetts  cases  last  cited.  In 
Massachusetts  it  is  held  that  the  actual 
state  of  facts  at  the  time  of  an  aban- 
donment, rather  than  the  intelligence 
received  by  the  insured,  is  the  proper 
test  of  the  right  to  abandon,  Dorr  v. 
Union  Ins.  Co.,  8  Mass.  502;  Hall  v. 
Franklin  Ins.  Co.,  9  Pick.  (Mass.)  406. 
The  right  to  abandon  and  recover  for 
a  constructive  total  loss  depends  on 
the  state  of  facts  when  abandonment 
is  made,  Snow  v.  Union  Mut.  Mar. 
Ins.  Co.,  119  Mass.  592,  21  Am.  Rep. 
349;  Greene  v.  Pac.  Mut.  Ins.  Co.,  9 
Allen  (Mass.),  217  (whaler  jammed 
fast  in  ice;  constructive  total  loss). 
The  redelivery  of  a  captured  vessel  on 
bail  does  not  defeat  the  right  to  aban- 
don, Lovering  v.  Mercantile  Ins.  Co., 
12  Pick.  (Mass.)  348. 

5De  Hart  &  Simey,  Ins.  (1907),  73, 
citing  Arnould,  §§  1095-1102;  Ruvs  v. 
Roval  Exch.  Ass.  Corp.  (1897),  2 
Q.  B.  135,  66  L.  J.  Q.  B.  534;  Sailing 
Ship  Blairmore  v.  Macredie  (1898), 
App.  Cas.  593,  67  L.  J.  P.  C.  96.  For 
example,  in  case  of  capture,  Bain- 
bridge  V.  Neilson  (1808),  10  East,  329. 

6  Orient  Mut.  Ins.  Co.  v.  Adams,  123 
U.  S.  67,  75,  8  S.  Ct.  68,  31  L.  Ed 
63. 


EFFECT   OF   ABANDONMENT 


249 


Justice  Story  in  an  elaborate  opinion,  after  reviewing  the  two  doc- 
trines and  the  reasons  and  authorities  bearing  upon  them,  gave  to 
the  American  rule  the  weight  of  his  judgment.^ 

§  195.  Form  cf  Notice  of  Abandonment. — No  specific  form  is 
necessary  for  the  notice  of  abandonment,  nor,  unless  required  by 
the  policy,  is  it  essential  that  it  should  be  made  in  writing,  though  it 
is  customary  and  advisable  so  to  give  it.  But  the  notice  must  be 
given  in  terms  which  indicate  the  intention  of  the  assured  to  abandon 
to  the  insurer  unconditionally  his  insured  interest  in  the  subject- 
matter.2 


§  196.  Effect  of  Abandonment. — Where  there  is  a  valid  abandon- 
ment the  insurer  is  entitled  to  take  over  the  interest  of  the  assured 
in  whatever  may  remain  of  the  subject-matter  insured,  and  all  pro- 
prietary rights  incidental  thereto.^ 

If  there  are  several  underwriters,  they  share  in  the  transfer  of  the 
interest  in  proportion  to  the  amount  of  their  several  subscriptions.'* 


^  Peele  v.  Merchants'  Ins.  Co.,  3 
Mason,  27,  19  Fed.  Cas.  98. 

2  Canada  Sugar  Ref.  Co.  v.  Insurance 
Co.,  175  U.  S.  609,  20  S.  Ct.  239;  7ns. 
Co.  of  N.  A.  V.  Johnson,  70  Fed.  794, 
37  U.  S.  App.  413,  17  C.  C.  A.  416; 
Boslcy  V.  Chesapeake  Ins.  Co.,  8  Gill  & 
J.  (Md.)  4.50,  22  Am.  Dec.  337;  North- 
western Transp.  Co.  v.  Thames  &  M. 
Ins.  Co.,  59  Mich.  214,  26  N.  W.  336. 
The  word  "abandon"  need  not  be  used 
in  notice;  any  equivalent  expression 
conveying  notice  of  intention  to  aban- 
don is  sullicient,  Currie  v.  Bombay  Na- 
tive Ins.  Co.,  6  Moore  P.  C.  N.  S.  302,  39 
L.  J.  P.  C.  1,  22  L.  T.  317.  If  a  writing 
is  required  by  the  policy  such  stipula- 
tion must  be  compliea  with,  North- 
u-estern  Transp.  Co.  v.  Thames  &  M. 
Ins.  Co.,  59  Mich.  214,  26  N.  W.  330. 
Clause  requiring  written  transfer  on 
abandonment  construed  in  Harvey  v. 
Detroit  F.  &  M.  Ins.  Co.,  120  Mich. 
601,  79  N.  W.  898.  Compare  The 
Manitoba,  30  Fed.  129;  The  Mary  E. 
Perew,  15  Blatchf.  (U.  S.  C.  C.)  58. 

^  Mason  v.  Mar.  Ins.  Co.,  110  Fed. 
452,  49  C.  C.  A.  106,  54  L.  R.  A.  700; 
Patavsco  Ins.  Co.  v.  Sonthqate,  5  Pet. 
(U.  S.)  604,  8  L.  Ed.  243;  Northwest 
Trans.  Co.  v.  Thames  &  M.  his.  Co..  59 
Mich.  244,  26  N.  W.  336;  Civcinnati 
Ins.  Co.  V.  Duffield,  6  Ohio  St.  200.  67 
Am.  Dec.  339;  Steicort  v.  Greenock-  Inf. 
Co.  (1848),  2  H.  L.  Ca.s.  182      Accord- 


ingly expenses  properly  incurred  by 
the  master  from  date  of  casualty  will 
be  chargeable  to  the  underwriters, 
Gilchrist  v.  Chicago  Ins.  Co.,  104  Fed. 
566,  44  C.  C.  A.  43;  Ranhin  v.  Potter, 
L.  R.  6  H.  L.  119;  and,  on  the  other 
hand,  all  the  incidents  of  ownership 
pass  as  fully  as  though  a  deed  of  c  ession 
had  been  executed.  The  underwriters, 
on  paying  total  loss  or  amount  of 
valuation  in  a  valued  policy,  may  seek 
to  recover  the  property,  or  sell  it,  or  do 
with  it  what  they  deem  best,  and  they 
may  keep  the  proceeds  though  in  ex- 
cess of  the  amount  of  insurance  paid, 
Mobile,  etc.,  R.  Co.  v.  Jurey,  111  U.  S. 
584,  594;  Mason  v.  Marine  Ins.  Co., 
110  Fed.  452,  460;  North  Eng.  Ins. 
Assoc.  V.  Armstrong,  L.  R.  5  Q.  B.  244, 
248;  Stewart  v.  Greenock  Mar.  Ins.  Co., 
2  H.  L.  Cas.  159,  183.  But  where 
salvage  consists  of  damages  from  an- 
other vessel  for  collision  the  under- 
writers can  only  be  indemnified  out  of 
the  proceeds,  giving  to  the  assured  any 
balance.  The  Livingston.  130  Fed.  746, 
since  such  a  claim  passes  by  virtue  of 
the  right  of  subrogation  ana  not  as  an 
incident  to  the  property  in  the  ship, 
Simpson  V.  Thompson  (1877),  3  App. 
Cas.  2D2.  An  abandonment  rightfully 
made  relates  back  to  the  time  of  the 
loss,  Snovo  V.  Ins.  Co.,  119  Mass.  592, 
20  Am.  Rep.  349. 

*  Gilchrist  v.  Chi.  Ins.  Co.,  104  Fed. 


•_>."»:)  OENKUAl.    I'UINCII'LKS   OK   INSURANCE    LAW 

A II.  I  where  the  assured  is  insured  for  an  amount,  less  than  the  insur- 
able value,  or  in  the  case  of  a  valued  policy,  for  an  amount  less  than 
the  policy  valuation,  he  is  deemed  to  be  his  own  insurer  in  respect  of 
ihe  uninsured  bahinco.  :ind  therefore  is  entitled  to  his  share  of  sal- 
vaf^e.' 

After  abandonment,  any  acts  subsequent  to  the  casualty,  per- 
formed by  tiie  assured  or  his  agents  in  respect  to  the  subject  of 
insurance,  are  at  the  risk  of  the  insurer  and  inure  to  his  benefit,  if 
done  reasonably  and  in  good  faith. ^ 

By  the  English  rule,  upon  the  abandonment  of  a  ship,  the  insurer 
thereof  is  entitled  to  any  freight  in  course  of  being  earned  and  which 
is  earned  by  her  subsequent  to  the  casualty  causing  the  loss,'''  less  the 
expenses  of  earning  it,  incurred  after  the  casualty;  and,  where  the 
ship  is  carrying  the  owners'  goods,  the  insurer  is  entitled  to  a  reason- 
able remuneration  for  the  carriage  of  them,  subsequent  to  the  casu- 
alty causing  the  loss."*  In  America  many  decisions  award  the  pending 
freight,  where  it  has  been  finally  matured  by  the  underwriter,  to  him 
and  to  the  owner  of  the  vessel  pro  rata  itineris  which  each  has  accom- 
plished.^ 

The  doctrine  of  abandonment  in  marine  insurance  law  must  not 
be  confused  with  that  of  subrogation.  The  doctrine  of  abandonment 
applies  only  to  a  total  loss,  whether  actual  or  constructive,  and  in- 
volves a  change  of  property  in  the  thing  insured.  Abandonment  is 
the  cession  of  all  interest  in  the  thing  insured  which  the  assured  by 
necessary  inference  of  law  makes  to  the  insurer  by  acceptance  of 
payment  for  total  loss.  By  abandonment,  an  actual  change  of  owner- 
ship, from  the  insured  to  the  insurer,  is  effected,  and  therefore  if  the 
thing  abandoned,  peradventure,  prove  to  be  of  greater  value  than 
the  amount  so  paid  by  the  underwriters,  they  may  possibly  succeed 
in  more  than  recouping  their  loss.^    But  subrogation,  on  the  other 

566;  StenaH  v.  Greenock  Mar.  his.  Co.,  No.  12,342,  case  tiff'd  13  Pet.  (U.  S.) 

2   H.    L.   Cas.    183.     A  disbursement  387,   10   L.   Ed.   213.     See  Peirce   v. 

policy  is  entitled  to  its  share  of  salvage.  Ocean  Ins.  Co.,  18  Pick.  (Mass.)  83,  89, 

Brown  \.  Merchants'  Mar.  Ins.  Co.,  lo2  29  Am.  Dec.  567;  Chesapeake  Ins.  Co. 

Fed.  411.     Abandonment  relates  only  v.   Stark,  6  Cranch   (U.   S.),  272.  ex- 

to  property  at  risk  at  the  time  of  loss;  plained    in     Columbian    his.     Co.     v. 

not  to  property  previously  delivered  or  Ashhy,  4  Pet.  (1^1.  S.)  137. 
disposed  of.  3  See  Ins.  Co.  v.  Hodden  (1884),  13 

1  Sntchez,  etc.,  Co.  v.  Louisville  Un-  Q.  B.  D.  706. 
derirriters,  44  La.  Ann.  714;  Tlie  Welsh  *  The  Red  Sea.  73  Law  T.  Rep   462 

Girl  (I90G),  22  T.  L.  R.  475.  (1896), P.  20;  Miller  v.  Woodfall  (1857) 

2Ron  in  V.   Potter  (IS7S),  h.  R.  6  27  L.  J.  Q.  B.  120. 
H.  L.  119;  Jumel  v.  Marine  Ins.  Co.,  7  5  Mason  v.  Marine  Ins  Co    110  Fed 

Johns.  (N.  Y.)  412,  413,  5  Am.  Dec.  452,  457-459,  49  C.  C.  A.  106* 
..'S3:  Mordecai  &  Co.  v.  /7i.s.   Co.,   12  ^Mobile,  etc.,  R.  Co.  v    Jurev    111 

Rich.  L.  (3.  C.)  512;  The  Sarah  Ann,  2  U.  S.  584,  594.  ' 

Sumn.    (U.   S.  C.  C.)  206,  Fed.  Cas. 


PARTICULAR   AVERAGE  251 

hand,  involves  no  such  change  of  property,  and  occurs  whether  the 
loss  be  total  or  partial.  It  is  by  subrogation  that  the  insurer  has  the 
right  to  stand  in  the  shoes  of  the  assured,  so  as  to  enable  the  insurer, 
after  indemnifying  the  assured  for  a  loss,  to  enforce  in  his  own  in- 
terest all  remedies  which  the  assured  may  have  against  third  persons, 
with  the  object  of  preventing  the  assured  from  recovering  from  his 
underwriters  for  a  loss  which  has  been  made  good  to  him  from  other 
sources.^  But  the  insurer's  right  by  subrogation  is  limited  in  amount 
to  a  reimbursement  for  their  payment,  and  for  any  balance  recovered 
they  must  account  to  the  insured,  who,  in  the  absence  of  an  express 
assignment  of  his  title,  remains  owner  of  the  subject-matter  of  in- 
surance.^ 

§  197.  Particular  Average. — The  term  "particular  average"  in 
marine  insurance  sometimes  is  used  in  contradistinction  to  general 
average.  It  then  means  a  partial  loss  insured  against,  of  such  a 
character  that  it  is  not  the  subject  of  general  average  contribution, 
but  remains  with  the  particular  interest,  or  with  the  insurers  of  that 
interest.^ 

The  same  term  is  used  also  in  contradistinction,  sometimes  to  sal- 
vage charges;^  and  sometimes  to  particular  charges,  which,  though 
they  may  be  recoverable  from  the  underwriters,  are  incurred,  not  to 
repair  the  damage,  nor  for  the  common  safety,  but  to  preserve  or 
rescue  the  particular  interest,  as,  for  example,  ship  or  cargo. ^  The 
words  "particular  average,"  when  occurring  in. the  memorandum 
clause  of  the  policy,  mean  partial  loss.^ 

1  De  Hart  &  Simey,  Ins.  (1907),  90.  under  the  suing  and  laboring  clause 

2  The  Livingston,  130  Fed.  746.  as   particular   average,   or   as   general 

3  Wilson  V.  Smith,  3  Burr.  1550,  average,  according  to  circumstances," 
1555;  Price  V.  A 1  Ships,  etc.,  Assoc,  22  De  Hart  &  Simey,  Ins.  (1907),  7G. 
Q.  B.  D.  580,  590.  A  shipowner's  liability  to  pny  life  sal- 

4  "The  charges  recoverable  under  vage  is  not  covered  by  a  policy  in  the 
maritime  law  by  a  salvor  independ-  usual  form;  but  is  sometimes  specially 
ently  of  contract,"  Eng.  Mar.  Ins.  Act  insured  against,  Nourse  v.  Liverpool, 
(1906),  ch.  41,  §  65;  Anderson  v.  Ocean  etc.,  Assn.  (1896),  2  Q.  B.  16,  65  L.  J. 
Mar.  Ins.  Co.  (1884),  10  App.  Cas.  Q.  B.  507.  A  clause  "no  claim  to  at- 
107;  Aitchison  v.  Lohre  (1879),  4  App.  tach  for  salvage  charges"  in  a  rein- 
Cas.  765.  Referring  to  the  case  last  surance  against  "total  loss"  was  held 
cited  it  is  said:  "The  result  of  the  de-  to  exclude  liability  under  the  sue  and 
cision  is  that  if  the  particular  average  labor  clause.  Western  Assvr.  Co.  v. 
claim  together  with  the  salvage  charges  Poole  (1903),  1  K.  B.  376,  72  L.  J. 
exceed  the  full  sum  insured,  the  excess  K.  B.  195. 

is   not   recoverable  from  the   insurers.  ^  Kidston  v.   Empire  Mar.  Ins.  Co., 

It  is  to  be  noticed  that  this  rule  does  I-.   R.    1   C.   P.   535;  MacArthur,  Ins. 

not  apply  where  the  salvage  services  (2d  ed.),  261. 

have  been  rendered  under  a  contract  ^  See  ch.  XX.    "  Particular  charges 

with  the  salvors;  in  such  a  case  the  are  not  included  in  particular  average," 

assured  may  recover  the  excess  either  Eng.  Mar.  Ins.  Act  (1906),  c.  41,  §  64. 


252 


GENERA  J.   J'HINCII'LLS    UK    INSURANCE    LAW 


The  technical  rules  relating  to  adjustments  of  losses  with  marine 
untlerwriters  are  of  more  interest  and  utility  to  the  expert  average 
adjuster,  and  to  the  specialist  in  marine  insurance  law  than  to  the 
general  practitioner;  and,  therefore,  need  not  long  detain  us.  The 
concise  phraseology  of  the  rules  following  in  this  chapter  has  been 
largely  borrowed  from  the  English  codification  passed  by  Parliament 
in  1906. 

§  198.   Salvage    Charges  Recoverable.— Subject    to   any  express 

provisit)U  in  the  policy,  salvage  charges,  incurred  in  preventing  a  loss 
by  perils  insured  against,  may  be  recovered  as  a  loss  by  those  perils.^ 

§  199.  Insurer  Liable  for  General  Average  Loss. — Subject  to  any 
express  provision  in  the  policy,  where  the  assured  has  incurrad  a 
gsneral  average  expenditure,-  he  may  recover  from  the  insurer  in 
respect  of  the  proportion  of  the  loss  which  falls  upon  him;  and,  in 
tlie  case  of  a  general  average  sacrifice,  he  may  recover  from  the 
insurer  in  respect  of  the  whole  loss,  without  having  enforced  his 
right  of  contribution  from  the  other  parties  liable  to  contribute,^ 


1  Aitchison  v.  Lohre  (1879),  4  App. 
Cas.  765;  Steamship  Balmoral  v.  Mar- 
ten (1901),  2  K.  B.  904.  They  do  not 
fall  under  sue  and  labor  clauses  but 
recovery  is  limited  by  amount  insured. 
Illustrations  taken  from  Chalmers  & 
Owen  (1907),  95,  93:  (1)  A  ship  valued 
at  £2,600  is  insured  with  D.  for  £1 ,200. 
After  encountering  very  bad  weather 
the  ship  is  rescued  by  a  steamer  with 
which  no  contract  is  made,  and  whicli 
afterward  obtains  an  award  of  £800, 
as  salvage  money.  The  owner  does 
not  abandon  the  ship,  but  elects  to  re- 
pair her.  D.'s  proportion  of  the  ex- 
penses of  repair  comes  to  £1,200;  that 
is  to  say,  tlie  full  sum  insured.  He  is 
not  liable  for  any  portion  of  the 
salvage  or  general  average  expenses  in 
excess  of  the  £1,200,  Aitchison  v.  Lohre 
(1879),  4  App.  Cas.  755,  c/.  Mont- 
gomeru  v.  Indemnit'i  Mut.  Mar.  his. 
Co.  (1900),  6  Com.  Cas.  23.  (2)  Time 
policy  on  shio,  which  begins  a  voyage 
short  of  coal  and  engages  the  services 
of  a  tug  to  tow  her  to  port  of  dis- 
charge. The  owner  of  tug  gets  judg- 
ment for  salvage  services  which  the 
assured  has  to  pay.  The  steamer  met 
with  no  extraordinary  weather  and 
might  in  time  have  sailed  to  her  port. 
The  loss  is  not  due  to  perils  of  the  seas. 


but  to  improper  deficiency  of  coal, 
Ballanlyne  v.  McKinnon  (1896),  2 
Q.  B.  455. 

2  General  average  defined  §  212. 

3Eng.  Mar.  Ins.  Act  (1906),  c.  41, 
§  06(4);  Dickenson  v.  Jardine,  L.  R. 
3  C.  P.  639;  The  Mary  Thomas  (1894), 
Prob.  125.  The  distinction  specified  in 
the  text  between  recovery  for  e.x- 
penditure  and  recovery  for  sacrifice  is 
thus  explained:  "General  average  ex- 
penditures do  not  involve  the  loss  or 
destruction  of  anything  insured.  The 
underwriter  is  only  liable  for  his  as- 
sured's  proportion  of  the  amount  ex- 
pended, and  consequently  he  cannot  be 
sued  until  there  has  been  some  kind  of 
adjustment.  It  is  different  with  a  gen- 
eral average  sacrifice.  The  insured  may, 
in  the  first  instance,  recover  the  whole 
loss  from  the  insurer,  but  when  the 
ship,  freight,  and  cargo  belong  to  the 
same  person,  it  is  said  that  the  assured 
is  deemed  to  have  the  contribution  of 
the  other  interests  in  his  pocket,  and 
can  only  recover  a  proportionate 
amount  from  the  underwriter  on  each," 
De  Hart  &  Simey,  Ins.  (1907),  77, 
citing  Montgomery  v.  Indemnit',  etc., 
Ins.  Co.  (1902),  1  K.  B.  734,  741,  61 
L.  J.  K.  B.  467. 


TOTAL   LOSS  253 

provided,  in  either  case,  the  peril,  sought  to  be  avoided  by  the  general 
average  expenditure  or  sacrifice,  was  one  insured  against.^ 

§  200.  Insurer  also  liable  for  General  Average  Contribution.— 

Subject  to  any  express  provision  in  the  policy,  where  the  assured 
has  paid,  or  is  liable  to  pay,  a  general  average  contribution  ^  in  re- 
spect of  the  subject  insured  he  may  recover  therefor  from  the  insurer,^ 
provided  the  general  a\erage  loss  was  incurred  for  the  purpose  of 
avoiding  a  peril  insured  against.^ 

§  201.  Measure  of  Indemnity. — The  sum  which  the  assured  can 
recover  in  respect  of  a  k  ss  on  a  policy  by  which  he  is  insured,  in  the 
case  of  an  unvalued  poll  ;y,  to  the  full  extent  of  the  insurable  value, 
or,  in  the  case  of  a  value  1  policy,  to  the  full  extent  of  the  value  fixed 
by  the  policy,  is  called  t  le  measure  of  indemnity.^ 

Where  there  is  a  loss  recoverable  under  a  marine  policy,  the  in- 
surer, or  each  insurer  il  there  be  more  than  one,  is  liable  for  such 
proportion  of  the  measure  of  indemnity  as  the  amount  of  his  sub- 
scription bears  to  the  val  ue  fixed  by  the  policy,  in  the  case  of  a  valued 
policy,  or  to  the  insurable  value,  in  the  case  of  an  unvalued  policy.^ 

That  is  to  say,  if  not  fully  insured,  the  assured  as  to  the  deficiency 
is  himself  a  coinsurer^ 

§  202.  Total  Loss. — Where  there  is  a  total  loss  of  the  subject-mat- 

iRalli  V.  Troop,  157  U.  S.  386,  393,  s  Eng.   Mar.  Ins.  Act   (1906),    §  67 

15  S.  Ct.  657;  Harris  v.  Scaramanga,  (1). 

L.  R.  76  C.  P.  496.  «  Lohre  v.  Aitchison  (1878),  3  Q.  B. 

2  Defined  §  212.  D.  564,  565.    Rule  of  adjustment  dif- 

3  Eng.  Mar.  Ins.  Act  (1906),  c.  41,  fers  in  fire  insurance,  see  §  50. 
§66(5);   The   Brigella   (1893),  p.   198,  7  Thus  a  cargo  valued  at  $10,000  is 
7  Asp.  Mar.  Cas.  405.  insured  for  $2,000,  leaving  the  owner 

*  Harris    v.    Scaramanga,    L.    R.    7  coinsurer  for  $8,000.     The  damage  by 

C.    P.    496.      Thus   the    underwriters,  sea   perils   is   $1,500.     Two-tenths  or 

though  not  directly  parties  to  a  gen-  one-fifth  of  the  loss,  $300,  falls  upon 

eral  average  adjustment,  must  make  the  underwriters,  the  balance,  $1,200, 

good  the  loss  of  the  assured,  so  far  as  or  four-fifths  of  the  whole  loss,  remains 

the  amount  of  the  insurance  permits,  with  the  insured.  Western  Assur.  Co.  v. 

Ralli  V.  Troop,  157  U.  S.  386,  15  S.  Ct.  Southwestern  Trans.  Co.,  68  Fed.  923, 

657;  Potter  V.  Ocean  Ins.  Co.,  3  Sumn.  16    C.    C.    A.    65.      Illustration    from 

(U.  S.  C.  C.)  27;  Padelford  v.  Board-  Chalmers    &  Owen,  Ins.    (1907),   102. 

man,  4  Mass.  548,  550.     Where  ship,  A  ship  valued  at  £5,000  is  insured  for 

freight,  and  cargo,  or  any  two  of  those  £1,000.    The  ship  is  stranded,  and  the 

interests,  are  owned  by  the  same  as-  o^\-ner  spends  £1,000  in  trying  to  get 

sured,  the  liability  of  the  insurer  in  her  off,  but  eventually  she  is  totally 

respect   of   general    average   losses   or  lost.     The   insurer   must   pay    £1,000 

contributions  is  to  be  determined  as  if  on    the  policy,   and  £200   {i.  e.,  one- 

those  interests  were  owned  by  different  fifth)    under  the   suing    and   laboring 

persons,  Montgomery  v.  Indemnity  Mut.  clause.     It  is  immaterial  whether  the 

M.  Ins.  Co.  (1901),  1  K.  B.  147,  aff'd  real   value  of  the  ship  be  £4,500  or 

a902)  1  K.  B.  734.  £5,500. 


254 


GENERAL   I'UINCIPLES  OF  INSURANCE   LAW 


ter  insured,  if  the  policy  be  valued,  the  measure  of  indemnity  is  the 
sum  fixed  by  the  policy.^  If  the  policy  be  not  valued,  the  measure 
of  indenmity  is  the  insurable  value  of  the  suljjcct-mattcr  insured.^ 

§  203.  Partial  Loss  of  Ship.— In  case  of  partial  loss  of  the  ship, 
subject  to  an}-  express  provision  in  the  policy,  the  following  rules 
apply:  (1)  Where  the  ship  has  been  repaired,  the  assured  is  entitled 
to  the  reasonable  cost  of  the  repairs,  less  the  customary  deductions, 
but  not  exceeding  the  sum  insured  in  respect  of  any  one  casualty.^ 


»  Sail  in/}  Ship  Blainnore  \.  M  acred  ie 
(1838),  App.  Cas.  GIO.  In  case  of  total 
loss  the  policy  valuation  makes  settle- 
ment a  simple  matter.  In  case  of  a 
valued  policy  on  freight  or  cargo,  if  a 
part  only  of  tlie  subject  is  exposed  to 
risk  the  Valuation  applies  only  in  pro- 
portion to  such  part,  Dnv/  v.  Ilallett,  3 
(^aines  (N.  Y.),  H5,  2  Am.  Dec.  241. 
Wiiere  profits  are  valued  and  insured, 
loss  of  profits  is  presumed  from  loss  of 
the  property  out  of  which  they  were 
expected  to  arise,  and  the  valuation  of 
policy  fixes  their  amount,  Patnpsco 
Ins.  Co.  V.  Coulter,  3  Pet.  (Q.  S.)  222. 
Where  hull  and  macliinery  are  sepa- 
rately valued,  the  parts  thus  separated 
are  to  be  treated  as  distinct  insurances. 
Am.  S.  S.  Co.  V.  hidemnit-i  Mvl.  Mar. 
Ins.  Co.,  108  Fed.  421,  atf'd  118  Fed. 
1014,  56  C.  C.  A.  ,56.  Unless  the  policy 
can  be  construed  to  intend  a  separate 
insurance  on  several  articles,  a  total 
loss  of  part  is  only  a  partial  loss,  De 
Hart  &  Simcy,  Ins.  (1907),  07. 

"^  Irviwj  V.  Manninq  (1847),  1  H.  L. 
Cas.  305,  307.  In  the  absence  of  a 
policy  valuation  insurable  value  is  as- 
certained as  follows:  In  insurance  on 
ship,  the  insurable  value  is  the  value, 
at  the  commencenent  of  the  risk,  of 
the  ship,  including  her  outfit,  provi- 
sions and  stores  for  the  officers  and 
crew,  money  advanced  for  seamen's 
wages,  and  other  disbursements  (if 
any)  incurred  to  make  the  ship  fit  for 
the  voyage  or  adventure  contemplated 
by  the  policy,  plus  the  charges  of  in- 
surance upon  the  whole,  Cannon  v.  Mar. 
Ins.  Co.,  5  Fed.  Cas.  178;  Lenvemrorth 
v.  Delajicld,  1  Gaines  (N.  Y.),  573,  2 
Am.  Dec.  201;  Moran  Calln"av  v. 
Uzidli  (lOO.j),  2  K.  R.  .558  (disburse- 
ments); Bro^h  V.  Whit^^ore  (1791),  4 
T.  R.  203  (stores  and  pro'  isions  for 
ere  v);  Stevens  v.  Columbian  Ins.  Co., 
3  Gaines  (N.  Y.),  43,  2  Am.  Dec.  247 
(cost    of    insurance).      The    insurable 


value,  in  the  case  of  a  steamship,  in- 
cludes also  the  machinery,  boilers,  and 
coals  and  engine  stores,  if  owned  by  the 
assured,  and  in  the  case  of  a  ship  en- 
gaged in  a  special  trade,  the  ordinary 
fittings  requisite  for  that  trade,  Ho- 
garth V.  Wal  er  (1900),  2  Q.  B.  2S3 
(fittings),  but  a  policy  on  "hull  and 
machinery,"  instead  of  "ship,"  may 
not  cover  coals  and  stores,  Roddir.r.  v 
Ins.  Co.  (1895),  2  Q.  B.  386.  In  in- 
surance on  freight,  w^hether  paid  in 
advance  or  otherwise,  the  insurable 
value  is  the  gross  amount  of  the  freight 
at  the  risk  of  the  assured,  plus  the 
charges  of  insurance,  U.  S.  Shipping 
Co.  V.  Empress,  etc.,  Corp.  (1907),  1 
K.  B.  259  (commission  not  to  be  added). 
In  insurance  on  goods  or  merchandise, 
the  insurable  value  is  the  prime  cost  of 
the  property  insured,  plus  the  ex- 
penses of  and  incidental  to  shipping 
and  the  charges  of  insurance  upon  the 
whole,  Ush-er  v.  Noble  (1810),  12  East, 
639,  646.  In  America  instead  of 
"prime  cost"  the  actual  or  market 
value  at  time  and  place  of  lading  is 
sometimes  said  to  be  the  test,  but  in 
practice  this  is  measured  by  the  in- 
voice or  cost  price,  Pleasants  v.  Mar"'- 
land  Ins.  Co.,  8  Cranch,  .55,  3  L.  Ed. 
486;  S7iell  v.  Dela-are  his.  Co.,  22 
Fed.  Cas.  713,  4  Dall.  430;  Warren  v. 
Franklin  Ins.  Co.,  104  Mass.  518. 
Loss  in  raising  money  for  the  purcliase 
is  not  to  be  added,  Minturn  v.  Cnlvm- 
bian  Ins.  Co.,  10  Johns.  (N.  Y.)  75. 
In  insurance  on  any  other  subject- 
matter,  the  insurable  value  is  the 
amount  at  the  risk  of  the  assured  when 
the  policy  attaches,  plus  tlie  cluarges  of 
insurance,  McArthur,  Ins.  (2d  ed.), 
p.  69. 

3  Hevderso'"  v.  Shan' In vd  (1830"),  1 
O.  B.  525;  Pitman  v.  Urivcr  H  A^rr. 
Ins.  Co.  (1882),  9  0.  B.  D.  192,  215; 
Aitchison  v.  Lohre  (1879),  4  App.  Cas. 
762.    The  measure  of  indemnity  is  thue 


PARTIAL  LOSS  OF  GOODS  255 

(2)  Where  the  ship  has  been  only  partially  repaired,  the  assured  is 
entitled  to  the  reasonable  cost  of  such  repairs,  computed  as  above, 
and  also  to  be  indemnified  for  the  reasonable  depreciation,  if  any, 
arising  from  the  unrepaired  damage,  provided  that  the  aggregate 
amount  shall  not  exceed  the  cost  of  repairing  the  whole  damage, 
computed  as  above. ^ 

(3)  Where  the  ship  has  not  been  repaired,  and  has  not  been  sold 
in  her  damaged  state  during  the  risk,  the  assured  is  entitled  to  be 
indemnified  for  the  reasonable  depreciation  arising  from  the  unre- 
paired damage,  but  not  exceeding  the  reasonable  cost  of  repairing 
such  damage,  computed  as  above.^ 

§  204.  Partial  Loss  cf  Freight. — Subject  to  anj'-  express  provision 
in  the  policy,  where  there  is  a  partial  loss  of  freight,  the  measure  of 
indemnity  is  such  proportion  of  the  sum  fixed  by  the  policy,  in  the 
case  of  a  valued  policy,  or  of  the  insurable  value,  in  the  case  of  an 
unvalued  policy,  as  the  proportion  of  freight  lost  by  the  assured 
bears  to  the  whole  freight  at  the  risk  of  the  assured  under  the  policy.^ 

§  205.  Partial  Loss  of  Goods. — Where  there  is  a  partial  loss  of 
goods,  merchandise,  or  other  movables,  the  measure  of  indemnity, 
subject  to  any  express  provision  in  the  policy,  is  as  follows: 

(1)  Where  part  of  the  goods,  merchandise,  or  other  movables  in- 
sured by  a  valued  marine  policy  is  totally  lost,  the  measure  of  in- 
demnity is  such  proportion  of  the  sum  fixed  by  the  policy  as  the 
insurable  value  of  the  part  lost  bears  to  the  insurable  value  of  the 
whole,  ascertained  as  in  the  case  of  an  unvalued  polic3^^ 

(2)  Where  part  of  the  goods,  merchandise,  or  other  movables 
insured  by  an  unvalued  marine  policy  is  totally  lost,  the  measure 
of  indemnity  is  the  insurable  value  of  the  part  lost,  ascertained  as 
in  case  of  total  loss.° 

theoretically,  the  cost  of  repairs,  less  fore  the  casualty  less  the  amount  for 

the  improvement  resulting  therefrom.  which  she  sold,  Pitman  v.    Universal 

As  to  what  are  customary  deductions  Mar.  Ins.  Co.  (1882),  9  Q.  B.  D.  192, 

see  §  209  and  Appendix,  Vh.  Ill;  also  51  L.  J.  Q.  B.  561. 

Chalmers  &  Owens,  Ins.   (1907),  154.  ^  U.  S.  Shipping  Co.  \.  Empress,  etc., 

As  to  "reasonable  cost  of  repairs,"  see  Corp.  (1907),  1  K.  B.  259;  The  Main 

Rvahon  S.S.   Co.  v.  London  ylss.   Co.  (1894),  P.  320.     See  Arnould,  §§878, 

(1900),  Apu.  Cas.  6,  69  L.  J.  Q.  B.  86;  1041. 

Aqenoria  S.S.   Co.  v.  Merchavts\  etc.,  *  Ursula- Bright  S.S.  Co.  v.  Amsincl', 

Ins.  Co.  (1903),  8  Com.  Cas.  212.  115   Fed.    242,   245,   and   cases   cited; 

i  StevaH   V.   Steele    (1852),  5   Scott  Lamar  his.  Co.  v.  McGIashen,  54  111. 

N.  R.  948.  513,  5  Am.  Rep.  162,  and  see  more  in 

2  Ste^'-aH   V.    Steele    (18.52),   5   Scott  detail  §  236; /mngr  v.  Manmn^r  (1847), 

N.  R.  927.    Where  the  shio  was  sold  in  1  H.  L.  Cas.  305. 

her  damaged  state,  it  was  held  that  the  ^Irving  v.  Manning  (1847),  1  H.  L. 

amount  recoverable  was  her  value  be-  Cas.  305;  Tobin  v.  Hartford,  32  L.  J, 


256 


GENERAL   PRINCIPLES   OF   INSURANCE   LAW 


(:])  Where  llic  whole  or  any  part  of  llie  goods  or  merchandise  in- 
sured has  been  deUvercd  at  its  destination,  the  measure  of  indemnity 
is  such  i^roportion  of  the  sum  fixed  by  the  policy,  in  the  case  of  a 
valued  policy,  or  of  the  insurable  value  in  the  case  of  an  unvalued 
policy,  as  the  difference  between  the  gross  sound  and  damaged  values 
at  tiio  i)lace  of  arrival  bears  to  the  gross  sound  value. ^ 

It  is  important  to  discriminate  between  a  particular  average  loss 
and  a  salvage  loss  on  goods,  since  the  measure  of  liability  laid  upon 
the  underwriter  is  not  the  same  in  both.    A  salvage  loss  is  a  total  loss 


C.  P.  i;?t,  130;  Lewis  v.  Ruckcr  (1701), 

2  Burr.  11G7.  A  particular  average  on 
goods  coiLsists  cither  in  damage  to  or 
total  loss  of  part  of  the  subject  in- 
sured by  operation  of  the  perils  in- 
sured against,  Kiddon  v.  Empire  Mar. 
Ins.  Co.,  L.  R.  1  C.  P.  53.5. 

1  Johnson  v.  Sheddon  (1802),  2  East, 
5S0.  "Gross  value"  means  the  whole- 
sale price,  or,  if  there  be  no  such  price, 
the  estimated  value,  with,  in  either  case, 
freight,  landing  charges,  and  duty  paid 
beforeliand;  provided  that  in  the  case 
of  go^ds  or  merchandise  customarily 
sold  in  bond,  the  bonded  price  is 
deemed  to  be  the  gross  value.  "Gross 
proceeds"  means  the  actual  price  ob- 
tained at  a  sale  where  all  charges  on 
sale  are  paid  by  the  sellers,  Eng.  Mar. 
Ins.  Act.  (1933),  §  71(4).  Thus  it  ap- 
pears that,  in  case  of  damaged  cargo  at 
destination,  a  loss  percentage  is  ob- 
tained which  is  applied  to  tlie  agreed 
valuation,  if  the  policy  is  valued,  other- 
wise to  the  original  market  or  insur- 
able value,  Laurence  v.  vV.  Y.  Ins.  Co., 

3  Johns.  Gas.  217.  The  practical  mode 
of  ascertaining  such  ratio  or  per- 
centage of  loss  is  usually  based  upon  a 
comparison  between  the  gross  pro- 
ceeds of  sales  of  property  sound  and 
property  damaged  at  place  of  dis- 
charge, Lanar  Ins.  Co.  v.  McGlashen, 
54  111.  513,  5  Am.  Rep.  162;  Lawrence 
V.  N.  Y.  Ins.  Co.,  3  Johns.  Gas.  216; 
Evans  v.  Commercial  Ins.  Co.,  6  R.  I. 
47.  If  property  is  reconditioned  the 
underwriter  is  liable  for  the  reasonable 
expense,  Francis  v.  Boidton  (1895),  65 
L.  J.  Q.  B.  N.  S.  153,  73  L.  T.  R.  578. 
Illustrations  fron  Chalmers  &  Owen, 
Ins.  (1907),  107,  108:  (1)  Unvalued 
policy  on  co^ee  from  Jamaica  to  Lon- 
don. The  insurable  value,  i.  e.,  the 
invoice  cost,  plus  shipping  expenses 
and  charges  of  insurance,  is  £200. 
Half  the  coffee  is  damaged  on  the 
voyage.     The  value  of  the  damaged 


coffee  in  London  is  half  that  of  the 
undamaged  coffee.  The  selling  price 
in  London  fixes  the  measure  or  per- 
centage of  depreciation,  but  not  the 
amount  the  insurer  has  to  pay.  That 
must  be  determined  by  applying  the 
depreciation  to  the  insurable  value,  so 
that  in  this  case  the  insurer  has  to  pay 
£.50,  Usher  V.  Noble  (1810),  12  East, 
639  (the  test  adopted  excludes  the 
rise  or  fall  of  the  London  market). 
(2)  Policy  on  40  bales  of  cotton,  which 
are  shipped  as  part  of  a  cargo  of  1 ,600 
bales  of  cotton  belonging  to  different 
owners.  Owing  to  sea  perils  200  bales 
have  to  be  jettisoned,  and  the  rest  are 
damaged  and  the  marks  wholly  oblit- 
erated. The  1,400  bales  are  sold  for 
the  benefit  of  whom  it  may  concern. 
This  is  a  partial  loss,  and  the  assured  is 
entitled  to  recover  as  if  five  of  the 
forty  bales  had  been  jettisoned,  and  the 
rest  damaged  to  the  extent  shown  bj'- 
the  sale  of  the  whole,  Spence  v.  Uiiion 
Mar.  Ins.  Co.  (1868),  L.  R.  3  G.  P. 
427.  (3)  Policy  on  1,700  packages  of 
tea,  valued  at  £6,000.  Part  of  the  tea 
is  sea-damaged,  and  the  remainder, 
which  arrives  undamaged,  sells  in 
consequence  for  a  smaller  price.  The 
insurer  is  not  liable  for  the  deprecia- 
tion so  caused,  Cator  v.  Great  Western 
Ins.  Co.  (1873),  L.  R.  8  C.  P.  552,  561; 
and  see  Brown  Bros.  v.  Fleming  (1902), 
7  Gom.  Gas.  245  (damage  to  labels, 
etc.).  (4)  Policy  on  cargo  of  sheet  iron 
in  separate  packages,  average  payable 
"on  each  packet  separately  or  on  the 
whole."  Damage  is  sustained  before 
the  termination  of  the  risk.  The 
whole  of  the  iron  is  ur.. packed  and 
examined.  The  damaged  iron  is  sold, 
and  the  rest  is  repacked  and  sent  on. 
The  insurer  is  not  liable  for  the  ex- 
penses incurr'^d  in  examining  and  re- 
packing the  packages  which  were  not 
damaged,  Lysayht  v.  Coleman  (1895).  1 
Q.  B.  49. 


GENERAL  AVERAGE  CONTRIBUTION  AND  SALVAGE  CHARGES  257 

diminished  by  salvage,  and  takes  place  in  relation  to  goods  when 
there  is  either  an  absolute  or  a  constructive  total  loss  of  the  subject 
insured,  but  some  remains  of  the  property  have  been  recovered  by 
the  assured.^  The  underwriters  are  called  upon  to  pay  the  difference 
between  the  insured  value  of  the  goods  and  the  net  proceeds  of  sale, 
ascertained  by  deducting  from  the  gross  proceeds  the  expenses  of 
salvage.  On  the  other  hand,  the  method  for  computing  a  technical 
particular  average  loss  is  declared  to  be  well  established  and  is  thus 
described:  the  damaged  goods,  upon  reaching  their  destination, 
must  be  at  once  sold  for  the  best  price  obtainable.^  It  is  then  to  be 
determined  what  the  goods  would  have  been  worth  in  the  same  mar- 
ket had  they  been  sound,  and  the  difference  between  the  sound 
value  and  the  proceeds  of  the  sale  of  the  damaged  article  gives  the 
ratio  of  deterioration,  and  the  underwriter  is  to  pay  this  ratio  or  per- 
centage of  loss  on  the  policy  value. ^ 

§  206.  Apportionment  of  Valuation. — Where  different  species  of 
property  are  insured  under  a  single  valuation,  the  valuation  must  be 
apportioned  over  the  different  species  in  proportion  to  their  respective 
insurable  values,  as  in  the  case  of  an  unvalued  policy.  The  insured 
value  of  any  part  of  a  species  is  such  proportion  of  the  total  insured 
value  of  the  same  as  the  insurable  value  of  the  part  bears  to  the  in- 
surable value  of  the  whole.^ 

§  207.  General    Average    Contribution   and  Salvage    Charges. — 

Subject  to  any  express  provision  in  the  policy,  where  the  assured 
has  paid,  or  is  liable  for,  any  general  average  contribution,  the  meas- 
ure of  indemnity  is  the  full  amount  of  such  contribution  if  the  sub- 
ject-matter liable  to  contribution  is  insured  for  its  full  contributory 
value;  but  if  such  subject-matter  be  not  insured  for  its  full  contribu- 
tory value,  or  if  only  part  of  it  be  insured,  the  indemnity  payable  by 

1  MacArthur,  Ins.  (2d  ed.),  241.  as  a  salvage  loss).  Loss  en  goods  ar- 
See  Devitt  v.  Prov.  Washington  Ins.  riving  in  specie  sea-damaged  and  with 
Co.,  61  App.  Div.  390,  401,  70  N.  Y.  marks  obliterated,  so  that  they  cannot 
Supp.  654  (in  which  there  was  a  con-  be  delivered  to  their  respective  owners, 
structive  total  loss  of  canal  cargo  of  must  be  adjusted  according  to  the 
potatoes  which  the  court  holds  to  be  rules  of  particular  average,  Spence  v. 
"a  salvage  loss."  Some  of  the  pota-  Union  Mar.  Ins.  Co.,  L.  R.  3  C.  P.  427. 
toes  arrived  in  specie  but  salvage  ex-  <  Where  a  valuation  has  to  be  ap- 
penses  exceeded  proceeds).  portioned,  and  particulars  of  the  prime 

2  Usually  by  auction.  cost  of  each  separate  species,  quality, 

3  London  Ass7ir.  v.  Companhia  cle,  or  description  of  goods  cannot  be  as- 
etc,  167  U.  S.  149,  171,  17  S.  Ct.  785,  certained,  the  division  of  the  valuation 
42  L.  Ed.  113  (where,  by  agreement,  may  be  made  over  the  net  arri\ed 
loss  was  converted  into  a  constructive  sound  value  of  the  different  species, 
total  loss  and  adjusted  by  the  court  qualities,  or  descriptions  of  goods. 

17 


258 


GENERAL   PRINCIPLES   OF   INSURANCE   LAW 


the  insurer  must  be  reduced  in  proportion  to  the  und^r  insurance, 
and  where  there  has  been  a  particular  average  loss  which  constitutes 
a  deduction  from  the  contributory  value,  and  for  which  the  insurer 
is  liable,  that  amount  must  be  deducted  from  the  insured  value  in 
order  to  ascertain  what  the  insurer  is  liable  to  contribute.  Where 
the  insurer  is  liable  for  salvage  charges  the  extent  of  his  liability 
must  be  determined  on  the  like  principle.' 

§  208.  Liability  for  Successive  Losses  may  Exceed  Amount  of 
Policy.— The  rule  obtains  in  marine  insurance  that  if  a  partial  loss 
is  repaired  or  adjusted  and  there  is  a  subsequent  partial  or  total 
loss  under  the  same  policy,  the  insurer  is  liable  for  both,  though 
exceeding  the  total  amount  underwritten. ^  This  rule,  peculiar  to 
marine  insurance,  secures  only  reasonable  protection  to  the  insured, 
who  in  case  of  partial  loss  to  his  property  on  a  distant  voyage  is  likely 
to  receive  no  prompt  report  of  the  extent  of  loss  and  cost  of  restora- 
tion, and  may,  therefore,  be  in  no  position  to  take  out  further  in- 
surance to  equal  the  cost  of  repairs  until,  by  reason  of  a  subsequent 
total  loss,  it  is  too  late.     The  chance  of  added  liability  occasioned  by 


iMcArthur,  Ins.  (2d  ed.),  206,  210. 
In  a  recent  case  in  England  it  was  held 
that  the  assured  was  concluded  for 
this  purpose  also  by  the  agreed  valua- 
tion in  his  policy,  Balmoral  Co.  v. 
Marten  (1932),  App.  Cas.  511.  There 
the  policy  value  of  ship  was  £33,000, 
her  actual  value  adopted  in  the  salvage 
action  was  £40.000.  Held,  that  the  in- 
surer was  only  liable  to  make  good  to 
the  assured  thirty-three  fortieths  of 
his  general  average  losses.  The  law  in 
the  United  States  has  been  held  to  be 
otherwise.  Here  the  recovery  for  gen- 
eral average  loss  to  the  ship  and  nec- 
essary salvage  expenditures  is  not  to 
be  reduced  in  the  proportion  of  the 
undervaluation  in  the  policy  but  is  to 
be  based  upon  the  actual  value,  Inter- 
national Nav.  Co.  V.  »SVa  Ins.  Co.,  63 
C.  C.  A.  663,  123  Fed.  13,  15;  Inter- 
national Nav.  Co.  V.  Brit.  &  For.  Mar. 
Ins.  Co.,  100  Fed.  304.  The  contribu- 
tory value,  for  the  purpose  of  general 
average,  is  the  value  at  the  port  of  ad- 
justment, wiiereas  the  insurable  value 
is  the  value  at  the  commencement  of 
the  voyage. 

2  Wood  V.  Ins.  Co.,  6  Mass.  479,  4 
Am.  Dec.  163;  Broods  v.  MacDonnell 
(1835),  1  Y.  &  C.  500,  515;  Le  Chemi- 
nant  v.  Pearson,  4  Taunt.  367;  com- 
pare The  Dora  Foster  (1900),  Prob.  241. 


Rule  is  otherwise  in  fire  insurance, 
60  Neb.  116,  82  N.  W.  313.  In  Christie 
V.  Buc!:e;/e,  5  Fed.  Cas.  653,  the  under- 
writer was  held  liable  for  full  amount 
of  policy  for  total  loss,  and  in  addition 
for  the  payment  of  prior  general  aver- 
age loss.  So  also  in  Barl.er  v.  Phoenix 
Ins.  Co.,  8  Johns.  (N.  Y.)  307,  5  Am. 
Dec.  339;  Saltus  v.  Commercial  Ins. 
Co.,  10  Johns.  (N.  Y.)  487.  This  doc- 
trine is  held  to  be  independent  of  any 
special  clause  in  the  policy,  Matheson 
V.  Equitable  Mar.  Ins.  Co.,  118  Mass. 
209,  19  Am.  Rep.  441.  Where  under 
the  same  policy  a  partial  loss,  which 
has  not  been  repaired  or  otherwise 
made  good  is  followed  by  a  total  loss, 
the  assured  can  only  recover  for  the 
total  loss,  Livie  v.  Janson  (1810),  12 
East,  648  (stranding  followed  by  cap- 
ture). In  England  it  has  been  held  that 
where  a  partial  loss  takes  place  under 
one  policy  and  a  total  loss  under  a  con- 
secutive policy,  the  assured  may  re- 
cover for  both,  although  the  partial 
loss  be  unrepaired  and  however  ex- 
tensive it  mav  be,  De  Hart  &  Simey, 
Ins.  (1907),  87,  citing  Lidgett  v.  Secre- 
tan  (1871),  L.  R.  6  C.  P.  616,  40  L.  J. 
C.  P.  257;  Woodside  v.  Globe  Mar.  Ins. 
Co.  (1896),  1  Q.  B.  105,  65  L.  J.  Q.  B. 
117. 


ONE-THIRD   OFF   NEW  FOR  OLD  259 

this  recognized  doctrine  of  law  is  not  forgotten  by  the  underwriter 
when  he  estimates  the  rate  of  his  premium. 

§  209.  One-third  off  New  for  Old. — In  the  case  of  a  partial  loss  of 
a  ship  or  its  equipments,  the  old  materials  are  to  be  applied  toward 
payment  for  the  new,  and,  in  general,  a  deduction  of  one-third  from 
the  cost  of  repairing  or  replacing  the  damage  is  made  after  deducting 
the  value  or  proceeds  of  the  old  materials,  and  the  marine  insurer 
is  liable  for  two-thirds  of  the  balance  of  the  cost.^ 

1  Eager  v.  Atlas  Ins.   Co.,  14  Pick.  ing,  see  Prince  v.  Equitable  Safety  Ins. 

(Mass.)  141;  Byrnes  v.  Nat.  Ins.  Co.,  1  Co.,    12    Gray     (Mass.),    527;     chain 

Cow.  (N.  Y.)  265,  276  (where  the  court  cables,   etc.,   Orrok   v.    Commonwealth 

says:  "The  true  rule  seems  to  be  this,  Ins.   Co.,  21   Pick.  456,  32  Am.   Dec. 

to   apply   the   old   materials    towards  277;    Dunham   v.    Com.    Ins.    Co.,    11 

payment  for  the  new  and  to  allow  the  Johns.  (N.  Y.)  315,  6  Am.  Dec.  374. 

deduction  of  the  one-third  new  for  old,  For  deductions,  see  Appendix,  ch.  III. 

upon  the  balance")-     But  certain  ex-  As  to  new  ship  on   first   voyage  see 

captions  to  this  rule  are  allowed,  see  Pirie  v.  Steele,  2  Mood.  &  R.  49.    The 

Chalmers  &  Owen,  Ins.    (1907),   154,  charter  party  may  be  so  worded  as  to 

for  example,  in  the  case  of  iron  ships.  make    the    outward    and    homeward 

Anchors,  Brooks  v.  Oriental  Ins.  Co.,  passage  only  one  voyage,  Fenwick  v. 

7  Pick.  (Mass.)  259,  269;  metal  sheath-  Robinson,  3  C.  «fe  P.  323. 


CHAPTER  X 
General  Average — Marine 

§  210.  General  Average— Related  to  Insurance.— This  subject 
belongs  not  only  to  admiralty  law,  but  also  to  the  law  of  insurance, 
since  general  average  losses,  incurred  to  avert  a  peril  insured  against, 
are  held  by  legal  construction  or  inference  to  be  covered  by  the  marine 
policy.^  Thus,  while  in  the  first  instance  the  owner  of  ship  or  of 
cargo,  regardless  of  whether  his  interest  is  insured,  is  obligated  to 
make' contribution  in  proportion  to  the  value  of  his  property  saved 
by  a  general  average  sacrifice  or  expenditure,  yet  by  virtue  of  in- 
surance law,  if  he  is  so  fortunate  as  to  be  insured,  he  reclaims  from 
his  underwriters  the  amount  of  this  contribution.^  Therefore  it 
will  be  observed,  that  an  adjustment  of  a  general  average  loss,  if 
incurred  to  avert  a  peril  insured  against,  concerns  not  only  the 
ownei-s  of  ship,  freight,  and  cargo  at  risk,  but  also  their  respective 
sets  of  underwriters  as  well. 

The  English  law  and  that  of  the  Federal  courts  of  the  United 
States  differ  as  to  the  extent  to  which  the  underwriter  is  thus  answer- 
able. By  the  law  of  England,  the  shipowner  reclaims  in  full,  pro- 
vided the  policy  value  amounts  to  the  value  assessed  for  contribu- 
tion.^ By  the  New  York  decisions  ^  as  well  as  by  those  of  the  Federal 
courts,^  the  policy  valuation  is  conclusive,  and  the  underwriter  who 
covers  this  agreed  policy  value  is  answerable  for  the  entire  general 
average  assessment,  even  though  based  upon  a  valuation  exceed- 
ing that  stated  in  the  poUcy. 

§  211.  General  Average — Its  Basis. — The  rule  of  general  average 
has  its  basis  in  the  community  of  interest  existing  between  the  owners 
of  ship  and  cargo,  by  reason  of  which  losses  intentionally  incurred 

1  See  §§  199,  207.  Included  inEng.  *  Steamship  Balmoral  Co.  v.  Marten 
Ml-.  Ins.  Act  (1906),  §  66.  (19 j2),  a.  c.  511. 

2  McArthur,  Mar.  Ins.  (2d  ed.),  206,  *  Providence  &  Stonington  SS.  Co.  v. 
"The  law  of  average  and  contribution  Phoenix  Co.,  89  N.  Y.  559. 

had  existed  for  ages  before  the  practice  ^  Int.  Nav.  Co.  v.  Atlantic  Mtd.  Co., 

of    insurance    was    known,"    Price   v.       100  Fed.  304,  316. 
Noble,  4  Taunt.  123,  126,  by  Heath,  J. 

[2R0] 


DISTINCTION   BETWEEN   GENERAL   AND    PARTICULAR  AVERAGE    261 

for  the  common  safety  ought  to  be  equitably  apportioned  among  the 
interests    thereby    benefited.^ 

§  212.  General  Average  Loss  and  Contribution  Defined. — A  general 
average  loss,  is  a  loss  caused  by  or  directly  consequential  on  a  general 
average  act.  It  includes  a  general  average  expenditure  as  well  as  a 
general  average  sacrifice.  Any  extraordinary  sacrifice  or  expenditure, 
A'oluntarily  and  reasonably  made  or  incurred,  in  time  of  danger,  for 
the  purpose  of  preserving  the  property  imperilled  in  the  common 
adventure,  is  a  general  average  act,  provided  it  be  done  by  the  master 
or  one  in  his  stead  authorized  to  act.'  The  party  on  whom  the 
general  average  loss  falls  is  entitled,  subject  to  the  conditions  im- 
posed by  maritime  law,  to  a  ratable  contribution  from  the  other 
parties  interested,  and  this  is  called  a  general  average  contribution.^ 

§  213.  Distinction  between  General  and  Particular  Average. — The 

distinction  between  a  general  and  a  particular  average  lies  in  the  fact 
that  in  the  former  case  there  is  a  general  distribution  of  the  loss 
among  the  parties  to  the  adventure,  while  in  the  latter  case  there  is 
a  special  application  of  the  loss  to  one  or  more  of  the  parties."^  Every 
partial  loss  is  particular  average  in  relation  to  the  party  who  first 
sustains  it,  whether  that  loss  is  ultimately  to  be  made  good  by  a 
general  contribution  or  to  remain  where  it  falls.^ 

1  "It  is  founded  upon  the  plainest  loss,  short  of  total,  falling  directly 
principles  of  common  justice,"  Louis-  upon  a  particular  property.  General 
mile  Underwriters  v.  Pence,  93  Ky.  96,  average  is  the  liability  or  claim  falling 
103,  40  Am.  St.  R.  176,  19  S.  W.  10,  upon  that  property  from  the  loss  of  or 
per  Holt,  C.  J.  "Average  contribution  damage  to  something  else,"  Bargett  v. 
is  the  creation  of  the  maritime  law  and  Orient  Mut.  Ins.  Co.,  3  Bosw.  (N.  Y.) 
is  founded  in  the  great  principles  of  385;  Potter  v.  Ocean  Ins.  Co.,  3  Sumn. 
equity,"  Dike  v.  Propeller  St.  Joseph,  6  (U.  S.  C.  C.)  27,  39;  Firemen's  Ins.  Co. 
McLean  (U.  S.  C.  C),  573,  575,  Fed.  v.  Fitzhugh,  4  B.  Mon.  (Ky.)  160,  164 
Cas.  No.  3,908.  et  seq. 

2  Ralli  v.  Troop,  157  U.  S.  386,  400,  s  price  &  Co.  v.  Al  Ships  Ins.  Assoc, 
403,  404,  15  S.  Ct.  657;  Hobson  v.  22  Q.  B.  D.  580,  590;  Peters  v.  Warren 
Lord,  92  U.  S.  397;  Star  of  Hope,  9  7ns.  Co.,  1  Story  (U.  S.  C.  C),  463, 
Wall.  (U.  S.)  203,  228;  The  Strathdon,  469,  Fed.  Cas.  No.  11,034.  For  in- 
94  Fed.  206,  208;  Van  Den  Toorn  v.  stances  of  particular  average  on  ship 
Leeming,  79  Fed.  107;  Iredale  v.  and  how  computed,  see  Marine  Ins. 
Traders'  Ins.  Co.  (1900),  2  Q.  B.  515,  Co.  v.  China,  etc.,  S.  Co.,  11  App.  Cas. 
519;  Svensden  v.  Wallace,  13  Q.  B.  D.  573;  Ruabon  S.  Co.  v.  London  Assur. 
69,  84.  Compare  Compania  La  Flecha  (1900),  App.  Cas.  6.  Obviously  it  is 
V.  Brauer,  168  U.  S.  i04,  where  it  is  likely  to  make  a  great  difference  in  the 
held  that  a  jettison  must  be  reason-  result,  whether  the  loss  remains  with 
ably   necessary.  the  particular  interest  or  whether  it  is 

^Svensden    v.    Wallace    (1885),    10  distributed  among  all,  Dent  v.  Smith, 

App.  Cas.  415.  L.  R.  4  Q.  B.  414;  but  if  all  interests 

*  See    Orrok    v.    Commonwealth,    21  are  insured,  it  is  usually  a  question  be- 

Pick.   (Mass.)  456,  32  Am.  Dec.  271.  tween    the    different    sets    of    under- 

" Particular  average  is  the  dam.'3,ge  or  writors.     The  liability  to   contribute, 


262  GENERAL   PRINCIPLES  OF  INSURANCE   LAW 

Thus,  in  an  old  case,  the  EngUsh  ship  Brothers  was  captured  by  a 
French 'privateer.  The  EngUsh  captain  and  most  of  the  crew  were 
taken  out  and  replaced  by  a  French  prize  crew.  On  the  way  to  Mar- 
seilles in  a  heavy  storm,  the  Frenchmen,  after  consulting  the  English 
mate,  necessarily  threw  overboard  the  ship's  guns,  anchors,  chains, 
and  a'  (juantity  of  stores  from  the  middle  deck  in  order  to  lighten  the 
laboring  vessel.  Before  reaching  Marseilles  the  ship  was  recaptured 
by  the  English  mate,  with  the  aid  of  others  aboard,  and  brought  to 
Gibraltar.  The  owner  of  the  ship  made  a  claim  on  the  owner  of  the 
cargo,  for  contriluition  to  the  jettison.  Lord  Mansfield,  holding  that 
the  act  was  justifiably  done  for  the  common  safety,  allowed  the  claim.^ 

But  where  the  captain  of  a  Spanish  ship,  on  the  point  of  being 
boarded  by  an  enemy,  threw  overboard  a  bag  containing  $100,000, 
not  to  avert  a  common  danger,  but  to  prevent  the  enemy  from  getting 
the  money,  the  insurers  of  the  money  paid  the  loss  without  claiming 
the  benefit  of  general  average.^ 

§  214.  Obligation  Rests  upon  Law  Rather  than  Contract.— The 

right  to  general  average  and  its  correlative  obligation  are  not  founded 
necessarily  upon  contract,  but  arise  from  the  common  law  of  the 
sea,  which  is  applicable  to  all  who  are  engaged  in  maritime  com- 
merce.^ Therefore  the  right  and  the  obligation  exist  as  between 
the  owners  of  ship,  freight  and  cargo  whether  their  interests  are  in- 
sured or  not  insured.'' 

§  215.  Origin  of  General  Average.— The  earliest  trace  of  this 
ancient  rule  of  maritime  law  is  to  be  found  in  an  extract  from  the 
Rhodian  law  which  was  incorporated  in  the  Roman  civil  law.^  Thence 
it  found  its  way  into  the  common  law  of  England  and  of  the  United 

however,  exists  independent  of  insur-  charges  and  expenses,  Burton  v.  Eng- 

ance,  and  therefore  the  liabiUty  of  the  lish,  L.  R.  12  Q.  B.  D.  218,  220,  cited 

insurer  under  the  pohcy  may  not  be  and  rehed  on  in  Marwick  v.  Rogers,  163 

commensurate    with    that  of    the   as-  Mass.  50,  52,  47  Am.  St.  R.  436,  39 

sured  under  the  contract  of  affreight-  N.  E.  780. 

ment,    The    Brigella    (1893),    P.    195.  *  The  Brujella  (1893),  F.  195,  7  Asp. 

For    example,    if    goods    are    insured  Mar.  Cas.  404. 

warranted  free  from  capture,  general  s  The    Rhodian    law    provides    "if 

average    expenses    incurred    to    avoid  goods  are  thrown  overboard  in  order 

capture  would  not  fall  upon  the  under-  to  lighten  a  ship,  the  loss  incurred  for 

writer.  the  sake  of  all  shall  be  made  good  by 

1  Price  V.  Noble,  4  Taunt.  123.  the  contribution  of  all,"  Columbian  Ins. 

2  Butler  v.  Wildman,  2  B.  &  Aid.  398.  Co.  v.  Af;hbv,  13  Pet.  (U.  S.)  331,  338, 
s  Ralli  v.  Troop,  157  U.  S.  386,  400,  10  L.  Ed.  186-  LowTides,  Gen.  Av.,  1; 

15  S.  Ct.  657;  Ruabon  S.  Co.  v.  London      Anderson  v.  Ocean  SS.   Co.,  10  App. 
Assur.    (1900),    App.    Cas.    6.      Dock      Cas.  107,  114. 


REQUISITES  OF  GENERAL  AVERAGE  ACT 


263 


Statos  and  became  an  implied  condition  both  in  the  contract  of 
affreightment  and  the  policy  of  marine  insurance.'^ 

§  216.  Requisites  of   General  Average  Act. — To  justify  a  general 
avejige   contribution   the   following   conditions   must   be   fulfilled: 

(1)  When  the  act  is   performed   the  danger  must   be  imminent,^ 

(2)  It  must  be  a  common  peril  threatening  both  ship  and  cargo.^ 

(3)  The  sacrifice  or  expense  must  be  voluntarily  made  or  incurred 
to  avoid  the  peril  and  for  the  common  safety  or  for  the  common 
benofit.'*  (4)  The  general  average  act  must  be  followed  by  some 
measure  of  success,  since,  if  the  whole  be  lost,  the  sacrifice  of  part 
is  proved  to  be  of  no  avail,  and  there  is  nothing  saved  upon  which 
contribution  can  be  laid ;  ^  but  either  ship  or  cargo  may  become 
a  total  loss  without  defeating  general  average,  provided  the  gen- 
eral a^''erage  act  was  justifiable  when  performed  and  was  presently 
succesi'ful.^  (5)  The  act  must  be  directed  b}^  the  master  of  the  ship, 
or  by  s:)meone  in  his  stead  authorized  to  represent  the  owners  of  all 
interestr?  included  in  the  common  adventure.  Thus  the  scuttling 
of  a  ship  by  the  municipal  authorities  of  a  port  against  the  protest 
of  the  commanding  officer,  to  extinguish  a  fire  in  her  hold,  is  not  a 
general  a'erage  loss,^  but  if  a  sacrifice,  as  in  the  case  of  pouring 

(U.  S.)  331,  338,  10  L.  Ed.  186; 
Sctidder  v.  Bradford,  14  Pick.  (Mass.) 
13,  15,  2,5  Am.  Dec.  355;  Nimick  v. 
Holmes,  25  Pa.  St.  266,  64  Am.  Dec. 
710.  As  to  how  far  success  is  an  es- 
sential element  by  the  English  and 
continental  practice  see  Arnould,  Mar. 
Ins.  (7th  ed.).  §§  912,  979,  980.  It  has 
been  stated  that  the  operation  of  the 
rule  turns  more  in  England  upon  the 
immediate  and  not  the  ultimate  suc- 
cess than  it  does  in  the  United  States 
and  on  the  continent,  1  Ency.  Laws, 
Eng.  (ed.  1897),  428. 

«  Columbian  Ins.  Co.  v.  Ashby,  13 
Pet.  (U.  S.)  331;  Patten  v.  Darling,  1 
Cliff.  (U.  S.  C.  C.)  254,  266;  Lee  v. 
Grinnell,  5  Duer  (N.  Y.),  400,  421, 
Hoffman,  J.  But  see  Caze  v.  Reilbi,  3 
Wash.  (U.  S.  C.  C.)  298,  Fed.  Cas. 
No.  2,538  (jettison  unsuccessful);  and 
Marshall  v.  Garner,  6  Barb.  (N.  Y.) 
394  (no  sacrifice,  since  stranding  was 
involuntary). 

7  Ralli  V.  Troop,  157  U.  S.  386,  15 
S.  Ct.  657.  If  master  is  disabled  who- 
ever is  in  active  command  may  act  for 
him,  Lawrence  v.  Minturn,  17  How. 
(U.  S.)  110;  Price  v.  Noble,  4  Taunt. 
123.  Barges  in  tow  of  a  steam  tug  are 
not  under  control  of  the  master  of  a 


1  Ralli  v.  Troop,  157  U.  S.  386,  393, 
15  S.  Ct.  657.  See  Nimick  v.  Holmes, 
25  Pa.  St.  3r)6,  371,  64  Am.  Dec.  710. 

2  Hobson  V.  Lord,  92  U.  S.  397,  400; 
Ralli  V.  Tro.*r,  157  U.  S.  386,  400, 
15  S.  Ct.  657. 

3  Barnard  v  Adams,  10  How.  (U.  S.) 
270,  303,  13  L    Ed.  417. 

4  J.  P.  Domldson,  167  U.  S.  599, 
602;  Ralli  v.  Troop,  157  U.  S.  386,  403; 
Hobson  V.  Lord.  92  U.  S.  397,  400; 
Van  Den  Toorn  v.  Leeming,  79  Fed. 
107;  Iredale  v.  (.'hina  Traders  Ins.  Co. 
(1900),  2  Q.  B.  515,  519.  Thus  where 
masts,  spars,  rigfiing,  and  sails,  were 
first  carried  away  by  the  elements  anci 
left  hanging  over  tl'e  vessel's  side,  and 
afterwards  were  cut  loose  for  the  com- 
mon safety,  the  o^-ner  of  the  cargo 
saved  by  being  taken  out  of  the  ship 
and  brought  into  po^t,  was  held  not 
liable  for  contribution,  Nickerson  v. 
Tvson,  8  Mass.  467. 

5  Ralli  V.  Troop,  157  U.  S.  386,  403, 
15  S.  Ct.  657;  Hobson  ^  Lord,  92  U.  S. 
397,  403;  Star  of  Hope,  1  Wall.  (U.  S.) 
203,  229,  2.30,  19  L.  Ed.  638  ("if  noth- 
ing is  saved  there  cannot  be  any  such 
contribution");  Barnard  ".  Adamv,  10 
How.  (U.  S.)  303,  13  L.  ^d,  '17; 
Columbian  Ins.  Co.  v.  AshY  *    ' '    \'et. 


201 


(iENEUAL    rillNClPLES   OF    INSURANCE   LAW 


tvater  into  the  hold  of  the  vessel  to  the  injury  of  the  cargo  with  the 
purpose  of  extinguishing  a  fire,  is  made  at  the  request  of  the  master, 
the  damage  is  general  average.^ 

A  jettison  must  be  made  in  good  faith  and  with  prudence,  and 
ought,  so  far  as  possible,  to  begin  with  the  most  bulky  and  least 
valuable  articles.  But,  of  necessity,  the  master  of  the  ship  must  be 
left  free  to  take  such  steps  as  he  deems  necessary  for  the  preserva- 
tion of  the  interests  intrusted  to  his  care.^ 


§  217.  Negligence  Cause  of  Sacrifice.— A  party  whose  negligence 
has  made  the  sacrifice  necessary  cannot  claim  contribution  in  gen- 
eral average;  •''  and  the  shipowner  may  be  responsible  in  this  respect 
for  the  negligent  acts  of  his  master  and  crew. 


tug  to  the  same  extent  as  the  tug  and 
its  cargo,  and  where  tlie  master  casts 
otf  and  abandons  the  barges  with  the 
intention  and  effect  of  saving  the  tug 
no  contribution  can  be  had  against  the 
tug.  There  is  no  sucli  community  of 
interest  between  the  owners  of  the  tug 
and  the  owners  of  the  barges  and  no 
such  single  maritime  adventure  as  are 
contemphited  within  the  meaning  of 
the  law  of  general  average,  J.  P. 
Donaldson,  167  U.  S.  599,  17  S.  Ct.  951. 
"The  sacrifice  (a)  must  be  voluntary 
and  for  the  benefit  of  all;  (b)  must  be 
made  by  the  master  or  by  liis  author- 
ity; (c)  must  not  be  caused  by  the 
fault  of  any  party  asking  the  contribu- 
tion; (d)  must  be  successful;  (e)  must 
be  necessary,"  Hughes,  Adm.,  39. 
Where  for  the  common  safety  it  be- 
comes necessary  to  land  goods,  ac- 
cording to  the  English  rule  when  the 
goods  have  once  been  put  in  a  place 
of  security  they  cease  thereafter  to  be 
at  the  risk  of  the  general  venture  and 
being  themselves  in  safety  they  are 
held  to  constitute  no  sacrifice  and  the 
act  of  interrupting  the  voyage  to  land 
them,  Iredale  v.  China  Traders  Ins.  Co. 
(1900),  2  Q.  B.  515,  or  any  expense  in- 
curred in  reshipping  them,  Svendsen  v. 
Wallace,  10  App.  Cas.  404,  is  held  to 
afford  no  justification  for  general  av- 
erage contribution.  In  this  country 
the  tendency  of  the  courts  is  to  extend 
the  community  of  interest  between  the 
ship  and  the  cargo  if  both  are  still  sub- 
ject to  the  master,  though  there  may  be 
physical  seoaration.  Pacific  Mail  S.S. 
Co.  V.  California  Vintage  Co.,  74  Fed. 
564,  570;  Nelson  v.  Belmont,  21  N.  Y. 
36;  Bevan  v.  Bank,  4  Whart.  (Pa.)  301. 


1  The  Roanoke,  59  Fed.  161,  8  C.  C.  A. 
67. 

2  "Much  is  deferred  in  such  an 
emergency  to  the  judgment  and  de- 
cision of  the  master,"  Star  of  Hope,  9 
Wall.  (U.  S.)  203,  229.  In  former 
times,  when  merchants  voyaged  with 
their  wares  their  consent  was  held 
necessary  to  a  jettison,  and  the  captain 
was  also  required  to  consult  with  his 
officers  or  with  some  of  his  crew,  then 
perhaps  more  nearly  his  equals  than  in 
later  times.  But  even  then  the  final 
decision  rested  with  the  captain,  RalH 
v.  Troop,  157  U.  S.  386,  399,  15  S.  Ct. 
657.  Although  such  a  conference  has 
long  since  been  discontinued  in  prac- 
tice, there  is  a  sense  in  which  it  is  still 
held  in  theory,  inasmuch  as  the  master 
becomes  agent  for  the  OAvner  of  the 
cargo  as  well  as  for  the  shipowner  in 
times  of  emergency,  with  authority  to 
bind  both  parties  in  the  adoption  of 
such  measures  as  are  expedient  in  the 
common  interest,  Gratitudine,  3  Chas. 
Robinson,  240;  Nirnick  v.  Holmes,  25 
Pa.  St.  366,  372,  64  Am.  Dec.  710,  per 
Lo^vrie,  J.  Although  such  consultation 
may  be  highly  proper  there  is  no 
weight  in  the  objection  that  it  is  nec- 
essary, Columbian  Ins.  Co.  v.  Ashhy,  13 
Pet.  (U.  S.)  .331,  343,  344,  per  Story,  J. 
"It  would  defeat  the  main  utility  of 
general  average,  if  at  the  moment  of 
emergency,  the  captain's  mind  were  to 
hesitate  as  to  saving  the  adventure, 
through  fear  of  casting  a  burden  on  his 
owners,"  Shevherd  v.  Kottqen,  L.  R. 
2  C.  P.  D.  578,  583,  per  Grove,  J. 

3  Ralli  V.  Troop,  157  U.  S.  386,  403, 
15  S.  Ct.  657;  Portsmouth,  9  Wall. 
(U.  S.)  682;  Tnnidad  Shipping  &  Trad- 


GENERAL    AVERAGE   LOSSES 


265 


The  City  of  Para  sailed  from  Aspinwall  for  New  York  with  a  gen- 
eral cargo,  valued  at  $232,561,76.  Through  the  negligence  of  the 
master  she  stranded  upon  a  reef  at  the  southwest  corner  of  Old 
Providence  Island.  After  ineffectual  attempts  to  get  her  off,  the 
master  justifiably  jettisoned  part  of  the  cargo  and  flooded  the  ship 
for  the  benefit  of  both  ship  and  cargo.  The  ship  and  remaining  cargo 
were  salved.  The  court  held  that  these  measures  were  general  aver- 
age acts,  and  that  the  owners  of  the  cargo  jettisoned,  but  not  the 
shipowners,  were  entitled  to  a  general  average  contribution.^ 

§  218.  General  Average  Losses. — For  the  benefit  of  the  common 
adventure  imperilled,  a  carrier  by  water  may  scuttle  the  ship  itself,^ 
or  cut  away  any  of  her  appurtenances,^  or  jettison  the  whole  or  any 
part  of  the  cargo,'*  or  incur  expenses  with  like  purpose.^  Thus  it  will 
be  seen  that  the  principal  kinds  of  losses  for  which  a  general  average 
contribution  is  appropriate  are  naturally  classified  under  three  heads: 


ing  Co.  v.  Frame,  Alston  &  Co.,  88  Fed. 
528;  Robinson  v.  Price,  L.  R.  2  Q.  B.  D. 
91;  The  Parana,  L.  R.  1  Prob.  Div.  452; 
Strang,  Steel  &  Co.  v.  A.  Scott  &  Co.,  14 
App.  Cas.  601,  608.  The  Harter  Act 
has  not  changed  this  rule,  and  where 
a  vessel  though  seaworthy  at  the  be- 
ginning of  the  voyage  is  afterward 
stranded  through  the  negligence  of  the 
master,  the  shipo^vner  has  no  right  to 
general  average  contribution  for  sacri- 
fices subsequently  made  in  successful 
efforts  to  save  vessel,  freight, and  cargo, 
since  the  negligence  of  the  master  is 
attributable  to  the  shipowner.  The 
Irrawaddij,  171  U.  S.  187,  18  S.  Ct.  831. 
But  the  shipowner  in  such  a  case  may 
himself  be  liable  to  contribute  for  the 
benefit  of  the  owners  of  cargo  which 
has  been  justifiably  sacrificed.  The 
Srathdon,  94  Fed.  206. 

^Pacific  Mail  S.  Co.  v.  N.  Y.,  etc., 
Mining  Co., 74  Fed.  564,  20 C.  C.  A.  349. 

2  A  chard  v.  Ring,  31  L.  T.  647,  2 
Asp.  Mar.  Cas.  422. 

3  Tackle,  Bir/Jeyv.  Presgrave,  1  East, 
220;  masts,  spars,  rigging.  The  Mary 
Gibhs,  22  Fed.  463;  Patten  v.  Darling,  1 
Cliff  (U.  S.),  254;  Potter  v.  Prov.  Wash. 
Ins.  Co.,  4  Mason  (U.  S.),  298;  sails, 
Mamarethe  Blanca,  14  Fed.  59. 

4  To  save  her  from  foundering  or  to 
flont  her  when  stranded,  or  facilitate 
escape  from  enemy,  Ralli  v.  Troop,  157 
U.  S  386,  393;  Laurence  v.  Minturn,  17 
How.  (II.  S.)  100;  .Johnson  v.  Chavman, 
19  C.  B.  (N.  S.)  563,  15  L.  T.  70; 
discharge  of  cargo,  Reliance  Mar.  Ins. 
Co.  V.  N.  Y.  Mail  S.S.  Co.,  77  Fed.  317. 


Damage  to  cargo  necessarily  arising 
from  a  forced  discharge  is  allowable  as 
general  average,  Gregory  v.  Orrall,  8 
Fed.  287.  If  unloading  is  necessary  to 
the  raising  of  a  vessel  for  repair  the 
expense  is  general  average,  but  if  the 
cargo  is  unloaded  merely  for  its  own 
benefit  it  is  not  a  general  average 
charge,  Firemen's  Ins.  Co.  v.  Fitzhngh, 
4  B.  Mon.  (Ky.)  160,  167.  Damage  to 
cargo  caused  by  water  entering  the 
ship's  hold  through  holes  made  by  the 
fall  of  a  mast  cut  away  is  general 
average,  Maggrath  v.  Church,  1  Caines 
(N.Y.),19Q;Saltusv.  Ocean  Ins.  Co.,  14 
Johns.  (N.  Y.)  138.  Also  damage  to 
the  cargo  by  water  admitted  into  the 
ship's  hold  to  extinguish  a  fire.  White- 
cross  Wire  &  Iron  Co.,  Ltd.,  v.  Savill, 
51  L.  J.  Q.  B.  426,  4  Asp.  M.  C.  531, 
8  Q.  B.  D.  653.  See  Nimick  v.  Holmes, 
25  Pa.  St.  306,  64  Am.  Dec.  710,  and 
compare  English  rule,  Steuart  v.  West 
Indian  &  Pac.  Steamship  Co.,  28  L.  T. 
742,  L.  R.  8  Q.  B.  88.  Also  loss  of 
cargo  consumed  as  fuel  to  work  a 
steamer's  engines  or  a  donkey  engine 
in  time  of  peril,  provided  the  supply  of 
fuel  was  originally  sufficient,  Robinson 
V.  Price,  2  Q.  B.  D.  295,  3  Asp.  M.  C. 
407,  36  L.  T.  354.  Also  passengers' 
baggage,  though  itself  not  liable  to 
contribute,  He^<s  v.  North  German 
Llo-d,  33  Fed.  60,  aff'd  36  Fed.  705,  2 
L.  R.  A.  287.  Provisions  do  not  con- 
tribute, even  when  the  cargo  of  the 
ship  consists  only  of  passengers,  Brown 
v.  Stapyleton,  4  Bing.  119. 
5  §  221. 


266 


CJENEKAL    I'UINCIPLES   OF   INSURANCE   LAW 


sacrifices  of  parts  of  the  ship,  sacrifices  of  cargo,  and  extraordinary 
expenses.' 

§  219.  Deck  Load.— In  the  United  States  and  England  the  courts 
allow  a  jettison  of  deck  load  to  be  included  in  general  average, 
provided  a  custom  of  the  trade  can  be  shown  justifying  the  loading 
of  the  goods  on  deck.^  But,  if  no  such  custom  is  proved,  a  claim 
for  jettison  of  deck  load  cannot  be  allowed  in  general  average,^ 
although  if  a  deck  load  is  saved  by  a  general  average  act,  it  must 
itself  contribute.^ 

§  220.  Voluntary  Stranding.— In  the  United  States  the  voluntary 
stranding  of  a  ship  when  in  peril  is  held  to  be  a  general  average  act, 
and  that  irrespective  of  the  question  whether  the  vessel  ultimately 
becomes  a  total  wreck  or  not.°  And  this  includes  repairs  thereby 
necessitated.^  A  voluntary  stranding  is  not  allowed  as  a  general 
average  act  by  English  practice  in  the  absence  of  express  agreement.'^ 

§  221.  Port  of  Refuge  and  other  Expenses. — The  most  frequent 
cause  of  general  average  expenses  occurs  where  a  vessel  in  peril  puts 
into  a  port  of  refuge  for  repairs  to  enable  her  to  continue  the  voyage. 


iLow-ndes,  Gen.  Av.  (1888),  20. 
In  America  the  whole  ship  may  be 
sacrificed  and  perhaps  totally  lost  by  a 
general  average  stranding,   §  220. 

2  Taunton  Co.  v.  Ins.  Co.,  22  Pick. 
(Mass.)  108;  Harris  v.  Moodij,  30  N.  Y. 
266,  86  Am.  Dec.  375;  Wood  v.  Phainix 
Ins.  Co.,  8  Fed.  27.  See  Campania  La 
Flecha  v.  Brauer,  168  U.  S.  104,  18 
S.  Ct.  12.  But  compare  Sproat  v. 
Donnell,  13  Shep.  (Me.)  185,  45  Am. 
Dec.  103.  As  to  English  rule  see 
recent  case,  Apollinaris  Co.  v.  A^ord 
Deutsche  Ins.  Co.  (1904),  1  K.  B.  252. 

3  The  Milwaukee  Belle,  2  Biss.  (U.  S. 
C.  C.)  197,  Fed.  Cas.  No.  9,627;  The 
John  H.  Cannon,  51  Fed.  46;  The 
Hettie  Ellis,  20  Fed.  507.  The  reason 
why  such  a  jettison  of  goo  Is  stowed 
on  deck  gives  to  their  owner  no  claim 
to  contribution  is  that  they  ought  not 
to  be  there,  1  Par.soas,  Ship.  &  Ad.  354. 

*  There  must  be  an  actual  intention 
to  throw  the  deck  cargo  overboard  in 
order  to  constitute  a  general  average 
act.  The  Adele  Thackera,  24  Fed.  809. 

5  Fo  der  v.  Rathbones,  12  Wall. 
(U.  S.)  102,  20  L.  Ed.  281;  Star  of 
Hope,  9  Wall.  (U.  S.)  203,  19  L.  Ed. 
638;  Barnard  v.  Adams,  10  How. 
(U.  S.)  270,  13  L.  Ed.  417;  Columbian 
Ins.  Co.  V.  Ashbij,  13  Pet.  (U.  S.)  331, 


10  L.  Ed.  186;  Norwich  &  N.  Y. 
Transp.  Co.  v.  Ins.  Co.,  118  Fed.  307; 
Emery  v.  Huntington,  109  Mass.  431, 
12  Am.  Rep.  725. 

^N.  W.  Transfer  Co.  v.  Cont.  Co., 
24  Fed.  171.  But  general  average  is 
not  allowed  in  favor  of  the  shipowner 
if  the  voluntary  stranding  was  made 
necessary  by  negligent  navigation  of 
the  ship.  The  Irrawaddy,  171  V.  S.  187, 
18  S  Ct  831 

7'Arnould,'Mar.  Ins.  (7th  ed.),  §  938; 
MacArthur,  Mar.  Ins.  (2d  ed.),  195, 
note.  The  English  rule  is  said  to  be 
defended  mainly  upon  two  grounds: 
(1)  that  the  stranding  is  not  a  sacrifice 
at  all,  nor  the  result  of  any  selective 
discrimination  between  different  inter- 
ests, but,  on  the  contrary,  is  an  at- 
tempt to  put  both  ship  and  cargo  into 
a  situation  of  less  peril;  and  (2)  that  in 
practice  it  is  impossible  to  distinguish 
between  damages  received  by  the  ship 
and  cargo  prior  to  stranding,  which  are 
admittedly  particular  and  not  general 
average,  and  losses  sustained  after  or 
in  conseouenoe  of  stranding,  which  it 
is  claimed  should  come  into  general 
average.  The  York  Antwerp  rules  on 
this  as  on  some  other  points,  have 
struck  a  compromise  between  conflict' 
ing  views.  Appendix  infra,  eh.  III. 


ILLUSTEATIONS  267 

The  general  average  practice  in  such  a  case  in  the  United  States 
differs  in  some  particulars  from  the  rules  prevailing  in  England.^ 

By  the  law  of  this  country,  wages  and  provisions  of  the  crew  are 
allowed,  in  general  average,  from  the  time  of  deviating  from  the 
voyage  for  the  purpose  of  putting  into  a  port  of  refuge,  until  the 
voyage  is  resumed,  or  until  the  cargo  and  vessel  are  separated,  or 
until  there  is  no  longer  a  reasonable  prospect  that  the  voyage  will 
be  continued.^ 

The  expenses  of  entering  the  port,  and  of  unloading,  warehousing, 
and  reloading  the  cargo,  are  allowable,  provided  the  voyage  is  re- 
sumed, or  so  long  as  there  is  a  fair  prospect  of  its  continuance.* 
Before  actually  selling  or  pledging  the  cargo,  however,  in  a  port  of 
refuge,  the  master  is  bound  to  communicate  with  its  owners  if  it  is 
possible,  in  order  to  take  their  instructions.^ 

Goods  or  money  paid  for  ransom  from  capture  ^  or  for  salvage,® 
or  for  other  services  rendered  for  the  common  benefit,  are  also 
allowed  in  general  average.  Thus  the  necessary  expense  for  tugs 
to  release  a  stranded  vessel,'^  or  the  necessary  expense  to  extinguish 
fire.*  But  if  the  expense  is  not  incurred  for  the  common  safety, 
then  it  is  chargeable,  in  particular  average,  to  that  interest  which  it 
was  intended  to  benefit.* 

§  222.  Illustrations. — The  difficulty  of  determining  whether  strand- 
ing should  be  regarded  as  a  general  average  act  is  shown  in  some  of 
the  cases  following. 

The  brig  Hope  bound  for  Barbadoes  was  assailed  by  a  hurricane 
in  Chesapeake  Bay.  She  was  steered  towards  a  point  in  the  shore 
for  safety,  and  anchored  in  three  fathoms  of  water.  Sails  were  furled, 
and  all  efforts  made  by  use  of  cables  and  anchors  to  prevent  her  going 

1  Svendsen  v.  Wallace,  L.  R.  (1885)  5  Woods  v.  Olsen,  99  Fed.  451. 

10  App.   Cas.   404.     In   America  the  ^S.S.  Balmoral  Co.  v.  Marten  (1901), 

scope    of    general    average    is    much  2  K.  B.  896;  The  Eliza  Lines,  102  Fed. 

broader  than  in  England,  and  often  184. 

extends  to  expenses  incurred  after  the  '^  Magdala  S.S.  Co.  v.  H.  Baars  Co., 

common  danger  has  ceased,  The  Star  101  Fed.  303. 

of  Hope,  9  Wall.  203,  19  L.  Ed.  638;  s  The  Strathdon,  101  Fed.  600. 

Hohson  V.  Lord,  92  U.  S.  397,  23  L.  Ed.  «  McGaw  v.  Ocean  Ins.  Co.,  23  Pick. 

613.  405;  Douglas  v.  Moodrj,  9  Mass.  548; 

2  Hoh.'^on  V.  Lord,  92  U.  S.  397;  The  McAndrevs  v.  Thatcher,  3  AVall.  (U.  S.) 
Star  of  Hope,  9  Wall.  (U.  S.)  203,  19  347;  Ocean  St.  C.  Co.  v.  Anderson,  13 
L.  Ed.  638.  Q.  B.  D.  651.     Salvage  charges,  allow- 

3  The  Joseph  Fanrell,  31  Fed.  844;  able  in  general  average,  include  all 
Da  Costa  v.  Nevnham,  2  Term  R.  407.  liabilities  for  services  rendered  by 
When  expense  of  refitting  not  general  persons,  other  than  the  ship's  corn- 
average,  see  Jackson  v.  Charnock,  8  pany,  for  the  joint  preservation  of  ship 
Term  R.  509,  5  Rev.  R.  425.  and  cargo  from  the  marine  peril,  Mc- 

*  The  Julia  Blake,  107  U.  S.  418.  Arthur,  Mar.  Ins.  (2d  ed.),  171. 


26S  GENERAL   PRINCIPLES   OF   INSURANCE    LAW 

on  shore.  The  gale  increased,  the  brig  struck  adrift,  and  dragged 
tliree  miles;  the  windlass  was  ripped  up,  and  the  chain  cable  parted. 
The  vessel  then  brought  up  below^  Crancy  Island,  where  she  thumped 
on  the  shoals,  and  her  head  swinging  round  brought  her  broadside 
to  the  sea.  The  captain  finding  no  possible  means  of  saving  the  vessel 
and  cargo,  and  preserving  the  lives  of  the  crew,  ran  her  on  shore. 
After  the  storm  she  was  left  high  and  dry  on  a  bank.  The  vessel 
was  substantially  a  total  loss;  the  lives  aboard  and  the  whole  cargo 
were  saved.  The  court  by  Justice  Story  held,  that  the  insurers  of 
cargo  were  liable  for  general  average  in  favor  of  the  owners  of  the  brig; 
ana  Uiat  the  values  of  boch  brig  and  the  freight  which  she  was  earn- 
ing were  proper  subjects  of  the  general  average.^ 

The  ship  Brutus,  with  cargo  aboard  for  New  York  was  lying  at 
anchor  in  charge  of  the  first  mate  in  the  outer  roads  at  Buenos  Ayres, 
about  seven  miles  from  shore.  A  gale  had  commenced,  and  next 
morning  the  ship  began  to  drag  her  anchors.  About  nine  o'clock  in 
the  evening,  the  gale  increasing,  the  best  bower  anchor  parted  with  a 
loud  report.  About  ten  o'clock,  the  small  bower  parted,  and  the  ship 
commenced  drifting  broadside  with  the  wind  and  waves.  The  chains 
were  then  shipped,  and  the  vessel  got  before  the  wind;  two  men  were 
put  to  the  wheel  and  one  to  the  lead,  and  it  was  determined  to  run 
the  ship  ashore  for  the  preservation  of  the  cargo  and  the  lives  of  the 
crew.  The  shore  towards  which  the  ship  had  been  drifting  had  banks 
and  shallows.  If  the  vessel  had  been  driven  on  these  by  the  tempest 
she  would  have  been  lost,  together  with  cargo  and  crew.  For  the  pur- 
pose of  saving  the  cargo  and  crew  anyhow,  and  possibly  the  ship,  she 
was  steered  up  the  river  and  beached.  The  ship  was  not  broken  up, 
though  somewhat  damaged,  and  the  cargo  being  uninjured  was  trans- 
shipped to  destination.  It  being  found  that  it  would  cost  more  than 
the  ship  w^as  w^orth  to  get  her  off,  she  was  sold.  The  court  held  that 
the  voluntary  stranding  of  the  vessel  in  a  less  perilous  place  than  that 
towards  which  she  seemed  to  be  drifting  was  a  general  average  act 
and  that  the  owners  of  the  cargo  must  contribute  to  make  good  the 
general  average  loss.^ 

1  Columbian  Ins.   Co.   v.   Ashby,   1.3  (elaborate  opinion  by  Justice  Clifford 

Pet.  (U.  S.)  331,  10  L.  Ed.  186.    "Simi-  regarding  general  average). 

larly  the  same  court  held  that  a  volun-  -  Barnard  v.  Adams,  10  How.  270, 

tary  stranding  because  of  a  smoulder-  13  L.  Ed.  417  (Daniel,  J.,  rendering  a 

ing  but  extensive  fire  in  the  hold  of  the  dissenting   opinion).      The   court   also 

ship  was  a  good  general  average  act  held  that,  as  to  a  part  of  the  cargo 

although  the  master  had  no  knowledge  seriously  damaged  on  continuance  of 

of  the  existence  of  the  partioilar  reef  the   voyage  after  transshipment,   con 

upon  which  the  vessel  grounded,  Star  tribution    should    be    assessed    on    its 

of  Hope,  9  Wall.  203,  19  L.  Ed.  638  value  at  the  home  port,  and  not  at 

place  of  disaster. 


ILLUSTRATIONS  269 

The  schooner  Major  William  H.  Tantum,  loaded  with  a  cargo  of 
iron,  went  for  refuge  inside  the  Delaware  breakwater.  I'he  bad 
weather  developed  into  a  great  storm,  and  the  vessel  gradually 
dragged  her  anchors  until  but  a  single  anchor  chain  remained,  and 
the  vessel  was  drifting  towards  the  beach  broadside  on.  The  master, 
fearing  for  the  lives  of  those  on  board,  determined  to  ship  his  cable 
and  run  ashore,  head  on.  The  cable  was  accordingly  shipped,  and 
the  vessel,  without  canvas,  paid  off  and  went  head  on  the  beach. 
Afterwards  she  turned  broadside  to  the  sea  and  became  a  total  loss. 
Part  of  the  cargo  was  saved  and  forwarded  to  destination.  The  court 
concluded  that  while  the  master  by  slipping  his  cable,  hastened  the 
inevitable  result,  and  also  bettered  the  chance  of  safety  to  those 
aboard,  yet,  as  no  benefit  accrued  to  the  cargo,  no  case  of  general 
average  was  made  out  by  the  shipowner.^ 

The  libellant,  claiming  general  average  contribution,  had  shipped 
his  cargo  of  flour  on  the  steamship  Wordsivorth  for  Rio  de  Janeiro. 
On  leaving  Sandy  Hook  the  steamer  met  a  heavy  sea  and  shipped 
much  water.  The  next  day  the  carpenter  reported  the  fore-peak  full 
of  water.  This  compartment  held  150  tons.  The  master  after  ex- 
amination, conjectured  that  a  hole  must  have  been  stove  in  below, 
and  opened  the  sluices  of  the  collision  bulkhead  to  transfer  the  water 
to  the  engine  room  where  there  were  powerful  pumps.  Water  was 
thus  accumulated  in  a  compartment  where  the  flour  was  stored  and 
the  damage  in  question  was  incurred.  The  master  knew  that  water 
damage  would  be  thus  caused  but,  believing  that  there  was  a  hole 
forward,  thought  that  his  method  furnished  the  only  means  of  safety 
to  the  adventure.  In  fact  the  leak  arose  from  a  break  in  the  port 
hawse-pipe,  and  when  discovered  was  quickly  repaired.  The  court 
decided  that  the  opening  of  the  sluices  was  a  necessary  condition  of 
any  further  prosecution  of  the  voyage,  as  the  situation  appeared  to 
the  master  at  the  time,  and  that  the  loss  attending  his  act,  though 
it  turned  out  to  be  a  mistake,  was  a  sacrifice  in  the  interest  of  all  con- 
cerned, which  would  support  a  decree  for  the  libellant.^ 

The  plaintiffs  shipped  a  deck  cargo  of  cattle  and  sheep  on  board 
the  Edenbridge  for  carriage  from  Buenos  Ay  res  to  Deptford,  under 
contract  which  provided  that  the  ship  should  call  at  no  Brazilian 
port.  By  order  of  the  Board  of  Agriculture  foreign  animals  could  not 
land  in  the  United  Kingdom  if  the  ship  conveying  them  had  touched 
at  a  Brazilian  port.  During  the  voyage  the  ship  sprung  a  leak,  and 
the  master,  for  the  safety  of  all  concerned,  put  into  a  Brazilian  port 

1  The  Major  William  H.  Tantum,  49  3  The  Wordsworth,  88  Fed.  313. 

Fed.  252,  1  C.  C.  A.  236. 


270  GENERAL   PRINCIPLES   OF  INSURANCE   LAW 

for  repairs.  In  consequence  the  plaintiffs  were  obliged  to  sell  theii 
live  stock  elsewhere  and  at  lower  prices  than  would  have  been  realized 
in  the  English  market.  The  court  held  that  this  depreciation  must 
1)6  made  good  in  general  average.^ 

Shippers  chartered  the  iron  ship  Lodore  to  carry  a  cargo  of  coals 
from  Cardiff  to  Esquimault.  During  the  voyage  the  coal  heated  to 
such  an  extent  that  it  was  necessary  for  the  safety  of  the  whole  ad- 
venture for  the  vessel  to  bear  up  the  River  Plate  and  subsequently 
put  into  Buenos  Ayres.  In  this  port  of  refuge  the  coal  was  landed, 
and  upon  survey  was  found  to  be  in  such  a  condition  as  to  be  incapable 
of  being  carried  with  safety  to  its  destination.  The  master  accord- 
ingly abandoned  the  voyage,  and  the  chartered  freight  was  lost 
to  the  owners.  The  coal  was  condemned  and  sold.  The  insurers 
of  chartered  freight  were  willing  to  recognize  liability  to  the  owners 
of  the  ship,  but  claimed  by  way  of  set-off  that  the  loss  of  freight  was 
the  subject  of  general  average  contribution.  The  court  held  that 
while  the  bearing  up  the  river  to  Buenos  Ayres  was  a  general  average 
act,  nevertheless  there  had  been  no  sacrifice  of  freight  for  the  common 
safety  in  time  of  danger.  This  conclusion  was  put  upon  the  ground 
that  the  coal  was  condemned  by  reason  of  its  inherently  worthless 
condition  and  the  voyage  abandoned  after  the  common  danger  had 
ceased.^ 

^  Anglo- Argentine,    etc.,    Agency    v.  3  C.  P.  375.     (3)  Policy  on  cargo  gf 

Temperly  Shipping  Co.  (1899),  2  Q.  B.  corn  from  Varna  to  Marseilles,  general 

403.  average   "as  per  foreign  statement." 

Airedale  v.  China  Traders'  Ins.  Co.  The  ship  springs  a  leak,  part  of  the 

(1900),    2    Q.    B.    515.      Illustrations  corn  is  sea-damaged,  and  the  voyage 

from  Chalmers  &  Owen,  Ins.    (1907),  has  to  be  broken  up  at  Constantinople. 

p.  99:   (1)  Policy  on  goods.     Certain  Average  is  adjusted  according  to  the 

is    are    jettisoned    by    a    general  law  prevailing  there,  and  the  damage 


average  act.  The  insurer  of  these  to  the  wheat  is  charged  to  general 
goods  must  pay  the  insured  value  of  average,  though,  according  to  English 
them  as  an  ordinary  loss  under  the  law,  it  would  be  particular  average 
policy  but  he  then  stands  in  the  place  excluded  by  the  memorandum.  The 
of  the  assured  as  regards  claims  for  insurer  is  liable  to  pay  this  sum,  Mavro 
contribution  from  the  other  con-  v.  Ocean  Mar.  Ins.  Co.  (1875),  L.  R. 
tributories,Z)icA-m.son  V.  Jarc?/ne(186S),  10  C.  P.  415.  (4)  Policy  on  goods. 
L.  R.  3  C.  P.  639.  (2)  Policy  on  ship  Both  ship  and  goods  belong  to  same 
from  London  to  Liverpool  and  thence  owmer.  In  stormy  weather  the  mast 
to  Calcutta.  The  ship  strands  on  a  has  to  be  cut  away  for  the  safety  of 
bank  in  Ireland.  Half  the  cargo,  con-  ship  and  cargo.  The  shipoA\'ner  is  en- 
sisting  of  salt,  is  jettisoned.  The  re-  titled  to  a  general  average  contribution 
mainder  is  brought  back  much  dam-  from  the  insurer  on  goods  in  respect  of 
aged  to  Liverpool.  The  amount  to  be  the  general  average  sacrifice,  Mont- 
made  good  in  general  average  must  be  gomery  v.  Indemnihi  Mut.  Mar.  Ins. 
ascertained  by  valuing  the  jettisoned  Co.  (1901),  1  Q.  B.  147,  aff'd  (1902)  1 
salt  at  the  price  it  would  have  fetched  K.  B.  734.  (5)  Policy  on  ship.  Under 
in  Liverpool,  and  the  probability  that  charter  party  the  ship  sails  in  ballast 
it  would  have  been  damaged  like  the  for  Savannah,  where  she  is  to  load  a 
rest  must  be  taken  into  account,  cargo  of  cotton  for  England.  On  the 
Fletcher   v.    Alexander    (1868),   L.    R.  voyage  out  the  ship  groimds  and  a 


THE  ADJUSTMENT  271 

§  223.  The  Lien  for  Contribution. — After  a  sacrifice,  the  master 
has  a  maritime  lien  for  the  contributory  amounts  due  from  the 
interests  that  have  been  saved  and  still  in  his  possession.^  Although 
this  contributory  sum  cannot  be  ascertained  until  after  discharge, 
the  lien  is  enforceable  before  parting  with  the  goods,  and  the  master 
is  authorized  to  exact  securit}^  in  the  form  of  a  general  average  bond.^ 
The  execution  of  such  a  bond  is  not  an  admission  of  liability.  It 
merely  stands  as  a  security  in  place  of  the  goods. 

In  New  York,  the  practice  is  for  the  consignee  of  the  goods  to  sign 
the  bond,  which  is  guaranteed  by  his  insurer,  or  in  the  absence  of 
an}^  local  insurer,  the  usage  is  to  take  a  cash  deposit  sufficient  to 
secure  the  eventual  contribution  from  such  merchandise.  Such  a 
bond  often  contains  the  cargo  owner's  express  promise  (which  would 
probably  be  implied)  to  give  full  particulars  of  the  value  of  his  goods 
for  the  information  of  the  adjusters,  as  may  be  required. 

§  224.  The  Adjustment. — It  is  the  duty  of  the  shipowner  and  his 
agents  to  take  such  steps  as  may  be  reasonable,  and  within  a  reason- 
able time,  to  provide  that  all  general  average  contributions  whether 
due  to  himself  or  others  are  adjusted  and  collected.^  The  sacrifices 
and  expenses  allowed  in  general  average  are  apportioned  over  the 
aggregate  value  of  the  property  saved,  as  computed  at  the  time  and 
place  of  adjustment ;  ^  but  the  property  which  has  been  sacrificed 
must  bear  its  share  as  a  contributor  no  less  than  if  it  had  been  saved, 
for,  in  legal  theory,  general  average  contribution  is  to  be  so  regulated 
as  to  make  it  in  result  immaterial  to  each  interest  at  risk,  whose 
property  shall  in  the  first  instance  have  been  taken,  whose  money 
spent,  or  whose  credit  pledged,  for  the  safety  of  all.^  The  practical 
effect  of  such  an  adjustment  is  that  the  party  upon  whom  the  general 
average  loss  most  heavily  falls  in  the  first  instance  receives  the  benefit 


general  average  loss  is  incurred  in  re-  Cas.   373;   Crooks  v.   Allan   (1879),  5 

spect  of  the  ship's  machinery.     The  Q.  B.  D.  38;  Strang  S.  &  Co.  v.  Scott 

chartered  freight  is  liable  to  contribute  (1889),  14  App.  Cas.  607. 

and  the  amount  of  the  contribution  ^  McArthur,    Mar.     Ins.     (2d     ed.), 

can  be  deducted  from  the  sum  due  196. 

under  the  policy  on  ship,  Steamship,  5  Lowndes,  Gen.  Av.,  38;  Arnould, 

etc.,  Co.  V.  London,  etc.,  Ins.  Co.  (1901),  Ins.,  §§  970,  974.     See  Royal  Mail  Co. 

6  Com.  Cas.  291.  v.  English  Bank  (1887),  19  Q.  B.  D. 

i  Dupont    de    Nemours    &    Co.     v.  371,  372.     Wages  of  the  crew  do  not 

Vance,  19  How.  (U.  S.)  162.  contribute,    Arnould,    §  972.      As    to 

2  Wellmxin  v.  Morse,  76  Fed.  573;  passenger  luggage  see  Heye  v.  North 
Huth  V.  Lamport  (1885),  16  Q.  B.  D.  German  Lloyd,  33  Fed.  60,  36  Fed.  705. 
442.  An  illustration  of  a  general  average 

3  Wavertree  Sailing  S.  Co.  v.  Love,  66  adjustment  is  given  in  Arnould,  Ins., 
L.  J.  P.  C.  77,  76  L.  T.  576  (1897),  App.  §  991 . 


272  GENERAL   PRINCIPLES  OF   INSURANCE   LAW 

of  the  general  average  contribution,  and  the  payment  is  thus  made 
proportionate  to  the  benefit  received.^ 

The  proper  time  for  adjustment  is  the  time  of  the  completion  of 
the  voyage,  or  of  the  separation  of  the  interests.  An  adjustment 
made  at  the  end  of  the  voyage,  if  valid  there,  is,  in  general,  valid 
anywhere.  Any  port  reached,  subsequent  to  the  general  average 
act,  at  which  the  interests  are  separated,  may  be  the  end  of  the 
vovage  for  this  purpose.^ 

An  adjustment  of  general  average  begins  by  a  statement  of  the 
facts,  usually  embodying  an  extract  from  the  master's  protest, 
together  with  copies  of  the  local  surveys  if  they  are  relied  on  to 
justify  the  course  pursued.  In  dealing  with  the  various  expenditures, 
the  adjuster  has  to  separate  those  items  which  are  chargeable  to  all 
interests,  from  those  that  are  applicable  only  to  cargo,  or  which  may 
apply  only  to  certain  parts  of  the  cargo  (special  charges)  as  dis- 
tinguished from  the  expenses  that  are  to  be  borne  solely  by  the 
shipowner.  This  separation  is  usually  shown  by  the  use  of  different 
parallel  columns.  A  detailed  statement  of  the  contributing  interests 
(ship,  freight,  and  cargo)  follows,  from  which  is  found  the  ratio  of 
contribution  stated  in  a  percentage  carried  out  to  six  or  more  decimal 
places.  Where  the  insurance  on  the  properties  is  known  to  the  ad- 
juster, a  settlement  under  the  policies  is  often  appended,  showing 
the  sums  due  from  each  underwriter.  Harrington  Putnam,  Esq., 
of  the  New  York  bar  has  courteously  prepared  for  this  book  the 
example  of  a  general  average  adjustment  given  in  the  Appendix.^ 

1  Harris  v.  Moodi/,  30  N.  Y.  266;  adjustment,  Star  of  Hope,  9  Wall.  203, 
Wheaton  v.  China  Mut.  Ins.  Co.,  39  19  L.  Ed.  638.  Whereas  the  latter  is 
Fed.  879.  As  to  rule  for  ascertaining  the  value  at  the  commencement  of  the 
general  average  contribution  in  respect  voyage.  So  that  even  when  the  sub- 
to  goods  jettisoned,  see  Fletcher  v.  ject-matter  is  fully  insured,  the  in- 
Alexander,  L.  R.  3  C.  P.  37.5,  380.  As  surers  are  not  liable  for  the  whole 
to  general  rule  for  adjustment  of  gen-  amount  of  the  general  average  con- 
eral  average  see  Gillett  v.  Ellis,  11  111.  tribution  assessed  against  that  subject- 
579,  and  The  Eliza  Lines,  102  Fed.  184.  matter  if  the  contributory  value  is 
The  general  principle  of  contribution  greater,"  De  Hart  &  Simey,  Ins.  (1907), 
may  be  summed  up  in  one  sentence:  83,  citing  S.S.  Balmoral  Co.  v.  Marten 
"  It  must  be  determined  how  much  bet-  (1902),  App.  Cas.  511,  71  L.  J.  K.  B. 
ter  off,  in  a  pecuniary  sense,  each  owner  819. 

of  property  exposed  to  hazard  on  ship-  2  Barnard  v.  Adams,  10  How.  (U.  S.) 
board  would  be  in  the  event  of  a  safe  270,  13  L.  Ed.  417;  Eliza  Lines,  102 
arrival  than  in  the  event  of  a  total  loss;  Fed.  184;  Bradley  v.  Cargo  of  Lumber, 
and  on  this  amount,  which  represents  29  Fed.  648.  The  policy  often  states 
the  benefit  derived  by  each  from  the  by  what  rules  or  customs  the  adjust- 
sacrifice  which  has  saved  the  ship,  each  ment  shall  be  made,  De  Hart  v.  Corn- 
must  contribute,"  Lowndes,  Gen.  Av.,  pania,  etc.  (1903),  1  K.  B.  109,  aff'd 
304.  The  contributory  value,  for  the  (1903),  2  K.  B.  503;  Hendricks  v. 
purpose  of  general  average  and  the  in-  Australasian  Ins.  Co.,  L.  R.  9  C.  P. 
surable  value  may  differ,  inasmuch  as  460. 
the  formpi-  is  the  value  at  the  port  of  3  Appendix,  ch.  III. 


CONTRIBUTORY   VALUE   OF   FREIGHT  273 

§  225.  York  Antwerp  Rules. — The  rules  of  practice  for  the  ad- 
justment of  general  average  losses  vary  greatly  in  detail  in  different 
countries  and  in  different  ports.  The  regulations  most  frequently 
used  by  agreement  are  the  York-Antwerp  rules,  adopted  at  Antwerp 
in  1877  by  the  Association  for  the  Reform  and  Codification  of  the 
Law  of  Nations,  and  amended  at  their  Liverpool  conference  in  1890.^ 

By  aid  of  these  rules,  set  forth  in  the  Appendix,  the  practice  of 
adjusting  general  average  has  been  brought  into  harmony  on  many 
important  points. 

§  226.  Contributory  Value  of  Freight. — In  respect  to  the  con- 
tributory value  of  the  freight  interest,  which  cannot  always  be  easily 
ascertained,  an  arbitrary  rule  has  been  adopted  in  New  York. 
While  the  full  amount  of  freight  is  contributed  for  in  general  average 
where  the  loss  of  freight  is  total,  only  fifty  per  cent  of  that  amount 
is  called  upon  for  contribution.^  That  is  supposed  to  be  a  rough 
estimate  of  its  net  value  at  the  end  of  the  voyage,  after  expenses 
have  been  deducted  from  gross  freight.^ 

Other  ports  in  the  United  States  deduct  one-third.^  The  usage 
in  England  is  to  compute  the  net  freight  interest  for  contribution 
by  deducting  the  estimated  amounts  saved,  such  as  wages  and 
port  charges,  instead  of  relying  on  any  arbitrary  ratio,^  and  this  is 
also  the  provision  of  the  York- Antwerp  Rules. ^ 

1  These  as  amended  are  given  in  the  general  average  sacrifice  made  on  the 
Appendix,  ch.  III.  De  Hart  v.  Com-  outward  voyage,  Steamship  Caris- 
pania,  etc.  (1903),  1  K.  B.  109  (general  brook  Co.  v.  London  &  Provincial  Mar. 
average  payable  as  per  foreign  state-  &  Gen'l  Ins.  Co. ,  L.  R.  (1902)  2  K.  B. 
ment).    For  Lloyd's  Rules,  see  Arnould  681. 

(7th  ed.),  1523-1538.  4  Qourlie,     Gen.    Average,    p.    534; 

2  Rathbone  v.  Fouler,  6  Blatch.  (U.  S.  Humphreys  v.  Union  Ins.  Co.,  3 
C.  C.)  296.  Mason,  429  (1824). 

3  Chartered    freight    of    homeward  5  2  Arnould,  Ins.,  §989. 
voyage  is  held  liable  to  contribute  to  a  s  Rule  XVII. 

18 


PART  II 

MEANING   AND    LEGAL    EFFECT    OF   THE 
CLAUSES  OF  THE  POLICIES 


PART    II 

MEANING  AND  LEGAL  EFFECT  OF  THE  CLAUSES  OF 
THE  POLICIES 


CHAPTER  XI 
The    Standard    Fire    Policy 

§  227.  Introductory. — All  our  labor  hitherto  has  been  in  a  sense 
preparatory.  General  principles  in  insurance  law  may  be  called  in- 
struments, with  the  aid  of  which  the  rights  rnd  obligations  of  the 
parties,  insurers  and  insured,  created  under  the  contracts  between 
them,  must  be  investigated  and  developed.  It  is  ccirpsratively 
seldom  that  the  insured,  or  the  beneficiary  rppointed  ty  l.im,  calls 
upon  his  legal  adviser  until  he  finds  himself  in  difTculty.  An  appre- 
ciation of  di.ficult}^  usually  means  that  the  casualty  ir.sured  egfinst 
has  occurred,  and  that  a  claim  under  the  insurance  pchcy  exists. 
Then  at  once  starts  up  the  practical  inquiry  on  the  ere  side,  is  the 
claim  well  founded  in  the  law?  And  on  the  other,  the  equally  prac- 
tical question,  does  the  law  furnish  a  good  defense?  All  the  clauses 
of  the  principal  contracts  of  insurance,  fire,  life,  rccident,  and  marine, 
merit  our  attention.  And  among  the  conventional  forms  of  policies, 
first  in  order  of  importance  come  the  standard  fire  policies. 

The  dissimilarities  existing  in  earlier  times  between  numerous 
forms  of  fire  policies  in  common  use,  resulted  in  inconveniences  and 
uncertainties,^  especially  in  cases  where  the  same  property  was  in- 
sured by  poHcies  in  different  companies,  which  often  thus  furnished 
inconsistent  provisions  for  the  adjustment  of  the  one  loss  sustained 
by  the  one  party.  It  frequently  happened  that,  though  overinsured, 
the  plaintiff  could  not  recover  full  indemnity.  Moreover,  many  policy 
clauses  devised  in  the  interest  of  the  companies,  were  unreasonably 
technical,  and  were  commonly  printed  in  type  so  fine  as  to  be  well- 
nigh  unintelligible  without  the  aid  of  a  magnifying  glass.^     Such 

I  Peabodv  v.  Satterlee,  166  N.  Y.  174,  2  De  Laney   v.  Ins.   Co.,  52  N.   H. 

59  N.  E.  818;  Bourqeois  v.  Northwestern      581. 
Nat.  Ins.  Co.,  86  Wis.  606, 57  N.  W.  347. 

[277] 


278 


MEANING    AND    LEGAL    EFFECT   OF    FIRE   POLICY 


considerations  ^  have  influenced  the  legislatures  of  many  states  to 
adopt  a  uniform  lire  policy,-  the  use  of  which  is  made  compulsory  so 
far  as  property  situated  within  the  particular  state  is  concerned.^ 

A  legislature  has  the  constitutional  power  to  prescribe  the  form  of 
a  policy  of  insurance,  and  to  provide,  as  some  state  legislatures  have 
enacted,  that  copies  of  all  papers  referred  to  in  the  policy  as  parts 
thereof,' shall  be  attached  thereto;  and  it  may  also  prescribe,  as  a 
penalty  for  the  nonobservance  of  this  regulation,  that,  if  this  is  not 
done,  such  papers  shall  not  be  considered  a  part  of  the  policy  or  be 
received  in  evidence/^  The  New  York  law,  however,  does  not  re- 
quire that  the  application  shall  be  attached  to  the  standard  fire 

policy. 

In  framing  a  statutory  form  of  fire  policy  Massachusetts  was  the 
pioneer  state.^  In  1886  New  York  adopted  a  standard  fire  policy,^ 
the  terms  of  which  are  in  great  part  followed  either  by  statutory 
enactment  or  by  the  usual  practice  of  the  stock  fire  companies 
throughout  all  the  country,  with  the  exception  of  a  few  states,  the 
statutory  policies  of  some  of  these  taking  as  their  basis  the  Massa- 
chusetts formJ     As  the  Minnesota  court  says,  "the  Massachusetts 


i  Moore  v.  Hanover  F.  Ins.  Co.,  141 
N.  Y.  219,  224,  3G  N.  E.  191. 

2  Forms  of  the  standard  policies 
given  in  Clement,  Ins.  (190.5);  to  that 
date. 

3  Appendix,  ch.  I. 

i  Considine  v.  Met.  Life  Ins.  Co.,  165 
Mass.  462,  43  N.  E.  201.^  And  see 
Business  Men's  League  v.  Waddill,  143 
Mo.  495,  45  S.  W.  262,  40  L.  R.  A.  501. 

*L.  1873,  c.  331.  The  use  was  not 
compulsory.  Repealed  1881,  c.  161, 
Connecticut  passed  an  act,  L.  1867, 
c.  121,  for  a  policy,  but  none  was 
framed  under  it.  Repealed  L.  1868, 
c.  7.  The  Massachusetts  policy  now  in 
use  was  framed  under  a  later  act. 
Closely  following  many  of  its  provi- 
sions are  the  forms  of  policies  since 
adopted  by  New  Hampshire,  Minne- 
sota, Maine,  and  South  Dakota;  but 
the  standard  policies  in  use  in  South 
Dakota  and  New  Hampshire,  at  the 
close  of  1907,  contain  numerous  impor- 
tant departures.  The  legislatures  of 
New  York  and  other  states  have  been 
bombarded  with  crude  and  ill-advised 
measures  proposed  from  time  to  time  to 
alter  the  standard  policy.  Any  such 
measure  should  be  framed  in  the  inter- 
est of  the  whole  country  and  by  some 
expert  commission,  representative  of 
many  states,  so   as  to   diminish  and 


not  multiply  the  dissimilarities  now  ex- 
isting between  the  various  statutory 
fire  policies.  Compare  the  method  of 
drafting,  revising,  and  enacting  the 
English  codification  of  marine  insur- 
ance law  as  described  in  the  preface  to 
Chalmers  &  Owen,  Ins.  (1907). 

6  L.  1886,  c.  488.  General  Laws, 
1892,  c.  38;  N.  Y.  Ins.  L.,  §  121. 
Policy  framed  by  a  committee  of  the 
New  York  Board  of  Fire  Underwriters, 
E.  R.  Kennedy,  Esq.,  chairman,  in 
conference  with  a  committee  of  the 
National  Board  of  Fire  Underwriters, 
and  by  William  Allen  Butler,  Esq.,  and 
other 'counsel  of  New  York  and  Con- 
necticut. 

7  P.  278,  n.  5,  supra.  A  form  of  English 
fire  policy  is  given  in  Bunyon,  Ins. 
(1900) ,  5  et  seq.  Where  the  act  providing 
for  a  policy  has  turned  over  to  a  commis- 
sioner or  a  commission  the  legislative 
function  of  framing  in  future  an  ex- 
clusive form  of  contract  it  has  been 
held  to  be  unconstitutional  as  in  the 
case  of  the  Michigan,  Khig  v.  Con- 
cordia Ins.  Co.,  140  Mich.  258,  103 
N.  W.  616;  Minnesota,  Anderson  v. 
Manchester  Assur.  Co. ,59  Minn.  182,  63 
N.  W.  241  (but  see  later  Minn.  Act 
Appendix,  ch.  I);  Pennsylvania,  O'A^eill 
v.  American  Ins.  Co.,  166  Pa.  St.  72, 
30  Atl.   943;   South  Dakota,   Phcenix 


INTRODUCTORY  279 

and  New  York  standard  policies  went  into  effect  about  the  same 
time  and  have  formed  the  models  for  the  legislation  in  other  states."  ^ 

The  use  of  a  standard  policy,  including  its  provisions  and  type,  is, 
in  general,  made  obligatory  by  the  statute  upon  all  corporations,  and 
in  some  states  a  penaltj^  is  imposed  for  violating  the  act,  but  any 
policy,  though  in  purport  inconsistent  with  the  provisions  of  the  act; 
is  nevertheless  binding  upon  the  company  issuing  it,  and  may  be 
enforced  against  the  company  according  to  its  terms  as  written.^ 

The  standard  policies,  like  earlier  forms,  having  been  drafted  by 
insurance  men  or  largely  under  their  superintendence,  the  same 
general  rules  of  construction  are  said  to  prevail  as  of  old.^  But  the 
standard  policy  has  been  declared  by  at  least  one  court  to  be  a 
statutory  law  as  well  as  a  contract,^  and,  giving  recognition  to  the 
fact  that  its  provisions  are  drawn  with  better  regard  to  the  interests 
of  both  parties  than  those  of  fire  policies  formerly  in  vogue,  the  courts 
in  construing  them  are  giving  less  emphasis  to  the  maxim  "the  law 
abhors  a  forfeiture,"  and  more  to  the  rule  that  the  terms  of  the  con- 
tract should  be  enforced  fairly,  according  to  their  plain  import.^ 

In  connection  with  the  subject  of  warranties  in  an  earlier  chapter, 
a  general  comparison  was  instituted  between  the  provisions  of  the 
marine  policy,  and  those  of  the  fire  policy;  and  the  attitude  of  the 
courts  in  the  past  towards  each  policy  was  adverted  to,  as  evinced 
by  their  interpretation  of  the  meaning  and  legal  effect  of  the  con- 

Ins.  Co.  V.  Perkins,  101  N.  W.  1110,  ^  Hewins  v.  London  Assur.  Corp.,  184i 

and  Wisconsin,  Douiing  v.  Lancashire  Mass.  177,  G8  N.  E.  62,  64. 

Ins.  Co.,  92  Wis.  63,  65  N.  W.  738,  ^  Chidiester   v.   Neiv   Hampshire   F. 

statutes.     But  after  such  a  policy  has  Ins.   Co.,  74  Conn.  510,  51  Ati.  545; 

been  framed  by  agencies  outside  the  Reed  v.  Wash.  Ins.  Co.,  138  Mass.  572, 

legislature,  the  legislature  may,  with-  577    (construed   as   a  contract  rather 

out  violating  the  federal  constitution,  than  a  statute);  Davis  &  Co.  v.  7ns.  Co. 

adopt  an  exclusive  form  of  policy,  af-  of  N.  A.,  115  Mich.  382,  73  N.  W.  393; 

fecting  property  within  the  state,  to  be  Kollitz  v.  Eq.  Mid.  Fire  Ins.  Co.,  92 

used   by  incorporated   companies.   Re  Minn.  234,  9^  N.  W.  892;  Matthews  v. 

Opinion  of  Justices,  97  Me.  590,  55  Atl.  American  Cent.  his.  Co.,  154  N.  Y.  449, 

8^8;  KoUitz  v.  Eq.  Mut.  F.  Ins.  Co.,  48  N.  E.  751,  61  Am.  St.  R.  627,  39 

92  Minn.  234,  99  N.  W.  892;  O'Neill  v.  L.  R.  A.  433;  Maisel  v.  Fire  Assn.  of 

American  Ins.  Co.,  166  Pa.  St.  72,  30  Phila.,  59  App.  Div.  (N.  Y.)  461,  69 

Atl.  943.     Companies  doing  business  in  N.  Y.  Supp.  181. 

the  state  need  not  use  the  statutory  *  Temple  v.   Niagara  Ins.   Co.,   109 

policy  of  that  state  if  the  property  is  Wis.  372,  85  N.  W.  361. 

located   in   another   state,   Loomis   v.  5  Armstrong  v.  Western  Man.  M.  I. 

Leu'is,  62  App.   Div.   433,   71  N.  Y.  Co.,   95    Mich.    137,   54    N.    W.    637; 

Sunp.  62.  Nelson  v.   Traders'  Ins.  Co.,  86  App. 

1  Wild-Rice  Lumber  Co.  v.  Roval  Ins.  Div.  66,  67,  83  N.  Y.  Supp.  220,  aff'd 

Co.  (Minn.,  1906),  1(8  N.  W.  871  (in-  181  N.  Y.  472,  74  N.  E.  421;  Quinlan 

surer  has  no  authority  to  add  to   the  v.  Prov.  Wash.  Ins.  Co.,  133  N.  Y.  356, 

New  York  standard  policy  a  clause  3G5,  31  N.  E.  31;  Hart  v.  Stand.  Mar. 

warranting    the     maintenance     of     a  Ins.    Co.,    L.    R.   22    Q.    B.    D.    499. 

designated  clear  space  about  the  in-  501. 

sured  premises). 


5 


280  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

ventional  forms  of  the  marine  policy  on  the  one  hand  and  of  the 
fire  policy  on  the  other.^ 

We  shall  in  this  and  following  chapters  examine  the  clauses  of  the 
New  York  standard  policy,  in  the  sequence  in  which  they  occur  in 
the  instrument  itself,  noticing  the  more  important  variations  con- 
tained in  the  standard  policies  of  other  states,  but  giving  only  scant 
attention  to  those  numerous  decisions,  which  the  general  use  of 
standard  forms  of  fire  policies  has  rendered  largely  obsolete  in  this 
country.^ 

§  228.  In  Consideration  of  the  Stipulations  and  Premium.— The 

policy  is  not  an  absolute  agreement  to  grant  indemnity  to  the  in- 
sured 3  for  the  loss  occasioned  by  the  casualty  insured  against,  but 
the  insurer's  promise  to  pay  is  made  dependent  upon  the  fulfillment 
by  the  insured  of  certain  provisions  of  the  contract  which  are  called 
conditions  or  warranties.  As  already  shown,  if  any  one  of  these  is 
violated  or  unperformed,  the  policy  is  avoided,''  and  there  can  be  no 
recovery  unless  the  policy  is  subsequently  revived  by  the  insurer  ° 
The  conditions  for  the  most  part  are  expressed  in  the  contract  itself, 
and  to  solve  their  proper  meaning,  force,  and  effect,  must  be  a  chief 
concern  in  the  study  of  fire  insurance  law.«  These  conditions  may 
be  divided  into  three  classes;  those  precedent  to  a  valid  inception  of 
the  contract,  those  relating  to  the  contract  during  the  pendency  of 

1  See  §  107,  p.  140,  note  3,  supra.  knowledged  to  be  inoperative  and  of  no 

2  Precisely,' or  in  the  main,  follow-  avail."  Sometimes  valued  policy  and 
ing  the  New  York  form,  are  the  stand-  other  statutory  provisions  intervene; 
ard  policies  of  Connecticut,  Louisiana,  in  some  standard  policies  the  com- 
Michio-an,  New  Jersey,  North  Carolina,  pany's  permit  may  be  by  oral  assent  or 
Nortlf  Dakota,  Oregon,  Rhode  Island,  agreement;  in  some  standard  policies 
West  Virginia,  and" Wisconsin;  but  in  there  are  provisions  as  to  breaches  oi 
some,  especially  those  of  Michigan  and  certain  warranties  limiting  forfeiture 
Wisconsin,  there  are  important  diTer-  to  such  breaches  as  contribute  to  the 
ences.  The  standard  policies  of  Iowa  loss;  in  some  there  are  special  provi- 
and  South  Dakota  do  not  adhere  to  the  sions  relating  to  cancellation,  subroga- 
phraseology  either  of  the  New  York  or  tion,  proofs  of  loss,  and  appraisal;  and 
Massachusetts  forms,  and  contain  im-  in  some  there  are  special  provisions 
portant  modifications  in  favor  of  the  making  the  insurance  company  re- 
insured. In  Pennsylvania  the  stand-  sponsible  for  the  knowledge  or  acts  of 
ard  policy  law  adopting  the  New  York  the  agent  or  solicitor.  The  state  legis- 
form  was  adjudged  unconstitutional;  latures  are  industrious,  and  the  status 
but  in  practice  the  New  York  form  is  at  the  close  of  1907  is  no  safe  guide  for 
used.  In  Missouri  the  companies  were  a  later  date.  It  is  obvious,  therefore, 
required  by  statute  to  adopt  a  uniform  that  the  contents  of  every  policy  in 
policy  to  be  approved  by  the  fire  in-  question  must  be  critically  examined 
surance  commissioner.    The  New  York  as  occasion  demands. 

form  was  so  adonted  with  the  following  ^Chichester  v.  A''.  H.  Fire  Ins.  Co., 

clause  added:  "it  is  hereby  ag'eed  on  74  Conn.  510,  513,  51  Atl.  545. 

the  part  of  the  company  issuing  the  <  There  are  exceptions  to  this  rule. 

policy  that  any  provisions  of  said  policy  &  Imperial  F.  Ins.  Co.  v.  Coos  Co.,  161 

in  conflict  with  the  statutes  of  the  state  U.  S.  452,  14  S.  Ct.  379. 

of  ^ilissouri  are  distinctly  held  and  ac-  «  See  Appendix,  ch.  II. 


IN    CONSIDERATION    OP'   STIPULATIONS   AND    PREMIUMS 


281 


the  risk,  and  those  which  appertain  to  the  presentation  and  en- 
forcement of  the  claim  of  the  assured  after  loss. 

As  regards  the  premium,  the  insurer  is  entitled  to  its  pay- 
ment upon  the  delivery  of  the  policy  or  closing  of  the  contract,^ 
unless  otherwise  understood ;  ^  but  ordinarily  the  payment  of  the 
premium  is  not  made  a  condition  of  the  fire  policy,  nor  its  non-pay- 
ment a  ground  of  forfeiture.^  A  premium  is  generally  paid  in  cash  or 
check,'*  but  may  be  paid  by  notes  or  credit.^  While  on  the  one  hand, 
as  just  shown,  the  insured  is  in  general  presumed  to  have  allowed 
credit  for  the  premium  if  the  policy  is  delivered  without  requiring 
payment  in  advance;  ^  so  also,  on  the  other  hand,  a  promise  to  pay 
the  premium  is  implied  as  against  the  insured  from  his  acceptance  of 
the  policy,  although  shortly  thereafter  he  may  change  his  mind  and 
return  it  as  not  wanted.'^ 

If  the  company  accepts  a  credit  with  its  agent  instead  of  actual 
payment  as  required  by  the  policy,  such  a  transaction  is  equivalent 
to  payment  so  far  as  the  company  is  concerned.* 


1  Mauck  V.  Merchants'  &  M.  Fire 
his.  Co.  (Del.  Super.),  54  Atl.  952; 
Taylor  v.  Loicell,  3  Mass.  331.  3  Am. 
Dec.  141;  A'^.  Y.  Lumber,  etc.,  Co.  v. 
Peoples'  F.  Ins.  Co.,  96  Mich.  20,  55 
N.  W.  434;  Schajfer  v.  Mut.  F.  Ins.  Co., 
8d  Pa.  St.  296.  The  delivery  of  the 
policy  and  the  payment  of  the  premium 
are  declared  to  be  reciprocal  or  con- 
current considerations,  Ins.  Co.  v. 
Lezcis,  187  U.  S.  3.35,  235  Ct.  li:6. 

2  Firemen's  Ins.  Co.  v.  Kuessner,  164 
111.  275,  45  N.  E.  540;  Western  Assur. 
Co.  V.  McAlpin,  23  Ind.  App.  220,  55 
N.  E.   119. 

^  Ohio  F.  Ins.  Co.  v.  Stowman,  16 
Ind.  App.  205,  44  N.  E.  558.  And 
credit  is  inferred  if  agent  delivers  policy 
without  exacting  advance  payment, 
Germania  F.  Ins.  Co.  v.  Midler,  110 
111.  App.  190;  Kollitz  v.  Equitable  Mut. 
Ins.  Co.,  92  Minn.  234,  99  N.  W.  892; 
Church  V.  La  Fayette  F.  Ins.  Co.,  66 
N.  Y.  222.  Under  cancellation  clause 
company  often  cancels  for  non-pay- 
ment. Citizens'  Fire  Ins.  Co.  v.  Sicartz, 
21  Misc.  671,  47  N.  Y.  Supp.  1107. 
But  mutual  companies  often  require 
prepayment  of  the  premium.  Waincr 
V.  Mil  ford  Mvt.  F.  Ins.  Co.,  153  Mass 
335,  26  N.  E.  877,  11  L.  R.  A.  598 
AInlreif  v.  Shau-rvut  Mut.  F.  Ins.  Co. 
4  Allen  (Mass.),  116,  81  Am.  Dec.  689; 
Buffum  V.  Fayette  Mitt.  Fire  Im.  Co.,  3 
Allen  (Mass.),  360.  Bui  tlie  company 
may  accept  payment  by  giving  credit 


to  the  broker  in  a  personal  account 
with  him.  White  v.  Connecticut  Fire 
Ins.  Co.,  120  Mass.  330.  A  promise  by 
the  insurer  to  temporarily  "hold"  cer- 
tain expired  policies,  credit  for  the 
premium  being  given  to  the  assured,  is 
binding.  Baker  v.  Westchester  Fire  Ins. 
Co.,  162  Mass.  358,  38  N.  E.  1124. 

*  Penn.  L.  Mut.  F.  Ins.  Co.  v.  Merer, 
126  Fed.  352,  61  C.  C.  A.  254;  Walls  v. 
Home  Ins.  Co.,  114  Ky.  611,  71  S.  W. 
650;  Greenicich  Ins.  Co.  v.  Oregon  Imp. 
Co.,  76  Hun,  194,  27  N.  Y.  Supp.  794. 

5  Carson  v.  Jersey  City  Ins.  Co.,  43 
N.  J.  L.  300,  39  Am.  Rep.  584.  A  note 
taken  in  place  of  cash  for  premium 
becomes  a  binding  obligation  when  the 
risk  attaches.  Merchants'  Ins.  Co.  v. 
Clapp,  11  Pick.  (Mass.)  56;  Li/nn  v. 
Burgoyne,  13  B.  Mon.  (Ky.)  400.  But 
note  may  be  collected  though  insur- 
ance is  suspended  for  default  in  its  pay- 
ment, Robinson  v.  German  Ins.  Co.,  51 
Ark.  441,  11  S.  W.  686;  Pheiiix  Ins. 
Co.  V.  Rollings,  44  Neb.  745,  63  N.  W. 
46.  A  note  given  for  premium  is 
negotiable,  Mclntire  v.  Preston,  5 
Gilman  (111.),  48,  48  Am.  Dec.  321; 
Union  Ins.  Co.  v.  Greenleaf,  64  Me.  123. 
A  voidable  policy  is  sufficient  consid- 
eration for  a  premium  Bote, Pb't7iptonv. 
Dunn,  148  Mass.  523,  527,  20  N.  E.  180. 

6  See  also  §  75,  supra. 

7  Western  F.  Ins.  Co.  v.  Guriai  115 
App.  Div.  (N.  Y.)  610. 

8  Jones  V.  ^tna  Ins.  Co.,  13  Fed.  Cas. 


282 


MEANING    AND    LEGAL    KFFECl^    OF    FIRE    POLICY 


In  mutual  companies  premiums  are  often  paid,  in  whole  or  in  part, 
hy  premium  or  deposit  notes  of  the  insured,  which  are  held  by  the 
company,  and  from  t  ime  to  time  assessed  to  pay  losses  and  expenses.^ 


*»3S;  Lurtqatrass  v.  German  Inn.  Co.,  57 
Mo.  \07;'Gatisville  Mjg.  Co.  v.  Phcenix 
Mut.  F.  Ins:  Co.,  (17  N.  H.  457,  36  Atl. 
3(i7;  Train  v.  IloUaml-Purchase  In.^.  Co., 
(>2  N.  Y.  59S;  \V\ithcville  Ins.  ct  B.  Co. 
V.  Teiqcr,  90  Va.'277,  IS  S.  E.  195;  and 
see  Mechanics'  &  T.  /7?.s.  Co.  v.  Mut., 
etc.,  Hldq.  Assn.,  98  (Ja.  202,  25  S.  E. 
457.  And  if  agent  pays  the  company, 
latter  cannot  forfeit  the  policy,  though 
it  orovi(.les  that  company  will  not  be 
liable,  "until  the  premium  be  actually 
paid,"  Home  Ins.  Co.  v.  Gilman,  112 
Ind.  7,  13  N.  E.  118.  Compare  Her- 
ring V.  Am.  his.  Co.,  123  Iowa,  533, 
99  N.  W.  130;  Dunham  v.  Mor.se,  158 
Mass.  132,  32  N.  E.  111(5.  Credit  was 
given  to  the  broker  in  White  v.  Conn. 
F.  Ins.  Co.,  120  Mass.  330.  Where  the 
standard  policy  has  been  delivered  by 
the  insurer  without  payment  of  the 
premium  recovery  thereon  for  a  loss 
caimot  be  defeated  on  the  ground  of 
non-payment  of  premium,  Healy  v. 
Insurance  Co.,  50  App.  Div.  327,  63 
N.  Y.  t^upp.  1055;  sec  §  172,  supra. 
And  see  Weisman  v.  Commercial  F.  I. 
Co.,  3  Penn.  (Del.)  224,  50  Atl.  93. 
Unless  the  company  has  repudiated 
liability  on  other  grounds,  Knicler- 
hoc'er  L.  Ins.  Co.  v.  Pendleton,  112 
IT.  S.  696;  Stokes  v.  Mac':ay,  147  N.  Y. 
223,  41  N.  E.  496;  Howe  Ins.  Co.  v. 
Adlcr,  71  Ala.  516,  the  premium,  if 
impaid,  should  be  duly  tendered  by 
the  insured  before  the  commencement 
of  action  on  the  policy,  Farnum  v. 
Phoenix  Ins.  Co.,  83  Cal.  246,  23  Pac. 
869;  Van  Tassel  v.  Greenwich  Ins.  Co., 
28  App.  Div.  163,  169,  51  N.  Y.  Supp. 
79;  Hardwick  v.  State  Ins.  Co.,  20  Oreg. 
547,  26  Pac.  840.  Any  unearned 
premium,  however,  paid  to  the  com- 
pany need  not  be  tendered  back  by  it 
as  a  condition  of  defending  action, 
unless  required  by  statute,  Georgia 
Home  Ins.  Co.  v.  Rosenfield,  95  Fed. 
358  (no  waiver  of  forfeiture  to  retain 
it);  Par.<ions  v.  Lane,  97  Minn.  98,  106 
N.  ^V.  485;  Ser.or  v.  Western  M.  Mrd. 
F.  Ins.  Co.,  181  Mo.  104,  79  S.  W.  687. 
Insured  who  seeks  to  rescind  is  liable 
for  premium  until  time  of  rescission, 
Am.  Ins.  Co.  v.  Garrett,  71  Iowa,  243, 
32  N.  W.  356.  As  to  obligation  for 
premium  when  company  is  insolvent 
see  Ins.   Commissioner  v.  Peoples'  F. 


Ins.  Co.,  68  N.  H.  51,  44  Atl.  82; 
Merchants'  Mut.  Ins.  Co.  v.  Under- 
wood,  3  N.  Y.  Super.  Ct.  474;  Eqmt. 
Ins  Co.  V.  Harvey,  98  Tenn.  636,  40 
S.  W.  1092. 

1  New  Hampshire  Mut.  F.  Ins.  Co.  v. 
Rand,  4  Post.  (N.  H.)  428.  Power  to 
assess  is  ordinarily  limited  by  losses  and 
expenses,  Farmers'  Mut.  F.  Ins.  Co.  v. 
Knight,  162  111.  470,  44  N.  E.  834; 
Sinnissipi  Ins.  Co.  v.  Farris,  26  Ind. 
240,  342;  Ionia,  etc.,  his.  Co.  v.  Ionia 
C.  Judge,  100  Mich.  606,  59  N.  W.  250; 
excluding  those  accrued  prior  to  mem- 
bership, Mutual  F.  Ins.  Co.  v.  Jean,  96 
Md.  252,  53  Atl.  950;  Detroit  Mjrs.  M. 
F.  Ins.  Co.  V.  Merrill,  101  Mich.  393, 

59  N.  W.  661;  Sands  v.  Lilienthal,  46 
N.  Y.  541.  Liability  to  assessment 
continues  so  long  as  member's  insur- 
ance continues,  Planters'  Ins.  Co.  v. 
Comfort,  50  Miss.  662;  Morgan  v.  Hog 
Raisers'  Mut.  Ins.  Co.,  62  Neb.  446, 
87  N.  W.  145.  Hut  is  limited  by  face 
value  of  premium  note,  Davis  v. 
Oshkosh,  etc.,  Co.,  82  Wis.  488,  52 
N.  W.  771.  Member  is  liable  for  losses 
occurring  prior  to  his  withdrawal, 
Peake  v.  Yule.  123  Mich.  675,  82  N.  W. 
514;  or  during  term  of  his  policy 
though  assessment  is  subsequent, 
Raegener  v.  Willard,  44  App.  Div.  41, 

60  N.  Y.  Supp.  478;  Susquehanna,  etc., 
Ins.  Co.  v.  Mardorf,  152  Pa.  St.  22,  25 
Atl.  234.  Sometimes  there  is  a  cash 
premium  and  assessments  besides, 
Dwinnell  v.  Felt,  90  Minn.  9,  95  N.  W. 
579;  Buckle'/  v.  Columbia  Ins.  Co.,  83 
Pa.  St.  298;  Whipple  v.  U.  S.  Fire  Ins. 
Co.,  20  R.  I.  260,  38  Atl.  498.  Levy  of 
assessment  is  not  always  a  condition 
precedent  to  liability  of  the  company 
under  its  charter.  Wood  v.  Farmers'  L. 
As.m.,  121  Iowa,  44,  95  N.  W.  226; 
Thornburq  v.  Farmers'  L.  Assn.,  122 
Iowa,  260,  98  N.  W.  105;  Nashua  F. 
Ins.  Co.  v.  Moore,  55  N.  H.  48.  But 
usually  notes  are  conditional  and  a  due 
assessment  is  essential  to  fix  liability 
of  maker,  Hagan  v.  Merchants'  &  B. 
Ins.  Co.,  81  Iowa,  321,  46  N.  W.  1114. 
Validity  of  assessment  ordinarily  is 
determined  by  laws  of  state  where 
company  is  incorporated,  Warner  v. 
Delhridge,  etc.,  Co.,  110  Mich.  590,  68 
N.  W.  283.  In  general,  the  company 
cannot   make   an   assessment   until   a 


THE  TERM 


283 


If  the  risk  attaches,  the  premium  is  not  returnable,^  except  as  pro- 
vided by  the  terms  of  the  agreement,  as  in  the  case  of  the  standard 
fire  policy  or  by  statute;  but  if  the  pohcy  is  void  ah  initio,  or  if  the 
risk  never  attaches  and  there  is  no  fraud  on  the  part  of  the  insured, 
and  the  contract  is  not  against  law  or  good  morals,  the  insured  is 
entitled  to  recover  back  the  premium  paid  ,2  but  if  the  policy  is 
void  for  fraud  the  premium  is  not  returnable,^  unless  the  policy  so 
provide. 

§  229.  Premium — To  whom  Payable. — A  general  or  local  agent 
with  power  to  countersign  policies  has  apparent  authority  to  collect 
premiums.    In  that  regard  his  acts  are  those  of  the  company.^ 


§  230.  The   Term.— From    the 


day   of at   noon. 

"Noon"  in  the  absence  of  statutory  provisions  to  the  contrary,  or 
evidence  of  a  different  intent,  has  been  held  to  refer  to  solar  and  not 
standard  time.^ 


loss  has  occurred,  Wolcolt  v.  State  F. 
Mut.  Ins.  Co.  (Neb.,  1906),  110  N. 
W.  6-8.  Premium  notes  in  mutual 
companies  are  generally  made  a  lien 
upon  the  property  insured,  Wood  fin  v. 
Asheville  Mid.  Ins.  Co.,  6  Jones  (N.  C), 
558.  The  Iowa  standard  fire  policy 
provides  that  the  company  shall  not  be 
liable  if  insured  defaults  in  payment  of 
premium  or  assessment  note,  provided 
notice  as  required  by  law  has  been 
given,  but  acceptance  of  payment  is 
waiver. 

1  Parsons  v.  Lane,  97  Minn.  98,  119, 
106  N.  W.  485  (citing  many  cases); 
Hendricks  v.  Ins.  Co.,  8  Johns.  (N.  Y.) 
1,  5. 

2  Parsons  v.  Lane,  97  Minn.  98,  119, 
106  N.  W.  485  (citing  many  cases); 
Ins.  Co.  V.  Pile,  44  Ohio  St.  19,  4  N.  E. 
465,  58  Am.  Rep.  781. 

3  Blaeser  v.  Miluaulee  Mut.  Ins. 
Co.,  37  Wis.  31,  19  Am.  Rep.  747. 

*Mauck  V.  Merchants'  &  Mfrs.'  F. 
Ins.  Co.  (Del.),  54  Atl.  952.  As  to 
payments  to  solicitors,  see  Andes  F. 
7ns.  Co.  V.  Loehr,  6  Daly  (N.  Y.),  105; 
Long  Creek  Bldg.  Assn.  v.  State  Ins.  Co., 
29  Oreg.  569,  46  Pac.  366.  As  to  pay- 
ments to  brokers,  see  Am.  Fire  Ins.  Co. 
V.  Broo's,  S3  Md.  22,  34  Atl.  373; 
Globe  ct  R.  Fire  Ins.  Co.  v.  Bobbins,  43 
Misc.  65,  86  N.  Y.  Supp.  493;  Louns- 
buri/  V.  DucLrow,  22  Misc.  434,  50  N.  Y. 
Supp.  927;  Citizens'  F.  Ins.  Co.  v. 
Su-artz,  21  Misc.  671,  47  N.  Y.  Supp. 
1107. 


5  Jones  V.  German  Ins.  Co.,  110  Iowa, 
75,  81  N.  W.  188,  46  L.  R.  A.  860 
(cases  cited) ;  Meier  v.  Phoenix  Ins.  Co. , 
12  Ins.  L.  J.  (N.  S.)  192.  And  see 
Searles  v.  Averhoff,  28  Neb.  668,  44 
N.  W.  872;  Parker  v.  State,  35  Tex. 
Cr.  R.  12,  29  S.  W.  480.  Whether 
solar  or  standard ,  may  be  construed  as 
a  question  of  intent.  Globe  &  R.  F. 
Ins.  Co.  V.  Moffat,  154  Fed.  13  (May, 
1907)  (citing  cases);  or  of  well-known 
custom,  Rochester  German  Ins.  Co.  v. 
Peaslee  Co.  (Ky.),  87  S.  W.  1115.  In 
marine  insurance  time  is  to  be  taken  at 
the  place  where  the  contract  is  maile, 
Waller  v.  Protection  Ins.  Co.,  29  Me. 
317.  In  fire  insurance,  however,  the 
locus  of  the  property  has  been  regarded 
as  controlling,  Globe  &  R.  F.  Ins.  Co. 
V.  Moffat,  154  Fed.  13  (May,  1907). 
The  lack  of  a  definite  term  does  not 
of  necessity  render  the  contract  in- 
complete, Petrie  v.  Phuenix  Ins.  Co., 
132  N.  Y.  137,  30N.  E.  380.  Reason- 
able time  sometimes  is  presumed, 
Schrceder  v.  Traders'  Ins.  Co.,  109 
111.  157.  Policy  for  thirty  days  con- 
strued in  Barr  v.  7ns.  Co.,  61  Ind.  488. 
Where  the  term  is  not  so  precisely 
defined  the  law  does  not  regard  frac- 
tions of  a  day  and  construes  liberally 
to  the  insured.  Policy  then  runs  till 
midnight  and  first  and  last  days  are 
both  included,  Isaacs  v.  Ro'  al  Ins.  Co. 
(1870),  L.  R.  5  Exch.  296,  39  L.  J. 
Exch.  189,  22  L.  T.  681.  But  "noon" 
as   employed   in   the   standard   policy 


2S4 


MEANING    AND    LKGAL    KF1< KCT    OF    FIRE    POLICY 


§  231.  Insures  Against  all  Direct  Loss  by  Fire,  Except  as  Provided. 

—Loss  by  fire  means  the  result  of  the  ignition  of  the  property  insured 
or  of  some  substance  near  to  it.'  Thus,  the  action  of  fire  in  charring, 
scorching,  cracking,  smoking  or  heating  may  be  included  though  no 
flame  be  seen.- 

Again,  it  is  said  that  if  the  fire  is  in  no  respect  a  hostile  fire,  that  is, 
if  the  fire  itself  does  not  pass  beyond  the  limits  assigned  for  it,  as,  for 
example,  a  stove,  furnace,  lamp  or  similar  receptacle  intended  to 
hold  fire,  then  the  results  of  smoke  and  heat,  where  there  is  no  igni- 
tion outside  the  agencies  employed,  are  not  covered  by  the  policy. 
If  the  fire,  however,  extend  beyond  the  place  where  it  belongs  it 
becomes  a  hostile  fire,  which,  indeed,  is  the  peril  insured  against. 
Thus  loss  by  soot  caused  by  an  accidental  fire  in  the  chimney  was 
held  to  be  included  though  the  fire  originated  in  the  stove.^  The 
word  "  direct  "  in  the  policy  means  immediate,  or  proximate,  as  dis- 
tinguished from  remote; ''  but  the  proximate  results  of  fire  within  the 
rule  of  law  establishing  the  liability  of  the  insurer  may  include  other 


makes   it  definite,   Matthews   v.    Con- 
iinmtnl  Cas.  Co..  7S  Ark.  81. 

1  Babcock  v.  Mont/onery  Co.  Mid. 
Ins.  Co.,  6  Barb.  (N.  Y.)  637.  As  to 
what  is  fire  see  recent  and  interesting 
opinions  in  Western  Woolen  Mill  Co. 
cases,  infra. 

^Scripture  v.  Lo-rell  Mut.  F.  Ins. 
Co.,  64  Mass.  356,  .57  Am.  Dec.  Ill; 
Singl'ton  v.  Phxni.z  Ins.  Co.,  132  N.  Y. 
2JS,  30  N.  E.  833.  But  no  degree  of 
heit  alone  without  ignition  is  covered 
by  the  policy,  Gibbons  v.  German  Ins. 
&  Savings  Inst.,  30  111.  App.  263,  26.5. 
Before  heat,  or  desonDOsitioa  in  ani- 
mal or  vegetable  matter  reaches  the 
point  of  ignition  it  has  recently  been 
held,  there  must  be  more  than  "charr- 
ing." There  must  be  "a  flame  or  a 
glow,"  or  something  that  can  be  '^'^lled 
"luminosity,"  Western  Woohn  Mill  Co. 
V.  Northern  Assur.  Co.,  12  U.  S.  C.  C. 
A.  1,  130  Fed.  637  (in  whi-^h  court  dis- 
missed the  action):  Sun  Ins.  Office  v. 
Western  Woolen  Mi'l  Co.,  72  Kan.  48, 
82  Pac.  513  (in  which  jury  was  allowed 
to  find  for  plaintiff). 

3  Way  V.  Abimton  M.  F.  I.  Co.,  166 
Mass.  67,  74,  43  N.  E.  1032,  32  L.  R.  A. 
608,  55  Am.  St.  R.  379.  But  where 
sugar  was  snoiled  by  great  heat  from  a 
fire  in  ordinary  use  because  of  the 
closing  of  a  register,  the  company  was 
held  not  liable,  Austin  v.  Dreve,  6 
Taunt.  436,  and  so  also  where  the  heat 
of  the  sun  contracted  timber  without 


any  actual  combustion,  Babcock  v. 
Montrjomerif  Co.  Mut.  Ins.  Co. ,  6  Barb. 
(N.  Y.)  637.  Similarly  where  the  in- 
terior of  a  boiler  was  damaged  by 
overheating  from  regular  furnace  fires 
owing  to  absence  of  water  in  the  boiler, 
American  Towing  Co.  v.  Ger.  Fire  Ins. 
Co.,  74  Md.  25,  21  Atl.  5.53,  in  which 
the  court  says:  "When  fire  is  employed 
as  an  agent,  either  for  the  ordinary 
purposes  of  healing  the  building,  for 
the  purpose  of  manufacturing,  or  as 
an  instrument  of  art,  the  in&urer  is  not 
liable  for  the  ronsenuences  thereof,  so 
long  as  the  fire  itself  is  confined  within 
the  limit  of  the  agencies  employed;  as 
from  the  effects  of  smoke  or  heat 
evolved  thereby,  or  esca  ing  there- 
from, from  any  cause,  whether  in- 
tentional or  accidental.  In  order  to 
bring  such  consequences  within  the 
risk,  there  must  be  actual  ignition 
outside  of  the  agencies  employed,  not 
purposely  caused  by  the  assured,  and 
these,  as  a  consequence  of  such  igni- 
tion, dehors  the  agencies."  Fitzqerald 
V.  German-American  I.  Co.,  30  Misc. 
72,60N.  Y.  Suno.  824. 

■*  California  Ins.  Co.  v.  Union  Com- 
press Co.,  133  IT.  S.  387.  415,  10  S.  Ct. 
365.  In  Lvnn  Gas  &  El.  Co.  v.  Meri- 
den  F.  Ins.  Co.,  158  Mass.  570,  3? 
N.  E.  690,  20  L.  R.  A.  297,  35  Am.  St. 
R.  540  "direct  and  proximate"  cause 
is  defined  and  explained.  For  further 
discussion     of    proximate    cause    see 


INSURES  AGAINST  ALL   DIRECT   LOSS   BY   FIRE  285 

things  than  combustion;  as,  for  example,  the  resulting  fall  of  the 
building  or  parts  thereof,*  injuries  to  the  insured  property  by  water 
from  the  fire  engines,  and  operations  of  firemen  and  others,^  or  ex- 
posure of  goods  during  tl  e  fire,  or  expense  for  or  damage  during  their 
reasonable  removal;  ^  also  the  loss  of  goods  by  theft  '^  during  the  fire, 
or  during  a  reasonable  i  emoval  to  a  place  of  safet}^^  also  injury  to 
buildings  blown  up  to  stay  a  conflagration,^  except  as  such  results  of 
fire  are  expressly  excluded  by  the  terms  of  the  contract. 

A  comparison  between  the  two  cases  following  brings  out  the  dis- 
tinction between  a  hostile  and  a  friendly  fire,  though  both  kinds  of 
fire  may  be  the  cause  of  damage  to  the  insured.  Way,  the  plaintiff, 
had  a  policy  on  his  cigai  s,  manufactured  and  in  process  of  manufac- 
ture, located  at  25  Doar  3  Street,  Boston.  One  night  the  soot  in  the 
chimney  accidentally  b(  came  ignited,  and  the  room  in  which  the 
cigars  were  located  was  !  died  with  dense  smoke,  which  injured  their 
flavor.  The  court  held  1  hat  a  fire  in  a  chimney,  especially  when  not 
intentionally  kindled  wii  h  a  purpose  to  burn  out  the  soot,  should  be 
considered  a  hostile  rather  than  a  friendly  fire;  and  that  damage 
caused  by  it  is  covered  by  the  ordinary  policy.'^ 

About  four  years  later,  apparently  without  having  its  attention 
directed  to  the  Way  cofie,  the  Georgia  court  decided  in  favor  of  the 
insurer,  on  a  somewhat  different  state  of  facts.  Cannon's  insurance 
w^as  on  her  stock  of  dry  goods,  hats,  clothing,  etc.,  in  a  building  at 
Lalton,  Georgia.  In  arranging  a  stove,  the  pipe  became  disengaged 
at  the  ceiling  of  the  floor  immediately  below  the  floor  where  the  goods 
were  located.  When  the  fire  was  built  in  the  stove,  the  escaping 
smoke  and  soot  and  also  water  used  to  cool  the  ceiling,  but  not  to 
prevent  ignition,  did  the  damage  to  the  goods.    No  actual  burning 

ch.  XX.     Whether  fire  is  the   proxi-  ^  White  v.  Republic  Fire  Ins.  Co.,  57 

mate  cause  is  often  for  the  jury,  N.  Y.  Maine,  91,  2  Am.  Rep.  22. 

Boston  Ex.   Co.   v.   Traders'   &  Mech.  ■*  Cohn  v.  National  Ins.  Co. ,  96  Mo. 

Ins.  Co.,  132  Mass.  377,  135  Mass.  221,  App.  315,  70  S.  W.    259;  Sklencher  v. 

and  see  Milwaulee  R.  R.  Co.  v.  Kellogg,  Fire  Asso.  (N.  J.  L.),  60  Atl.  232. 

94  U.  S.  469.  5  Stanleii  v.  Western  Ins.  Co.,  L.  R.  3 

1  Ermentrout  v.  Girard  F.  &  M.  Ins.  Exch.  74;  37  L.  J.  Exch.  73. 

Co.,   63   Minn.    305,   65    N.    W.    635.  ^  City   F.    Ins.    Co.    v.    Corlies,    21 

Compare  the  interesting  case  in  which  Wend.  367;  Heuer  v.  Westchester  Fire 

insured  recovered  where  a  wall  injured  7ns.   Co.,  44  111.  App.  429.     But  the 

by  fire  fell  over  seven  days  later  in  a  standard  policy  expressly  excludes  cer- 

strong  wind  and  damaged  the  plain-  tain    classes    of    losses,    for    example, 

tiff's  nrooerty,  Rvssell  v.  German  F.  his.  damage  by  theft  and  by  order  of  civil 

Co.  (Minn.,  1907),  111  N.  W.  400  (no  authority,  and   these  express  exemp- 

fire  reached  the  plaintiff's  premises).  tions  prevail. 

2  Davis  &  Co.  v.  Insurance  Co.  of  ^  Way  v.  Ahington  M.  F.  Ins.  Co., 
N.  A.,  115  Mich.  382,  73  N.  W.  393;  166  Mass.  67,  43  N.  E.  1032, 32  L.  R.  A 
Boak  Fish  Co.  v.  Manchester  F.  Assur.  608,  55  Am.  St.  R.  379. 

Co.,  84  Minn.  419,  87  N.  W.  932. 


280  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

of  anything  except  the  material  put  in  the  stove  purposely  to  burn 
was  alleged  in  the  proofs  of  loss.  The  court  was  of  opinion  that  the 
fire  diJ  not  break  out  from  where  it  Avas  intended  to  operate,  and 
that,  therefore,  being  a  friendly  fire,  the  effects  of  it  though  det- 
rimental were  not  covered  as  a  fire  loss  within  the  meaning  of  the 
policy.^ 

If  a  policy  were  silent  upon  the  subject,  loss  by  fire  would  include 
loss  by  a  gunpowder  explosion,^  but  not  loss  by  a  steam  explosion  or 
by  the  wind.^  It  would  not  include  loss  by  lightning  '*  unless  ignition 
resulted;  ^  but  a  lightning  clause  may  be,  and  usually  is,  attached  to 
the  policy. 

The  fire,  however,  may  be  the  proximate,  that  is,  the  dominant  and 
efficient  cause  of  the  loss,  though  it  starts  outside  the  premises  in- 
sured and  never  extends  to  them  in  the  form  of  combustion.^  But 
any  express  provisions  of  the  contract  govern.^ 

A  three  story  building  known  as  "Russell  Block,"  in  Minneapolis, 
was  insured  against  loss  by  fire.  To  the  northwest  of  it,  first  came 
th3  Peck  Building  of  five  stories,  then  an  alley  twelve  feet  wide  and 
th3n  the  Boutelle  Building.  A  fire  starting  in  the  Boutelle  Building, 
extended  to  the  Peck  Building,  and  gutted  the  contents  of  both,  but 
di  1  not  reach  "Russell  Block."  The  five  story  wall  of  the  Peck 
Building,  adjacent  to  the  "  Russell  Block,"  was  left  standing.     For  a 

1  Cannon  v.  Phoenix  Ins.  Co.,  110  tace  case);  Caballero  v.  Home  Mut.  Ins. 
Ga.  563,35  S.  E.  775,78  Am.  St.  R.  Co.,  15  La.  Ann.  217;  Everett  v.  The 
124.  London  Assurance,  19  C.  B.  N.  S.  126. 

2  Hence  the  explosion  clause  of  stand-  Nor  damage  from  a  smoking  lamp 
ard  policy.  chimney,  Samuels  v.  his.   Co.,  2  Pa. 

3  Waters  v.  Merchants'  Louisville  Ins.  Dist.  R.  397;  Fitzgerald  v.  German-Am. 
Co.,  11  Pet.  (U.  S.)  218;  Millaudon  v.  7n.s.  Co.,  30  Misc.  72,  62  N.  Y.  Supp. 
A'eiv  Orleans  Ins.  Co.,  4  La.  Ann.  15;  824.  Nor  damage  from  soot  from  a 
50  Am.  Dec.  550;  Transatlantic  Fire  defective  stove  pipe,  Cannon  v.  Phoenix 
Ins.  Co.  V.  Dorseij,  56  Md.  70,  40  Am.  Ins.  Co.,  110  Ga.  503,  35  S.  E.  775. 
Rep.  403;  Scripture  v.  Lowell  Mut.  Fire  Nor  damage  caused  by  escaping  steam, 
Ins.  Co.,  10  Gush.  (Mass.)  356,  57  Am.  Gibbons  v.  German  Ins.  Co.,  30  111.  App. 
Dec.  111.  263.    Nor  damage  caused  by  a  fire  en- 

■*  iiCennision  V.  7ns.  Co.,  14  N.  H.  341,  gine  on   its   way   to   a   fire,   Foster  v. 

AQ  Asn.  Dec.  \^Z;  Everett  X.  The  Loyidon  Fidelity  Ins.   Co.,  24   Pa.   S.   Ct.   585. 

Assurance,  19  C.  B.  N.  S.  126.  Nor   the   fall   of   a   wall   several   days 

^  Babcodc  v.   Montgomery,  etc.,  Ins.  after   the   fire,  heavy    rains   interven- 

Co.,  4  N.  Y.  326.     Fire  originating  in  ing    to    weaken    the    wall,    Cuestu   v. 

spontaneous  combustion  is  within  the  Royal  Ins.  Co.,  98  Ga.  720,  27  S.  E. 

risk.     Damage  caused  solely  by  con-  172. 

cussion,  if  the  result  of  an  explosion  in  «  Russell    v.    German    F.    Ins.    Co. 

a  distant  building,  is  not  within  the  (Minn.,  1907),  111  N.  \V.  400;  Ermen- 

risk,  Hustace  v.  Phoenix  Ins.  Co.,  175  trout  v.  Girard  Fire  &  M    Ins    Co     63 

N.  Y.  232,  67  N.  E.  592,  62  L.  R.  A.  Minn.  305,  65  N.  W.  635.  30  L.  R.  A. 

651  (Tarrant  explosion  in  New  York);  346,  56  Am.  St.  R.  481. 

Hall  V.  National  F.  Ins.  Co.   (Tenn.),  '  See,  for  example,  Conner  v    Man- 

92  S.  W.  402,  35  Ins.  L.  J.  507  (citing  Chester  Assur.  Co.,  130  Fed,  743,  as  to 

many  authorities  and  criticizing  Hus-  order  of  civil  authority. 


INSURES   AGAINST   ALL   DIRECT   LOSS   BY   FIRE  287 

week  after  the  fire  a  high  wind  prevailed,  at  times  amounting  to  a 
gale;  and  on  the  seventh  day  after  the  fire,  while  a  strong  wind  was 
blowing,  this  high  wall  fell  over  on  "Russell  Block,"  crushing  in  its 
roof  and  doing  considerable  damage.  The  court  sustained  the  find- 
ing of  the  jury  that  this  damage  was  a  proximate  loss  by  the  fire, 
and  therefore  covered  by  the  standard  policy.^ 

The  policy  includes  loss  by  the  incendiary  act  of  the  insured  if 
insane,  and  by  his  carelessness,  though  sane,^  and  includes  the  un- 
intentional or  careless  acts  of  third  persons,  whether  his  agents  or 
not,^  as  well  as  their  criminal  acts,"*  but  if  the, fire  is  caused  by  the 
fraudulent  act  of  the  insured  himself,  or  of  someone  acting  with  his 
privity  or  consent,  the  insurer  is  exonerated.^  Arson  by  the  wife  of 
the  insured  without  his  connivance  furnishes  no  defense  to  the  com- 
pany.^ 

The  word  "direct"  is  not  in  the  corresponding  clause  of  the  Massa- 
chusetts poUcy,  but  the  doctrine  of  proximate  cause  applicable 
is  substantially  the  same.^  Thus  in  a  case  in  that  state,  the  plaintiff 
had  insured  its  building  and  machinery  against  loss  by  fire.  A  fire 
occurred  in  a  tower  of  the  building.  It  was  confined  to  the  tower, 
and  did  only  slight  damage  there.  Through  this  tower,  however, 
wires  for  electric  lighting  were  carried.  The  fire  acted  upon  the  wires 
in  such  a  way  that  a  connection  called  a  short  circuit  was  made  be- 
tween lightning  arresters.  The  electricity  because  of  the  short  cir- 
cuit affected  the  dynamo  in  such  a  way  as  to  cause  greater  resistance 
to  the  machinery.  This  resistance,  transmitted  to  a  pulley  through 
a  belt,  in  turn  destroyed  the  pulley,  which  destruction  in  turn  dis- 
turbed the  main  shaft  and  ruptured  other  pulleys.     By  reason  of 


^Russell   V.   German   Fire  Ins.    Co.  Fed.  485.     Arson  or  fraud,  by  an  of- 

(Minn.,  1907),  111  N.  W.  400.  ficer  of  an  insured  corporation,  or  by 

2  Karow  v.  Continental  Ins.  Co.,  57  an  agent  of  any  insured  principal, 
Wis.  56,  46  Am.  Rep.  17.  without  connivance  of   the  principal, 

3  Wcrtheimer-Suarts  Co.  v.  U.  S.  furnishes  no  defense  to  the  insurer, 
Cas.  Co.,  172  Mo.  135,  72  S.  W.  because  a  principal  does  not  im- 
635,  61  L.  R.  A.  766,  95  Am.  St.  R.  pliedly  authorize  his  representative 
500.  to  commit  such  acts,  Plinsky  v.  Ger- 

■1  Union  Ins.  Co.  v.  McCullough,  96  mania  F.  &  M.  Ins.  Co.,  32  Fed.  47; 

N.  W.  79;  Henderson  v.  Western  M.  &  Feibelman  v.  Manchester  F.  Assur.  Co  , 

F.  Ins.  Co.,  10  Rob.  (La.)  164;  Feibel-  108  Ala.  180,  201,  19  So.  540;  Hender- 

man  v.  Manchester  F.  Assur.  Co.,  108  son  v.  Western  Ins.  Co.,  10  Rob.  (La.) 

Ala.  180,  19  So.  540.  164,  43  Am.  Dec.  176.     But  see  where 

^Waters  v.  7ns.  Co.,  11  Pet.  (U.  S.)  substantially    all    the    stock    was    in 

213.  hands    of   one    family,    Meily    Co.    v. 

6  Same    rule    applies    to    arson    by  London  &  L.  F.  Ins.  Co.  (U.  S.  Cir.  Ct., 

husband  of  assured.  Midland  Ins.  Co.  v.  Jan.,  1906),  142  Fed.  873. 
Smith,  L.  R.  6  Q.  B.  D.  568;  Plinski/  v.  7  Lynn  Gas  &  Elec.  Co.  v.  Meriden 

Germania  F.  &  M.  Ins.  Co.,  32  Fed.  Fire  Ins.  Co.,  158  Mass.  570,  33  N.  E 

47;  Perry  v.  Mech.  Mut.  Ins.  Co.,  11  690. 


288 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


pieces  flying  from  the  jack-pulley  or  other  similar  cause,  the  fly- 
wheel of  the  engine  was  destroyed,  the  governor  broken,  and  the 
machinery  disrupted  generally.  The  disruption  and  damage  to  the 
machinery  occurred  in  a  part  of  the  building  remote  from  any  fire  or 
combustion.  The  court  held,  however,  that  the  whole  loss  was  by 
fire,  within  the  meaning  of  the  Massachusetts  standard  policy.^ 

§  232.  The  Following  Described  Property.— The  description  of 
the  property  is  written  into  the  printed  form,  usually  in  brief  and 
general  terms.  Hence,  if  the  language  of  the  description  leaves  it 
doubtful  what  goods  or  buildings  or  other  property  it  was  intended 
to  cover,  the  courts  construe  the  ambiguity  liberally  in  favor  of  the 
insured,  with  a  purpose  to  give  a  full  indemnity  for  all  that  might 
reasonably  be  considered  included  in  the  description.^  Accordingly, 
the  description  of  the  policy  covers  not  only  what  is  specifically  men- 
tioned but  also  whatever  is  reasonably  appurtenant  to  it  or  included 
in  it.^    And  oral  evidence  is  freely  received  to  identify  the  subject- 


1  Lvnn  Gas  &  Elec.  Co.  v.  Meriden 
Fire  Ins.  Co.,  158  Mass.  570,  33  N.  E. 
690,  29  L.  R.  A.  237,  35  Am.  St.  R.  540 
("when  it  is  said  that  the  cause  to  be 
sought  is  the  direct  and  proximate 
cause,  it  is  not  meant  that  the  cause  or 
agency  which  is  nearest  in  time  or  place 
to  the  result  is  necessarily  to  be 
cliosen.  .  .  .  The  primary  cause  may 
be  the  proximate  cause  of  a  disaster, 
though  it  may  operate  through  succes- 
sive instruments,  as  an  article  at  the 
end  of  a  chain  may  be  moved  by  a 
force  applied  to  the  other  end.  .  .  . 
In  the  present  case  the  electricity  was 
one  of  the  forces  of  nature — a  passive 
agent  working  under  natural  law^s — 
whose  existence  was  known  when  the 
insurance  policies  were  issued.  .  .  . 
The  fire  worked  through  agencies  in 
the  building,  the  atmosphere,  the  me- 
tallic machinery,  electricity,  and  other 
things;  and,  w-orking  precisely  as  the 
defendants  would  have  expected  it  to 
work  if  they  had  thoroughly  under- 
stood the  situation  and  the  laws  ap- 
plicable to  the  existing  conditions,  it 
put  a  great  strain  on  the  machinery 
and  did  great  damage.  No  new  cause 
acting  from  an  independent  source 
intervened.").  Mere  negligence  on  the 
part  of  the  insured  though  the  direct 
cause  of  the  fire  is  no  defense,  Johnson 
V.  Berkshire  Mut.  F.  Ins.  Co.,  4  Allen 
(Mass.),  388. 

2  Ric  erson  v.  Hartford  Fire  Ins.  Co., 
149  N.  Y.  307,  313;  Saunders  v.  Agri- 


cultural Ins.  Co.,  39  App.  Div.  631,  57 
N.  Y.  Supp.  683;  Ric'.erson  v.  German- 
Am.  Ins.  Co.,  6  App.  Div.  550,  39  N.  Y. 
Supp.  547;  Gra'ihill  v.  Penn  Township 
Mat.  F.  Ins.  Asso.,  170  Pa.  St.  75,  32 
Atl.  632.  These  cases  also  hold  that 'if 
there  is  ambiguity,  the  question  is  for 
the  jury. 

3  Phoenix  Ins.  Co.  v.  Favorite,  49 
111.  259;  Clarle  v.  Firemen's  Ins.  Co., 
1 8  La.  431 ;  Lovewell  v.  Westchester  Fire 
Ins.  Co.,  124  Mass.  418,  26  Am.  Rep. 
671;  Medina  v.  Builders'  Mtd.  Fire  Ins. 
Co.,  120  Mass.  225;  Buchanan  v.  Ex- 
change Fire  Ins.  Co.,  61  N.  Y.  26.  See 
many  instances,  1  Clement,  Ins.  (1905), 
79-81.  Thus  a  furnace  and  boiler  were 
held  to  be  part  of  the  house  insured, 
West  v.  Fanners'  Mut.  Ins.  Co.,  117 
Iowa,  147,  90  N.  W.  523.  An  annex  to 
the  building  was  held  to  be  covered  by 
the  policy  on  the  building,  Boa':  Fish 
Co.  v.  Manchester  F.  Assur.  Co.,  84 
Minn.  419,  87  N.  W.  932.  And  the 
word  "sheds"  means  not  only  those 
adjoining  a  mill  or  factory  but  also 
more  distant  sheds,  Woherine  Lumber 
Co.  V.  Palatine  Ins.  Co.,  139  Mich.  432, 
102  N.  W.  991.  The  term  "grain"  has 
been  construed  as  including  broom 
corn  in  the  bale,  Reavis  v.  Farmers' 
Mut.  F.  I.  Co.,  78  Mo.  App.  14,  2  Mo. 
App.  Rep.  119.  And  "grain  and  seed" 
as  covering  flax  seed  afterwards  con- 
verted into  oil  cake.  Marsh  Oil  Co.  v. 
Mna  Ins.  Co.,  79  Mo.  App.  21,  2  Mo. 
App.  Rep.  400.     But  the  plain  import 


ADDITIONS,   ALTERATIONS,   ETC. 


289 


matter  of  the  contract.^  So  also  a  general  understanding  in  the 
trade  or  a  well-established  custom  may  be  shown  to  clarify  the 
meaning  of  words  or  terms  of  technical,  indefinite,  or  doubtful  im- 
port, used  in  the  description  of  the  property  insured. ^  But  oral 
evidence  is  not  admissible  to  disturb  the  plain  import  of  the  de- 
scription as  written.^ 


§233.    Additions,   Alterations,   etc. — The    word    "additions"    is 

in  the  general  printed  clause,  Phoenix 
Ins.  Co.  V.  Flemming,  65  Ark.  54,  44 
S.  W.  464,  67  Am.  St.  R.  900,  39  L.  R. 
A.  789.  But  compare  Johndon  v. 
Niagara  F.  Ins.  Co.,  118  N.  C.  643 
(patterns);  Banyer  v.  Albany  F.  Ins. 
Co.,  85  App.  Div.  122,  83  N.  Y.  Supp. 
65,  aff'd  179  N.  Y.  554,  71  N.  E.  1140 
(fixtures).  Whether  benzine  is  "usu- 
ally kept  in  a  country  store"  is  for 
jury,  Carrigan  v.  Lijcoming  F.  I.  Co., 
53  Vt.  418,  38  Am.  Rep.  687. 

1  Westfield  Cigar  Co.  v.  7ns.  Co.  of 
N.  A.,  169  Mass.  382,  47  N.  E.  1026. 
See  §  85,  supra.  A  granite  front  satis- 
fies the  description  of  "a  granite  build- 
ing," Medina  v.  Ins.  Co.,  120  Mass.  225. 
A  jeweler's  "stock  in  trade"  does  not 
cover  blankets  hung  upon  the  building 
to  stay  the  fire,  Welles  v.  Boston  Ins. 
Co.,  6  Pick.  (Mass.)  182  (insurer  held 
liable  to  a  share  of  the  value  of  the 
blankets  destroyed,  because  they  re- 
sulted in  salvage).  Stock  of  "watches, 
watch  trimmings,  etc.,"  was  held  to 
cover  also  silver  and  plated  ware, 
clocks,  jewelry,  etc.,  Crosby  v.  Frank- 
lin l7is.  Co.,  5  Gray  (Mass.),  504. 
"Stock  in  trade"  of  furniture  dealer 
covers  also  paints  and  varnish,  Haley 
V.  Dorchester  Mut.  F.  Ins.  Co.,  12  Gray 
(Mass.),  545.  "Merchandise"  means 
property  kept  for  sale.  "Property" 
includes  also  articles  kept  for  use. 
Burgess  v.  Alliance  Ins.  Co.,  10  Allen 
(Mass.),  221.  "Patterns"  may  be  con- 
strued as  "tools,"  Lovewell  v.  WesU 
Chester  Fire  Ins.  Co.,  124  Mass.  418,  26 
Am.  Rep.  671.  A  "hotel"  is  not  a 
"dwelling  house,"  Thomas  v.  Com- 
mercial  Union  Assur.  Co.,  162  Mass. 
29,  37  N.  E.  672,  44  Am.  St.  R.  323. 

2  Westfield  Cigar  Co.  v.  Ins.  Co.  of 
X.  A.,  169  Mass.  382,  47  N.  E.  1026; 
Daniels  v.  Hudson  R.  R.  Co.,  12  Cush. 
(Mass.)  416,  59  Am.  Dec.  192.  See 
§  89,  supra. 

3  Ferguson  v.  Lumbermen's  Ins.  Co. 
(Wash.,  1907),  88  Pac.  128.  And  see 
§§  85,  86. 


of  the  language  employed  must  not  be 
disregarded.  See  many  instances,  1 
Clement,  Ins.  (1905),  81-84.  Thus 
"decorations  to  walls  and  ceilings" 
will  not  cover  painting  of  outside  walls, 
Sherlock  v.  German-Am.  F.  Ins.  Co.,  21 
App.  Div.  18,  47  N.  Y.  Supp.  315, 
aff'd  162  N.  Y.  656,  57  N.  E.  1124; 
And  "machinery  used"  must  not  be 
extended  to  include  "machinery  kept 
for  sale,"  Michel  v.  American  Cent.  I. 
Co.,  17  App.  Div.  87,  44  N.  Y.  Supp. 
832.  And  "building  occupied  as 
tannery"  does  not  include  engine  and 
machinery,  Sunderlin  v.  Mtna  Ins.  Co., 
18  Hun  (N.  Y.),  .522  (other  policies  in- 
dicated the  restrictive  meaning).  In 
Bigler  v.  A'.  Y.  C.  Ins.  Co.,  20  Barb. 
(N.  Y.)  635,  the  words  "steam  saw 
mill"  were  held  to  include  machinery. 
As  to  whether  description  of  character 
of  building  is  a  warranty,  see  Dougherty 
v.  Greenwich  Ins.  Co.,  64  N.  J.  L.  716, 
42  Atl.  485;  Aiple  v.  Boston  Ins.  Co.,  92 
Minn.  337,  100  N.  W.  8;  Massell  v. 
Protective  Mut.  F.  I.  Co.,  19  R.  I.  565, 
35  Atl.  209.  But  where  the  words 
"while  occupied  as  dwelling"  were  in- 
serted in  application  and  policy  by 
mistake  of  agent,  and  without  knowl- 
edge of  assured,  company  was  held 
estopped,  Mead  v.  Saratoga  &  Wash. 
Fire  Ins.  Co.,  81  App.  Div.  282,  80 
N.  Y.  Supp.  885,  aff'd  179  N.  Y.  537, 
71  N.  E.  1134.  As  before  shown,  evi- 
dence of  usage  is  admissible  to  show 
the  meaning  of  ambiguous  words  as 
employed  in  any  trade.  Thus,  in  an 
action  upon  a  fire  policy  described  to 
cover  a  junk  dealer's  stock  of  "rags" 
and  "old  metals,"  evidence  was  ad- 
mitted to  show  that  by  trade  custom 
those  terms  had  acquired  a  broader 
signification  than  belongs  to  them  in 
common  usage,  Mooneu  v.  Hou-ard  Ins. 
Co.,  138  Mass.  375,  52  Am.  Rep.  277. 
Where  a  stock  of  goods  is  insured  as 
"drugs"  and  "chemicals"  it  has  been 
decided  that  it  includes  benzine  though 
benzine  is  one  of  the  articles  prohibited 

19 


•_>!)()  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

frequently  used  both  in  the  description  of  the  property,  if  one  or  more 
buildings,  and  also  in  a  special  privilege,  commonly  attached,  per- 
mitting "additions,  alterations,  and  repairs."  This  word  is  held  to 
have  a  more  restricted  meaning  when  the  subject  of  insurance  is  a 
single  building,  or  a  building  insured  by  separate  amount;  ^  though 
sometimes,  even  in  that  event,  the  circumstances  may  warrant  a  broad 
construction  including  an  independent  and  additional  structure.^  But 
where  the  insurance  is  upon  a  factory  or  mill,  and  particularly  if  the 
policies  are  in  blanket  form,  as  is  frequently  the  case,  that  is,  each  m 
one  lump  amount  upon  the  entire  group  of  buildings  or  upon  the  es- 
tablishment in  its  entirety,  including  buildings  and  contents,  then 
the  word  "additions"  may  reasonably  signify  "an  addition  to  the 
plant,"  and  may  include  an  entirely  separate  and  independent  build- 
ing added  to  the  property  described.^ 

For  instance,  the  Arlington  Manufacturing  Company  had  over  forty 
policies,  each  a  blanket,  on  the  buildings  and  their  contents  together 
constituting  their  manufacturing  establishment  at  Arlington,  N.  J., 
two  buildings  alone  out  of  sixteen  being  excepted  for  special  reasons, 
and  the  contents  of  only  one  of  them  being  excepted.  Many  com- 
panies were  on  the  risk,  and  the  description  of  the  property  and  also 
special  clauses  were  contained  in  a  printed  rider,  a  copy  of  which  was 
attached  to  each  policy.  The  description  in  the  rider  enumerated 
the  buildings  which  were  standing  when  the  rider  was  prepared  and 
alluded  to  a  map  on  file  with  the  broker  which  also  portrayed  the 
buildings  enumerated  in  the  rider.  Every  policy  also  contained  a 
one  hundred  per  cent  coinsurance  clause.  One  of  the  special  clauses 
in  the  rider  was  a  privilege  to  make  "  additions,  alterations  and  re- 
pairs, the  policy  to  cover  thereon  and  therein."  For  several  years 
new  and  independent  structures  had  been  added  to  the  plant  at  the 

^Peoria  Sugar  Ref.  Co.  v.  Peoples'  lot  mentioned);  Carpenter  v.  A  ZZemama 

Fire  Ins.  Co.,  24  Fed.  773;  Franhlin  Ins.  Co.,  156  Pa.  St.  37,  26  Atl.  718; 

Ins.  Co.  V.  Hellerick  (Ky.),  49  S.  W.  Cummins  v.  German-Am.  Ins.  Co.,  197 

1066;  Forbes  v.  Am.  Ins.  Co.,  164  Mass.  Pa.  St.  62,  46  Atl.  902;  Home  Ins.  Co. 

402,  41  N.  E.  656;  Hannan  v.  Williams-  v.  Roe,  71  Wis.  33,  36  N.  W.  594. 

burgh  Cit'i  F.  Ins.  Co.,  81  Mich.  556,  45  3  Arlington  Mfg.  Co.  v.  Colonial  Ins. 

N.   W.    1120;   Evanston  Golf   Club   v.  Co.,    180   N.    Y.    337,    73    N.    E.    34. 

Home  Ins.  Co.,  119  Mo.  App.  175,  95  Contra,  Arlington  Mfg.  Co.  v.  Norwich 

S.  W.  980.  Union  F.  Ins.  Co.,  107  Fed.  662,  46 

^  Cargill  V.  Millers'  Ins.  Co.,  33  Minn.  C.  C.  A.  542  (facts  the  same  as  in  the 
90,  22  N.  W.  6;  Phenix  Ins.  Co.  v.  later  case  cited  first).  And  see  South- 
Martin  (Miss.),  16  So.  417;  Rickerson  v.  west  L.  &  Z.  Co.  v.  Phoenix  Ins.  Co.,  27 
Hartford  Fire  Ins.  Co.,  149  N.  Y.  307,  Mo.  App.  446;  Marsh  v.  N.  H.  Ins.  Co., 
43  N.  E.  856  (a  separate  five-story  rear  70  N.  H.  590,  49  Atl.  88;  Marsh  v. 
factory,  held,  covered,  though  the  front  Concord  Ins.  Co.,  71  N.  H.  253,  51  Atl. 
was  a  store  and  dwelling);  Maisel  v.  898;  Grifjing  Iron  Co.  v.  L.  &  L.  &  G. 
Fire  Assn.  of  Phila.,  59  App.  Div.  461,  Ins.  Co.,  68  N.  J.  L.  368,  54  Atl.  409; 
69  N.  Y.  Supp.  181  (the  rear  was  for  a  Home  Mut.  Ins.  Co.  v.  Roe,  71  Wis. 
depth  of  only  about  two  inches  on  the  33,  36  N.  W.  594. 


FLuCtUA'lriNG  STOCK,   Etc.  20 1 

rate  of  more  than  one  a  3'ear,  new  maps  aftd  riders  being  prepared 
at  much  longer  intervals.  After  this  rider,  before  the  court  for  con- 
struction, was  prepared  for  the  poUcies  a  large  and  valuable  building 
was  erected,  separated  about  thirty  or  forty  feet  from  the  nearest 
building  of  the  plant,  and  into  it  machinery  from  one  of  the  old 
buildings  was  transferred.  On  its  completion  more  blanket  insurance 
was  taken  out  by  binding  slips,  all  the  insurance  fully  covering  the 
value  of  the  buildings  and  their  contents.  The  new  building,  of 
course,  was  not  shown  on  the  map  or  rider  which  were  made  before 
the  construction  of  the  latest  building  was  begun.  The  court,  inter- 
preting the  privilege  as  allowing  reasonable  additions  to  the  plant 
held  that  the  new  building  and  its  contents  were  covered  by  the 
policy.^ 

If  a  building  though  physically  separate  from  the  building  described 
in  the  policy  is  connected  with  it  in  use  the  court  may  readily  con- 
clude that  it  is  covered  by  the  term  "additions;"  for  instance,  where 
the  addition  was  four  feet  distant  from  the  main  building.^  And 
clearly  applicable  is  the  rule  where  there  is  no  other  structure  except 
the  independent  building  to  answer  to  the  description  of  "addi- 
tions." 3 

§  234.  Fluctuating  Stock,  etc.— A  policy  iipon  merchandise  in  a 
store  applies  to  the  stock  successively  in  the  store  from  time  to 
time.'*  It  would  be  incredible  to  suppose  that  the  parties  to  the  policy 
intended  that  the  merchant,  on  protecting  himself  with  insurance, 
must  discontinue  his  regular  business  of  buying  and  selling  goods,  in 
order  to  reap  the  benefit  of  his  insurance  on  his  business  stock.^ 
Therefore  it  is  wholly  immaterial  whether  the  merchandise,  on  hand 

1  Arlington  Mfg.  Co.  v.  Colonial  Ins.  v.  Mtna  Ins.  Co.,  32  N.  Y.  405;  Hooper 
Co.,  180  N.  Y.  337,  73  N.  E.  34.  v.  Hudson  River  Fire  Ins.  Co.,  17  N.Y. 
Contra,  Arlington  Mfg.  Co.  v.  Norwich  424.  The  same  rule  applies  to  ma- 
Union  F.  Ins.  Co.,  107  Fed.  662,  46  chinery,  furniture,  and  clothing,  Cum- 
C.  C.  A.  542.  mings  v.  Cheshire  Co.  Mut.  F.  Ins.  Co., 

2  Guthrie  Lanndrjf  Co.  v.  Northern  55  N.  H.  457;  horses  and  cattle.  Mills 
Assur.  Co.  (Okla.,  1906),  36  Ins.  L.  J.  v.  Farmers'  Ins.  Co.,  37  Iowa,  400; 
146  (citing  many  cases);  Gross  v.  Mil.  Tomkins  v.  Hartford  Ins.  Co.,  22  App. 
Mech.  his.  Co.,  92  Wis.  656,  63  N.  W.  Div.  380,  49  N.  Y.  Supp.  184;  grain, 
712  (three  feet  away).  And  see  Fergu-  Coleman  v.  Phoenix  Ins.  Co.,  3  App.  Div. 
son  V.  Lumbermen's  Ins.  Co.  (AVash.,  65,  38  N.  Y.  Supp.  985;  Johnston  v. 
1907),  88  Pac.  128  (eighteen  inches  7ns.  Co.  (Neb.),  102  N.  W.  72;  vehicles, 
away,  but  connected  with  shaft  and  Beyer  v.  St.  Paul  F.  &  M.  Ins.  Co.,  112 
belt).  Wis.   138,  88  N.  W.   57;  implements 

^  Pheenix  Ins.  Co.  v.  Martin  (Miss.,  generaWy,  Johnson  v.  Farmers' Ins.  Co., 

1894),    16   So.    417    Qaundry   covered  126  Iowa,  565,  102  N.  W.  502;  contents 

thovgh  independent.  " Two-story  brick  of  barn.  Farmers'  Mut.  F.,  etc.,  Assn. 

building  and  additions  thereto.'').  v.  Kryder,  5  Ind.  App.  430,  31  N.  E. 

*  Manchester  F.  A.  Co.  v.  Feibelman,  851. 
118  Ala.  308,  23  So.  759;  Am.  Cent.  Ins.  s  Hoffman  v.  /Etna  Ins.  Co.,  32  N.  Y. 

Co.  V.  Rothchild,  82  111.  166;  Hoffman  405. 


292  MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 

at  the  time  of  the  loss,  be  acquired  before  or  after  the  issuance  of  the 
policy.  Such  merchandise  whenever  acquired  will  be  covered  to  the 
amount  of  the  policy,  simply  by  virtue  of  a  general  description, 
without  the  aid  of  any  special  permit. 

§  235.  Location. — While  located  and  contained  as  described  herein 
and  not  elsewhere.  Place  is  ordinarily  material  to  the  contract  and 
of  the  very  essence  of  the  risk.^  With  varying  location  the  risk  is  apt 
to  vary,  and  whether  it  does  or  not  the  insurers  have  the  right  to 
know  what  risk  they  are  assuming,^  and  often  decline  an  insurance 
because  of  the  amount  already  placed  by  them  upon,  or  in,  the  same 
building.^ 

If  a  permit  for  removal  is  obtained,  goods  are  not  protected  in 
transit  "^  unless  the  policy  so  provides,^  but  are  protected  in  the  old 
place  until  removed.^ 

But  it  has  been  held  that  where  the  clause  in  the  policy  is  simply 
in  the  words,  "the  following  described  property  contained  in"  a 
certain  building,  the  location  is  not  material,  if  the  nature  of  the 
property  makes  it  clear  that  it  must  have  been  the  intention  of  the 
parties  to  protect  it  by  the  policy  whether  in  the  particular  place  or 
not.  In  that  event  a  designation  of  place  is  looked  upon  as  merely 
descriptive  and  to  be  controlled  by  the  necessary  use  of  the  thing 
insured.'''    In  the  case  of  furniture  *  or  stock  ^  described  as  contained 

1  Brce  V.  Lorillard  Fire  his.  Co.,  55  ^  Boyd  v.  Miss.  Home  Ins.  Co.,  75 
N.  Y.  240;  Davison  v.  London  &  Lan.  Miss.  47,  21  So.  708;  Niagara  Fire  Ins. 
Fire  Ins.  Co.,  189  Pa.  St.  132,  42  Atl.  2.  Co.  v.  Elliott,  85  Va.  962,  9  S.  E.  694. 

2  Ohio  Farmers'  Ins.  Co.  v.  Burget,  For  example,  where  a  horse,  described 
65  Ohio  St.  119,  122,  61  N.  E.  712,  55  as  in  a  barn,  was  insured  against  fire  or 
L.  R.  A.  825.  lightning,  the  court  was  of  opinion  that 

3  Bradbury  v.  Fire  Ins.  Asso.,  80  Me.  it  was  not  the  intention  of  the  parties 
396;  Sampson  v.  Security  Ins.  Co.,  133  to  retain  the  protection  of  the  policy 
Mass.  49;  Enjlish  v.  Franklin  Fire  Ins.  only  in  the  event  that  the  horse  was 
Co.,  55  Mich.  273,  54  Am.  Rep.  377;  kept  in  the  barn  all  the  time  waiting 
Wall  V.  East  River  Mut.  Ins.  Co.,  7  N.  for  a  fire  or  a  stroke  of  lightning, 
Y.  370;  Londoyi  and  Lancashire  Ins.  Co.  Haws  v.  Fire  Asso.,  114  Pa.  St.  431; 
V.  Lvcoming  Fire  Ins.  Co.,  105  Pa.  St.  Longueville  v.  West.  Assn.  Co.,  51  Iowa, 
424,432;  Lyons  v.  Providence  Washing-  553,  33  Am.  Rep.  146.  Where  an  oil- 
ton  Ins.  Co.,  14  R.  I.  109,  51  Am.  Rep.  tank  was  carried  away  by  a  flood  to 
364;  Theobald  v.  Railway  Passengers'  another  part  of  the  tract  named  in  the 
Assur.  Co.,  10  Exch.  45.  policy  and  took  fire  there,  the  com- 

*  Goodhue  v.  Ins.  Co.,  184  Mass.  41,  psiny  washeld,  Western,  etc.,  Pipe  Lines 

67  N.  E.  645.  v.  Hom^  Ins.  Co.,  145  Pa.  St.  346,  22 

^  Kratzenstein  v.  Western  Assur.  Co.,  Atl.  665,  27  Am.  St.  R.  703.     And  a 

116  N.  Y.  54,  22  N.  E.  221,  5  L.  R.  A.  trotting  horse  was  held  covered  out- 

793.  side  the  counties  in  which  defendant 

6  Kunzze  v.  Amer.  Exch.  Fire  Ins.  was  authorized  to  do  business,  there 

Co.,  41   N.  Y.  412;  Sharpless  v.  Ins.  being  no  restriction  in  the  policy,  iJc^tfy 

Co.,  140  Pa.  St.  437.    Standard  policy  v.  Farmers'  Mut.  Ins.  Co.,  20  App.  Div. 

has  special  clause  regarding  removal  of  109,  46  N.  Y.  Supp.  695. 

property  endangered  by  fire. s  Green  v.  Ins.  Co.,  91  Iowa,  615,  60 

9  English  v,  Ins.  Co.,  55  Mich.  273,  21  N.  W.  340,  54  Am.  Rep.  377. 


HELD    IN   TRUST  293 

in  a  certain  building,  however,  the  designated  location  is  without 
doubt  an  essential  element  of  the  contract. 

The  addition  of  the  words  "and  not  elsewhere"  in  the  New  York 
standard  policy  seems  to  eliminate  all  ground  for  contention.  Under 
it,  location  is  a  warranty;  ^  and  parol  evidence  to  show  that  the  agent 
knew  at  the  time  the  policy  issued  that  the  property  was  in  another 
building  was  held  inadmissible  in  an  action  on  the  contract.^  Clothes 
on  a  clothes-line  outside  in  the  yard  are  not  covered  where  the  loca- 
tion is  described  as  the  building.^  But  it  is  held  that  the  building 
itself  may  be  moved  if  the  risk  is  not  increased.^  And  personal  prop- 
erty may  be  moved  from  one  structure  to  another  within  the  described 
premises  insured,  if  the  nature  of  the  business  or  occupancy  involves 
notice  that  such  shifting  might  be  expected.^ 

This  clause  is  not  a  part  of  the  Massachusetts  standard  policy;^ 
but  the  Massachusetts  court  limits  location  to  the  premises  as  de- 
scribed in  the  policy.^ 

§  236.  Held  in  Trust. — Their  own,  or  held  by  them  in  trust  or  on 
commission,  or  sold  but  not  delivered. 

Such  special  phrases  connected  with  the  description  are  sometimes 
employed  in  the  policies  of  carriers,  warehousemen,  commission  and 
other  merchants,  to  show  that  the  assured  though  holding  property 
of  others  is  to  secure  the  full  measure  of  insurance  upon  all  the  prop- 
erty insured,  whether  the  title  is  or  is  not  vested  in  him. 

"  Held  in  trust "  means  simply  that  the  goods  or  property  are  in  the 


N.  W.  189;  Lyons  v.  Prov.  Wash.  Ins.  privilege  and  not  obligation,  Sharpless 

Co.,  14  R.  I.  109,  51  Am.  Rep.  364.  v.  Hartford  F.  Ins.   Co.,  140  Pa.  St. 

Ambiguity    of    description    was    con-  437,  21  Atl.  451. 

strued  against  the  plaintiff  preparing  6  Westfield  Cigar  Co.  v.  7ns.  Co.  of 

it  \n  London  Assur.  Corp.  V.  Thompson,  North  Am,.,  169  Mass.   382,  47  N.  E. 

170  N.  Y.  94,  62  N.  E.  1066.  1026  (question  of  location  of  goods  in 

1  Village  of  L'Anse  v.  Fire  Assn.  of  building  communicating,  but  with  dif- 

Phila..,  119  Mich.  427,  78  N.  W.  465;  ferent    street    number,    was    sent    to 

Bahr  v.  Nat.  Fire  Ins.   Co.,  SO  Hun,  jury). 

309,  62  N.  Y.   St.  R.  341,  29  N.  Y.  t  Westfield  Cigar  Co.  v.  Ins.  Co.  of 

Supp.   1031;   Brit.-Am.   Assur.   Co.   v.  N.  A.,  165  Mass.  541,  43  N.  E.  504 

Miller,  91  Tex.  414,  44  S.  W.  60,  39  (if  ambiguity,  issue  is  for  jury);  Mead 

L.  R.  A.  545,  66  Am.  St.  R.  901.  v.  Phosnix  Ins.  Co.,  158  Mass.  124,  32 

^  .^tna   Fire   Ins.    Co.    v.    Brannon  'N.E.  945;  Sampson  v.  Security  Ins.  Co., 

(Tex.  Civ.  App.),  81  S.  W.  560  (1904).  133  Mass.  49;  Hews  v.  Atlas  Ins.  Co.. 

^  Leventhal    v.    Home   Ins.    Co.,    32  126  Mass.  389.    But  during  the  term  of 

Misc.  685,  66  N.  Y.  Supp.  502.  the  contract  the  property  insured  may 

*  Hannon  v.  Hartford  Fire  Ins.  Co.,  be  shifted  within  the  insured  premises, 

41  App.  Div.  (N.  Y.)  226.  Fair  v.  Manhattan  Ins.  Co.,  112  Mass. 

5  McKeesport    Mach.     Co.     v.     Ben  320.    And  see  Fitchburg  R.  Co.  v.  Ins. 

Franklin  Ins,  Co.,  173  Pa.  St.  53,  34  Co.,  7  Gray  (Mass.),  64  (cars  on  track 

Atl.    16.      Permit    for    removal    is    a  belonging  to  another  railroad). 


294 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


custody  or  care  of  the  insured.  He  may  hold  them  as  agent '  or  as 
bailee,  or  in  any  capacity .^  The  word  "trust"  is  not  to  be  given  its 
strict  technical,  but  rather  its  mercantile,  significance.''*  The  clause  is 
practically  a  privilege  to  the  insured.  Its  important  function  is  to 
supersede  the  warranties  regarding  sole  and  absolute  ownership  else- 
where contained  in  the  policy,  and  thus  to  prevent  forfeiture.  Under 
such  a  policy  the  assured  may  collect  the  whole  amount  due,'*  holding, 
as  trustee  for  the  owner  or  principal,  any  balance  over  and  above  his 
own  interest  in  the  property.^  The  owner,  though  knowing  nothing 
about  the  insurance  and  having  given  no  authority  for  its  procure- 
ment, may  ratify  and  take  the  benefit  of  it  after  loss.^ 

§  237.  As  Interest  may  Appear.— The  policy  not  infrequently 
insures  one  or  more  persons  "as  interest  may  appear."  It  is  some- 
times convenient  to  use  this  phrase  where  the  interests  are  shifting 
or  uncertain;^  for  example,  where  owner  and  creditors  or  lienors 
desire  protection  by  one  policy,*  or  where  the  owner  has  died  and 
the  vesting  of  interests  may  be  ill  defined,  or  contingent  and  for  a 
time,  perhaps,  unrepresented  by  any  executor  or  administrator,  or 
where  owner  and  tenant  require  security  under  the  same  insurance, 


1  Roberts  v.  Firemen's  Ins.  Co.,  165 
Pa.  St.  .55,  30  Atl.  450. 

2  Bnr'.e  v.  Continental  Ins.  Co.,  100 
App.  Div.  lOS,  91  N.  Y.  Supp.  402. 

3  California  Ins.  Co.  v.  Union  Com- 
press Co.,  133  U.  S.  387,  10  S.  Ct.  365; 
Home  Ins.  Co.  v.  Baltiynore  Warehouse 
Co.,  93  U.  S.  527;  Snow  v.  Carr,  61 
Ala.  363;  Hough  v.  People's  Fire  Ins. 
Co.,  36  Md.  398;  Lucas  v.  7ns.  Co.,  23 
W.  Va.  258,  48  Am.  Rep.  383. 

*  Ferguson  v.  Pe\in  Plow  Co.,  141 
Mo.  161,42  S.  W.  711. 

5  California  Ins.  Co.  v.  Union  Com- 
press Co.,  133  U.  S.  387,  409,  10  S.  Ct. 
365;  Roberts  v.  Firemen's  Ins.  Co.,  165 
Pa.  55,  30  Atl.  450;  Waters  v.  Monarch 
Assur.  Co.,  5  El.  &  Bl.  870.  His  own 
interest  may  be  that  of  owner  or  it 
may  be  renresented  by  his  commis- 
sions, De  Forest  v.  FiiUon  Fire  Ins. 
Co.,  1  Hall  (N.  Y.),  94,  101;  or  charges, 
South.  Cold  Sloraqe  Co.  v.  Dechman 
(Tex.  Civ.  App.),  73  S.  W.  545;  or  liens 
on  the  property,  Pittsburg  Storage  Co. 
V.  Scottish  Union  &  Nat.  Ins.  Co.,  168 
Pa.  St.  522,  32  Atl.  58;  or  by  an  obliga- 
tion to  insure  for  others,  California 
Ins.  Co.  V.  Union  Compress  Co.,  133 
U.  S.  387,  10  S.  Ct.  365;  or  by  liability 


to  the  owners  on  contract,  Johnson  v. 
Campbell,  120  Mass.  449;  or  in  tort  for 
the  loss,  Hough  v.  People's  Fire  Ins. 
Co.,  36  Md.  398.  Common  carriers  may- 
insure  against  their  liability  for  negli- 
gence, Phoenix  Ins.  Co.  v.  Erie  Transp. 
Co.,  117  U.  S.  312,  6  S.  Ct.  750,  1176. 
^  Larsen  v.  Thuringia  Am.  Ins.  Co., 
208  111.  166,  70  N.  E.  31;  Maiis  v. 
Cumberland  Mut.  F.  Ins.  Co.,  15 
Vroom  (N.  J.),  478;  Waring  v.  In- 
dermiity  Ins.  Co.,  45  N.  Y.  600;  Fergu- 
son V.  Pel.in  Plow.  Co.,  141  Mo.  161,  42 
S.  W.  711;  South  Cold  Storaje  Co.  v. 
Dechman  (Tex.  Civ.  App.),  73  S.  W. 
545;  Eng.  Mar.  Ins.  Act  (1906),  ch.  41, 
§  86.  But  see  as  to  mutuality  of  con- 
tract required,  Retinoids  v.  Mut.  F. 
Ins.  Co.,  34  Md.  280;  Ins.  Co.  v.  Schall, 
96  Md.  225,  53  S.  W.  925. 

7  Da\in  v.  L.  &  L.  &  G.  Ins.  Co.,  77 
N.  Y.  600;  Sullivan  v.  Spring  Garden 
Ins.  Co.,  34  App.  Div.  128,  54  N.  Y. 
Supp.  629;  De  Wolf  v.  Capital  City  Ins 
Co.,  16  Hun,  116;  Watson  v.  Swann,  11 

C.  B.  N.  S.  755. 

8  Da^in  v.  Ins.  Co.,  supra;  Brown  v. 
Commercial    Fire    Ins.    Co.,   21    App. 

D.  C.  325;  Kent  v.  Mna  Ins.  Co.,  84 
App.   Div.   428,  82  N.  Y.  Supp    817 


FOR    WHOM    IT   MAY    CONCERN 


295 


or  where  vendor  and  vendee  wish  to  be  covered  during  a  pending 
contract  of  sale  in  part  performed.^ 

In  considering  the  apphcation  and  effect  of  the  phrase  a  clear  dis- 
tinction must  be  observed  between  the  frequent  use  of  the  words 
"as  interest  may  appear"  in  connection  with  the  names  of  the  as- 
sured, and  the  frequent  use  of  the  same  words  in  connection  with  an}'- 
third  party  named  in  the  policy  as  a  mere  payee  or  appointee  to  re- 
ceive the  insurance  money. ^  In  the  latter  instance  the  payee  takes 
only  what  the  assured  is  entitled  to  receive,  and  if  the  assured  has 
broken  a  warranty  the  payee  gets  nothing."'' 


§  238.  For  Whom  it  may  Concern. — These  words,  which  are  now 
seldom  used  in  a  fire  policy,  but  frequentl}^  in  the  marine  policy, 
protect  all  those  who  have  any  insurable  interest  in  the  property, 
but  are  held,  like  other  general  descriptions  of  the  insured,  to  include 
only  such  classes  of  persons  as  are  intended  by  the  assured,  when  he 


1  Each  party  in  such  and  similar 
instances  naturally  might  not  be  will- 
ing to  pay  a  separate  premium  for  the 
full  value  of  the  property;  even  assum- 
ing that  the  separate  interests  could  be 
properly  and  safely  described  in  the 
respective  policies  and  with  due  regard 
to  its  exacting  warranties  on  the  sub- 
ject of  o^\^lership.  Theoretically,  in- 
deed, a  vendor  and  a  vendee  under 
contract  of  sale  may  each,  under  cer- 
tain circumstances,  have  an  insurable 
interest  to  the  full  value  of  the  prop- 
erty, Tiemann  v.  Citizens'  Ins  Co.,  76 
App.  Div.  5,  78  N.  Y.  Supp.  620; 
R'jan  V.  Agricultural  Ins.  Co.,  188 
Mass.  11,  73  N.  E.  849,  where  pur- 
chaser was  obligated  for  full  purchase 
price  (1905);  but  see  Tahhut  v.  Am. 
Ins.  Co.,  185  Mass.  419,  70  N.  E.  430, 
and  contra,  in  England,  Castellain  v. 
Preston,  L.  R.  11  Q.  B.  D.  380.  But 
imderwTiters  will  seldom,  without  a 
struggle,  consent  to  pay  in  the  aggre- 
gate more  than  the  value  of  the  prop- 
erty destroyed;  and,  moreover,  the 
doctrine  of  subrogation  is  supposed  to 
prevent  an  ultimate  recovery  of  more 
than  the  insurable  value  of  the  prop- 
erty from  the  whole  body  of  insurers, 
see  De  Hart  &  Simey,  Ins.  (1907),  19. 
In  many  instances,  therefore,  prudence 
dictates  that  the  parties  in  interest 
adopt  a  form  of  insurance  by  which 
they  may  obtain  their  full  indemnity 
for  any  loss  without  delay  and  without 
complications  with  the  underwriters, 
arranging  among  themselves  to  divide 


up,  at  their  convenience,  the  insurance 
moneys  collected.  The  clause  at  the 
head  of  the  section  provides  for  this 
desirable  result,  and  supersedes  the 
warranties  regarding  sole  and  absolute 
ownership.  The  only  safe  practice  is 
to  join  all  the  assured  as  parties,  either 
plaintiff  or  defendant,  Leicis  v.  Guar- 
dian Ins.  Co.,  181  N.  Y.  392;  Kent  v. 
Mna  Ins.  Co.,  84  App.  Div.  428,  82 
N.  Y.  Supp.  817;  Bezant  v.  Glens  Falls 
Ins.  Co.,  72  App.  Div.  276,  76  N.  Y. 
Supp.  35;  Davis  v.  Fire  Ins.  Co.,  70  Vt. 
217,  30  Atl.  1095. 

2  West  Coast  Lumber  Co.  v.  Ins.  Co., 
98  Cal.  502,  33  Pac.  258;  Graham  v. 
Fire  Ins.  Co.,  48  S.  C.  195,  26  S.  E.  323; 
Donaldson  v.  Ins.  Co.,  95  Tenn.  280, 
32  S.  W.  251.  Such  indorsement  "as 
interest  may  appear"  does  not  excuse 
a  chattel  mortgage  without  permit. 
Atlas  Reduction  Co.  v.  Ins.  Co.,  138 
Fed.  497. 

sllei/l  V.  ^tna  Ins.  Co.,  144  Ala. 
549,  38  So.  118;  Grosvenor  v.  Atl.  Ins. 
Co.,  17  N.  Y.  391;  Wunderlich  v. 
Palatine  Ins.  Co.,  104  Wis.  382,  80 
N.  W.  471.  But  it  has  been  held  that 
an  accord  and  satisfaction  between 
o^^T>er  and  insurer  does  not  bind  payee 
if  his  interest  is  described  in  policy  as 
that  of  mortgagee,  Hathaicay  v.  Ins. 
Co.,  134  N.  Y.  409,  32  N.  E.  40.  See 
§  290,  infra.  And  the  burden  is  on  the 
payee  to  show  what  his  interest  is, 
Wilcox  V.  Mut.  Fire  Ins.  Co.,  81  Minn. 
478,  84  N.  W.  334. 


290 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


takes  the  policy,  to  be  included.^ 
parol. - 


Who  these  are  may  be  shown  by 


§  239.  Measure  of  Damages.— iVoi  liable  beyond  actual  cash  value 
of  the  properti/  at  the  time  of  loss,  with  proper  deduction  for  depreciation, 
however  caused. 

This  in  express  terms  excludes  remote  damages,  such  as  loss  from 
interruption  of  business,  prospective  rent  or  profit,  except  as  these  are 
specifically  insured;  it  also  excludes  any  pretium  affectionis.  The 
actual  cash,  or  market,  value  at  the  time  of  the  fire  rules,^  and  the 
purchase  price  is  relevant,  if  at  all,  only  as  bearing  upon  that.^ 

If  at  the  place  of  the  fire  there  is  no  market  price,  the  fair  value 
must  be  ascertained;^  the  market  value  at  the  nearest  place,  with 
cost  of  transportation,  may  properly  be  taken  as  the  criterion.^ 

building);  Mitchell  v.  Ins.  Co.,  92 
Mich.  594,  52  N.  W.  1017;  Hickerson  v. 
Ins.  Cos.,  96  Tenn.  193,  33  S.  W.  1041; 
German  Ins.  Co.  v.  Everett  (Tex.  Civ. 
App.),36S.  W.  125. 

4  Snell  V.  Delaware  Ins.  Co.,  4  Dallas, 
430;  Birmingham  Fire  Ins.  Co.  v.  Pul- 
ver,  126  111.  329;  Brown  v.  Quincy  Ins. 
Co.,  105  Mass.  396;  Hilton  v.  Phosnix 
Assur.  Co.,  92  Me.  272,  42  All.  412; 
Waynesboro  Mut.  Fire  Ins.  Co.  v. 
Creaton,  98  Pa.  St.  451,  42  Am.  Rep. 
618.  Market  value  rules  more  clearly 
in  case  of  personal  property,  State  Ins. 
Co.  V.  Taylor,  14  Colo.  499,  24  Pac.  333 
(actual  value  of  a  building);  Boyd  v. 
Ro^al  Ins.  Co.,  Ill  N.  C.  372,  16  S.  E. 
389. 

^  Gere  v.  Council  Bluffs  Ins.  Co.,  67 
Iowa,  272,  23  N.  W.  137. 

6  Western  Assur.  Co.  v.  Studebaker, 
124  Ind.  176,  23  N.  E.  1138.  Values 
are  largely  a  matter  of  opinion.  After 
the  property  is  destroyed  it  is  often 
difficult  to  obtain  precise  proofs  of 
value,  Glascr  v.  Home  Ins.  Co.,  47 
Misc.  89,  93  N.  Y.  Supp.  524.  They 
must  be  reasonably  precise  under  the 
circumstances  of  the  case,  Goldberg  v. 
Besdine,  76  App.  Div.  (N.  Y.)  451,  78 
N.  Y.  Supp.  776.  And  the  courts  have 
allowed  very  vague  and  indefinite 
proof  of  value  when  it  seemed  to  be  the 
best  obtainable,  Thomason  v.  Capital 
Ins.  Co.,  92  Iowa,  72;  Tubbs  v.  Garri- 
son, 68  Iowa,  44,  25  N.  W.  921;  Tubbs 
V.  Mechanics'  Ins.  Co.  131  la.  217,  108 
N.  W.  3.'4  (cases  cited).  And  see  Lv- 
coming  Ins.  Co.  v.  Jackson,  83  111.  302, 
25  Am.  Rep.  386.  But  compare 
Metzger  v.  Manchester  Assur.  Co.    102 


1  Hooper  v.  Robinson,  98  U.  S.  528; 
Duncan  v.  China  Mut.  Ins.  Co.,  129 
N  Y.  237,  23  N.  E.  76;  Boston  Fruit 
Co.  v.  Brit.,  etc.,  Co.  (1906),  App.  Cas. 
336.  „        ^    ^ 

2  Mewson  v.  Douglass,  7  Har.  &  J. 
(Md.)  417;  Pacific  Ins.  Co.  v.  Catlett,  4 
Wend.  (N.  Y.)  76.  But  it  is  not  neces- 
sarj'  that  the  insured  should  have  any 
specific  individual  in  mind  to  give  effect 
to  the  clause,  Ilaqan  v.  Scottish  Ins.  Co., 
186  U.  S.  423,  423,  22  S.  Ct.  862.  The 
owners,  or  others,  intended  to  be  cov- 
ered by  such  a  form  may  ratify  the 
insurance  and  take  the  benefit  of  it, 
though  ignorant  of  its  existence  at  the 
time  of  the  issuance  of  the  policy, 
Waring  v.  Indemniti  his.  Co.,  45  N.  Y. 
606.  They  may  ratifv  even  after  loss. 
Hooper  v.  Robinson,  98  U.  S.  528;  Fire 
Ins.  Asso.  V.  Merchants',  etc..  Trans. 
Co.,  66  Md.  333;  Herkimer  v.  Rice,  27 
N.  Y.  163;  Babbitt  v.  Liverpool,  etc., 
Ins.  Co.,  66  N.  C.  70.  If  the  insured 
collects  the  whole  amount  of  the  policy, 
he  will  hold  as  trustee  the  portion  of 
the  proceeds  belonging  to  the  others, 
Protection  Ins.  Co.  v.  Wilson,  6  Ohio 
St.  553;  Hagedorn  v.  Oliverson,  2 
Maule  &  Selw.  485.  "Legal  representa- 
tives" construed  in  Aljord  v.  Consoli- 
dated Fire  &  M.  I.  Co.,  88  Minn.  478,  93 
N.  W.  517.  "Estate"  construed  in 
Phoenix  Ins.  Co.  v.  Hancock,  123  Cal. 
222,  55  Pac.  905;  Weed  v.  //.  B.  F. 
his.  Co.,  133  N.  Y.  394,  31  N.  E.  231. 
Extrinsic  cxidence  is  admissible  to 
show  who  were  intended,  Clinton  v. 
Hope  Ins.  Co.,  45  N.  Y.  454. 

^Stenzel  v.  Penn.  Fire  Ins.  Co.,  110 
La.  1019,  35  So.  271  (actual  value  of  a 


MEASURE   OF   DAMAGES 


297 


The  purchase  price,  in  usual  course  of  business,  if  not  at  too  re- 
mote a  period,  may  properly  be  received  and,  though  not  at  all  con- 
clusive, generally  furnishes  some  evidence  of  present  value. ^  But 
the  assured  is  entitled  to  the  actual  cash  value  of  articles  destroyed 
though  they  may  have  cost  him  nothing.^ 

Where  a  manufacturer  insures  machines  of  his  own  make,  a  usual 
test  of  value  is  what  it  would  cost  him  to  reconstruct  them.^  He  is 
not  entitled  to  his  selling  price,  since  that  would  include  profit.^ 

The  cost  of  replacing  real  ^  or  personal  property  often  furnishes  a 
fair  criterion  for  estimating  the  amount  of  loss;  ^  but  this  alone  gives 
no  true  measure  of  present  value  or  damage  in  the  case  of  an  old 
building^  Neither  is  the  original  cost  of  articles  which  have  been  in 
use  for  a  long  time  reliable,  in  itself,  to  establish  present  value, 
inasmuch  as  proper  allowance  for  depreciation  must  always  be  made.^ 
The  selling  price  of  damaged  goods  after  the  fire  often  furnishes  evi- 
dence of  the  extent  of  damage.^ 


Mich.  334,  63  N.  W.  650;  Teerpenning 
V.  Corn.  Ex.  Ins.  Co.,  43  N.  Y.  279. 
If  company's  agent  inspects  before 
issuing  the  policy,  its  amount  furnishes 
some  evidence,  it  is  said,  that  property 
is  worth  as  much,  Mandand  Home  F. 
In.^.  Co.  V.  Kimmell,  89  Md.  437,  43 
Atl.  764. 

^Johnston  v.  Farmers'  Ins.  Co.,  106 
Mich.  96,  64  N.  W.  5;  Matter  of  Johns- 
ton, 144  N.  Y.  563,  567,  39  N.  E.  643; 
Hawver  v.  Bell,  141  N.  Y.  140,  143, 
36  N.  E.  6;  Cheever  v.  Scot.  Union  & 
Nat.  Ins.  Co.,  86  App.  Div.  328,  83 
N.  Y.  Supp.  730. 

2  Chapman  v.  Rod  ford  Ins.  Co. ,  89 
Wis.  572,  62  N.  W.  422,  28  L.  R.  A. 
405.  Actual  cash  value  is  not  what  the 
goods  or  articles  would  bring  at  a 
forced  sale.  Sun  Fire  Office  v.  Ayersl,  37 
Neb.  184,  55  N.  W.  635. 

3  Standard  Sewinj  Machine  Co.  v. 
Ro'.allns.  Co.,  201  Pa.  St.  645,  51  Atl. 
354;  but  see  Mitchell  v.  S*.  Paul  Fire 
Ins.  Co.,  92  Mich.  594,  52  N.  W.  1017; 
and  Hartford  F.  Ins.  Co.  v.  Cannon,  19 
Tex.  Civ.  App.  305,  46  S.  W.  851. 

*  Niagara  Ins.  Co.  v.  Hcflin,  22  Ky. 
L.  R.  1212,  60  S.  W.  393.  But  ma- 
cliinery  might  be  out  of  fashion  or  well- 
nigh  worthless.  The  actual  value  at 
time  of  fire  is  the  legal  measure, 
Hercules  Ins.  Co.  v.  Hunter,  15  S.  S.  C. 
800, 1st  series;  Vance  v.  Fofter,  It.  Circ. 
R.  47.  Even  a  manufacturer  may  be 
able  to  establish  a  market  value  as  the 
measure  of  his  indemnity,  Frick  v.  Ins. 
Co.   (Pa.),  67  Atl.  743.     In  England 


the  doctrine  of  indemnity  was  enforced 
against  a  landlord  in  favor  of  his  in- 
surer where  the  tenant  was  obligated 
to  make  certain  repairs,  Yates  v. 
Dunster,  11  Exch.  15,  24  L.  J.  Exch. 
227. 

^  Mtna  Ins.  Co.  v.  Johnson,  11  Bush 
(Ky.),  587,  21  Am.  Rep.  223;  Holter  L. 
Co.  v.  Firemen's  Fund  Ins.  Co.,  18 
Mont.  282,  45  Pac.  207. 

6  Cummins  v.  German- Ain.  Ins.  Co., 
192  Pa.  St.  359,  43  Atl.  1016;  Clovre  v. 
Greenwich  Ins.  Co.,  101  N.  Y.  277,  283, 
4  N.  E.  724;  Post  Printing  Co.  v.  Ins. 
Co.,  189  Pa.  St.  300,  42  Atl.  192;  Tex. 
Moline  Plow  Co.  v.  Niagara  Ins.  Co. 
(Tex.  Civ.  App.),  87  S.  W.  192  (1905). 
As  to  how  loss  of  merchandise  is  com- 
puted, S3e  1  Clement,  Ins.  (1905),  101- 
103.  As  to  retail  stock  see  Sherlock  v. 
German-Am.  Ins.  Co.,  21  App.  Div. 
18,  47  N.  Y.  Supp.  315,  81  N.  Y.  St.  R. 
315,  afT'd  162  N.  Y.  656, 57  N.  E.  1124. 
Loss  of  manufacturers  patterns,  see 
Michelsv.  Western  Underwriters'  Assn., 
129  Mich.  417,  89  N.  W.  56  (1902). 

7  Scott  V.  Security  Fire  his.  Co. ,  98 
Iowa,  67,  71;  Hilton  v.  Phoenix  Assur. 
Co.,  92  Me.  272.  281,  42  Atl.  412. 

8  Germier  v.  Springfield  F.  &  M.  Ins. 
Co.,  103  La.  341,  33  So.  301. 

^  Clewnt  V.  Brit.-Am.  Assur.  Co., 
141  Mass.  298,  5  N.  E.  847.  But  is  not 
conclusive,  Reading  Ins.  Co.  v.  Engel- 
hoff,  115  Fed.  333.  As  to  growing 
crops  insured  against  hail,  see  Condon 
v.  Des  Moines,  etc.,  Assn.,  120  Iowa, 
80,  94  N.  W,  477;  Mcllrath  v.  Farmers' 


298 


MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 


And  the  difference  between  the  actual  cash  value  of  the  property 
just  before  the  fire  and  its  value  after  the  fire,  is  the  measure  of  in- 
demnity where  the  property  has  been  injured  and  not  destroy ed.^ 

The  word  "indemnity"  indicates  the  general  rule.  Therefore,  it 
has  been  held  that  in  reinstating  a  building,  damaged  or  destroyed, 
any  increased  cost  of  rebuilding  necessitated  by  building  laws  must 
be  taken  into  account,^  except  where  the  terms  of  the  contract,  like 
those  of  the  standard  fire  policy,  provide  otherwise.^  For  the  same 
reason  the  company  is  entitled  to  an  allowance  for  any  depreciation, 
since  the  prime  purpose  to  be  accomplished  is  not  profit  but  reinstate- 
ment.'* 

If,  during  the  pendency  of  the  risk,  there  has  been  more  than  one 
loss  under  the  policy,  the  recovery  in  the  aggregate  is  limited  to  the 
face  of  the  policy.^  As  has  been  observed,  a  somewhat  different 
doctrine  is  applied  in  marine  insurance  law. 

The  word  "cash"  is  omitted  from  the  Massachusetts  form.  The 
omission  is  probably  immaterial.^ 

Where  valued  policy  laws  prevail,  the  amount  named  in  the  policy 
indicates  the  amount  payable  on  a  building  in  case  of  total  loss,' 
though  such  amount  in  fact  exceed  the  cash  value  of  the  property.* 

Mvt.,  etc.,  Assn.,  114  Iowa,  244,  86 
N.  W.  310;  Barry  v.  Same,  110  Iowa, 
433,  81  N.  W.  690.  Experts  who  have 
seen  the  property  or  who  are  familiar 
with  similar  property  may  testify  as  to 
values,  Home  Ins.  Co.  v.  Sylvester,  25 
Ind.  App.  207,  57  N.  E.  991;  Reed  v. 
Washington  F.  d-  M.  Ins.  Co.,  138 
Mass.  572;  Burnett  v.  Am.  Cent.  Ins. 
Co.,  68  Mo.  App.  343;  Clark  v.  Baird,  9 
N.  Y.  183;  Teerpenninq  v.  Com.  Exch. 
Ins.  Co.,  43  N.  Y.  279.  This  is  the 
regular  and  usual  method  of  furnishing 
proof  upon  the  trial.  And  if  they  have 
not  examined  the  property,  hypothet- 
ical questions  may  be  put  as  in  other 
classes  of  actions,  Latimer  v.  Burrows, 
163  N.  Y.  7,  9,  57  N.  E.  95;  Chi.  &  Al. 
R.  R.  v.  Glen7vi,  175  111.  238,  51  N.  E. 
896.  An  owner,  Union  Pac.  R.  Co.  v. 
Lucas,  136  Fed.  374;  Tvbbs  v.  Me- 
chanics' Ins.  Co..  131  Iowa,  217,  108 
N.  W.  324  (citing  authorities);  or 
housekeeper,  though  not  strictly  an 
expert,  may  b(!  allowed  to  testify  to 
values  if  suitable  foundation  of  knowl- 
edge or  experience  be  first  established, 
Rademacher  v.  Greenwich  Ins.  Co.,  75 
Hun,  83. 

1  Commercial  Ins.  Co.  v.  Allen,  80 
Ala.  571;  Burkett  v.  Georgia  Home  Ins. 
Co.,  105  Teim.  548,  58  S.  W.  848. 


^  Hewins  v.  London  Assur.  Co  ,  184 
Mass.  177,  68  N.  E.  62;  Penn.  Co.  v. 
Phila.  Contribvtorship,  201  Pa.  St.  497, 
51  Atl.  351. 

3  The  provisions  of  the  standard 
policy  would  seem  to  be  quite  as  con- 
sistent with  the  doctrine  of  indemnity. 
If  a  man  by  letting  his  wooden  house 
burn  down  could  get  a  brick  or  stone 
house  in  place  of  it,  he  would  greatly 
profit.  Which  new  material  should 
furnish  the  criterion  of  value,  brick  or 
stone? 

■»  Erb  v.  German-Ayn.  Ins.  Co.,  98 
Iowa,  606,  67  N.  W.  .583. 

5  Mechanics'  Ins.  Co.  v.  Hodge,  149 
111.  298,  37  N.  E.  51. 

8  As  to  measure  of  recovery  see  also 
ch.  II,  supra. 

">  W eslinqhouse  Electric  Co.  v.  West- 
ern Assxtr'.  Co.,  42  La.  Ann.  28,  7  So. 
73;  Murphy  v.  North  Brit.  &  M.  Co., 
61  Mo.  App.  323;  Queen  Ins.  Co.  v. 
.lefferson  Ice  Co. ,  64  Tex.  579. 

8  Borden  v.  Hingham  Mut.  F.  Ins. 
Co.,  18  Pick.  (Mass.)  523,  29  Am.  Dec. 
614.  Sometimes  a  deduction  may  be 
made  for  depreciation  occurring  since 
date  of  the  insurance,  Caledonia  Ins 
Co.  V.  Coo'e.  101  Ky.  412,  41  S.  \V.  279; 
Marshall  v.  Ins.  Co.,  SO  Mo.  App.  18. 
Valued  policy  law  held  to  be  binding 


MEASURE    OF  DAMAGE§-=TOTAL   L0S9   0?   BUILDING 


299 


By  accepting  a  policy  with  a  provision  repugnant  to  the  law  the 
policyholder  does  not  waive  the  benefit  of  the  law.^  But  the  insurer 
is  not  bound  by  the  valuation  named  in  the  policy,  if  it  is  the  result 
of  fraud  on  the  part  of  the  assured. ^  Where  under  such  a  law,  there 
are  several  policies  on  a  building,  their  sum  total  indicates  the  whole 
insurable  value. ^ 


§  240.  The  Same — Total  Loss  of  Building. — A  building  becomes 
a  "total  loss,"  under  the  valued  policy  laws,  when  it  is  so  far  de- 
stroyed that  it  cannot  properly  be  designated  as  a  building,  though 
some  parts  of  it  may  remain  standing  after  the  fire.'* 


though  contract  was  made  in  another 
state,  Seyk  v.  Ins.  Co.,  74  Wis.  67,  41 
N.  W.  443,  3  L.  R.  A.  523;  Scottish  U. 
&  N.  Ins.  Co.  V.  Eustie,  78  Miss.  157, 
28  So.  822. 

1  Western  Assur.  Co.  v.  Phelps,  77 
Miss.  625,  27  So.  745;  Havens  v.  Ger- 
mania  F.  Ins.  Co.,  123  Mo.  403,  27 
S.  W.  718,  26  L.  R.  A.  107,  45  Am.  St. 
R.  570. 

2  Hartford  F.  Ins.  Co.  v.  Redding 
(Fla.),  37  So.  62,  67  L.  R.  A.  518. 

3  Wensel  v.  Property  Mut.  Ins.  Ass., 
129  Iowa,  295. 

"i  American  Cent.  Ins.  Co.  v.  Noe,  75 
Ark.  406,  88  S.  W.  572  (only  a  glass 
door  was  left  intact);  Palatine  Ins.  Co. 
V.  Weiss,  109  Ky.  464,  59  S.  W.  509; 
O'Keefe  v.  L.  &  L.  &  G.  his.  Co.,  140 
Mo.  558,  41  S.  W.  922  (a  total  loss  if  to 
utilize  standing  walls  would  cost  as 
much  as  to  rebuild  them);  Corhett  v. 
Spring  Garden  Ins.  Co.,  155  N.  Y.  389, 
50  N.  E.  282,  40  App.  Div.  628,  58 
N.  Y.  Supp.  148,  aff'd  167  N.  Y.  596 
Penn.  F.  Ins.  Co.  v.  Drachett,  63 
Ohio  St.  57,  57  N.  E.  962;  Am.  Cent. 
Ins.  Co.  V.  Murph'/  (Tex.  Civ.  App.), 
61  S.  W.  956;  Lindner  v.  St.  Paul  F. 
&  M.  Ins.  Co.,  93  Wis.  526,  67  N.  W. 
1125.  The  question  is,  has  the  building 
lost  its  identity  and  specific  character 
as  such,  has  it  become  so  far  disinte- 
grated that  it  can  no  longer  be  prop- 
erly designated  as  a  building,  though 
some  parts  may  remain  standing, 
Stevens  v.  Normch  Union  F.  his.  Soc, 
120  Mo.  App.  88,  96  S.  W.  684  (citing 
cases,  and  held  a  question  for  the  jury 
though  the  larger  part  of  the  house 
was  left  standing).  "Phrase  'total 
loss'  or  'wholly  destroyed,'  as  used, 
when  applied  to  the  subject  of  insur- 
ance, does  not  contemplate  the  entire 
annihilation  or  extinction  of  the  prop- 


erty insured.  Neither  does  it  require 
that  any  portion  of  the  property  re- 
maining after  loss  shall  have  no  value 
for  any  purpose  whatever  but  does 
mean  only  that  the  destruction  of  the 
property  insured  is  to  such  extent  as  to 
deprive  it  of  the  character  in  which  it 
was  insured.  Although  some  portion 
of  the  building  may  remain  after  the 
fire,  yet  if  such  portion  cannot  be 
reasonably  used  to  advantage  in  the 
reconstruction  of  the  building,  or  will 
not  for  some  purpose  bring  more 
money  than  sufficient  to  remove  the 
ruins,  such  building  is  in  contempla- 
tion of  law  a  '  total  loss, '  or  '  wholly 
destroyed,'  "  Liverpool  &  L.  &  G.  I. 
Co.  V.  Ilcckman,  64  Kan.  388,  67  Pac. 
879.  See  also  Williams  v.  Hartford 
Ins.  Co.,  54  Cal.  442,  35  Am.  Rep.  77; 
Northwestern  Mid.  L.  I.  Co.  v.  Rochester 
German  Ins.  Co.,  85  Minn.  48,  88  N.  W. 
205  ("total  loss"  considered  as  ap- 
plied to  one  plant  with  several  build- 
ings); Ins.  Co.  v.  Bachler,  44  Neb.  549, 
62  N.  W.  911.  So  of  words  "wholly 
destroyed,"  Trustees,  etc.,  v.  North- 
western Nat.  Ins.  Co.,  98  Wis.  257,  73 
N.  W.  767.  There  is  no  total  loss  if 
remnant  standing  is  reasonably  adapted 
to  be  used  as  a  basis  and  part  of  restora- 
tion, Prov.  Wash.  Ins.  Co.  v.  Board  of 
Education,  49  W.  Va.  360,  38  S.  E.  679; 
Royal  Ins.  Co.  v.  Mclntyre,  90  Tex. 
170,  37  S.  W.  1068  (would  a  reason- 
ably prudent  owner  utilize  the  stand- 
ing portions  in  rebuilding,  is  the  test). 
But  there  is  a  total  loss  if  remnant 
standing  is  unsafe,  Thnringia  Ins.  Co. 
V.  Mallott,  111  Ky.  917,  64  S.  W.  991; 
Murphy  v.  Am.  Cent.  Ins.  Co.,  25  Tex. 
Civ.  App.  241,  54  S.  W.  407  (founda- 
tion walls  are  not  to  be  taken  into 
account).  Bunyon  says:  "A  'total 
loss'  in  the  language  of  fire  insurance. 


300  MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 

Under  the  valued  policy  laws,  if  the  loss  is  not  total,  the  measure 
of  damage  is  the  actual  loss.^  Valued  policy  provisions  relating  to 
total  loss  of  buildings  have  been  introduced  into  several  of  the  stand- 
ard lire  policies.'  Under  such  a  form  of  policy  the  Minnesota  court 
has  given  careful  attention  to  this  subject  and  has  established  the 
following  tests:  A  building  is  not  a  total  loss  unless  it  has  been  so 
far  destroyed  by  the  fire  that  no  substantial  part  or  portion  of  it 
above  the  foundation  remains  in  place  capable  of  being  safely  utilized 
in  restoring  the  building  to  the  condition  in  which  it  was  before  the 
fire.  The  words  "total  loss,"  when  applied  to  a  building,  mean 
totally  destroyed  as  a  building;  that  is,  that  the  walls,  although 
some  portion  of  them  remain  standing,  are  unsafe  to  use  for  the  pur- 
pose of  rebuilding,  and  would  have  to  be  torn  down  and  a  new  build- 
ing erected  throughout.  There  can  be  no  total  loss  of  a  building  so 
long  as  the  remnant  of  the  structure  left  standing  above  the  founda- 
tion is  reasonably  and  safely  adapted  for  use  (without  being  taken 
down)  as  a  basis  upon  which  to  restore  the  building  to  the  condition 
in  which  it  was  immediately  before  the  fire;  and  whether  it  is  so 
adapted  depends  upon  the  question  whether  a  reasonably  prudent 
owner  of  a  building  uninsured,  desiring  such  a  structure  as  the  one 
in  question  was  before  the  fire,  vrould,  in  proceeding  to  restore  the 
building,  utilize  such  standing  remnant  as  such  basis.  If  he  would, 
then  the  loss  is  not  total.^ 

§241.  Measure  of  Damage — As  Affected  by  Provision  as  to  Re- 
pairing.— The  provision  that  the  liability  of  the  underwriters  shall 
in  no  event  exceed  what  it  would  then  cost  the  insured  to  repair  or 
replace  with  materials  of  like  kind  and  quality,  is  not  restricted  to  a 

does  not  then  mean,  as  in  marine  in-  And  where  a  building  insured  is  located 
surance,  the  totil  destruction  of  the  within  the  fire  limits  and  its  repair 
property,  but  its  destruction  or  injury  after  fire  is  prevented  under  the  terms 
to  such  an  extent  as  to  render  the  in-  of  a  city  ordinance  defining  the  char- 
surer  liable  to  pay  the  total  sum  in-  acter  of  authorized  construction,  the 
sured,"  Bunyon,  F.  Ins.  (5th  ed.),  244.  insured  may  recover  as  for  a  total  loss, 
Question  of  total  loss  when  for  jury,  deducting  for  any  value  of  the  remains 
see  §  93.  Statutes  allowing  counsel  in  excess  of  the  cost  of  removal ,  Larkin 
fee  to  successful  plaintiff  in  case  of  v.  Glens  Falls  Ins.  Co.,  80  Minn.  527, 
total  loss  not  unconstitutional,  §  6.  83  N.  W.  409.  It  is  permissible  for  a 
1  Lancashire  Ins.  Co.  v.  Biish,  60  plaintiff  to  allege  a  total  loss  and  re- 
Neb.  116,  82  N.  W.  313.  Under  a  use  cover  a  partial  loss,  Moore  v.  Ins.  Co., 
and  occupancy  policy  on  a  hotel  the  100  Minn.  374,  111  N.  W.  260. 
loss  is  total  where,  though  the  damage  2  For  example,  Minnesota,  New 
by  fire  and  water  does  not  extend  to  Hampshire,  and  South  Dakota, 
all  the  rooms,  nevertheless,  the  build-  3  Northwestern  Mut.  L.  Ins.  Co.  v. 
ing  is  so  far  destroyed  that  the  business  Rochef^ter  German  Ins.  Co.,  85  Minn, 
cannot  be  carried  on  until  repairs  are  48.  88  N.  W.  265  (citing  many  authori- 
made,  Chatfield  v.  JEtna  Ins.  Co.,  71  ties);  Northwestern  Mut.  L.  Ins.  Co.  v. 
App.  Div.  164,  75  N.  Y.  Supp.  620.  Sun  Ins.  Office,  85  Minn.  65,  88  N.  W, 


COINSURANCE   AND   OTHER   SPECIAL   CLAUSES,    ETC.  301 

case  where  the  underwriter  elects  to  rebuild,  but  fixes  the  extreme 
hmit  of  liability  in  all  cases.' 

§  242.  Coinsurance  and  Other  Special  Clauses  Modifying  Measure 
of  Liability. — The  extent  of  the  insurer's  liability  is  often  modified 
by  particular  clauses;  as,  for  example,  one  of  the  various  forms  of 
coinsurance  clauses  or  average  clauses  of  which  specimens  are  given 
in  the  Appendix,  or  a  special  clause  limiting  liability  to  two-thirds  or 
three-fourths  of  tne  value  of  the  property. 

The  object  of  the  coinsurance  clause  is  to  compel  the  insured  to 
take  out  insurance  to  the  designated  percentage  of  the  value  of  his 
property,  usually  either  eighty  or  one  hundred  per  cent,-  or  else  be- 
come his  own  insurer  to  the  amount  of  the  deficiency;  and  the  average 
clause  applies  where  property  is  insured  as  an  entirety,  though  located 
in  several  places  or  buildings  in  proportions  perhaps  unknown  to  the 
insurers,  or  in  shifting  proportions,  and  its  object  is  to  ratably  dis- 
tribute the  insurance  over  all  the  properties,  so  that  in  case  of  a  loss 
in  one  place,  the  insured  cannot  call  upon  the  total  amount,  but  only 
the  ratable  amount  of  insurance,  for  contribution  to  such  a  localized 
loss. 

In  determining  the  measure  of  the  underwriter's  liability,  full 
effect  must  be  given  to  these  restrictive  clauses;^  but  not  when  they 
are  inconsistent  with  statutory  requirements.'*  In  the  absence  of  a 
coinsurance  clause,  the  assured  collects  his  whole  loss,  if  that  does  not 
exceed  his  insurance,  and  his  whole  insurance,  if  that  does  not  exceed 


272;  Poppitz  v.  German  Ins.   Co.,  85      Millis  v.  Scot.  Union  &  Nat.  Ins.  Co., 
Minn.  118,  88  N.  W.  438.  95  Mo.  App.  211  (three-fourths  clause); 

^  Hevxins  v.  London  Assur.  Co.,  184      Catoosa   S.     Co.    v.    Linch,    18    Misc. 


Mass.  177,  68  N.  E.  62;  McCready  v 
Hartford  Fire  Ins.  Co.,  61  App.  Div 
(N.  Y.)  583,  70  N.  Y.  Supp.  778 
Stand.  Sewing  Mach.  Co.  v.  Royal  Ins 
Co.,  201  Pa.  St.  645,  51  Atl.  354  (1902) 


(N.  Y.)  209,  41  N.  Y.  Supp.  377  (co- 
insurance clause);  Penn.  Fire  Ins.  Co. 
V.  Moore,  21  Tex.  Civ.  App.  528,  51 
S.  W.  878  (coinsurance  clause). 

*  For  example,  valued  policy  laws, 


Ins.   Co.    V.  Board,   49    W.  Va.    360,  Sachs  v.  L.  &  L.  Fire  Ins.  Co.,  113  Ky. 

38  S.  E.  679.  88,  67  S.  W.  23;  Hid er son  v.  Ins.  Co., 

2  Where  assured  has  option  to  choose  96  Tenn.    193,  33  S.  W.   1041.     The 

either  eighty  per  cent  or    full    coin-  Michigan  court  has  decided  that  under 

surance     clause,     the     latter     usually  its  statutes  the  insurer  cannot  add  a 

carries  a  lower  rate  of  premium,  Belt  coinsurance    clause.   Attorney    General 

V.  American  Central  Ins.  Co.,  148  N.  Y.  v.  Commissioner  of  Ins.  (Mich..  1907), 

624,  43  N.  E.  G'' ,  29  App.   Div.  546,  112  N.  W.   132   (reasons   for    coinsur- 

53  N.  Y.  Supp.  316,  aff'd  163  N.  Y.  ance  clauses  explained).     But  see  fol- 

555,  57  N.  E.  1104,  resulting  difference  lowing  cases  in  which  it  is  held  that 

in  recovery  is  given.  coinsurance    clauses    are    not    incon- 

^  Blinn  v.  Ins.  Co.,  85  Me.  389,  27  sistent  with  statutes,  Firemen's  Fund 

Atl.    263    (two-thirds    value    clause);  Ins.  Co.  v.  Pelor,  106  Ga.  1.  31  S.  E. 

Owsehrouqhv.  HomeIns.Co.,Q)lM.\ch..  11^;  Quinn  v.  Fire  Assn.,  180  Mass 

833.  28  N.  W.  110  (four-fifths  clause);  560,  62  N.  E.  980. 


302  MPANING    AND    LEGAL    EFFECT    OF    FIRE    POLIQY 

his  loss.  With  a  coinsurance  clause  present,  the  foregoing  rule  of 
recovery  is  modified,  and  the  recovery  reduced,  but  only  if  the  in- 
surance and  the  loss  are  both  below  the  percentage  of  value,  usually 
eighty,  or  one  hundred  per  cent,  as  named  in  the  clause.  If  either 
insurance  or  loss  equals  or  exceeds  the  specified  percentage  of  values, 
the  clause  is  inoperative.  Simple  examples,  prepared  by  Mr.  Willis 
O.  Robb,  secretary  of  the  loss  committee  of  the  New  York  Board  of 
Fire  Underwriters,  showing  in  figures  the  operation  of  the  coinsur- 
ance clauses,  are  given  in  the  Appendix.^ 

Certain  states  have  passed  statutes  prohibiting  the  insertion  of 
a  coinsurance  clause  in  the  policy,  except  as  the  insured  may  volun- 
tarily accede  to  it  in  consideration  of  a  lower  rate  of  premium.^ 
Such  statutes  are  enforcible.^ 

§  243.  Insurance  Payable  Sixty  Days  After  Satisfactory  Proofs. — 

Any  insurance  money  due  under  the  terms  of  the  policy  is  not  paj''- 
able  until  after  sixty  days  from  receipt  by  the  insurer  of  proofs  of 
loss.^ 

§  244.  Reinstatement  ClaMse.— Optional  with  company  to  take  all 
or  any  part  of  the  articles  at  ascertained  or  appraised  value,  or  to  re- 
build or  replace  property,  lost  or  damaged,  within  reasonable  time,  on 
giving  notice  within  thirty  days  after  receipt  of  proofs,  but  there  can  be 
710  abandonment  to  the  company  of  the  property. 

The  company  reserves  these  options  to  protect  itself  against 
extravagant  claims,  and  to  prevent  disputes  as  to  the  amount  of 
damage.^ 

The  right  of  giving  notice  of  election  to  rebuild  or  replace  expires 

1  Ch.  III.  As  to  the  effect  of  the  garded  under  the  circumstances  of  the 
coinsurance  clause  on  apportionments  case,  not  necessarily  satisfactory  to  the 
see  Mr.  Robb's  discussion,  last  note  to  insurer,  Robinson  v.  Palatine  Ins.  Co.. 
§  318,  infra.  As  to  measure  of  recov-  11  N.  M.  162,  66  Pac.  535;  Boijle  v. 
ery  when  some  of  the  policies  contain,  Hamburg-Bremen  F.  Ins.  Co.,  169  Pa. 
and  some  do  not  contain,  a  coinsurance  St.  349;  Georgia  Home  Ins.  Co.  v. 
clause,  see  §  317,  infra.  Goode,  95  Va.  751,  30  S.  E.  366;  Bill- 

2  Appendix,  ch.  I.  nfier  v.  Hamburg-Bremen  F.  Ins.  Co., 

3  Block  V.  American  Ins.  Co.  (Wis.,  .57  W.  Va.  (1905),  42, 49  S.  E.  901  (sub- 
1907),  112  N.  W.  45.  stantial  compliance  sufficient).    Where 

^Gillon  V.  Northern  As.swr.  Co.,  127  the  insurer  denies  liability  some  cases 

Cal.  480,  59  Pac.  901;  Pxdze  v.  Sagi-  hold  that    the    insured  need  not  wait 

naii\  etc.,  Ins.  Co.,  1.32  Mich.  670,  94  sixty  days,  but  may  sue  at  once.  Frost 

N.  W.  191.    And  see  KeWi  v.  Supreme  v.  North    Brit.  &  M.    Ins.    Co   77  Vt 

Council,  46  Apo.   Div.   79,  61    N.   Y.  407,  63  Atl.  803. 

Supp.  394.     "Sixty  days"  held  to  run  &  Without  such  clause  insurer  would 

from  receipt  of  regular  proofs,  not  of  have    no    such    option,    Branigan    v. 

subsequently  required  duplicate   bills,  Jefferson,  etc.,  Ins.  Co.,  102  Mo.  App. 

Mna  Ins.    Co.   v.   McLead,  57   Kan.  70,  76  S.  W.  643.     In  practice  rein- 

95,  45  Pac.  73.    ''Satisfactory  proofs"  statement  is  for  the  most  part  limited 

means  proofs  that  ought  to  be  so  re-  to  buildings  and  machinery. 


JlElNSTATEMfiNt   CLAUSE 


m 


thirty  days  after  service  of  the  proofs  of  loss  and  does  not  begin  to 
run  from  any  subsequent  award  or  appraisal.^  But  the  right  of  the 
company  to  take  the  damaged  goods  at  the  appraised  value  certainly 
must  survive  until  after  the  award.^  Therefore,  until  after  the  award, 
if  there  be  one,  and  in  any  event  until  after  the  expiration  of  thirty 
days  succeeding  service  of  proofs,  it  would  be  highly  imprudent 
for  the  assured,  except  in  case  of  necessity,  or  with  notice  to  the 
company j'"*  to  sell  or  dispose  of  the  damaged  property,  since  thereby 
he  may  incur  forfeiture  of  his  insurance.'* 

If  the  company  once  elect  to  do  so,  they  must  reinstate,  and  cannot 
afterwards  repudiate  their  election.^  And  the  converse  is  also  true, 
for  the  selection  of  either  alternative  constitutes  an  abandonment  of 
the  other.® 

The  election  to  restore  or  rebuild  involves  not  onl}^  the  rejection 
of  the  right  to  pay  the  amount  of  damage  estimated  on  a  cash  basis,'' 


1  Ins.  Co.  V.  Hope,  58  111.  75,  11  Am. 
Rep.  48;  McAllaster  v.  Niagara  Fire 
Ins.  Co.,  156  N.  Y.  80,  50  N.  E.  502; 
Maryland  Home  Ins.  Co.  v.  Kimmel,  89 
Md.  437,  43  Atl.  764;  compare  Kelly  v. 
Sun  Fire  Office,  141  Pa.  St.  10,  21  All. 
447.  But  the  court  will  readily  infer 
a  waiver  of  this  right,  Davis  v.  Am.. 
Central  Ins.  Co.,  7  App.  Div.  488,  aff'd 
158  N.  Y.  688.  If  proofs  are  waived 
period  of  option  begins  to  run  from 
waiver,  Farmers,'  etc.,  Ins.  Co.  v. 
Warner,  70  Neb.  803,  98  N.  W.  48. 
The  option  may  b'  exercised  at  any 
time  within  the  thirty  days,  Lanca- 
shire Ins.  Co.  V.  Barnard,  111  Fed.  702, 
43  C.  C.  A.  559.  Option  may  be  shown 
without  formal  notice  by  sending 
workmen,  starting  work,  etc.,  Fire 
Assn.  V.  Rosenthal,  lOS  Pa.  St.  474,  1 
Atl.  303.  It  is  said  that  an  offer  to 
repair  cannot  be  coupled  with  one  of 
compromise,  Rieger  v.  Mechanics'  Ins. 
Co..  69  Mo.  App.  674. 

2  Hamilton  v.  L.  &  L.  &  G.  Ins.  Co., 
130  U.  S.  242,  10  S.  Ct.  945. 

3  Davis  V.  Grand  Rapids  Fire  Ins. 
Co.,  15  Misc.  263,  36  N.  Y.  Supp.  792, 
aff'd  157  N.  Y.  685,  51  N.  E.  1090; 
Palatine  Ins.  Co.  v.  Morton  Scott  Co.. 
106  Tenn.  558,  61  S.  W.  787;  North 
German  Ins.  Co.  v.  Morton  Scott  Co., 
108  Tenn.  384,  67  S.  W.  816. 

4  Hamilton  v.  L.  &  L.  &  G.  Ins.  Co., 
136  U.  S.  242;  Astrich  v.  German-Am. 
Ins.  Co.,  131  Fed.  13;  Kelly  v.  Sun  Fire 
Office,  141  Pa.  St.  10,  21  Atl.  10. 
Valued  policy  laws  are  not  necessarily 
inconsistent  with  the  election  to  re- 


build or  repair  contained  in  a  standard 
policy  established  by  legislative  en- 
actment of  the  same  state,  Temple  v. 
Niagara  Fire  Ins.  Co.,  109  Wis.  372, 
85  N.  W.  361.  But  as  to  effect  of 
valued  policy  laws  in  rendering  option 
to  rebuild  nugatory,  see  Alil.  Mcch. 
Ins.  Co.  V.  Russell,  65  Ohio  St.  230, 
62  N.  E.  338,  56  L.  R.  A.  159;  Marshal 
V.  Ins.  Co.,  80  Mo.  App.  18,  23;  Com- 
mercial Union  Assur.  Co.  v.  Meyer,  9 
Tex.  Civ.  App.  7,  29  S.  W.  93;  Royal 
Ins.  Co.  V.  Mclntyre  (Tex.  Civ.  App.), 
34  S.  W.  669. 

5  Henderson  v.  Crescent  Ins.  Co. ,  48 
La.  Ann.  1176,  20  So.  658;  Fire  Assn. 
V.  Rosenthal,  108  Pa.  St.  474, 1  Atl.  303. 

6  Times  Fire  Assur.  Co.  v.  Hawle, 
1  Fost.  &  F.  406;  Scottish,  etc.,  Assn.  v. 
Northern  Assur.  Co.,  11  S.  S.  C.  4th 
series,  287.  A  positive  refusal  to  re- 
build is  an  irrevocable  election,  Piatt 
V.  ^tna  Ins.  Co.,  153  111.  113,  38  N.  E. 
580.  Reinstating  of  machinery  does 
not  of  necessity  mean  putting  it  back 
in  the  same  building,  if  that  is  im- 
possible, Anc?erso»  V.  Commercial  Union 
Assur.  Co.,  55  L.  J.  Q.  B.  N.  S.  146,  34 
W.  R.  189.  But  if  after  notice  of  elec- 
tion the  insurer  fails  to  rebuild  or  repair 
then  the  insured,  at  his  option,  may 
maintain  action  for  the  insurance 
money,  Langan  v.  ^tna  Ins.  Co.,  99 
Fed.  374,  aff'd  108  Fed.  985,  48  C.  C. 
A.  174  (the  company  has  no  right  to 
refuse  to  go  on  with  rebuilding  be- 
cause cost  of  construction  has  in- 
creased). 

7  Zalesky  v.  Iowa  State  Ins.  Co.,  102 


304  MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 

but  also  the  waiving  of  all  those  provisions  of  the  contract  having 
reference  to  that  method  of  performance.  From  the  time  of  such 
election  the  contract  between  the  parties  becomes  a  new  and  inde- 
pendent undertaking  on  the  part  of  the  insurers  to  build  or  repair  the 
subject  insured,  and  to  restore  it  to  its  former  condition/  and  the 
measure  of  damages  for  a  breach  of  this  substituted  contract  of  re- 
placing does  not  necessarily  depend  on  the  amount  of  damage 
inflicted  by  the  peril  insured  against,'  nor  is  it  limited  by  the  amount 
of  insurance.^  But,  if  the  insured  refuses  to  permit  the  insurer  to 
replace,  the  latter  having  seasonably  elected  to  do  so,  the  former 
can  maintain  no  action  upon  the  policy."*  If  the  insurers,  in  the  at- 
tempt to  restore  the  property,  do  more  than  their  contract  obligates 
them  to  do,  they  cannot  claim  allowance  for  the  excess  of  value,^ 
If,  without  fault  of  the  insured,  the  company  either  neglects  to  com- 
plete the  work  or  is  prevented  from  doing  so  by  the  interference  of 
the  public  authorities,  the  loss  will  fall  upon  the  insurers.^  So,  also, 
if  during  the  rebuilding  or  repairing,  the  property  is  again  burned; 
for  here,  too,  through  no  fault  of  the  insured,  the  insurers  have  failed 
to  fulfill  their  contract. 

Whether  the  work  of  repairing  or  rebuilding  is  done  properly  and 
within  a  reasonable  time,  must  generally  be  a  question  for  the  jury,^ 
and  for  any  breach  of  their  obligations  the  insurers  will  be  held  re- 
sponsible, according  to  the  ordinary  rules  of  damage.* 

Iowa,  ,512,   70   N.    W.  187;  Heilmann  afforded,    Northwestern    Ins.     Co.     v. 

V.  Westchester  Ins.  Co.,  75  N.  Y.  7.  Woodward,  18  Tex.  Civ.  App.  496,  45 

1  Hartford  Ins.  Co.  v.  Peeble's  Hotel  S.  W.  185.  Assured  may  meanwhile 
Co.,  82  Fed.  546,  27  C.  C.  A.  223;  make  necessary  repairs,  Eliot  Savings 
Zaleshj  v.  Iowa  State  Ins.  Co.,  102  Bank  v.  Commercial  Union  Assur.  Co., 
Iowa,  512,  70  N.  W.  187;  Heilmann  v.  142  Mass.  145,  7  N.  E.  550. 
Westchester  F.  Ins.  Co.,  75  N.  Y.  7.  ^  Brinley  v.  National  Ins.  Co.,  11 
A  building  substantially  the  same  as  Mete.  (Mass.)  195. 

to   material,  size,  and   form,  Beals  v.  « Thus  where  during  reinstatement 

Home  Ins.  Co.,  36  N.  Y.  522.  the  commissioner  of  sewers  considered 

2  Wynkoop  v.  Niagara  Fire  Ins.  Co.,  the  premises  dangerous,  and  caused 
91  N.  Y.  478, 43  Am.  Rep.  686;  Morrell  the  buildings  to  be  removed,  Brown  v. 
V.  Irving  Fire  Ins.  Co.,  33  N.  Y.  429,  Royal  his.  Co.,  1  El.  &  El.  853,  28 
88  Am.  Dec.  396.  Election  to  rebuild  L.  J.  Q.  B.  275.  The  company  must 
waives  all  known  forfeitures,  Bersche  comply  with  city  ordinances.  Fire 
V.  Globe  Ins.  Co.,  31  Mo.  546.  Assoc,  v.  Rosenthal,  108  Pa.  St.  474; 

'^Henderson  v.  Crescent  Ins.  Co.,  48  Heivins    v.    London    Assur.    Co,    184 

La.  Ann.   1176,  20  So.  658.     If  con-  Mass.  177,  68  N.  E.  62.    And  if  police 

construction  costs  less  than  amount  of  authorities  prohibit  rebuilding  assured 

policy,  it    has  been  said  the  balance  may  recover  as  for  a  total  loss,  Monte- 

remams  in  force  during  term  of  policy,  leone  v.  Royal  Ins.  Co.,  47  La    Ann 

Trull   V.    Roxhury   Ins.    Co.,   3   Cush.  1563.  18  So.  472. 

(Mass.)  263.  7  Haskins  v.  Hamilton  Mut.  Ins.  Co., 

*  Danl  V.  Firemen's  Ins.  Co.,  35  La.  5  Gray  (Mass.),  432. 

Ann.  98  (there  must  be  a  clear  refusal);  s  For   defective   construction     Hen- 

Beals  V.  Home  Ins.  Co.,  36  N.  Y.  522.  derson  v.  Sun  Mut.  Ins.  Co     48  La 

Not  so  if  opportunity  to  repair  was  Ann.  1031,  20  So.  164.    For  delay,  4m 


THIS   ENTIRE   POLICY   SHALL   BE  VOID  305 

The  rebuilding  clause  has  been  held  to  have  no  applicatioi.  to  a 
mortgagee's  policy,  or  to  a  standard  mortgagee  clause;  ^  but  where 
there  is  simply  an  indorsement  "loss  if  any  payable  to  mortgagee," 
the  mortgagee  is  not  a  contracting  party  but  a  mere  appointee  to 
receive  payment  and  the  rebuilding  clause  is  operative.^ 

The  Massachusetts  standard  policy  has  a  similar  provision  allow- 
ing the  company  to  restore  upon  giving  notice  within  fifteen  days 
after  the  proofs  of  loss  are  submitted,  and  the  company  is  declared 
not  liable  for  more  than  the  sum  insured  with  interest.^ 

§  245.  There  Can  be  no  Abandonment  to  Insurer. — The  marine 
doctrine  of  constructive  total  loss  is  thus  expressly  excluded;  it  has 
been  held  in  this  country  that  an  insurer,  though  covering  full  value 
by  his  policy,  does  not,  upon  settling  for  a  total  loss,  become  entitled 
to  take  any  damaged  remains  of  the  property,  or  salvage  subsequently 
realized  from  them.'' 

§  246.  This  Entire  Policy  Shall  be  Void. — Before  this  phrase  was 
inserted  in  the  polic}^,  the  better  opinion  was  that  the  contract  of 
insurance  was  severable  in  those  cases-  where  it  covered  several 
classes  of  property  which  were  insured  in  separate  amounts,  either 
at  separate  rates  or  for  a  gross  premium,  and  provided  the  breach  of 
warranty  related  onl}'  to  a  portion  of  the  items. ^ 

The  phraseology  of  the  New  York  standard  policy  was  doubtless 
intended  by  its  framers  to  prevent  the  application  of  this  equitable 
rule  of  construction,  and  courts  of  man}'  jurisdictions,  in  passing 
upon  this  important  question,  have  held  that  such  is  its  legal  intend- 
ment.® 


Ceni.  Ins.  Co.  v.  McLanathan,  11  Kan.  jerson  Ins.  Co.,  102  Mo.  App.  70,  76 

533.     Must  make  property  as  service-  S.  W.  643. 

able  and  valuable  as  before,  Co??im€maZ  ^  Thuringia  Ins.  Co.  v.  Mallot,  111 

F. /ns.  Co.  V.  A /Zen,  80  Ala.  571,  1  So.  Ky.    917,   64   S.   W.    991;    Liscom   v. 

202,    if   several    insurers    have    joined  Boston,  etc.,  F.  Ins.  Co.,  50  Mass.  205; 

they  must  contribute  towards  the  dam-  St.    Clara    Academy    v.    Ins.    Co.,    98 

age,  Hartford  Ins.  Co.  v.  Peeble's  Hotel  Wis.    257,    73    N.    W.    767.      Contra, 

Co.,  82  Fed.  546,  27  C.  C.  A.  223.  German  Ins.  Co.  v.  Eddy,  36  Neb.  461 , 

i  Hastings   v.    Westchester  Fire  Ins.  54  N.  W.  856;  Bunyon,  Ins.  (1906),  23, 

Co.,  73  N.  Y.  141.  236,  244.     This  author  concludes  that 

2  Heilmann  v.  Westchester  Fire  Ins.  under  English  policy  the  insurer  on 
Co. ,  75  N.  Y.  7.  A  demand  for  ap-  paying  a  total  loss  is  entitled  to  salvage 
praisal  is  a  waiver  of  option  to  rein-  though  it  chance  to  exceed  the  amount 
state,  Elliott  v.   Merchants',  etc.,  Ins.  of  insurance,  ifezrf.,  245. 

Co.,    109    Iowa,    39,    79    N.    W.    452;  s  See  §  115,  supra. 

Alliance,  etc.,  Ins.   Co.  v.  Arnold,  65  «  Some  of  the  following  cases  so  hold 

Kan.  163,  69  Pac.  174.  even  without  the  aid  of  the  phraseology 

3  Option  to  rebuild  is  denied  by  contained  in  the  standard  form,  Dumas 
statute  in  Missouri,  Branigan  v.  Jef-  v.  Northwestern  Nat.  Ins.  Co.,  12  App. 

20 


306 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


An  example  may  be  taken  from  the  Washington  reports.  The 
policy  of  the  insured  issued  for  the  gross  premium  of  $42.75  was 
distributed,  $125  on  beds;  $350  on  furniture;  and  $300  on  piano. 
A  total  loss  by  fire  occurred.  The  company  refused  to  make  any 
payment,  basing  its  refusal  on  the  ground  that  the  insured  was 
hot  the  owner  of  the  piano.  On  the  trial  it  appeared  that  the  piano 
was  held  under  a  contract  of  conditional  sale  taken  in  the  name 
of  the  daughter  of  the  insured,  title  not  to  pass  until  the  full  pur- 
chase price  of  $325  was  paid,  insurance  thereon  meanwhile  to  be 
maintained  for  the  benefit  of  the  sellers.  At  the  time  of  the  fire 
onl}^  $120  had  been  paid  on  account.  The  court  held  that  though 
the  plaintiff  had  an  insurable  interest  in  the  piano,  nevertheless, 
the  warranty  respecting  unconditional  and  sole  ownership  having 
been  broken,  the  entire  contract  was  avoided,  and  there  could  be 
no  recovery,  even  for  the  loss  of  the  other  items  of  furniture.^ 

To  similar  effect  is  a  Georgia  case  in  which  the  court  reviewed 
many  authorities.  Knight,  the  insured,  paid  a  gross  premium  for 
his  policy,  covering  in  separate  amounts  his  building,  and  stock  of 
merchandise  therein.  The  policy  contained  an  iron  safe  clause  re- 
quiring the  insured  to  take  and  preserve  an  annual  inventory  of 


D.  C.  245,  40  L.  R.  A.  358  (chattel 
mortgage  on  part  of  household  effects 
avoids  whole  policy);  Essex  Savings 
Bk.  V.  Meriden  Fire  Ins.  Co.,  57  Conn. 
335  (breach  as  to  building  avoids  as  to 
contents  also);  Southern  F.  Ins.  Co.  v. 
Knight,  111  Ga.  622,  36  S.  E.  821 
(breach  as  to  stock  avoids  as  to  building 
also);  Geiss  v.  FranLlin  Ins.  Co.,  123 
Ind.  172,  24  N.  E.  99  (breach  as  to 
ownership  of  part  avoids  the  whole); 
Kahler  v.  lo  va  State  Ins.  Co.,  106  Iowa, 
.380,  76  _N.  W.  734  (breach  as  to  build- 
ing avoids  as  to  machinery);  Republic 
Co.  Mut.  F.  Ins.  Co.  v.  Johnson,  69 
Kan.  146,  76  Pac.  419  (vacancy  avoids 
entire  contract);  Germier  v.  Spring-field 
F.  &  M.  Ins.  Co.,  103  La.  341,  33  So. 
361  (breach  as  to  building  avoids  also 
as  to  contents);  Thomas  v.  Commercial 
Union  Assur.  Co.,  162  Mass.  29,  37 
N.  E.  672;  Parsons  v.  Lane,  97  Minn. 
98  (building  on  leased  ground  avoids 
also  as  to  personalty) ;  Agricidtural  Ins. 
Co.  V.  Hamilton,  82  Md.  88,  33  Atl. 
423,  30  L.  R.  A.  633,  51  Am.  St.  R.  457 
(unoccupancy  avoids  also  as  to  con- 
tents); Bald'vin  v.  Hartford  F.  Ins.  Co., 
60  N.  H.  422,  49  Am.  Rep.  324  (sale 
of  one  building  avoids  as  to  all); 
Martin  v.  7ns.  Co.  of  N.  A.,  57  N.  J.  L. 
623,  31  Atl.  213;  CuthheHson  v.  N.  C. 


Home  Ins.  Co.,  96  N.  C.  480,  2  S.  E. 
258  (breach  as  to  building  avoids  as  to 
contents);  Coggins  v.  Jitna  Ins.  Co., 
56  S.  E.  506,  36  Ins.  L.  J.  354  (breach 
of  iron  safe  clause  avoids  as  to  build- 
ing also);  Germania  Fire  Ins.  Co.  v. 
Schild,  69  Ohio  St.  136,  68  N.  E.  706, 
100  Am.  St.  R.  663  (insurance  was  on 
contents  of  which  one  item  was  not 
owned  absolutely;  policy  avoided); 
Elliott  V.  Teutonia  Ins.  Co.,  20  Pa. 
Super.  Ct.  359  (breach  as  to  ownership 
of  machinery  avoids  as  to  building  and 
stock);  Dow  v.  Nat.  Assur.  Co.,  26  R.  I. 
379,  58  Atl.  999  (breach  as  to  owner- 
ship of  part  of  contents  avoids  entire 
policy);  McWilliams  v.  Cascade  F.  & 
M.  Ins.  Co.,  7  Wash.  48,  34  Pac.  140 
(misstatement  as  to  piano;  whole 
policy  avoided);  Corev  v.  Ger.-Am.  Ins. 
Co.,  84  Wis.  80,  54  N.  W.  18,  36  Am. 
St.  R.  907,  20  L.  R.  A.  267  (attachment 
of  part  of  goods  avoids  as  to  all;  but 
see  Loomis  v.  Rockford  Ins.  Co.,  77 
Wis.  87).  Following  case  holds  that 
policy  is  entire  as  to  all  articles  in- 
sured as  a  separate  class.  Home  F.  Ins. 
Co.  V.  Bemstern,  55  Neb.  260,  75  N.  W. 
839. 

1  McWilliams  v.  Cascade  Fire,  etc., 
Ins.  Co.,  7  Wash.  48,  34  Pac.  140. 


THE   ENTIRE   POLICY  SHALL   BE  VOID  307 

Stock,  which  he  failed  to  do.  The  court  held  that  the  premium 
Deing  entire,  the  breach  of  warranty  was  a  bar  to  recovery  not  only 
for  loss  of  stock,  but  also  for  loss  of  building;  and  reversed  the  judg- 
ment rendered  for  the  plaintiff  below. ^  So  also  in  a  late  case  the 
Federal  Circuit  Court,  interpreting  the  New  York  standard  policy, 
concludes  that  by  weight  of  reason  and  authority,  a  chattel  mort- 
gage on  personalty  will  forfeit  the  policy  also  as  to  realty,  though 
the  insurance  covers  them  by  separate  amounts.^ 

Several  other  courts,  however,  regarding  it  as  incredible  to  suppose 
that  for  some  trifling  mistake,  relating  perhaps  only  to  one  of  many 
items  of  property  insured,  the  parties  should  intend  to  abrogate  the 
entire  contract,  have  endeavored  to  give  effect  to  the  main  purpose 
of  the  policy  by  practically  ignoring  the  words  "this  entire  policy 
shall  be  void,"  and  by  applying  the  same  rule  of  interpretation  that 
formerly  prevailed  without  them.  This  conclusion  is  sought  to  be 
justified  by  the  New  York  Court  of  Appeals  on  the  ground  that  un- 
like the  policy  construed  in  Smith  v.  The  Agricultural  Ins.  Co.,^  the 
standard  policy  does  not  make  breaches  of  warranty  apply  to  "any 
part  of  the  property,"  but  only  to  the  property  generally.'*  This 
lack  of  precise  definition,  it  is  thought,  permits  a  narrowing  of  the 
effect  of  the  breach  to  the  portion  or  class  of  property  actually 
affected  by  the  breach. 

A  policy  of  $2,000  issued  to  Knowles  for  a  single  premium,  in- 
sured $1,200  on  hops  grown  in  1889,  and  $800  on  hops  grown  in 
1890,  separately  stored  in  one  hophouse.  Without  the  required 
written  permit  from  the  company,  the  crop  of  1889  was  incum- 
bered  by   a  chattel   mortgage;   the  court  decided,    though  "with 

^Southern  Fire  Ins.  Co.  v.  Knight,  building);   Knowles   v.   Am.   Ins.   Co., 

Ill  Ga.  622,  36  S.  E.  821.  66  Hun,  220,  21  N.  Y.  Supp.  50,  aff'd 

^  Fries-Breslin  Co.  v.  Star  Fire  Ins.  142  N.  Y.  641,  37  N.  E.  567  (chattel 

Co.,  154  Fed.  35,  36  Ins.  L.  J.  804.  mortgage  on  one  of  two  crops  does  not 

3  118  N.  Y.  522,  23  N.  E.  883  (often  avoid  as  to  other);  King  v.  Tioga  Co. 

cited  without  reference  to  particular  Fire  R.   Asso.,  35  App.    Div.   58,  54 

wording  of  the  policy).  N.  Y.  Supp.   1057;   Kiernan  v.  Agri- 

i  Donley  v.  Glens  Falls  Ins.  Co.,  184  cultural  Ins.  Co.,  81  Hun,  373,  30  N.  Y. 

N.  Y.  107,  76  N.  E.  914.    Thus  in  spite  Supp.  892  (breach,  either  as  to  realty 

of  word  "entire"    the    policy  is  held  or  personalty,  does  not  avoid  as  to  the 

not  to  be  avoided  as  to  the  whole  by  a  other);  Adler  v.  Germania  F.  Ins.  Co., 

breach  affecting  only  a  part.  Firemen's  17    Misc.    347    (chattel    mortgage    on 

Fund  Ins.  Co.  v.  Barker,  6  Colo.  App.  part  of  personalty  does  not  avoid  as  to 

535,  41  Pac.  513;  Trabue  v.  Dwelling  the  whole);  Miller  v.  Del.  Ins.  Co.,  14 

House  Ins.  Co.,  121  Mo.  75,  25  S.  W.  Okla.   81,   75   Pac.    1121    (if   different 

848,  23  L.  R.  A.  719,  42  Am.  St.  R.  classes  of  property  are  insured,  con- 

523  (change  of  title  as  to  real  estate  tract  is  severable).     See  many  cases 

does    not    avoid    as    to    personalty);  cited  in  §  115,  supra,  also  in  Parsons 

Kiernan  v.  Dutchess  Co.  Mut.  Ins.  Co.,  v.    Lane,   97    Minn.    124,    106  N.   W. 

150  N.   Y.    190,   194,   44   N.   E.   698  485. 
(chattel  mortgage  does  not  avoid  as  to 


308  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

hesitation,"   that  the  breach  of   warranty   avoided    the  insurance 
only  as  to  the  crop  of  1889.^ 

Other  courts  hold  that  the  contract  being  entire,  the  breach  must 
affect  the  entire  subject-matter  before  any  forfeiture  at  all  will  result, 
a  doctrine  which  certainly  presents  an  ingenious,  if  not  reasonable 
method  of  turning  the  tables  upon  the  underwriters  who  framed 
the  clause.'  Such  a  construction,  however,  is  not  only  strained,  but 
involves  a  wide  departure  from  principles  established  at  common 

law.^ 

More  satisfactory  than  the  last  rule,  doubtless,  is  the  following, 
that  where  the  facts  constituting  an  alleged  breach  affect  the  item 
of  property  in  question,  or  where  the  risk  itself  must  fairly  be  con- 
sidered indivisible,  the  contract  should  not  be  severed  for  the  purpose 
of  avoiding  forfeiture  as  to  part."* 

Parsons,  Rich  &  Co.  took  out  a  policy  for  SI, 000  apportioned  over 
building,  machinery,  stock,  supplies,  etc.  Without  permit  of  the 
insurer  the  building  stood  on  leased  ground  and  not  on  ground 
owned  by  the  insured  in  fee  simple.  The  court  concluded  that  by 
reason  of  the  breach  the  moral  hazard  was  increased  on  the  con- 
tents of  the  building  as  well  as  on  the  building  itself,  and  therefore 
the  entire  contract  was  avoided.^ 

If,  however,  there  be  not  only  a  gross  premium  but  also  no  separate 
apportionment  of  amounts  of  the  insurance,  then,  by  the  clear  weight 
of  authority  as  deduced  from  numerous  decisions  cited  in  this  section, 
a  breach  affecting  part  of  the  subject-matter  avoids  the  whole  con- 
tract.** 

^Knowles  v.  American  Ins.  Co.,  66  Johnson,   69   Kan.    146,   76   Pac.   419 

Hun,  220,  21  N.  Y.  Supp.  50,  aff'd  142  (1904)  (vacancy  of  house  avoids  as  to 

N.  Y.  641,  37  N.  E.  567.     In  a  later  stable,  corncrib  and  contents);  Agri- 

case  the  court  intimates  a  doubt  as  to  cultural  Ins.  Co.  v.  Hamilton,  82  Sid. 

the  soundness  of  this  rule  on  the  merits,  88,  33  Atl.  429,  30  L.  R.  A.  633,  51 

184  N.  Y.  HI.    A  chattel  mortgage  on  Am.    St.    R.    457    (vacancy   of    house 

cattle  does  not  avoid  the  policy  as  to  avoids  as  to  its  contents);  Parsons  v. 

the    house    and    furniture,    Taylor    v.  Lane,  97  Minn.  98,  124,  106  N.  W.  485 

Anchor  Mut.  F.  Ins.  Co.,  116  la.  625,  (citing  many  recent  cases.    If  building 

88  N.  W.  807,  57  L.  R.  A.  328,  93  is  on  leased  ground   a  breach   is  in- 

Am.  St.  R.  261.  curred    as    to    contents    also);    Brehm 

2  McQueeny  v.  PhoenLt  Ins.  Co.,  52  Lumber  Co.  v.  Svea  Ins.  Co.,  36  Wash. 

Ark.  257,  12  S.  W.  498,  5  L.  R.  A.  744,  520,  526,  79  Pac.  34   (shutting  down 

20  Am.  St.  R.  179  (vacancy  in  one  of  main  factory  thirty  days  avoids  as  to 

two  houses  held  to  be  harmless  even  other  structures  and  contents  though 

as   to    the   vacant   house).      And   see  the    latter    were    somewhat    in    use); 

Central  Montana  Mines   Co.   v.   Fire-  Dohlantrv  v.  Bine  Mounds  F.  &  L.  Ins. 

men's  Fund  Ins.  Co.,  92  Minn.  223,  99  Co.,  83  Wis.  181,  53  N.  W.  448. 
N.  W.  1120,  100  N.  W.  3.  5  Parsons  v.  Lane,  97  Minn.  98,  106 

^  Hoffec  er  v.  New  Castle,  etc.,  Ins.  N.  W.  485   (elaborate  citation  of  au- 

Co.,  4  Houst.  (Del.)  306;  Hoffecker  v.  thorities). 
/ns.  Co.,  5  Houst.  (Del.)  101.  ^Fitzgerald   v.    Allerton    Home   his. 

*  Republic  Co.  Mut.  F.  Ins.   Co.   v.  Co.,  61  App.  Div.  350,  70  N.  Y.  Supp. 


TEMPORARY    BREACH 


309 


Again  in  case  of  fraud  of  any  kind,  and  though  directly  affecting 
only  a  single  item,  whether  committed  to  procure  the  policy,  or  during 
its  life  or  in  the  proofs  of  loss,  no  indulgence  is  extended  to  the  in- 
sured. By  the  plain  terms  of  the  policy  as  well  as  at  common  law, 
fraud  as  to  a  part  vitiates  the  whole. ^ 

The  word  "entire"  is  omitted  from  the  similar  clause  of  the  Massa- 
chusetts form.  Nevertheless,  the  Massachusetts  court  holds,  that 
if  the  premium  be  an  entire  amount,  though  the  insurance  be  appor- 
tioned, the  contract  is  not  severable,  and  forfeiture  as  to  any  one 
item  defeats  the  whole  claim  of  the  insured.' 

§  247.  Temporary  Breach. — Where,  as  in  the  case  of  the  New 
York  standard  fire  policy,  it  is  expressly  provided  that  the  entire 
contract  shall  be  avoided  by  breach  of  a  condition  or  warranty,  it 
is  held  by  the  weight  of  reason  and  by  the  better  authority  that  a 
temporary  breach  avoids,  and  that  the  contract  can  thereafter  be 
revived  only  by  the  insurer's  consent,  or  by  his  misleading  conduct 
from  which,  under  the  doctrine  of  estoppel,  the  court  may  infer  his 
consent,^  though  in  many  courts  the  opposite  view  prevails.    These 


552,  72  App.  Div.  629,  76  N.  Y.  Supp. 
1013,  aff' d  175  N.  Y.  494, 67  N.  E.  1082. 

1  German  Ins.  Co.  v.  Reed,  9  Ky. 
Law  R.  929;  Hamberg  v.  St.  Paul  F.  & 
M.  Ins.  Co.,  68  Minn.  335,  71  N.  W. 
388;  Ins.  Co.  v.  Connelly,  104  Tenn. 
03,  56  S.  W.  828;  Worachek  v.  New 
Denmark  Ins.  Co.,  102  Wis.  88,  78 
N.  W.  411. 

2  Thomas  V.  Commercial  Union  Assur. 
Co.,  162  Mass.  29,  37  N.  E.  672,  44 
Am.  St.  R.  323  (house  and  stable);  Lee 
V.  Howard  F.  Ins.  Co.,  3  Gray  (Mass.), 
583;  Brown  v.  People's  Mut.  Ins.  Co., 
11  Gush.  (Mass.)  280;  Friesmxdh  v. 
Aqawam  Mid.  F.  Ins.  Co.,  10  Gush. 
(Mass.)  587.  But  if  a  portion  of  the 
property  is  sold  without  the  insurer's 
consent,  that  portion  simply  is  re- 
moved from  the  operation  of  the  policy, 
Bidlman  v.  North  Brit.  &  Mer.  Ins.  Co. , 
159  Mass.  118,  34  N.  E.  169. 

3  Imperial  Fire  Ins.  Co.  v.  Coos 
County,  151  U.  S.  452,  14  S.  Ct.  379, 
38  L.  Ed.  231  (full  compliance  with  all 
warranties  a  condition  precedent  to 
recovery);  Georgia  Home  Ins.  Co.  v. 
Rosenfield,  95  Fed.  358,  37  G.  C.  A.  96 
(temporary  other  insurance) ;  German- 
Am.  Ins.  Co.  V.  Humphrey,  62  Ark. 
348,  35  S.  W.  428,  54  Am.  St.  R.  297 
(temporary  incumbrance);  Replogle  v. 
Am.  Ins.  Co.,  132  Ind,  360,  31  N,  E. 


947  (temporary  other  insurance);  Ger- 
man Ins.  Co.  V.  Russell,  65  Kan.  373, 
69  Pac.  345,  58  L.  R.  A.  234  (tem- 
porary vacancy) ;  Concordia  F.  Ins.  Co. 
V.  Johnson,  4  Kan.  App.  7,  45  Pac. 
722  (illegal  use);  Kyte  v.  Connecticut 
Union  Assur.  Co.,  149  Mass.  116,  21 
N.  E.  361,  3  L.  R.  A.  5C8  (temporary 
increase  of  risk);  Home  F.  Ins.  Co.  v. 
Kuhlman,  58  Neb.  488,  78  N.  W.  936, 
76  Am.  St.  R.  Ill  (vacancy,  but  court 
thrust  on  company  burden  of  actively 
taking  advantage  of  knov/n  forfeiture); 
Moore  v.  Phoenix  Ins.  Co.,  62  N.  H. 
240,  13  Am.  St.  R.  556  (vacancy); 
Wheeler  v.  Traders'  Ins.  Co.,  62  N.  H. 
450  (use  of  prohibited  articles);  New- 
port Improvement  Co.  v.  Home  Ins.  Co., 
163  N.  Y.  237,  242,  57  N.  E.  475 
(building  alterations);  Mead  v.  North- 
western Ins.  Co.,  7  N.  Y.  530  (tem- 
porary use  of  camphene);  Couch  v. 
Farmers'  F.  Ins.  Co.,  64  App.  Div.  367, 
72  N.  Y.  Supp.  95  (temporary  va- 
cancy); Gray  v.  Guardian  Assur.  Co., 
82  Hun,  380,  31  N.  Y.  Supp.  237 
(temporarj'-  chattel  mortgage);  Eng. 
Mar.  Ins.  Act  (1906),  §  34(2);  De 
Hahn  v.  Hartley  (1786),  1  T.  R.  343 
(1787),  2  T.  R.  186  n.  (ship  warranted 
to  sail  with  fifty  hands  made  good  the 
number  before  loss;  policy  void); 
Quebec  Mar,   his.   Co    v    Commercial 


310 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


courts,  departing  from  the  doctrine  of  the  common  law  and  ignoring 
the  plain  language  of  the  contract,  have  seen  fit  to  make  a  new  con- 
tract for  the  parties  whieli  is  deemed  to  be  in  fairer  terms. ^ 

Certain  statutes,  however,-  and  certain  standard  policies^  provide 
that  breach  of  certain  warranties  shall  cause  forfeiture  only  where 
the  loss  occurs  during  the  breach  or  where  the  fact  constituting  the 
breach  is  a  contributory  cause  of  the  loss. 


§  248.  Concealment — Misrepresentation. — //  the  insured  has  con- 
cealed or  misrepresented,  in  writing  or  othermise,  any  material  fact.  As 
has  been  observed,"*  in  this  country  by  the  prevailing  rule,  conceal- 
ment of  a  material  fact  to  avoid  the  fire  policy  must  be  shown  to 
have  been  intentional  if  there  be  no  express  provision  of  the  contract 
to  the  contrary.  This  clause,  apparently,  was  intended  to  make 
obligatory  here  the  rule  on  this  subject  obtaining  in  England  with- 
out express  provision,  but  the  current  of  authority  in  this  countrj'^ 
construes  the  word  "concealment,"  appearing  in  this  clause,  to  mean 
as  theretofore  "an  intentional  withholding  of  a  material  fact."    The 


Bk.  (1870),  L.  R.  3  P.  C.  234  (ship 
iinseaworthy  with  defect  in  boiler 
repaired  before  loss;  policy  void). 

1  Sumter  Tobacco  Warehouse  Co.  v. 
Phoenix  Ins.  Co.  (3.  C,  1907),  56  S.  E. 
654  (citing  many  cases  pro  and  con); 
Adair  V.  Ins.  Co.,  107  Ga.  297,  33  S.  E. 
78.  73  Am.  St.  R.  122;  Tompkins  v. 
Hartford  F.  Ins.  Co.,  22  App.  Div.  380, 
49  N.  Y.  Supp.  184;  Organ  v.  Hibernia 
F.  Ins.  Co.,  3  Mo.  App.  576  ("an  in- 
terruption is  not  a  forfeiture").  So 
as  to  temporary  increase  of  hazard. 
Traders'  his.  Co.  v.  Catlin,  163  111.  256, 
45  N.  E.  255,  35  L.  R.  A.  ,595.  Tem- 
porary otlier  insurance,  Pha;n'ix  his. 
Co.  V.  Johnston,  42  111.  App.  66;  Ins. 
Co.  of  N.  A.  V.  McDo'vell,  50  III.  120; 
Ro'iat  Ins.  Co.  v.  McCrea,  8  Lea 
(Tenn.),  531,  41  Am.  Rep.  565. 
Temporary  vacancy,  Ins.  Co.  of  A''.  A. 
V.  Garland,  108  111.  220;  Stephens  v. 
Phoenix  Assur.  Co.,  85  111.  App.  671; 
President,  etc.,  v.  Pitts,  88  Miss. 
587,  41  So.  5;  East  Tex.  F.  Ins.  Co. 
v.  Kempner,  87  Tex.  229,  27  S.  W.  122, 
47  Am.  St.  R.  99.  Temporary  incum- 
brance, Bornv.  Home  Ins.  Co.,  110  Iowa, 
379,  81  N.  W.  676,  80  Am.  St.  R.  300 
(annotated  with  many  cases  pro  and 
con);  Home  F.  Ins.  Co.  v.  Johansen,  59 
Neb.  349,  80  N.  W.  1047;  Omaha  Fire 
Ins.  Co.  V.  Dierks,  43  Neb.  473,  61 
N.  W.  740.  Excessive  temporary  in- 
cumbrance, McKihban  v.  Des  Moines 


Ins.  Co.,  114  Iowa,  41,  86  N.  W.  38. 
Chattel  mortgage,  Ins.  Co.  of  N.  A.  v. 
Wicker,  93  Tex.  390,  55  S.  W.  740. 
Conveyance  and  reconveyance  of  real 
estate,  German  Mut.  F.  Ins.  Co.  v. 
Fox  (Neb.),  96  N.  W.  652,  63  L.  R.  A. 
334.  Compare  two  English  cases  in 
which  it  was  held  that  w-nere  the  mas- 
ter of  a  ship  omitted,  though  not 
fraudulently,  to  advise  the  shipowner 
of  a  mishap  causing  a  particular  aver- 
age loss,  the  non-disclosure  did  not 
avoid  the  policy  but  only  precluded 
the  assured  from  recovering  for  the 
loss  in  question,  Gladstone  v.  King 
(1813).  1  M.  &  S.  35;  Stribley  v.  Im- 
perial Mar.  Ins.  Co.  (1876),  1  Q.  B.  D. 
507.  These  decisions,  however,  have 
since  been  criticised,  Blackburn  v. 
Vigors  (1887).  12  App.  Cas.  531,  536, 
540;  Arnould,  Ins.,  §§  584,  585;  De 
Hart  &  Siniey,  Ins.  (1907),  24.  And 
they  are  not  followed  in  the  codifica- 
tion, Eng.  Mar.  Ins.  Act  (1906), 
§  18(1).  But  the  rule  may  well  be 
more  stringent  in  marine  insurance. 
If  a  temporary  breach  contributes  to 
the  loss  in  fire  or  life  insurance  the 
company  is  apt  to  know  it. 

2  See  Appendix,  ch.  I. 

3  Iowa,  New  Hampshire,  and  Michi- 
gan, for  example;  also,  as  to  unoC' 
cupancy  clause,  Wisconsin. 

*  See  §  96,  supra. 


INTEREST  OF   INSURED    NOT  TRULY   STATED   IN    1^0LiC\        311 

term  is  held  to  signify  something  more  than  "non-disclosure,"  and 
to  imply  a  conscious  or  willful  non-disclosure.^  This  express  war- 
ranty, therefore,  has  little  if  any  effect.^ 

Either  with  or  without  an  express  warranty,  a  misrepresentation 
of  a  material  fact,  made  through  mistake  or  by  design,  avoids  a 
polic}'  of  insurance  underwritten  on  the  faith  thereof.^ 

§  249.  Interest  of   the  Insured  not  Truly  Stated  in  the  Policy. — 

Except  for  this  requirement  the  insured  might  describe  his  interest 
in  the  most  general  terms,  and  if  he  had  any  insurable  interest  at  all 
it  would  avail  to  sustain  the  contract.'*  He  might  describe  the  pa*op- 
erty  as  his  or  say  that  he  was  the  owner,  and  if  that  were  true  in  any 
substantial  sense  he  could  recover  to  the  extent  of  his  insurable 
interest.^  But  under  this  clause,  which  is  a  condition  precedent  or 
warranty,^  he  is  bound  to  disclose  the  character  of  his  insurable 
interest;  whether,  for  example,  he  is  owner,  trustee,  consignee,  factor, 
agent,  mortgagee,  or  lessee,  and  make  sure  that  the  description  of  his 
interest  is  truly  noted  in  the  policy.^  It  is  only  right  that  the  in- 
surers should  know  the  nature  and  extent  of  his  insurable  interest, 
since  the  degree  of  care  exercised  in  guarding  the  property  from  fire 
is  likely  to  depend  somewhat  upon  the  character  and  extent  of  the 

^  Clark  V.   Union  Mut.  F.  Ins.  Co.,  that  the  false  answer  was  made  also 

40  N.  H.  333,  77  Am.  Dec.  721  (ques-  "with  intent  to  deceive,"  Levie  v.  Met. 

tion    of    intent    for    jury);    Arthur    v.  L.  Ins.  Co.,   163   Mass.  117,  39  N.  E. 

Palatine  Ins.  Co.,  35  Oreg.  27,  57  Pac.  792. 

62  (as  to  incumbrances);   Pelzer  Mfg.  *  Farmers'  Mutual  Fire  &  L.  I.  Co. 

Co.  V.  Sun  Fire  Office,  36  S.  C.  213,  v.  Lecroy,  91  111.  App.  41;  Buffum  v. 

268;  Mascott  v.  Ins.  Co.,  69  Vt.  116,  Bowditch  Mut.  Fire  Ins.  Co.,  10  Cush. 

37  Atl.  255;  Sanford  v.  Royal  Ins.  Co.,  (Mass.)  540. 

11  Wash.  653,  40  Pac.  609;  Van  Kirk  5  Wainer  v.  Milford  Mut.  Fire  Ins. 

V.  Citizens'  Ins.  Co.,  79  Wis.  627,  48  Co.,  153  Mass.  335;  Trade  Ins.  Co.  v. 

N.  W.  798;  Johnson  v.  Scottish  Union  Barracliff,  45  N.  J.  L.  543,  46  Am.  Rep. 

&  Nat.  his.  Co.,  93  Wis.  223,  67  N.  W.  792;  Daceij  v.  Aqricultural  Ins.  Co.,  21 

416.    And  see  Parker  v.  Otsego  Co^inty  Hmi   (N.   Y.),  83.     As,  for  example, 

Farmers'  C.  F.  I.  Co.,  47  App.   Div.  where  the  insured  called  the  property 

204,  62  N.  Y.  Supp.  199,  aff'd  168  N.  Y.  his  but  in  reality  had  only  a  life  estate, 

655,  61  N.  E.  1132;  Baldwin  v.  German  Allen  v.  Charlestown  Mut.  Fire  Ins.  Co., 

Ins.  Co.,  105  Iowa,  379,  75  N.  W.  326;  5  Gray  (Mass.),  384. 
Greenlee  v.  Hanover  Ins.  Co.,  104  Iowa,  «  il/ers  v.  Franklin  Ins.  Co.,  68  Mo. 

481,  73  N.  W.   1050;  McCarty  v.  Im-  127;  Weed  v.  L.  &  L.  Fire  Ins.  Co.,  116 

perial  Ins.  Co.,  126  N.  C.  820,  36  S.  E.  N.  Y.  106,  115,  22  N.  E.  229;  Matthie  v. 

284.  Globe  Fire  Ins.  Co.,  68  App.  Div.  239, 

2  See  §  97,  supra.  74  N.  Y.  Supp.  177,  aff'd  174  N.  Y. 

^Stetson  V.  Mass.  Mut.  Fire  Ins.  Co.,  489,  67  N.  E.  57. 
4  Mass.  3.30,  3  Am.  Dec.  217.     But  if  7  The     provisions     of     the     policy 

application    is   written,    the    company  amount    to    an    express    and    pointed 

his  r  o  ris;ht  to  rely  on  oral  representa-  inquiry   upon   these  subjects  and   the 

tion  bv  broker's  clerk,  Dollircr  v.  7ns.  insured  is  conclusively  bound  to  read 

Co.,  131  Mass.  39.     Under  the  Massa-  and  know  its  terms,  Par.'ions  v.  Lane 

chusetts  statute  the  insurer  must  show  97  Minn.  98,  113. 


312  MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 

insurable  interest.^  The  warranty  relates  to  the  time  of  the  incep- 
tion of  the  contract.^ 

This  clause,  however,  does  not  require  him,  unless  particularly 
interrogated  on  the  subject,  to  state  the  circumstances  which  relate 
to  the  value  or  permanency  of  his  interest.  For  example,  if  the  char- 
acter of  his  title  is  a  fee  simple  and  the  property  is  consequently 
described  as  his,  he  need  not  state  that  he  is  only  a  part  owner;  ■''  or 
that  there  are  mortgages,  judgments  or  other  incumbrances  out- 
standing upon  his  property;  ^  or  that  he  has  made  an  agreement  to 
part  with  the  title  in  the  future;  ^  or  that  his  property  has  been  seized 
on  execution  but  not  yet  sold.«  Any  obligation  which  may  rest  upon 
him  to  make  such  disclosures  does  not  come  by  virtue  of  this  particu- 
lar clause. 

The  word  "interest"  has  been  appropriately  used  in  the  standard 
form  in  place  of  the  words  "title  or  possession,"  for  the  reason  that 
there  are  some  insurable  rights,  like  those  of  mortgagee,  or  surety, 
or  stockholder,  to  which  the  attributes  of  title  and  possession  are  not 
necessarily  incident.  But  it  is  apprehended  that  the  substitution  of 
this  broad  word  does  not  impose  any  obligation  upon  the  insured  to 
make  any  fuller  or  other  disclosure  in  respect  to  his  title  or  possession 
than  is  required  by  the  other  form  of  words,  although  the  ruling  in 
cases  cited  in  the  notes  might  lead  to  a  different  conclusion.' 

1  Thus  if  insured  represents  that  he  pUcations  with  detailed  questions  are 

is  owner  when  in  reahtv  he  is  mort-  not    employed,    the    insurance    com- 

gagee,  Ordway  v.  Chace^  57  N.  J.  Eq.  panies  relying  upon  the  express  war- 

478,  42  Atl.  149;  or  that  he  owtis  in  ranties  of  the  policy, 

fee  when  in  fact  he  has  only  an  execu-  2  Collins  v.  Assur.  Corp.,  165  Pa.  St. 

tory  contract  for  purchase^  the  policy  .398,  30  Atl.  924. 

will  be  avoided,  Wooliver  v.  Boylston  ^  Peck  v.  Xew  Lond.  Co.  Mut.  Ins. 

Ins.  Co.,  104  Mich.  132,  62  N.  W.  149.  Co.,  22  Conn.  .575;  Turner  v.  Burron's, 

There  are  many  decisions  holding  that  5  Wend.  (N.  Y.)  .541. 

if  the  insurer  makes  no  affirmative  in-  *  Dolliver  v.  St.  Joseph  F.  &  M.  Ins. 

quiries  as  to  title  or  interest  it  must  Co.,  128  Mass.  315,  35  Am.  Rep.  378; 

be  presumed  that  he  is  content  with  Judge  v.  Conn.  Fire  Ins.  Co.,  132  Mass. 

any  insurable  interest,  Manchester  Fire  521;  Carson  v.  Jersey  City  Fire  Ins.  Co., 

Assur.  Co.  v.  Abrams,  89  Fed.  932,  32  43  N.  J.   L.   300,  39  Am.  Rep.  584; 

C.   C.   A.   426,  citing  cases;   Sharp  v.  Weedy.  Hamburg-Breynen  F.  I.  Co.,lS3 

Scottish   U.   &   N.   Ins.   Co.,   1.36  Cal.  N.  Y.  394,  45  N.Y.  St.  R.  105,  31  N.  E. 

542,  69  Pac.  253,  615;  Glens  Falls  Ins.  231;  McClelland  v.  Greenwich  Ins.  Co., 

Co.  v.  Michael  (Ind.),  74  N.  E.  964;  107   La.    124,   31    So.   691.      And   see. 

Glens  Falls  Ins.  Co.  v.  Michael  (Ind.),  Porter  v.  Orient  Ins.  Co.,  72  Conn.  519, 

79  N.  E.  905   (citing  cases);  Hartford  45  Atl.  7. 

F.  Ins.  Co.  \\  McClain  (Ky.),^oS.'W.  ^  Davis  v.  Quincy  Mut.  Fire  7n.s, 
693  (1905);  Miote  v.  7ns.  Co.,  113  Co.,  10  Allen  (Mass.),  113.  But  other- 
Mich.  166,  71  N.  W.  463  (Neb.),  100  wise  if  he  holds  under  an  executory 
N.  W.  130;  16  Wash.  155.  These  de-  contract  of  purchase,  Bro"n  v.  Com- 
cisions  are  not  in  accord  with  the  cur-  niercial  Fire  Ins.  Co.,  86  Ala.  189. 
rent  of  authority,  see  §  141,  s//pra,  and  ^Strong  v.  Manuf'rs  Ins.  Co.,  10 
were  probably  rendered  without  ap-  Pick.  40,  20  Am.  Dec.  507. 
preciation  of  the  method  cf  doing  '^  Lee  v.  Agricultural  Ins.  Co.,  79 
business  in  cities,  where,  as  a  rule,  ap-  Iowa,  379;    Edmonds   v.   Mut.  Safety 


FRAUD   OR   FALSE   SWEARING  313 

If  the  policy  is  made  payable  to  one  "as  his  interest  may  appear," 
the  interest  need  not  be  stated.  The  written  words  override  the  re- 
quirement of  the  printed  form.^ 

This  clause  does  not  appear  in  the  Massachusetts  form.  Therefore, 
under  that  form  of  contract,  an  appUcant  for  insurance  need  not 
disclose  the  special  nature  of  his  title  or  interest,  until  it  is  asked  for.^ 
Accordingly  it  has  been  held  in  that  state  that  the  applicant,  without 
fatal  results,  may  in  good  faith  describe  the  property  as  his,  though 
in  reality  his  only  interest  is  that  of  a  tenant  by  the  curtesy  initiate 
in  his  wife's  property.^ 

§  250.  Fraud  or  False  Swearing. — In  case  of  any  fraud  or  false 
swearing,  etc.,  whether  before  or  after  loss.  This  provision  makes  clear 
the  extension  of  the  general  rule  of  insurance  law  demanding  good 
faith,  to  intentional  misstatements  made  after  loss.  In  fact,  it  is  by 
the  statements  contained  in  the  proofs  of  loss  that  the  insured,  if 
unscrupulous,  is  most  tempted  to  deviate  from  strict  honesty  in  order 
to  swell  the  amount  of  his  recovery. 

False  swearing  in  the  examination  under  oath,'*  or  in  the  proofs 
of  loss,  to  vitiate  the  policy,  must  be  intentionally  false,  whether  by 
a  fraudulent  overvaluation  of  the  goods  destroyed,  or  a  statement  of 
items  which  really  have  no  existence,^  or  b}^  an  undervaluation  of 
what  is  saved,  or  as  to  ownership,®  or  incumbrances,^  or  origin  of  the 
fire,*  or  other  particulars.^     An  innocent  mistake, ^^  or  an  innocent 

Fire  Ins.   Co.,   1    Allen    (Mass.),   311;  112  Wis.  138,    88  N.  W.  57,    holding 

Abbott  V.  Hampden  Mut.  Fire  Ins.  Co.,  also  it  is  not  enough  that  false  swear- 

30  Me.  414.  ing  occurs  through  mistake,  careless- 

1  Dakin  v.  Liver-pool,  L.  &  G.  Ins.  ness,  or  inadvertence  or  in  unreason- 
Co.,  77  N.  Y.  600.  able  reliance  on    information    derived 

2  Wainer  v.  Milford  Mut.  Fire  Ins.  from  others.  The  assured  had  put 
Co.,  153  Mass.  335,  26  N.  E.  877,  11  into  his  schedules  the  original  cost 
L.  R.  A.  598  (owner  of  undivided  half  price  of  second-hand  articles. 

of  the  legal  title).  '^  Fitzgerald  v.  Atlanta  Home  Ins.  Co., 

3  Dorle  V.  American  Fire  Ins.  Co.,  61  App.  Div.  350,  356,  70  N.  Y.  Supp. 
181  Mass.  139,  63  N.  E.  394.  But  an  552,  aff'd  175  N.  Y.  494,  67  N.  E.  1082. 
application  may  call  for  a  true  disclos-  8  White  v.  Merchants'  Ins.  Co.,  93 
ure  as  to  title,  Wilbur  v.  Boicditch  Mut.  Mo.  App.  282. 

F.    Ins.    Co.,    10    Cush.    (Mass.)    446;  9  Republic  Fire  Ins.  Co.  v.  Weide,  81 

Allen  v.  Charlestown  Mut.  F.  Ins.  Co.,  U.   S.  375,  20  L.  Ed.  894;  Hilton  v. 

5  Gray  (Mass.),  384;  JenAins  v.  Qmnci/  Phoenix   Assur.    Co.,   92   Me.    272,   42 

Mut.  F.  Ins.  Co.,  7  Gray  (Mass.),  370.  Atl.  412;  Atherton  v.  Brit.-Am.  Assur. 

i  Claflin  V.  Commonvealth  Ins.  Co.,  Co.,  91  Me.  289,  39  Atl.  1006  (holding 

llOU.  S.  81,3  S.  Ct.  507,  28  L.  Ed.  76.  that   an   honest   misstatement   is   not 

^  Rovins^v  V.    Northern  As.s?/r.    Co.,  enough  to  avoid);  Daltoji  v.  Miluau' ee 

100  Me.  112,  60  Atl.  1025  (1905).  Mechanics'  Ins.    Co.,   126   Iowa,   377, 

0  Bever  V.St.  Paul  F.  i&  M.  Ins.  Co.,  102    N.    W.    120;    Garner   v.    Mutual 

10  Tubb  V.  L.  &  L.  (kG.  Ins.  Co.,  106  Little  v.  Phoenix  Ins.  Co.,  123  Mass. 
Ala.  651,  17  So.  615;  .Am.  Cent.  Ins.  380;  Thierolf  v.  Universal  Fire  Ins.  Co., 
Co.  V.  Ware,  65  Ark.  336,  46  S.  W.  129;       110  Pa.  St.  37,  20  Atl.  412. 


:n4 


MEANING    AND    LEGAL    EFFECT    OF    FIKE    i'OLLCY 


though  exaggerated  estimate  of  value,  will  not  avoid  the  policy.^ 
An  overvaluation,  in  order  to  work  a  forfeiture,  must  be  so  plain  that 
it  cannot  be  accounted  for  upon  the  principle  that  every  man  is 
naturall}'^  prone  to  put  a  favorable  estimate  upon  tlie  value  of  his 
own  property.-  Thus  in  a  Massachusetts  case  where  goods,  repre- 
sented by  the  plaintiff  to  be  worth  S2,802.04,  were  valued  by  the 
arbitrators  at  only  $761.68,  the  court  refused  to  find  fraud  as  a  matter 
of  law.^ 

The  fatal  effect,  however,  of  a  willful  misstatement  of  fact  is  not 
disturbed  because  of  the  failure  of  the  company  to  prove  that  preju- 
dice was  thereby  occasioned,"*  or  because  it  appears  that  the  actual 
loss  as  truthfully  stated  exceeds  the  amount  of  insurance."''  Within 
the  terms  of  the  policy  the  company  establishes  its  defense  when  it 
shows  that  the  statements  made  were  relevant  and  willfully  false. 
By  the  better  rule  it  need  not  go  further  and  assume  the  burden  of 
satisfying  a  jury  that  the  motives  of  the  assured,  in  making  the 
untruthful  statements,  were  bad,  for  that  is  presumed,  or  that  an 
actual  injury  to  the  company  ensued.® 


Fire  Ins.  Co.,  86  N.  W.  289;  Home 
his.  Co.  V.  Winn,  42  Neb.  331,  60 
N.  W.  .575  (assured  deliberately  raised 
the  amounts  in  invoices);  Titus  v. 
Glens  Falls  Ins.  Co.,  81  N.  Y.  410; 
Cheever  v.  Scottish  U.  &  Nat.  Ins.  Co., 
86  App.  Div.  (N.  Y.)  328  (schedule 
gave  articles  at  cost  price  and  not 
present  value,  held,  no  forfeiture); 
Medley  v.  German  Alliance  Ins.  Co., 
55  W.  Va.  342,  47  S.  E.  101;  Rickeman 
V.  Williamsburg  City  Fire  his.  Co.,  120 
Wis.  655,  98  N.  W.  960,  in  which  the 
company  contended  that  the  assured 
had  no  such  amount  of  stock  as  claimed, 
and  that  he  had  removed  debris  after 
the  fire  with  intent  to  destroy  evi- 
dence. Held,  that  it  was  relevant  to 
show  his  straightened  circumstances 
as  bearing  on  the  charge  of  fraud. 
Compare  Morley  v.  L.  &  L.  &  G.  Ins. 
Co.,  92  Mich.  590,  52  N.  W.  939  (held, 
not  relevant  to  show  that  assured  was 
engaged  in  a  losing  business).  A 
Lord  Chief  Baron  says:  "If  the  plain- 
tiff deliberately  introduced  into  his 
claim  one  article  which  he  never 
possessed,  or  placed  upon  any  one  that 
he  did  possess  a  fraudulent  and  false 
value  he  was  not  in  point  of  law  en- 
titled to  recover,"  Haigh  v.  De  la  Covr, 
3  Camp.  319;  Chapman  v.  Pole,  22 
L.  T.  N.  S.  306.  "Fraud"  means  any 
trick  or  artifice  perpetrated  on  the 
company  in  proofs  of  loss  or  otherwise, 


Maher  v.  Hibernia  Ins.  Co.,  67  N.  Y. 
283;  Dohmen  v.  Mfrs.,  etc.,  Ins.  Co.,  96 
Wis.  38,  55,  71  N.  W.  69.  As  to  fraudu- 
lent removal  of  property  after  fire,  see 
Schmidt  v.  Phila.  Underwriters,  109 
La.  884,  33  So.  907. 

1  Towne  v.  Springfield  Fire,  etc.,  Ins. 
Co.,  145  Mass.  582;  Jersey  City  his.  Co. 
V.  Nichol,  35  N.  J.  Eq.  291,  40  Am.  St. 
Rep.  625;  Maher  v.  Hibernia  Ins.  Co., 
67  N.  Y.  283;  Susquehanna  Mid.  Fire 
Ins.  Co.  V.  Stoats,  102  Pa.  St.  529; 
Norton  v.  Royal  F.  &  L.  Assn.  Co.,  2 
Times  L.  R.  460  (claimant  may  "put 
it  on"  to  get  full  settlement,  without 
fraud). 

2  Franklin  Fire  Ins.  Co.  v.  Vaughan, 
92  U.  S.  516;  Sturm  v.  Atlantic  Mut. 
Ins.  Co.,  63  N.  Y.  77. 

^Goldstein  v.  FranUin  Mut.  F.  Ins. 
Co.,  170  Mass.  243,  49  N.  E.  115.  As 
to  representation  regarding  o\vnership, 
.see  Little  v.  Phoenix  Ins.  Co.,  123  Mass. 
380,  25  Am.  Rep.  96  (policy  not 
avoided). 

*  Bannon  v.  Ins.  Co.  of  N.  A.,  115 
Wis.  290,  91  N.  W.  666  (books  of  ac- 
count fraudulently  altered  and  dis- 
played to  the  adjuster). 

^  DoUoff  V.  Phwnix  Ins.  Co.,  82  Me. 
266,  19  Atl.  396;  Capital  F.  Ins.  Co.  v. 
Beverly,  14  Ohio  C.  C.  468.  Contra, 
for  example,  Home  Ins.  Co.  v.  Lowen- 
thal  (Mi.ss.),  36  So.  1042  (1904). 

8  Claflin  V.  Commonwealth  Ins.  Co., 


FRAUD   OR   FALSE   SWEARING 


315 


There  are  decisions  to  the  effect  that  false  swearing  in  the  proofs  of 
loss  by  an  agent  will  not  avoid  the  policy,  unless  the  assured  himself 
is  responsible  for  it,  or  has  acquiesced  in  it,  the  theory  being  that 
authority  from  the  insured  to  commit  such  a  wrong  should  not  be 
inferred.^ 


110  U.  S.  81,  3  S.  Ct.  507;  Linscott  v. 
Orient  Ins.  Co.,  88  Me.  497,  34  Atl.  405; 
Virginia  F.  &  M.  his.  Co.  v.  Vaughan, 
88  Va.  832,  14  S.  E.  754  (in  which  in- 
voices were  intentionally  and  ma- 
terially altered  for  presentation  to  the 
company).  Conlrn,  for  example,  Pett'i 
V.  Mut.  F.  Ins.  Co.,  Ill  Iowa,  358,  82 
N.  W.  767.  A  dishonest  claimant  is 
apt  to  include  in  the  schedules  of  his 
proofs  of  loss  at  least  some  articles 
which  he  knows  have  altogether  es- 
caped the  fire.  If  the  underwriter  can 
demonstrate  this  a  defense  is  made 
good,  Wunderlich  v.  Palatine  Ins.  Co., 
104  Wis.  382,  80  N.  W.  467.  The 
question  of  fraud  or  false  swearing  is 
generally  for  the  jury.  Commercial  Ins. 
Co.  V.  Friedlander,  156  111.  595,  41 
N.  E.  183,  and  the  company  does  not 
receive  much  consideration  at  their 
hands  unless  a  clear  case  of  dishonesty 
is  established.  In  Goulstone  v.  Roi/ol 
Ins.  Co.,  1  F.  &  F.  276,  claim  for  furni- 
ture was  £260,  estimate  on  schedule  in 
insolvency  was  £50,  jury  fovmd  for 
defendant.  Court  directed  jury  to  do 
so,  "if  the  claim  was  willfully  false  in 
any  substantial  respect."  But  if  it 
appears  by  the  plaintiff's  own  show- 
ing, Carson  v.  Jersey  Citii  Fire  Ins. 
Co.,  14  Vroom.  (N.  J.)  300,  39  Am. 
Rep.  584,  that  his  statement  of  value 
was  knowingly  and  intentionally  ex- 
aggerated, a  forfeiture  ought  to  be 
found  by  the  court,  American  Ins.  Co. 
V.  Gilbert,  27  Mich.  429.  Where  the 
discrepancy  between  the  representa- 
tion of  the  insured  and  the  finding  of 
the  fact  by  the  jury  is  very  great,  a 
limit  will  be  reached  where  the  court 
will  intervene  and  decide  as  matter  of 
law  that  the  amount  of  the  error  is 
consistent  only  with  bad  faith.  To 
illustrate,  where  a  house  was  valued 
at  $1,400,  and  the  evidence  showed  its 
value  to  be  about  $1,000,  it  was  held 
that  this  difference  did  not  establish  as 
matter  of  law  that  there  had  been  a 
breach  of  warranty  against  over- 
valuation, Smith  V.  Home  Ins.  Co.,  47 
Hun  (N.  Y.),  30.  Putting  the  value  of 
$2,000  upon  goods  worth  $1,200  was 
held  not  to  prove  a  fraudulent  intent, 
Goldstein  v.  St.  Paul  Fire  &  M.  I.  Co., 


124  Iowa,  143,  99  N.  W.  696;  Behrens 
V.  Germania  Fire  Ins.  Co.,  64  Iowa,  19. 
Claim  more  than  double  the  award  was 
held  fraudulent,  Larocqve  v.  Roial  Ins. 
Co.,  23  Lr.  Can.  Jur.  217  (furniture, 
fixtures,  liquor,  etc.).  Also,  where  a 
value  of  $5,000  was  given  to  property 
worth  $2,000,  a  finding  of  no  fraudu- 
lent intent  was  not  set  aside.  But 
there  was  also  a  finding  that  the  actual 
value  of  the  property  destroyed  ex- 
ceeded the  amount  of  insurance,  Dogge 
V.  Northwestern  Nat.  Ins.  Co.,  49  Wis. 
501.  But  in  another  case  a  rule  nisi 
for  a  new  trial  was  made  absolute  where 
the  claim  sworn  to  was  £1,085,  and 
the  amount  found  by  the  jury  was 
only  £500,  the  court  concluding  that 
this  finding  of  fact  ought  to  be  con- 
sidered in  effect  a  verdict  for  the  de- 
fendant, Lemi  V.  Baillie,  7  Bing.  349. 
In  Sibley  v.  St.  Paul  F.  &  M.  Ins.  Co., 
22  Fed.  Cas.  60,  claim  was  for  $957.87, 
A  verdict  for  $567.50  was  set  aside  by 
the  court.  And  where  the  proofs  made 
the  loss  three  times  as  large  as  the 
amount  found  by  the  jury,  no  reason 
being  disclosed  for  supposing  that  the 
misstatement  arose  inadvertently,  the 
court  was  of  opinion  that  fraud  was 
shown  as  matter  of  law  and  that  the 
policy  should  be  held  forfeited,  not- 
withstanding the  jury's  verdict  for  the 
plaintiff,  Sternfield  v.  Park  Fire  Ins. 
Co.,  50  Hun  (N.  Y.),  262.  And  see 
Anibal  v.  Ins.  Co.  of  N.  A.,  84  App. 
Div.  634,  82  N.  Y.  Supp.  600  (claim 
$6,780.30;  a  judgment  at  special  term 
for  $1,857  was  set  aside).  In  a  Cali- 
fornia case,  however,  the  assured  in  his 
proofs  of  loss  claimed  $1,875,  and  in  his 
testimony  $2,000.  The  verdict  was  for 
only  $500,  but  the  court  held  that  this 
was  not  conclusive  of  fraud  or  false 
swearing,  Obersteller  v.  Commercial 
Assur.  Co.,  96  Cal.  645,  31  Pac.  587. 

1  7ns.  Co.  V.  Scales,  101  Tenn.  628, 
49  S.  W.  743;  Metzger  v.  Manchester  F. 
Ins.  Co.,  102  Mich.  334,  63  N.  W.  650 
(husband  of  insured);  Evans  v.  Ins. 
Co.  (Wis.),  109  N.  W.  952  (wife  of  in- 
sured). But  the  insured  must  not 
willfully  or  recklessly  adopt  or  take 
advantage  of  the  fraudulent  misstate- 
ments, Mullin  V.  Vt.  Mut.  F.  Ins.  Co., 


316 


MEANING    AM.    UMW.    l-lFbCT    OF    FIRE    POLICY 


It  will  be  ubscrvcl  that  a  .listinction  must  be  made  between  ante- 
cedent statements  wl.ich  form  the  in.lucement  for  the  contract,  and, 
whether  material  or  not,  are  generally  incorporated  in  the  contract 
as  warranties.'  and  those  statements,  on  the  other  hand,  which  are 
made  after  the  loss,  in  an  attempt  to  give  to  the  insurers  such  mfor- 
mation  as  may  be  available  respecting  the  origin,  character,  and  ex- 
tent of  the  loss  already  accrued.  The  latter  must  be  willfully  untrue 
to  avoid  the  ix.licy.  and  where  the  statements  in  the  verified  proofs  of 
loss,  or  in  the  examination  under  oath,  are  shown  to  be  intentionally 
false,  the  crime  of  perjury,  or  other  crime,  may  also  be  established  by 
statute,-  in  atldition  to  forfeiture  of  the  insurance.^ 

Fraud  as  to  one  item  forfeits  the  entire  contract.  There  is  no  equity 
to  induce  the  court  to  construe  the  contract  as  severable  in  such  a 
case;  •*  and  this  was  also  the  result  at  common  law,  without  special 
provision  in  the  policy." 

Several  of  the  standard  fire  policies  have  no  express  provision  re- 
garding false  .swearing  or  fraud  in  proofs  of  loss;  '^  but  even  under  such 
a  policy  a  fraudulent  or  dishonest  misstatement  by  the  insured  will 
avoid  his  policy.' 

58  Vt.  113,  4  Atl.  817.  As  to  arson 
and  fraud  by  assured  and  agents,  see 
§  231,  supra. 

1  Northwestern  Life  his.  Co.  v.  Mont- 
gomerxj,  116  Ga.  799. 

2N.  Y.  Penal  Code,  §§  9G,  579; 
Peovle  V.  Spieqcl,  75  Hun  (N.  Y.),  161; 
People  V.  Vanghnn.  19  Misc.  298.  And 
see  People  v.  Martin,  175  N.  Y.  315, 
Submitting  a  false  affidavit  to  an  in- 
surer, in  proof  of  lo.ss,  is  not  perjury 
at  common  law,  because  it  is  extra- 
judicial, People  V.  Travis,  4  Park. 
213 

^Avery  v.  Ward,  150  Mass.  160. 
Negligent  misstatement  does  not  avoid, 
Phcenix  Ins.  Co.  v.  Suann  (Tex.  Civ. 
App.),  41  S.  W.  519;  Beyer  v.  Ins.  Co., 
112  Wis.  138,  88  N.  W.  57.  Fraud  will 
vitiate  a  past  claim  already  matured, 
F.  Dohmen  Co.  v.  Niagara  F.  Ins.  Co., 
96  Wis.  38,  71  N.  W.  69.  But  the  rights 
of  the  parties  are  determined  by  the 
status  at  time  of  commencement  of 
action,  Deitz  v.  Prov.  Wash.  Ins.  Co., 
33W.  Va.  526,  11  S.  E.  50. 

*  Hamberg  v.  Ins.  Co.,  68  Minn.  335, 
71  N.  W.  388;  Hall  v.  /«.<?.  Co.,  106 
Mo.  App.  476,  81  S.  W.  227;  Fouler  v. 
Ins.  Co.,  35  Oreg.  559,  57  Pac.  421; 
Home  Ins.  Co.  v.  Connelhi,  104  Tenn. 
93,  56  S.  W.  828.  Misstatement  as  to 
irrelevant  matter,  it  is  said,  will  not 
forfeit,    Feibelman    v.    Manchester    F. 


A.'isur.  Co.,  108  Ala.  180,  19  So.  540. 
Nor  false  statement  in  proofs  as  to 
matters  not  required,  Runkle  v.  Hart- 
ford Ins.  Co.,  99  Iowa,  414,  68  N.  W. 
712.  Therefore,  it  is  said,  that  if  under 
valued  policy  laws  the  amount  of 
recovery  is  fixed,  misstatements  re- 
garding value  will  not  forfeit,  Oshhosh 
Co.  V.  Mercantile  Ins.  Co.,  31  Fed.  200; 
Snlliran  v.  Hartford  F.  Ins.  Co.,  89 
Tex.  665,  36  S.  W.  73;  but  see  Walker 
V.  Phoenix  Ins.  Co.,  62  Mo.  App.  209. 
A  statement  that  damage  was  by  fire 
when  in  fact  it  was  by  smoke  and 
water  is  no  fraud,  Kahn  v.  Traders' 
Ins.  Co.,  4  Wyo.  419,  34  Pac.  1059. 

5  See  §  94,  supra.  Tlie  correspond- 
ing clause  in  the  Massachusetts  stand- 
ard policy  is  as  follows:  "This  policy 
shall  be  void  if  any  material  fact  or 
circumstance  stated  in  writing  has  not 
been  fairly  represented  by  the  insured." 
This  does  not  refer  to  statements  in  the 
proofs  of  loss,  but  only  to  the  inducing 
representations  upon  which  the  con- 
tract is  based,  and  the  wording  of  the 
clause  makes  the  question  of  fairness 
one  for  the  jury,  Wainer  v.  Milford 
Mut.  Fire  his.  Co.,  153  Mass.  335,  26 
N.  E.  877,  11  L.  R.  A.  598. 

0  Iowa,  Maine,  Massachusetts,  Minne- 
sota, New  Hampshire,  South  Dakota. 

7  Tou-n  v.  Springfield  F.  &  M.  Ins. 
Co.,  145  Mass.  582. 


CHAPTER  XII 

The  Standard  Fire  Policy — Continued 

§  251.  Waivers  Must  be  by  Written  Agreements. — This  entire 
policy,  unless  otherwise  provided  by  agreement,  indorsed  hereon,  or 
added  hereto,  shall  be  vol  i,  if,  etc. 

The  evident  purpose  i  ^  to  do  away  with  alleged  parol  permits  and 
waivers,  and  with  the  uncertainties  of  oral  testimony.^  Modifica- 
tions may,  however,  b<  made  in  writing;  ^  but  protective  clauses 
of  the  standard  form  in  favor  of  the  assured  must  not  be  curtailed 
to  his  prejudice.^  The  c  uestion  how  far  the  doctrine  of  parol  waiver 
and  estoppel  is  enforced  in  spite  of  this  clause  of  the  policy  has  been 
considered  in  a  preceding  chapter.'' 

The  standard  policies  of  certain  states  in  providing  for  the  com- 
pany's assent  make  no  mention  of  a  written  agreement.^ 

§  252.  Other  Insurance. — //  the  insured  now  has  or  shall  hereafter 
make  or  procure  any  other  contract  of  insurance,  whether  valid  or  not, 
on  property  covered  in  whole  or  in  part  by  this  policy  without  agreement 
indorsed  hereon  or  added  hereto. 

Other  or  double  insurance  exists  where  there  are  two  or  more 
policies  on  the  same  interest  and  subject,  and  against  the  same  risk.® 
No  matter  how  much  insurance  exists,  recovery,  in  theory,  is  lim- 
ited to  actual  loss,  but  evidence  of  the  facts  essential  to  define  the 
loss  is  not  always  available  to  the  company  after  the  fire,  and  juries 
are  often  overliberal  to  the  insured  in  the  estimate  of  the  amount 
and  value  of  property.  Therefore  this  clause  of  the  policy  is  in- 
serted.   Its  main  function  is  to  prevent  an  excessive  amount  of  in- 

1  Moore  v.  Ins.  Co.,  141  N.  Y.  219,  Miller,  Opinion  N.  Y.  Atty.  Gen., 
224,  36  N.  E.  191.  Dec.  18,  1902;  Re  Globe  &  Rut.  F.  Ins. 

2  Nelson   v.    Traders'   Ins.    Co.,    181  Co.,  td,  April  24,  1902. 
N.  Y.  472,  474,  74  N.  E.  421.     And  i  Ch.  VIII,  supra, 
■written  permit  obtained  may  be  at-  ^  gee  §  253,  infra. 

tached  at  any  time,  Bennett  v.  Western  «  J^tna    F.    Ins.    Co.    v.    Tvler,    16 

Underwriters'   Assn.,    130    Mich.    216,  Wend.   (N.  Y.)  385,  30  Am.  Dec.  90; 

89  N.  W.  702.  West  Branch  L.  Exchange  v.  American 

3  Wild  Rice  L.  Co.  v.  Royal  Ins.  Co.,  Cent.  Ins.  Co.,  183  Pa.  St.  366,  385,  38 
99  Minn.   190,  108  N.  W.  871;  In  re  Atl.  1081. 

[317] 


318  MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 


surancc  which  furnishes  temptation  to  bring  about  a  destruction 
by  fire  or  inducement  to  be  careless  in  preventing  it.  The  condition 
nmst  be  comphcd  witii.^  So  far  as  it  aims  to  prohibit  overinsurance 
it  is  salutary  and  reasonable.  In  prohibiting  all  other  insurance 
without  special  permit  it  is  rigorous.^  Nevertheless,  almost  all  fire 
insurance  policies  contain  such  a  printed  provision.^ 


>  Xorthem  Assur.  Co.  v.  Grand  View 
Bliiq  .Usoc,  183  U.  S.  308,  22  S.  Ct. 
133-  Indcwmient.  S.  Did.  v.  Fidehti/ 
Ins.  Co.,  113  Iowa,  65,  84  N.  W.  956. 
Bigclow  V.  Granite  Slate  F.  his.  Co.,  91 
Me  39,  46  Atl.  808;  Sanders  v.  Cooper, 
115  N.  Y.  279,  22  N.  E.  212;  Mc- 
Sparran  v.  Southern  Ins.  Co.,  193  Pa. 
St  184,  44  Atl.  317;  Orient  Ins.  Co.  v. 
Pralher,  25  Tex.  Civ.  App.  446,  62 
S.  W.  89,  but  in  some  jurisdiction.s  a 
tenii)orar>'  breach  merely  suspends  lia- 
bility, Germania  F.  Ins.  Co.  v.  Klewer, 
12.1 'ill.  599,  22  N.   E.  489;  and  .see 

§111- 
2  The  underwriter  often  wants  the 

ins\u-ed  to  carry  part  of  the  risk  as 
an  incentive  to  care.  Therefore  a  pro- 
hibition merely  of  insurance  beyond 
property  value  would  be  unsatisfactory. 
Where  the  company  has  no  su.spicion 
of  a  moral  hazard,  indeed  in  the  ina- 
jority  of  instances,  it  grants  a  written 
or  printed  permit  for  "other  insurance 
without  notice,"  indorsed  on  the  face 
of  the  policy  at  the  time  of  issuance, 
anil  without  the  charge  of  additional 
premium.  Thus  this  privilege  is  al- 
most invariably  to  be  found  printed  or 
written  in  "the  forms"  of  descriptions 
prepared  and  presented  to  the  com- 
pany by  the  brokers,  whether  of  mer- 
cantile or  dwelling-house  risks,  and  in 
ordinary  ca.ses,  such  a  form  is  accepted 
by  the  "company  as  matter  of  course, 
the  company  remaining  ignorant  of  the 
amount  of  other  insurance  until  a  fire 
loss  occurs.  Then  it  must  have  a  dis- 
closure on  this  point  to  enable  it  to 
compute  its  pro  rata  share  of  liability. 
When  the  special  permit  is  granted  it 
supersedes  the  prohibition,  Blake  v. 
E.Tchange  Mid.  Ins.  Co..  12  Gray 
(Mass.),  265.  But  a  permit  does  not 
warrant  excess  above  the  permitted 
amount.  Union  Nat.  B'-.  v.  German 
Ins.  Co.,  n  Fed.  473,  18  C.  C.  A.  203; 
Allen  V.  Gemtan-Am.  Ins.  Co.,  123 
N  Y.  6,  25  N.  E.  309;  Benedict  v. 
Ocean  Ins.  Co.,  1  Daly  (N.  Y.),  8; 
Strauss  V.  Fhcenix  Ins.  Co.,  9  Colo. 
k-pp.  386,  48  Pac.  822;  Georgia  Home 


Ins.  Co.  V.  Campbell,  102  Ga.  106,  29 
S.  E.  148.  Prior  insurance  already 
subsisting  is  to  be  included  in  the  esti- 
mate, Palatine  Ins.  Co.  v.  Ewing,  92 
Fed.  Ill,  34  C.  C.  A.  236.  Though  the 
company  knew  and  relied  upon  the 
amount  of  other  contributing  insur- 
ance subsisting  at  the  time  of  the  issu- 
ance of  its  policy,  no  obligation  rests 
upon  the  assured  by  virtue  of  the  per- 
mit, to  maintain  in  force  the  original 
amount,  but  he  may  change  the 
amount  at  will,  Hoffman  v.  Mfg.  Ins. 
Co.,  38  Fed.  487;  Indiana  Ins.  Co.  v. 
Hoffman,  128  Ind.  250,  27  N.  E.  561; 
Lattan  v.  Royal  Ins.  Co.,  45  N.  J.  L. 
453;  Hand  v.  Williamsburg  City  Ins. 
Co.,  57  N.  Y.  41.  In  the  absence  of  a 
stipulation  to  the  contrary,  an  unac- 
cepted or  rejected  policy  does  not  con- 
stitute other  insurance,  N.  J.  Rubber 
Co.  V.  Commercial  U.  Assur.  Co.,  64 
N.  J.  L.  580,  46  Atl.  777,  Ins.  Co.  v. 
Graham,  181  111.  158,  54  N.  E.  914; 
Dalton  V.  Germania  Fire  Ins.  Co.,  126 
Iowa,  377,  102  N.  W.  127;  Price  v. 
Home  Ins.  Co.,  54  Mo.  App.  119.  Nor 
an  arrangement  for  insurance  not 
definitelj'  closed  until  after  the  fire, 
Tavlor  v.  Slate  Ins.  Co.,  107  Iowa,  275, 
77  N.  W.  1032.  As  where  a  policy  had 
not  yet  attached  because  the  premium 
was  not  paid,  Equitable  F.  &  Ace. 
Office  v.  Ching  (1907),  App.  Cas.  96. 
Insurance  taken  out  by  a  third  party 
in  the  name  of  the  assured  but  without 
his  authority  is  not  other  insurance 
within  the  meaning  of  this  clause, 
Church  of  St.  George  v.  Siin  Fire  Office, 
54  Minn.  162,  55  N.  W.  909;  Xelson  v. 
Atlanta  Home  his.  Co.,  120  N.  C.  302, 
27  S.  E.  38.  Unless  it  be  subsequently 
ratified,  German  Ins.  Co.  v.  Emporia 
Mut.  L.  &  A.  Assoc,  9  Kan.  App.  803, 
59  Pac.  1092.  Nor  does  the  renewal  of 
a  permitted  policy  violate  the  terms  of 
the  policy,  Pitney  v.  Glevs  Falls  Ins. 
Co.,  65  N.  Y.  6;  Stane  v.  Home  Ins.  Co., 
76  App.  Div.  509,  78  N.  Y.  Supp.  555. 
3  Formerly  Minnesota  had  a  stand- 
ard policy  prohibiting  other  insurance 
in  excess  of  the  insurable  value  of  the 


OTHER   INSURANCE  319 

To  constitute  "other  insurance"  the  interests  insured  by  the 
policies  must  be  the  same.  An  important  appUcation  of  this  doctrine 
is  furnished  by  the  construction  put  upon  the  full  mortgagee  clause. 
The  Syracuse  Screw  Company  insured  its  building  with  the  defend- 
ant. To  the  policy  was  attached  the  standard  mortgagee  clause  in 
favor  of  Everson  who  held  a  mortgage  upon  the  building.  This 
clause  made  the  insurance  first  payable  to  the  mortgagee  as  his 
interest  might  appear,  and  provided  that  as  to  his  interest  the  in- 
surance should  not  be  invalidated  by  any  act  or  neglect  of  the 
mortgagor.  After  the  issuance  of  this  policy,  the  insured  took 
out  another  policy  for  its  own  exclusive  benefit,  without  the  de- 
fendant's consent  and  without  a  mortgagee  clause.  The  court  held 
that  the  mortgagee  clause,  attached  to  the  first  policy,  created  a 
distinct  contract  in  favor  of  Everson.  It  further  held  that  while  the 
later  policy  was  other  insurance  in  relation  to  the  mortgagor's 
interest  it  was  not  other  insurance  in  relation  to  the  mortgagee's 
interest,  nor  would  it  defeat  or  affect  Everson's  right  of  recovery 
under  the  prior  policy.^ 

Hall,  the  plaintiff,  procured  a  policy  from  the  defendant  for  $1,000 
on  "stock  of  eggs  in  pickle,"  in  which  he  had  an  undivided  interest. 
Taylor,  the  owner  of  the  remaining  interest  in  the  eggs,  separately 
insured  for  his  own  benefit.  It  was  held  that  the  interests  of  the 
co-owners  were  not  the  same  and  that  therefore  Taylor's  policy 
was  not  "other  insurance."  Judgment  in  favor  of  the  plaintiff  was 
affirmed.^ 

To  constitute  "other  insurance,"  the  subject-matter  insured  by 
the  policies  must  be  at  least  in  part  the  same.  The  defendant  issued 
a  policy  to  Johnson  on  his  "farm  implements."  This  description 
was  adequate  to  embrace  certain  mowing  machines  and  binders 
which  were  subsequently  bought  by  him  and  added  to  his  "farm 
implem.ents."  After  the  purchase  and  without  consent  of  the  de- 
fendant Johnson  insured  his  "mowing  machines  and  binders"  with 
another  company.  This  was  held  to  be  "other  insurance,"  which 
avoided  the  policy  in  suit.^ 

property   insured,    Carpenter-Glass   L.  divided  interest  in  the  same  property 

Co.  V.  Germania  F.  his.  Co.,  86  Minn.  of  another  child  procured  by  the  child, 

371,  90  N.  W.  766.  Frani.lin  M.  &  F.  Ins.  Co.  v.  Dral.e,  2 

^  Eddy  V.  London  Assur.  Corp.,  143  B.  Mon.  (Ky.)  47.     Insurance  by  one 

N.  Y.  311,  38  N.  E.  307,  25  L.  R.  A.  creditor  on  the  goods  of  the  debtor  is 

686.  not  "other  insurance"  with  a  pohcy  on 

2  Hall  V.  Concordia  Fire  Ins.  Co.,  90  the  same   goods   in   favor  of   another 

Mich.  403,  51  N.  W.  524.    A  poHcy  by  creditor,  Roos  v.  Merchants'  Mut.  Ins. 

a  mother  as  trustee  for  certain  children  Co.,  27  La.  Ann.  409. 

on  their  interests  in  three  houses  will  3  Johnson     v     Farmers'     Ins.     Co., 

not  vitiate  a  prior  policy  on  the  un-  Iowa     (1905),   102   N,   W.   502,     The 


320  MEANING    AND    LEGAL    EFFECT    UF    FIRE    POLICY 

To  constitute  "other  insurance"  the  risk  also  must  be  the  same.» 
Thus  in  an  English  case,  the  plaintiff  procured  from  the  defendant 
a  policy  on  wool  in  transit  to  Sydney  by  land  or  in  warehouses  or 
on  wharf.  Subsequently  the  plaintiff  effected  an  insurance  against 
marine  perils,  one  of  them  being  fire,  and  so  worded  that  the  marine 
policy  might  possibly  cover  the  same  risk  of  fire  as  the  fire  policy 
for  some  period  of  time  during  the  transit,  but  not  while  the  goods 
were  in  warehouses.  The  court  held  that  the  marine  policy  not 
being  doul^le  insurance  with  the  fire,  the  plaintiff  was  entitled  to  a 
recovery. - 

It  often  happens  that  a  policy  in  force  is  given  to  a  broker  or 
agent  for  cancellation  with  instructions  to  procure  a  policy  from  a 
different  company  in  its  place.  Though  the  issuance  of  the  new  pol- 
icy may  antedate  the  actual  cancellation  of  the  old,  it  has  been  held, 
with  good  reason,  that  there  is  no  breach  of  this  warranty.^  This 
warranty,  like  all  enuring  to  his  benefit,  is  to  be  construed  strictly 
against  the  insurer,'*  and  neither  the  policy  of  the  law  nor  the  con- 
tract of  insurance  forbids  different  policies  on  different  interests, 
but,  on  the  contrary,  there  may  be  as  many  insurances  as  there  are 
separate  interests,^  but  where  warehousemen,  common  carriers, 
agents,  trustees,  or  bailees  generally,  take  out  insurance  for  the 
benefit  of  themselves  and  others  on  property,  "their  own  or  held 

policy  in  suit  was  on  goods  and  fix-  example,  a  policy  to  a  mortgagor  and 

tures.    A  subsequent  policy  on   goods  another  to  a  mortgagee  are  not  within 

only  av'oided  the  policy  in  suit,  Kim-  the  operation  of  this  clause,   because 

ball  V.   Howard  F.   Ins.   Co.,  8  Gray  they  do  not  constitute  double  insur- 

(Mass.),  33.  ance,  Cowart  v.  Capital  City  Ins.  Co., 

iHarrisv.Ohio  Ins.  Co. ,5  Ohio,  467.  114  Ala.  356,  22  So.  574;  Home  Ins. 

2  Australian     Agricultural     Co.      v.  Co.  v.  Koob,  24  Ky.  L.  R.  223,  68  S.  W. 

Saunders,  L.  R.  (1875)  10  C.  P.  668.  453,  58  L.  R.  A.  58;  Cannon  v.  Home 

sKnotdes  v.  American  Ins.  Co.,  66  Ins.  Co.,  49  La.  Ann.  1.367,  22  So.  .387. 
Hun,  220,  21  N.  Y.  Supp.  50,  aff'd  on  So  also  the  interests  of  different  mort- 
opinion  below,  142  N.  Y.  641,  37  N.  E.  gagees  are  distinct,  Fox  v.  Phceni.r  Fire 
567;  Train  v.  Holland  Purchase  Ins.  Ins.  Co.,  52  Me.  333,  and  the  different 
Co.,  68  N.  Y.  208;  but  an  unauthorized  interests  of  joint-owners,  Woodbury 
cancellation,  Kooistra  v.  Roc'. ford  Ins.  Sav.  Ban':  v.  Charter  Oak  F.  &  M. 
Co.,  122  Mich.  626,  81  N.  W.  568;  Ins.  Co.,  31  Conn.  518;  Pitney  v.  Glens 
Johnson  v.  iWorth  Brit.  &  M.  Ins.  Co.,  Falls  Ins.  Co.,  65  N.  Y.  6.  The  same  is 
66  Ohio  St.  6,  63  N.  E.  610;  or  an  in-  also  true  of  grantor  and  grantee,  or 
complete  cancellation,  Gardner  v.  vendor  and  vendee,  State  Ins.  Co.  v. 
Standard  Ins.  Co.,  58  Mo.  App.  611;  New  Hampshire  Tr.  Co.,  47  Neb.  62, 
East  Tex.  F.  Ins.  Co.  v.  Flippin,  4  66  N.  W.  9,  1106;  Spra/jue  v.  Holland 
Tex.  Civ.  App.  576,  23  S.  W.  550,  is  Purchase  Ins.  Co.,  69  N!  Y.  128;  land- 
unavailing  to  dispose  of  the  subsisting  lord  and  tenant,  Clemson  v.  Trammell, 
policy  whieh  then  stands  as  "other  34  111.  App.  414;  bailor  and  bailee, 
insurance."  West  Branch  L.  Exchange  v.  American 

*  Mead  v.  American  Fire  Ins.  Co.,  13  Cent.  Ins.  Co.,  183  Pa.  St.  366,  38  Atl. 

App.  Div.  476,  77  N.  Y.  St.  R.  334,  1081;   life  tenant  and  remainderman, 

43  N.  Y.  Supp.  334.  Fran'lin  M.  &  F.  Ins.  Co.  v.  Drake,  2 

5Dc  Witt  v.  Agricultural  Ins.   Co.,  B.  Mon.  (Ky.)  47. 
157  N.  Y.   353,  51    N.   E.   977.     For 


OTHER   INSURANCE  321 

by  them  in  trust,"  and  the  other  parties  in  interest  take  out  insur- 
ance for  themselves  upon  the  same  subject  and  against  the  same 
risk,  this  constitutes  double  insurance.^  Such  other  insurance  for 
another  person,  however,  would  not  avoid  the  owner's  policy,  unless 
it  appeared  that  it  was  taken  out  by  his  authority  or  consent,  or 
was  subsequently  ratified  by  him,  since  otherwise  it  would  not  con- 
stitute his  contract,  inasmuch  as  the  element  of  mutual  assent  would 
then  be  wanting,  and  the  courts  are  very  reluctant  to  vitiate  a  policy 
unless  the  intent  on  the  part  of  the  insured  to  procure  double  insur- 
ance is  established.-  If  the  insured  is  not  aware  of  the  existence  of 
other  insurance,  the  prime  object  of  this  clause  is  wanting.  No 
temptation  to  commit  arson  can  be  inferred  from  a  fact  of  which 
the  insui'ed  is  ignorant.^  But  the  warranty  in  the  policy  being  abso- 
lute, principle  would  seem  to  require,  that,  if  the  double  insurance 
really  exists  by  legal  authority  of  the  insured,  the  policy  in  suit  must 
be  held  avoided,  whether  the  existence  of  the  double  insurance  is 
known  to  the  insured  or  not.^ 

Gwathmey  &  Co.,  warehousemen,  for  the  benefit  of  themselves 
and  their  customers,  procured  insurance  from  the  defendant  on 
cotton  and  merchandise,  their  own  or  held  in  trust.  The  loss  pay- 
able was  not  to  exceed  the  sum  insured  nor  the  interest  of  the  as- 
sured in  the  property.  A  condition  of  the  policy  provided:  "Goods 
held  on  storage  must  be  separately  and  specifically  insured."  The 
owners  of  the  merchandise  on  storage  took  out  specific  insurance 
of  their  own  to  the  full  value  of  their  property.  Construing  in  its 
entirety  the  language  of  the  policy  in  suit,  the  court  concluded  that 
the  insurance  in  suit  was  not  double  or  contributing  with  the  other 
policies.^ 

1  Home  Ins.  Co.  v.  Bait.  Warehouse,  *  Phoenix  Ins.    Co.    v.    Copeland,  90 

Co.,  93  U.  S.  527;  SUirm  v.  Atlantic  Ala.  386,  8  So.  48;  Phoenix  Ins.  Co.  v. 

Mut.  Ins.  Co.,  63  N.  Y.  77;  Miisse^i  v.  Lamar,   106   Ind.   513,   7   N.   E.   241; 

Atlas  Mut.  Ins.  Co.,  4  Kern.  (N.  Y.)  79.  London  &  L.  Fire  his.  Co.  v.  Turnbull, 

^Mead  v.  Ayn.  F.  Ins.  Co.,  13  App.  80  Ky.  230;  Van  Aht'ine  v.  .^tna  Ins. 

Div.  476,  43  N.  Y.  Supp.  334;  Church  Co.,  14  Hun  (N.  Y.),  360;  Arnold  v. 

of  St.  George  v.  Sun  F.  Offlce,  54  Minn.  Ins.  Co.,  106  Tenn.  529,  61  S.  W.  1032. 

162,  55  N.  W.  909  (mortgajz;ee  took  out  Evidence    that    the    insured    believed 

insurance  on  mortgagor's  interest  with-  there  was  no  other  insurance  is  not 

out  knowledge  of  mortgagor).  admissible,  Zinck  v.  Phoenix  Ins.  Co., 

3  London  &  L.  Fire  Ins.  Co.  v.  Turn-  60  Iowa,  266. 

bull,  86  Ky.  230;  Doran  v.  Fran' lin  ^  Home  Ins.  Co.  v.  Gwathmey,  82  Ya,. 

Fire  his.  Co.,  86  N.  Y.  635.     In  one  923,  1  S.  E.  209.    Compare  Home  Ins. 

case  it  was  held  that  where  the  con-  Co.  v.  Railvau  Co.,  71  Minn.  296,  74 

signor  effected  an  insurance  with  the  N.  W.  140  (policies  held  contributing, 

warranty   "no   other   insurance,"   and  though   one   policy   covered   only   lia- 

unknown  to  him  the  consignees  also  bility   of   the   carrier   to   the   shippers 

insured  the  same  goods,  the  first  policy  while  the  other  policies  covered  grain, 

was  not  avoided,  Williams  v.  Crescent  its  own  or  held  in  trust.    If  the  case  had 

Mut.  Ins.  Co.,  15  La.  Ann.  652.  involved  a  question  not  of  contribu- 

21 


322  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

In  a  Maryland  case  the  plaintiff,  a  towing  company,  took  out 
marine  insurance  on  a  cargo  of  corn  "on  account  of  whom  it  may 
concern  "  The  owner  of  the  corn  also  had  it  insured  m  another 
company  against  the  same  perils,  and  did  nothing  either  before  or 
after  loss  towards  adopting  or  ratifying  the  insurance  procured  by 
the  plaintiff.  The  court  held  that  the  policy  in  smt  did  not  inure 
to  the  benefit  of  the  owner  so  as  to  result  in  double  insurance.^ 

The  permit  for  other  insurance  must  be  in  writing.-  It  is  not 
enough  for  the  assured  merely  to  give  notice  of  other  insurance,^ 
or  of^an  intention  to  procure  it,^  nor  is  it  enough  under  the  New 
York  standard  policy,  for  the  agent  of  the  company  to  promise  to 
indorse  the  permit  in  future.^ 

The  policy  provides  that  the  consent  must  be  indorsed  or  at- 
tached; but  if  in  writing,  the  assured  can  attach  it  at  any  time;  and 
Dven  a  telegraphic  consent  is  in  practice  considered  binding  upon 
the  company. 

§  253.  Effect  of  Words— Valid  or  Invalid.— Policies  in  which  the 
ilause  against  other  insurance  does  not  contain  the  additional 
irords  "valid  or  invalid,"  have  given  rise  to  much  difficulty  in  cases 
ihere  tw-o  or  more  policies  constituting  double  insurance  contain 
t  ^e  same  provision.  Shall  both  policies  be  avoided,  or  only  one,  and 
ii  only  one,  which  one?  There  is  in  each  a  condition  by  which  the 
pclicy  containing  it  ought  to  be  avoided,  and  yet  the  moment  that 
eit  ler  policy  is  held  void,  the  reason  for  vitiating  the  other  has 
cea.ied  to  exist. 

Aid  substantially  the  same  difficulty  arises  where  the  other  in- 
surance is  voidable  upon  some  other  ground  of  forfeiture  of  which 
the  ii  surers  have  elected  to  avail  themselves. 

The  opinions  of  the  courts  upon  these  questions  are  varied  and 
irreconcilable;  ^  but  the  sounder  view,  perhaps,  is  to  hold  the  earlier 

tion  bet'w  een  underwriters,  but  of  for-  ^  Orient  Ins.  Co.  v.  Prather,  25  Tex. 

feiture  foi  other  insurance  the  decision  Civ.  App.  446,  62  S.  W.  89. 

would  probably  have  been  otherwise).  *  Gray  v.  Germania  F.  Ins.  Co.,  155 

1  Western  Assur.   Co.  v.   Chesapeake  N.  Y.  180,  49  N.  E.  675. 

L.  &  Towiiq  Co.  (Md.,  1907),  65  Atl.  ^ Perm  v.  Ins.   Co.,  103  App.  Div. 

637.    Though  such  insurance  is  taken  (N.  Y.)  113,  93  N.  Y.  Supp.  .50. 

out  by  a  biilee  without  authority  of  '^  Lad ey  v.  Ga.  Home  Ins.  Co.,  42  Ga. 

the  owner,  ,t  has  been  held  that  the  456;  Hubbard  v.  Hartford  Fire  Ins.  Co., 

owner    may    ratify    even    after    loss,  33    Iowa,    325,    11    Am.    Rep.     125; 

Ferguson  v.    ^e' in  Plow  Co.,  141  Mo.  Thomas  v.  Builders  Mut.  F.  Ins.  Co., 

161,42  3.  W.  711.  119  Mass.  121,20  Am.  Rep.  317;  Fire- 

2  But  such  I  latters  of  detail  need  not  man's  Ins.  Co.  v.  Holt,  35  Ohio  St.  189, 
be  written  on  a  binding  slip,  Dayton  35  Am.  Rep.  601.  See  May,  Ins., 
Ins.  Co.  V.  Kel  y,  24  Ohio  St.  345.  ch.  18. 


EFFECT  OF   WORDS — VALID   OR   INVALID  323 

policy  undisturbed,  on  the  ground  that  the  later  has  had  no  valid 
inception,  or,  at  the  time,  has  ceased  to  exist. ^ 

Much  doubt  would  seem  to  be  removed  by  the  insertion,  as  in  the 
New  York  standard  form,  of  the  words  "valid  or  invalid,"  to  which 
force  must  be  given;  and  when  the  policy  in  suit  contains  them,  it 
should  be  held  vitiated  by  other  insurance,  whether  regarded  as 
void  or  voidable,  provided  no  written  consent  to  the  other  insurance 
has  been  obtained.'  In  a  suit  on  either  policy  with  such  a  clause 
the  insured  is  unabte  to  establish  his  case  by  virtue  of  excuse  that 
the  other  polic}^  is  invalid.^  And  insurance  taken  out  simultaneously 
with  the  policy  in  suit  is  equally  in  violation  of  the  warranty.'* 

Where,  however,  the  other  policy  is  upon  its  face  absolutely  null 
and  void,  so  as  to  be  no  policy  at  all,  but  a  piece  of  waste  paper,  or 
where  the  poHcy,  though  still  existing  as  a  document,  has  been 
canceled,^  then,  in  either  case,  the  conclusion  seems  to  follow  that 
there  is  within  the  meaning  of  this  clause  no  other  or  double  insur- 
ance.^ And  so  also,  in  construing  the  effect  of  this  warranty,  prop- 
erty removed  from  the  location  described  in  a  policy  should  be  con- 
sidered as  no  longer  within  the  operation  of  that  policy,  though  still 
named  in  its  description;  and  likewise  new  stock  added  subsequent 
to  the  issuance  of  the  policy  should  be  treated  as  coming  within  the 
reach  of  its  terms.'^ 

The  corresponding  provision  of  the  Massachusetts  policy  is  as 
follows:  "This  policy  shall  be  void  if  the  insured  now  has  or  shall 
hereafter  make  any  other  insurance  on  the  said  property  without  the 
assent  in  writing  or  in  print  of  the  company."  *  It  will  be  observed 
that  this  warranty  does  not  contain  the  words  "valid  or  invalid," 
and  in  construing  it  the  Massachusetts  court  holds  that  other  policies 

1  Sweeting  v.  Mut.  Ins.  Co.,  83  Md.  ^  United  Firemen's  Ins.  Co.  v. 
63,  34  Atl.  826,  32  L.  R.  A.  570;  Gee  v.  Thomas,  92  Fed.  127,  34  C.  C.  A. 
7ns.  Co.,  55  N.  H.  65;  Jersey  Ins.  Co.  v.       240. 

A^zc/ioZ,  35  N.  J.  Eq.  291.  ^German   Ins.    Co.    v.    Hayden,   21 

2  Hughes  v.  Ins.  Co.  of  North  Am.,      Colo.  127,  40  Pac.  453. 

40  Neb.  626,  59  N.  W.   112;  Gee  v.  ^  Phenix    Ins.    Co.    v.    Lamar,    106 

Cheshire    Co.    Mid.    F.    Ins.    Co.,    55  Ind.  513,  7  N.  E.  241;  Am. /ns.  Co.  v. 

N.  H.  65,  20  Am.  Rep.  171;  Allen  v.  Replogle,  114  Ind.  1,  15  N.  E.  810,  132 

Merchants'    Mut.    Co.,    30    La.    Ann.  Ind.   360,  31    N.   E.   947;  Landers  v. 

1386,   31    Am.    Rep.   243;    Donogh   v.  Watertown  Ins.  Co.,  86  N.  Y.  414,  40 

Farmers'  Ins.  Co.,  104  Mich.  503,  62  Am.  Rep.  554. 

N.  W.  721.  7  Washington  Ins.  Co.  v.  Hayes,  17 

3  Phenix  Ins.  Co.  v.  Lamar,  106  Ohio  St.  432;  Stevens  v.  Citizens'  Ins. 
Ind.  513,  7  N.  E.  241;  Reed  v.  Equitable  Co.,  69  Iowa,  658;  Johnson  v.  Farmers' 
Ins.  Co.,  17  R.  I.  785,  24  Atl.  833.  /ns.  Co.,  126  Iowa,  565,  102  N.  W.  502; 
But  see  Phoenix  Ins.  Co.  v.  Copeland,  Whitwell  v.  Putnam  Fire  Ins.  Co.,  6 
90  Ala.  386,  8  So.  48;  Stevens  v.  Citi-  Lans.  (N.  Y.)  166. 

zens'  Ins.  Co.,  69  Iowa,  658,  29  N.  W.  »  Hayes  v.  Mil.  Mut.  Fire  Ins.  Co., 

769;  WolpeH  v.  Northern  Assur.  Co.,  170  Mass.  492,  49  N.  E.  754;  Wheeler 
44  W.  Va.  734,  29  S.  E.  1024.  v.  WateHovm  In^.  Co.,  131  Mass.  1. 


324 


MEANING   AND    LEGAL    EFFECT    OF    FIRE    POLICY 


issuGil  by  other  companies  cither  before  or  after  the  one  in  suit,  with- 
out assent  of  (lie  defendant  offer  no  defense,  where  such  other  policies 
contain  the  same  condition.^ 

Other  standard  policies  provide  for  the  company's  assent  or  agree- 
ment, but  do  not  require  that  it  shall  be  in  writing  or  in  print.^  Such 
more  liberal  form  of  policy,  however,  does  not  supersede  the  common- 
law  rule  of  evidence,  by  virtue  of  which  contemporaneous  oral  state- 
ments and  understandings  are  merged  in  the  written  contract  and 
cannot  be  shown  by  parol.'  ' 

§  254.  Effect  of  Coinsurance  Clause  and  Other  Limited  Consent. 

— An  eighty  per  cent  or  other  coinsurance  clause  operates  as  a  per- 
mit for  other  insurance,  but  only  to  an  amount  required  to  make 
good  the  stated  percentage  of  value.'' 


§  255.  Factories. — Or  if  the  subject  of  insurance  be  a  manufacturing 
establishment,  and  it  be  operated  in  whole  or  in  part  at  night  later  than 
ten  o'clock,  or  if  it  cease  to  be  operated  for  more  than  ten  consecutive  days. 

This  condition,  which  is  akin  to  the  vacancy  clause,  is  said  to  be 
not  technical  but  substantial,^  and  reasonable.®  Its  violation  avoids 
the  policy.' 


1  Hai/es  V.  Milford  Mut.  Fire  Ins. 
Co.,  170  Mass.  492,  49  N.  E.  754. 

2  For  example,  Iowa,  Minnesota,  and 
South  Dakota. 

3  Calmenson  v.  Equitable  Mut.  Fire 
Ins.  Co.,  92  Minn.  390,  100  N.  W.  88. 
After  the  inception  of  the  contract  the 
local  countersigning  agent  may  give  a 
binding  oral  permit.  Cooper  v.  German- 
American  Ins.  Co.  (Minn.,  1905),  104 
N.  W.  687. 

4  Cutler  V.  Ro'/al  Ins.  Co.,  70  Conn. 
566,  40  Aa.  529,  41  L.  R.  A.  159; 
Nestler  v.  Germania  Fire  I.  Co.,  44 
Misc.  (N.  Y.)  97,  89  N.  Y.  Supp.  782, 
aff'd  91  N.  Y.  Supp.  29;  see  Dolan  v. 
Missouri  Town  M.  F.  I.  Co.,  88  Mo. 
App.  666;  Pool  v.  Mil.  Mech.  Ins.  Co., 
91  Wis.  530,  65  N.  W.  54.  Permit  was 
inferred  where  there  was  an  average 
clause  applicable  to  other  insurance. 
Agricultural  Ins.  Co.  v.  Bemiller,  70 
Md.  400,  17  Atl.  380.  Permit  is  some- 
times worded  "privilege  for  other  con- 
current insurance."  In  the  following 
case  it  is  reasonably  held  that  other 
insurance  is  concurrent  though  the 
properties  insured  by  the  different 
policies  were  only  in  part  the  same, 
Gough  V.  Davis,  24  Misc.  245,  52  N.  Y. 


Supp.  947,  aff'd  39  App.  Div.  639. 
And  see  A^  J .  Rubber  Co.  v.  Com- 
mercial Union  Assur.  Co.,  64  N.  J.  L, 
580,  46  Atl.  777;  Ea.'st  Tex.  F.  Ins.  Co. 
v.  Blum,  76  Tex.  653,  13  S.  W.  572, 
576.  "Concurrent"  is  not  to  be  con- 
strued in  this  connection  as  "identi- 
cal," Washburn- Halligan  Coffee  Co. 
v.  Merchants'  bis.  Co.,  110  Iowa,  423, 
81  N.  W.  707;  and  see  L'Engle  v. 
Scottish  M.  &  N.  Ins.  Co.  (Fla.),  37 
So.  462;  Senor  v.  Western  Millers'  Ins. 
Co.,  181  Mo.  104,  79  S.  W.  687; 
Caraher  v.  Royal  Ins.  Co.,  63  Hun 
(N.  Y.),  82,  17' N.  Y,  Supp.  858,  aff'd 
on  opinion  below,  1,36  N.  Y.  645,  32 
N.  E.  1015;  American  Cent.  Ins.  Co.  v. 
Heath,  29  Tex.  Civ.  App.  445,  69  S.  W. 
235.  In  following  case  a  mere  mistake 
in  calculating  amount  was  held  not  to 
avoid  earlier  insurance,  otherwise  valid, 
Phoenix  Ins.  Co.,  v.  Boulden  96  Ala. 
609,11  So.  774. 

^  Alspaugh  v.  Brit.^Am.  Ins.  Co., 
121  N.  C.  290,  28  S.  E.  415. 

8  Cronin  v.  Fire  Assoc,  119  Mich. 
74,  77  N.  W.  648. 

T  Cronin  v.  Fire  Assoc,  123  Mich. 
277,  82  N.  W.  45,  119  Mich.  74,  77 
N.  W.  648;  Straiise  v  Palatine  Ins.  Co., 


FACTORIES 


325 


Running  the  factory  at  night  after  the  hour  named  in  the  pohcy 
is  fatal/  but  such  continuation  of  the  furnace  fires,  or  even  of  the 
running  of  machinery,  as  cannot  from  the  nature  of  the  business 
be  temporarily  suspended,  is  not  to  be  considered  prohibited.  Thus 
the  mere  running  of  the  main  shaft  at  night  after  the  hour  named, 
without  any  further  operation,  is  permissible. ^  Nor  is  it  easy  to 
define,  by  any  general  rule,  what  constitutes  that  condition  of  in- 
activity or  cessation  from  the  usual  working  of  the  mill  or  factory 
which  the  latter  part  of  the  warranty  tolerates  for  a  period  of  only 
ten  days.  Temporary  and  unavoidable  cessation  in  the  operations, 
without  deliberate  purpose  to  shut  down,  has  been  held  to  be  no 
such  cessation  as  is  contemplated  by  this  clause,  though  continued 
for  more  than  ten  days.^ 

If  the  premises  are  in  the  same  condition  at  the  time  of  loss  as  at 
the  time  when  the  risk  is  accepted  and  the  policy  issued,  it  has  been 
held  that  the  company  has  no  just  cause  for  complaint  on  the  score 
of  idleness  or  inactivity,  and  may  not  be  permitted  to  invoke  the  aid 
of  this  clause  to  occasion  forfeiture,  unless  it  had  reason  to  suppose 
that  before  the  expiration  of  ten  days,  manufacturing  operations 
were  to  be  more  actively  resumed.^  Any  consent  or  special  agreement 
will  control.^ 


128  N.  C.  64,  38  S.  E.  256  (an  express 
permit  was  given).  The  clause,  how- 
ever, is  construed  strictly  against  the 
insurer,  Queen  Ins.  Co.  v.  Excehior 
Milling  Co.,  69  Kan.  114,  76  Pac.  423. 
As  to  what  is  a  manufacturing  estab- 
lishment, see  Stone  v.  Howard  Ins.  Co., 
153  Mass.  475,  27  N.  E.  6,  11  L.  R.  A. 
771;  Carlin  v.  Western  Assur.  Co.,  51 
Md.  515;  Phoenix  his.  Co.  v.  Holcombe, 
57  Neb.  622,  78  N.  W.  300;  Halpin  v. 
North  Am.  Ins.  Co.,  120  N.  Y.  73,  23 
N.  E.  989  (machinery  is  not  equivalent 
to  a  manufacturing  establishment). 

1  Reardon  v.  Faneuil  Hall  Ins.  Co., 
135  Mass    121 

2  Whitehead  v.  Price,  2  Cr.  M.  &  R. 
447,  5  Tyrwh.  825.  The  insurers  are 
presumed  to  have  some  knowledge  of 
the  requirements  of  the  business,  Mc- 
Keesport  Machine  Co.  v.  Ben  Franklin 
Ins.  Co.,  173  Pa.  St.  53,  34  Atl.  16. 

3  Waukan  Milling  Co.  v.  Citizens' 
Mut.  F.  Ins.  Co.  (Wis.,  1906),  109 
N.  W.  937  (agent  knew  mill  was  likely 
to  cease  operations) ;  Ladd  v.  /Etna  Ins. 
Co.,  147  N.  Y.  478,  42  N.  E.  197,  70 
N.  Y.  St.  R.  69.  But  see  Day  v.  Mill 
Owners'  Mut.  F.  Ins.  Co.,  70  Iowa,  710. 
Stoppage  as  to  only  part  of  the  factory 


operations  is  not  within  the  ban  of  this 
provision.  Am.  Ins.  Co.  v.  Brighton 
Cotton  Mfg.  Co.,  125  111.  131,  17  N.  E. 
771;  Cent.  Montaria  Mines  Co.  v.  Fire- 
men's Fund  Ins.  Co.,  92  Minn.  223,  99 
N.  W.  1120,  and  stopping  the  ma- 
chinery altogether  for  more  than  the 
stated  period,  if  other  work  is  done 
on  the  premises  and  a  man  left  in 
charge,  has  been  held  to  be  no  cause 
for  forfeiture,  Bole  v.  New  Hampshire 
Ins.  Co.,  159  Pa.  St.  53,  28  Atl.  205; 
but  see  McKenzie  v.  Scottish  Union  & 
Nat.  Ins.  Co.,  112  Cal.  548,  44  Pac.  922; 
Dover  Glass  Works  v.  A7n.  Ins.  Co.,  1 
Marv.  (Del.)  32,  29  Atl.  1039;  Breh77) 
Lumber  Co.  v.  Svea  Ins.  Co.,  36  Wash. 
520,  79  Pac.  34.  Where  there  is  room 
for  question,  the  prudent  manu- 
facturer instructs  his  broker  to  apply 
for  a  special  permit,  which  probably 
can  be  arranged  for  without  additional 
expense,  if  the  underwriters  are  sat- 
isfied with  the  moral  hazard. 

<  Louck  V.  Orient  Ins.  Co.,  176  Pa. 
St.  638,  35  Atl.  247,  33  L.  R.  A.  712; 
Lebanon  Ins.  Co.  v.  Erb,  112  Pa.  St. 
149,  4  Atl.  8;  but  see  Stone  v.  Howard 
Ins.  Co.,  153  Mass.  475,  27  N.  E.  6. 

5  El  Paso  Reduction  Co.  v.  Hartford 


326 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


The  Massachusetts  policy  contains  a  similar  clause,  naming  nint 
o'clock  p.  M.  instead  of  ten  o'clock,  and  thirty  days  as  the  limit  for 
cessation  of  operations.^ 

§  256.  Watchman.— It  is  sometimes  provided  that  a  watchman 
shall  be  kept.  The  object  of  such  a  clause  is  to  secure  personal 
supervision  over  the  property.'  The  warranty  must  be  observed.'* 
But  a  reasonable  compliance  is  sufficient.  Accordingly,  a  mere 
temporary  absence  for  a  few  minutes  '*  or  for  a  short  time  ^  or  for 
two  hours  ""  is  no  violation,  as  matter  of  law.^ 

Jj  257,  Increase  of  Risk. — Or-  if  the  hazard  te  increased  by  any 
means  icilhin  tJic  conlrol  or  knowledge  of  the  insured. 

So  far  as  the  conduct  of  the  insured  himself  is  concerned,  an  obliga- 
tion is  said  to  rest  ui)on  him  by  general  principles  of  insurance  law 
not  to  voluntarily  enhance  the  risk.*  This  clause  extends  his  re- 
sponsibiUty  to  acts  of  others  within  his  control  or  knowledge.^  It 
refers  exclusively  to  future  changes.    A  continuation  of  use  or  con- 


Fire  Ins.  Co.,  121  Fed.  937;  Edwards  v. 
Planters'  Fire  Assoc,  111  Ga.  449,  36 
S.  E.  755;  BarI.er  v.  Citizen.s'  Mut.  Fire 
Ins.  Co.,  136  Mich.  626,  99  N.  W.  866. 
The  doctrine  of  waiver  and  estoppel 
has  been  applied.  Waiver  allowed, 
Thac':ery  Mining  Co.  v.  Am.  Ins.  Co., 
62  .AIo.  App.  293;  hn proved  Match  Co. 
V.  Michigan  Ins.  Co.,  122  Mich.  256, 
80  N.  \V.  1088.  Waiver  not  allowed, 
Carlin  v.  Western  As.su?-.  Co.,  57  Md. 
515;  Stone  v.  Hoaard  In.s.  Co.,  153 
Mass.  475,  27  N.  E.  6. 

1  Reardon  v.  Faneuil  Hall  7n.s-.  Co., 
135  Mass.  121.  The  South  Dakota 
standard  policy  names  twenty  days  as 
the  limit;  the  Iowa,  ten  days. 

^  An  Sable  Lumber  Co.  v.  Detroit 
Mfrs.  M.  F.  I.  Co.,  89  Mich.  407,  50 
N.  W.  870. 

^  Bank  of  Ballston  Spa  v.  Ins.  Co., 
50  N.  Y.  45. 

*  McGannon  v.  Michigan  Millers' 
M.  F.  I.  Co.,  127  Mich.  636,  87  N.  W. 
61,54  L.  R.  A.  739. 

3  Hanover  Fire  his.  Co.  v.  Guslin, 
40  Neb.  828,  59  N.  W.  375. 

9  McGannon  v.  Millers'  Nat.  Ins.  Co., 
171  Mo.  143,  71  S.  W.  160;  Kansas 
Mill  Owners'  Ins.  Co.  v.  Metcalf,  59 
Kan.  383,  53  Pac.  68;  and  see  King 
Brick  Mfg.  Co.  v.  Phoenix  Ins.  Co.,  164 
Mass.  291,  41  N.  E.  277. 

7  Wauknv    MiJn'v/j    Cn.    v.    CHizena' 


Mut.  F.  Ins.  Co.  (Wis.,  1906),  109 
N.  W.  937;  Spies  v.  Greenwich  Ins.  Co., 
97  Mich.  310,  56  N.  W.  560  (foreman 
of  adjoining  mill  was  the  watchman). 
Nor  is  it  material  that  the  watclaman 
happens  to  be  asleep  when  the  fire 
breaks  out,  McGannon  v.  Millers'  Nat. 
Ins.  Co.,  171  Mo.  143,  71  S.  W.  160. 
But  in  another  case  it  was  decided 
that  where  the  clause  of  the  policy 
required  that  a  watchman  must  be 
kept  day  and  night,  the  policy  was 
voided  because  only  one  watchman 
was  employed  in  the  building,  the 
court  concluding  that  the  intent  of  the 
instrument  was  that  a  watchman  must 
be  awake,  and  if  there  were  only  one, 
there  would  be  some  portion  of  the 
time,  presumably,  when  he  would  be 
asleep,  Rankin  v.  Amazon  Ins.  Co.,  89 
Cal.  210,  26  Pac.  872. 

^  Hoffecker  v.  Newcastle  Co.  Mut. 
Ins.  Co.,  5  Houst.  (Del.)  101  (held  to 
be  an  implied  promise).  The  word 
"risk"  sometimes  refers  rather  loosely 
to  the  adventure  or  subject-matter, 
sometimes  to  the  hazard  or  chance  of 
loss,  Bradford  v.  Symondson  (1881),  7 
Q.  B.  D.  456,  464. 

9  .lanvrin  v.  Rockingham  Ins.  Co. ,  70 
N.  H.  35,  46  Atl.  686;  North  Brit.  & 
Am.  Ins.  Co.  v.  Union  Stockyard  Co. 
(Ky.),87S.  W.  285. 


INCREASE   OF   RISK 


327 


dition  existing  when  the  policy  issues  is  no  increase  of  risk,  however 
hazardous  it  may  be.^ 

Before  the  insurers  can  successfully  claim  forfeiture  on  the  ground 
of  increase  of  hazard,  they  must  show  either  that  the  situation  was 
within  the  control,  or  the  facts  within  the  knowledge,  of  the  assured;  ^ 
but  if  the  insured  had  knowledge,  the  standard  policy  seems  to  make 
him  as  responsible  as  though  the  increase  of  risk  had  been  deliberately 
brought  about  by  himself  or  his  agent. "'' 

This  important  warranty,  however,  must  receive  a  reasonable 
construction,  with  due  regard  to  the  main  purpose  of  insurance 
as  well  as  to  the  special  circumstances  of  every  case.^  Most  fires, 
perhaps,  result  from  acts  of  carelessness  which  temporarily  increase 
the  hazard,  but  a  principal  object  to  be  gained  by  the  policy  is 
indemnity  for  the  consequences  of  just  such  casual  acts  of  negligence, 
if  committed  without  evil  design  by  the  assured  or  his  agents.^ 
Thus,  though  it  may  seem  highly  reckless  to  use  kerosene  to  aid  in 
lighting  a  fire,  nevertheless,  the  use  of  it  for  that  purpose  has  been 


i  Hoffecker  v.  Ins.  Co.,  5  Houst. 
(Del.)  101;  Whitney  v.  Black  River  Ins. 
Co.,  72  N.  Y.  117;  Straker  v.  Phoenix 
Ins.  Co.,  101  Wis.  413,  77  N.  W.  752. 
A  future  change  which  does  not  in- 
crease the  risk  is  not  forbidden  by 
this  clause,  Parker  v.  Arctic  Fire  Ins. 
Co.,  59  N.  Y.  1.  And  see  Phosyiix 
Ins.  Co.  V.  Coomes,  13  Ky.  L.  Rep. 
238  (repairs  increased  value).  Evi- 
dence showing  decrease  of  risk  is  com- 
petent, Smith  V.  Ins.  Co.,  32  N.  Y. 
399. 

2  Waggonick  v.  Westchester  F.  Ins. 
Co.,  34  111.  App.  629;  Northern  Assur. 
Co.  v.  Crawford,  24:  Tex.  Civ.  App.  574, 
59  S.  W.  916.  As  to  whether  the  as- 
sured must  also  knoAV  that  the  knowli 
facts  amount  to  an  increase  of  hazard, 
compare  Phcenix  Ins.  Co.  v.  Parsons, 
129  N.  Y.  86,  29  N.  E.  87,  with  Mc- 
Gonigle  v.  Ins.  Co.,  168  Pa.  St.  1,  13,  31 
Atl.  868;  McKee  v.  Ins.  Co..  135  Pa. 
St.  544,  19  Atl.  1067;  Rife  v.  Ins.  Co., 
115  Pa.  St.  530,  6  Atl.  65.  Thus  the 
underwriter  cannot  rely  for  defense, 
under  this  particular  clause,  upon  the 
acts  of  a  tenant  of  the  insured,  unless 
the  insured  knew  of  them,  Merrill  v. 
Ins.  Co.,  23  Fed.  245;  Neb.  &  I.  Ins. 
Co.  V.  Christiensen,  29  Neb.  572,  45 
N.  W.  924;  East  Tex.  Ins.  Co.  v. 
Kempner,  12  Tex.  Civ.  App.  534,  34 
S.  W.  393  (tenant  used  gasoline  stove 
without  knowledge  of  assured).  So,  as 
to  acts  of  landlord,  where  tenant  was 


insured.  Mechanics'  Ins.  Co.  v.  Hodge, 
149  111.  298,  37  N.  E.  51. 

3  L.  &  L.  &  G.  Ins.  Co.  v.  Gunther, 
116  U.  S  113,  6  S.  Ct.  306,  29  L.  Ed. 
575;  id.,  134  U.  S.  110.  10  S.  Ct.  448; 
Allen  V.  Ho7ne  his.  Co.,  133  Cal.  29, 
65  Pac.  138;  Long  v.  Beeber,  106  Pa. 
St.  466.  For  the  acts  of  his  duly  au- 
thorized agent  the  insured  is  responsi- 
ble, and  so  likewise  the  knowledge  of 
his  agent,  acquired  while  acting  within 
the  scope  of  his  authorized  employ- 
ment, is  to  be  imputed  to  him.  Cole  v. 
Germania  Fire  his.  Co.,  99  N.  Y.  40, 
1  N.  E.  38. 

•1  Meiier  v.  Queen  Ins.  Co.,  41  La. 
Ann.  1000,  6  So.  899.  See  many  illus- 
trative cases,  2  Clement,  Ins.  (1905), 
310-317.  Changes  required  by  the 
ordinary  use  of  the  property  are  im- 
pliedly allowed,  so  far  as  this  clause  is 
concerned,  Washington  F.  Ins.  Co.  v. 
Davison,  30  Md.  91.  Thus,  repairs  to 
make  building  tenantable.  Jolly's  v. 
Baltimore  Eq.  Sac,  1  Har.  &  G.  (Md.) 
295,  18  Am.  Dec.  288;  or  removal  of 
dangerous  defect,  James  v.  Lycoming 
/?is.  Co.,  13  Fed.  Cas.  309. 

5  McKenzie  v.  Scottish  U.  &  N.  Ins. 
Co.,  112  Cal.  548,  44  Pac.  922;  Adair  v. 
Ins.  Co.,  107  Ga.  297,  .33  S.  E.  78;  De,s- 
Moines  Ice  Co.  v.  Niagara.  Fire  Ins. 
Co.,  99  Iowa,  193,  68  N.  W.  600; 
Karow  v.  Ins.  Co.,  57  Wis.  56,  15 
N.  W.  27,  46  Am.  Rep.  17  (assured 
burned  his  property  when  insane). 


;{2h  MEANING    AM)    LLGAL    El-bECr    OF    FIRE    POLICY 

lield  to  constitute  no  such  increase  of  risk  as  that  referred  to  in  this 
clause  of  the  policy.'  Mere  acts  of  negligence  by  the  assured  or  his 
agents,  though  causing  or  contributing  to  the  loss,  are  covered  by 
the  (ire  insiu-ance  policy,  in  the  absence  of  fraud  or  bad  faith  on  his 
part.- 

Goodfriond  owned  a  department  store  in  Middleborough.  He 
carried  upon  his  stock  of  merchandise  $18,100  of  insurance,  in- 
cluding a  policy  of  $1,000  issued  by  the  defendant.  The  store  was 
lighted  by  a  gasoline  machine,  which  got  out  of  order  shortly  before 
the  fire  and  caused  the  loss.  The  defendant  moved  to  amend  its 
answer  by  alleging  that  the  gasoline  lighter  was  defective  for  many 
days  prior  to  the  fire  which  was  known  or  by  the  exercise  of  ordi- 
nary care  could  have  been  known  to  the  plaintiff  before  the  fire. 
The  court  held  that  an  insurer  is  responsil)le  for  a  loss  occasioned 
by  a  risk  insured  against,  though  caused  by  the  negligence  of  the 
insured  or  his  agent,  and  ruled  that  the  amendment  was  immaterial.* 

The  defendant,  the  Niagara  Fire  Insurance  Company,  insured  an 
ice  house  belonging  to  the  Des  Moines  Ice  Company  and  situated 
on  the  shore  of  Lost  Island  Lake.  The  ice  house  was  destroyed  by 
fire.  The  loss  was  caused  by  the  spread  of  fire  from  a  bonfire  made 
by  the  president  of  the  plaintiff  companj'-  not  far  away  from  the  ice 
house,  for  the  purpose  of  burning  up  some  rubbish,  and  left  burning 
without  anyone  to  watch  it  at  the  noon  hour.  The  court  held  that 
though  the  plaintiff's  conduct  might  have  been  careless,  neverthe- 
less the  loss  was  covered  by  the  policy,  and  that  the  temporary  and 
incidental  increase  of  risk  amounted  to  no  breach  of  warranty. "• 

Furthermore,  it  must  not  be  forgotten  that  the  hazard  is  of  neces- 
sity a  variable  quantity.  It  changes  constantly  from  day  to  day, 
and  sometimes  imperceptibly,  from  the  operation  of  the  laws  of 
nature  and  from  various  circumstances  beyond  the  control  of  the 
insured.  Such  influences,  and  also  transactions  of  third  parties 
limited  to  adjoining  premises  ^  must  in  general,  unless  unusual  or 
extraordinary,  be  considered  as  a  necessary  part  or  incident  of  the 
risk  which  the  insurer  has  undertaken  to  bear.^    It  is  not  to  be  sup- 

^  Anqier  v.  Western  Assur.   Co.,  10  ^German    Ins.     Co.    v.    Goodjriend 

S.  D.  82,  71  N.  W.  761,  66  Am.  St.  R.  (Ky.,  1906),  97  S.  W.  1098. 

685.      As    to    mere    carelessness,    the  *  Des  Moines  Ice  Co.  v.  The  Niagara 

United    States    Supreme    Court    says:  Fire  Ins.  Co.,  99  Iowa,  193,  68  N.  W. 

"The  insured,  so  long  as  he  acts  with  600. 

fidelity,  is  answerable  neither  for  his  ^  German  Ins.  Co.  v.  Wright,  6  Kan. 

servants  nor  for   himself,"  Orient  Ins.  App.  611,  49  Pac.  704. 

Co.  V.  Adams,  123  N.  S.  73.  e  state  Ins.  Co.  v.   Taylor,  14  Colo. 

^German    Ins.    Co.    v.    Goodjriend  499,  24  Pac.  333  (acts  of  neighbors), 
(Ky.,  Dec,  1906),  36  Ins.  L.  J.  217. 
See  §  49,  supra. 


INCREASE    OF    RISK  329 

posed  that  the  insured  has  guaranteed  that  no  improvements  or 
changes  shall  be  made  anywhere  in  the  vicinity  of  the  insured  prop- 
erty during  the  life  of  his  insurance/  but  it  is  reasonable  to  exact  an 
obligation  from  him  that  he  shall  not  allow  himself,  or  permit  othei"s 
in  control  of  the  insured  property,  with  his  consent,  to  change  its 
structure,  nature,  or  habitual  use  in  such  a  way  as  to  make  the 
hazard  materially  different  from  that  which  the  insurers  have  agreed 
to  undertake.  Therefore  trivial  or  temporary  variations  in  the  risk 
incident  to  the  ordinary  use  of  the  insured  property  are  presupposed 
by  the  contracting  parties  to  be  likely  to  occur;  ^  but  not  so  with 
more  radical  or  permanent  changes.^ 

In  a  Georgia  case  the  defendant  insured  "the  estate  of  Mrs. 
Hudson"  against  fire  loss  to  dwelling  house  and  furniture.  The 
husband  of  the  decedent,  in  charge  and  occupancy  of  the  premises, 
employed  the  owner  of  a  movable  threshing  machine  run  by  an 
engine  to  bring  his  machine  to  the  premises  temporarily,  for  the 
purpose  of  threshing  some  wheat.  The  engine,  which  had  no  spark 
arrester,  was  moved  thither  and  located  about  eight3'-five  feet  from 
the  dwelling.  The  work  of  threshing  all  told  required  about  two 
hours.  When  the  job  was  half  done  a  sudden  and  unexpected  gust 
of  wind  came  and  carried  sparks  from  the  engine  to  the  house, 
which  was  in  consequence  destroyed  by  fire.  The  plaintiff  was 
nonsuited  below.  On  appeal,  however,  the  court  reversed,  holding 
that  the  question  whether  a  breach  of  the  warranty  had  been  com- 
mitted by  such  a  temporary  and  incidental  use  of  the  machine  was 
for  the  jury.'* 

This  clause  binds  the  assured  to  make  no  alteration  or  change  in 
the  structure  ^  or  use  ^  of  the  property  which  will  substantially 
increase  the  risk,'''  and  it  prohibits  him  from  introducing  any  un- 
usual practice  or  mode  of  conducting  his  business  which  would  have 

1  Schaejfer  v.  Farmers'  Mid.  F.  Ins.  107  Ga.  297,  33  S.  E.  78,  45  L.  R.  A. 

Co.,  80  Md.  563,  31  Atl.  317  (engine  204,  73  Am.  St.  R.  122. 

fifty  feet  away).  ^  Hill  v.  Middlesex  Mut.  Assur.  Co., 

3  Kircher   v.  Mil.   Mech.  Mut.  Ins.  174  Mass.  542,  55  N.  E.  319;  Calvert  v. 

Co.,  74  Wis.  470,  43  N.  W.  487.  Hamilton  M.  Ins.  Co.,  1  Allen  (Mass.), 

3  Adair  v.  So.  Mut.  Ins.  Co.,  107  Ga.  308,  79  Am.  Dec.  744. 

297,  33  S.  E.  78,  45  L.  R.  A.  204,  73  e  Planter.'^'  Mut.  Ins.  Co.  v.  Rowland, 

Am.     St.     R.     122     (mere    incidental  66   Md.    236,    7   Atl.    257    (change   in 

temporary  acts    are   not  prohibited);  process  of  manufacture);  Williams  v. 

Eager  v.  Firemen's  Fund  Ins.  Co.,  71  Peoples'  Fire  Ins.   Co.,  57  N.   Y.  274 

Hun,  352,  55  N.  Y.  St.  R.  29,  25  N.  Y.  (l^erosene);   Collins  v.   London  Assur. 

Supp.  35,  aff'd  148  N.  Y.  726,  42  N.  E.  Co.,  165  Pa.  St.  305,  30  Atl.  924;  Pool 

722  (risk  must  not  be  increased  beyond  v.  Miluau  ee  Mech.  Ins.  Co.,  91  Wis. 

that   existing   or   reasonably   contem-  530,  65  N.  W.  57. 

pkt^d  by  the  parties).  t  Janvrin  v.  7ns.  Co.,  70  N.  H.  35, 

''Adair  v.  Southern  Mut.  Ins.  Co.,  46  Atl.  686  (must  be  substantial  change 

to  avoid). 


330 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


the  same  effect/  and  also  from  discontinuing  any  precaution  repre- 
sented in  his  appUcation  to  have  been  adopted  and  practiced  with  a 
view  to  diminish  the  risk." 

During  the  term  of  the  policy  issued  by  the  defendant  to  Horan 
upon  his  two-story  frame  dwelling,  he  caused  an  adjoining  dwelling 
house  to  be  erected  which  in  fact  increased  the  risk  of  fire  in  the 
building  insured;  but  by  another  alteration,  namely,  by  the  removal 
of  a  carpenter  shop  standing  at  the  date  of  the  policy  in  suit,  the 
risk  was  diminished.  The  trial  judge  charged  the  jury,  "it  is  a 
question  of  fact,  under  all  the  evidence  in  this  case,  as  to  whether 
there  was  any  increase  of  risk  by  fire;  and  whether  it  was  counter- 
balanced by  the  removal  of  the  carpenter  shop."  On  appeal  the 
court  held  that  the  charge  was  erroneous  and  that  there  had  been 
a  fatal  increase  of  risk.     A  set-off  of  risks  was  not  allowed.-'' 

Erection  of  new  buildings  upon  the  property  insured,'*  or  adjacent 
thereto,^  or  any  change  in  the  structure  of  the  buildings  which  makes 
them  more  inflammable,  or  the  introduction  of  new  and  more  haz- 
ardous employment  ^  or  machinery  ^  is  hkely  to  avoid  the  policy, 
unless  a  disclosure  is  made  to  the  company,  and  its  consent  obtained 
by  written  permit.*     Other  insurance  is  not  per  se  an  increase  of 


1  Collins  V.  London  Assur.  Co.,  165 
Pa.  St.  305,  30  Atl.  924. 

2  Houghton  v.  Manufrs.  Mut.  F.  Ins. 
Co.,  8  Mete.  (Mass.)  114,  41  Am.  Dec. 
489;  Diehl  v.  Adams  Co.  Mut.  Ins.  Co., 
58  Pa.  St.  443,  98  Am.  Dec.  302. 
New  machinery  may  be  substituted 
for  old,  James  v.  Lycoming  Ins.  Co., 
13  Fed.  Cas.  309.  And  a  dwelling 
house,  in  the  absence  of  a  stipulation 
to  the  contrary,  may  be  used  for 
boarders,  Planters'  Ins.  Co.  v.  Sorrels,  1 
Baxt.  (Tenn.)  352,  25  Am.  Rep.  780; 
but  not  for  a  liquor  store.  Western 
Assur.  Co.  V.  McPike,  G2  Miss.  740. 
Nor  may  a  blacksmith  shop  be  added 
to  a  printing  office,  Robinson  v.  7ns. 
Co.,  27  N.  J.  L.  134.  By  the  rules  of 
the  New  York  Fire  Exchange,  oc- 
cupancy by  more  than  two  families 
converts  a  private  dwelling  into  an 
apartment  house,  a  more  hazardous 
risk. 

3  Pottsville  Mut.  Fire  Ins.  Co.  v. 
Horan,  89  Pa.  St.  438. 

4  Roberts  v.  Chenango  Ins.  Co. ,  3 
Hill  (N.  Y.),  501;  Francis  v.  Somerville 
M.  Ins.  Co.,  25  N.  J.  L.  78  (an  addi- 
tion for  hazardous  articles). 

5  Franklin  Brass  Co.  v.  Phoenix 
Assur.  Co.,  65  Fed.  773, 13  C.  C.  A.  124; 
Cole   V.   Germania  Fire  Ins.   Co.,  99 


N.  Y.  36,  1  N.  E.  38;  Murdoch  v. 
Chenango  Co.  Mut.  Ins.  Co.,  2  Comst. 
(N.  Y.)  210;  Yentzer  v.  Farmers'  Mut. 
Ins.  Co.,  200  Pa.  St.  325,  49  Atl.  767 
(erection  of  adjacent  building  for  in- 
cubator). 

«  Mack  V.  Rochester  German  Ins.  Co., 
106  N.  Y.  560,  13  N.  E.  343.  For  ex- 
ample, changing  from  private  dwelling 
to  hotel,  Guerin  v.  Manchester  Assur. 
Co.,  29  Can.  S.  C.  139;  or  to  liquor 
saloon,  Lappin  v.  Charter  Oak  Ins.  Co., 
58  Barb.  325. 

7  Orient  Ins.  Co.  v.  McKnight,  197 
111.  190,  64  N.  E.  339. 

8  Stokes  v.  Cox,  1  H.  &  N.  320.  And 
see  as  to  erection  of  neighboring  build- 
ings over  which  insured  had  no  con- 
trol, Janvrin  v.  Ins.  Co.,  70  N.  H.  35, 
46  Atl.  686;  Straker  v.  Phoenix  Ins.  Co., 
101  Wis.  413,  77  N.  W.  752.  Black- 
smith shop  ten  or  twelve  feet  away, 
held,  an  increase  of  risk,  Gardiner  v. 
Piscataquis  M.  F.  Ins.  Co.,  38  Me.  439. 
So  also  a  small  frame  building,  North- 
western Nat.  Ins.  Co.  v.  Davis,  10  Ky. 
L.  Rep.  818.  So  also  a  new  building 
in  a  lot  represented  to  be  vacant, 
Pottsville  M.  F.  Ins.  Co.  v.  Horan,  89 
Pa.  St.  438.  The  introduction  of  elec- 
tric lighting,  pending  the  term  of  in- 
surance,  should   be   disclosed   to   the 


INCREASE   OF   RISK  331 

risk.^  Nor  is  vacancy  per  se  an  increase  of  risk.^  Indeed,  some  classes 
of  buildings  are  much  less  hazardous  when  vacant  than  when  oc- 
cupied.^ Nor  is  change  of  occupants  an  increase  of  risk,  as  matter 
of  law.'' 

In  Iowa  it  has  been  held  that  giving  a  chattel  mortgage  amounted 
to  an  increase  of  risk  as  matter  of  law;  ^  but  this  decision  is  very 
questionable,  and  in  general  the  creation  of  incumbrances,  whether 
voluntary,  as  in  the  case  of  mortgages,  or  involuntary,  as  in  the  case 
of  tax  liens,  is  not  to  be  considered  as  increasing  the  risk  within  the 
meaning  of  this  clause,  although  they  might  result  in  increasing  the 
inducement  to  the  insured  to  destroy  his  property.^  The  conclusion 
is  doubtless  based  in  part  upon  the  circumstance,  that  the  fire  policy 
deals  specially  with  the  matter  of  incumbrances,  and  expressly 
demands  a  disclosure  of  chattel  mortgages  only. 

It  must  be  noticed  that  the  requirements  of  this  clause  impose 
upon  the  insured  an  obligation  which  in  terms  covers  all  changes 
of  which  he  has  knowledge  in  the  surrounding  or  adjoining  premises, 
provided  they  enhance  the  hazard;  but  inasmuch  as  nothing  is 
specifically  said  about  the  adjoining  premises,  and  the  word  "knowl- 
edge" is  connected  with  the  word  "control,"  it  is  doubtful  how  far 
the  courts  will  hold  the  insured  responsible  for  not  disclosing  changes 

company,   Hahn   v.    Guardian   Assur.  Co.,  74  N.  Y.  295;  Eurel a  F.  &  M.  Ins. 

Co.,  23  Oreg.  576,  581,  32  Pac.  683,  Co.  v.  Baldwin,  62  Ohio  St.  368,  57 

but  the  making  of  ordinary  and  neces-  N.  E.  57;  Boardman  v.  North  Waterloo 

sary  repairs  does  not  fall  within  the  7ns.  Co.,  31  Ont.  525;  but  see,  under 

prohibition  of  this  clause,  Lyman  v.  statute,  Jones  v.  Granite  State  F.  Ins. 

State   Mut.    Fire   Ins.    Co.,    14    Allen  Co.,  90  Me.  40,  37  Atl.  326:  Hanscom 

(Mass.),  329;  Toivnsend  v.  N orthu-estern  v.  Home  Ins.  Co.,  90  Me.  333,  38  Atl. 

Ins.  Co.,  18  N.  Y.  168;  Smith  v.  German  324. 

/ns.  Co.,  107  Mich.  270,  65  N.  W.  236,  3  Removal    of   part   of   goods   from 

30   L.    R.   A.    368    (temporary   use   of  insured    premises    is    no    increase    of 

gasoline  to  burn  off  old  paint,  held,  not  hazard,  RunJle  v.  Hartford  Ins.  Co.,  99 

to  avoid).    And  see  Bentley  v.  Lurnber-  Iowa,  414,  68  N.  W.  712. 
men's  Fire  Ins.  Co.,  191  Pa.  St.  276,  *  Georgia  Home  Ins.  Co.  v.  Kinnier, 

43  Atl.  209,  as  to  use  of  benzine,  but  28  Gratt.  (Va.)  88;  Planters'  Ins.  Co.  v. 

policy  was    not    standard.       Extraor-  Sorrels,  I  Baxt.   (Tenn.)  352. 
dinary   alterations    and    repairs,  with-  ^  Lee    v.    Agricidtural   Ins.    Co.,    79 

out   special   permit,   will   avoid.   First  Iowa,  379,  44  N.  W.  683. 
Cong.  Church  v.  Hoh'oke  Fire  Ins.  Co.,  ^  Hosford  v.  Germania  Fire  Ins.  Co., 

158  Mass.  475,  32  N.  E.  572,  19  L.  R.  A.  127  U.  S.  399;  Greenlee  v.  Ins.  Co..  102 

587,  35  Am.  St.  R.  508  (long  continued  Iowa,  427,   71    N.   W.   534;  Judge  v. 

use  of  naphtha  torches  in  connection  Conn.   Fire  Ins.    Co.,   132   Mass.   521; 

with  repairs,  issue  for  jury);  Merriam  Collins  v.  London  Assur.  Co.,  165  Pa. 

V.  Ins.  Co.,  21   Pick.    (Mass.)   162,  32  St.  298,  30  Atl.  924;  Continental  Fire 

Am.  Dec.  252.  Ins.  Co.  v.  Whita  er  112  Tenn.  151,79 

'  Lindley  v.  Ins.  Co.,  65  Me.  368,  20  S.  W.  119.    The  Wisconsirx  court,  how- 
Am.  Rep.  701.  ever,  decided  that  the  existence  of  a 

2  Becker  v.  Farmers'  Mut.  Ins.  Co.,  mortgage  was  a  fact  material   to  the 

48  Mich.  610,  12  N.  W.  874;  Luce  v.  risk,  Vankirk  v.  Citizens'  Ins.  Co.    79 

Dorchester  Mut.  F.  Ins.  Co.,  110  Mass.  Wis.  627. 
361;  Cornish  v.  Farms  Buildings  Ins. 


XV2  Mi;.\NiN(;  and  legal  effect  of  fire  policy 

in:ule  by  otlicrs  upon  adjacent  premises  ^  in  the  absence  of  a  special 
warranty  rrj^anling  "exposures." ' 

In  a  Colorado  case  the  policy  provided  that  it  should  be  void  if  the 
hazard  was  increased  without  written  consent  of  the  company.  The 
court  decided  that  such  a  clause  was  aimed  only  at  premises  of  the 
insured  and  property  within  his  control,  and  that  consequently  the 
language  could  not  be  extended  to  the  acts  of  contiguous  owners.*'* 
But  the  phra.scology  of  most  of  the  statutory  policies  is  broad  enough 
to  cover  all  such  acts  of  neighbors  done  on  their  premises  as  increase 
the  hazard  of  the  insured  property,  wdth  the  knowledge  of  the  in- 
sured, although  the  acts  are  not  within  the  control  of  the  insured. 
This  ruling  has  been  expressly  made  by  the  New  Hampshire  court 
under  the  standard  policy  of  that  state; ''  and  a  later  provision  in  the 
New  York  standard  form  respecting  proofs  of  loss,  which  requires  the 
insured  to  describe  "  anj^  changes  in  exposures  since  the  issuing  of 
the  policy,"  not  to  be  found  in  the  Massachusetts  and  New  Hamp- 
shire policies,  may  be  mentioned  as  an  added  reason  for  giving  the 
same  construction  to  the  New  York  policy.  Therefore,  whenever 
the  insured  learns  that,  by  reason  of  some  alteration  in  the  surround- 
ing exposures,  the  risk  of  loss  to  the  insured  property  has  been  sub- 
stantially enhanced,  his  safe  method  of  procedure  is  to  immediately 
notify  the  company  by  aid  of  his  broker,  who  will  secure  prompt 
action  by  the  company,  and,  if  necessary  as  an  additional  precaution, 
obtain  its  "binder  for  survey"  meanwhile.^ 

In  a  case  in  which  the  defense  was  that  the  risk  was  materially 
increased  by  the  erection  of  adjoining  buildings  with  the  knowledge 
and  consent  of  the  insured,  the  Minnesota  court  held  that  such  an 
issue,  unless  the  facts  were  undisputed  and  the  inference  obvious, 
raised  a  question  for  the  jury,  and  that  the  burden  of  alleging  and 
proving  the  defens3  rested  upon  the  insurer.*^ 

If  the  change  of  risk  is  such  as  to  fall  within  the  ban  of  this  pro- 
vision of  the  contract,  the  question  is  immaterial  whether  or  not  it 
is  the  cause  of  the  loss;  since  the  risk  becomes  other  than  that  which 
was  contracted  for,  and  the  contract  is  void  at  the  option  of  the 

^  State  Ins.  Co.  v.   Taylor,  14  Colo.  (the    increase   of   risk   must    be   sub- 

499,  24  Pac.  333.  stantial). 

3  Stra'-er    v.    Phoenix   Ins.    Co.,    101  ^Putnam    v.    Home    Ins     Co      123 

Wis.  413,  77  N.  W.  752  (where  there  Mass.  324,  25  Am.  Rep.  93      But  a 

was   an   express   warranty   of   no   ex-  binding  until  acceptance  or  rejection 

posvire  withm  100  feet).  will  not  run  after  rejection,  Gooahue  v 

s  State  his.  Co.  v.   Taylor,  14  Colo.  Hartford  Fire  Ins.  Co     184  Mass    41 

499,  24  Pac.  333.  67  N.  E.  645. 

*  Janvrin    v.    Rockingham   F.    Mut.  6  Taylor  v.  Security  Mut  F  Ins  Co 

Fire  Ins.  Co.,  70  N.  H.  35,  46  Atl.  686  88  Minn.  231,  92  N.  W.  952.    '        '       '' 


INCREASE   OF   RISK 


333 


insurers;  *  and  according  to  the  weight  of  authority  a  temporary 
increase  of  risk  vitiates  the  pohcy,  and  does  not  simply  suspend  its 
operation;  2  but  a  contrary  rule  has  been  adopted  in  Illinois  and 
elsewhere.'  And,  as  alread}^  shown,  statutes  and  statutory  forms  of 
policies  in  some  states  supersede  these  common-law  doctrines. 

This  clause  has  no  application  to  conditions  expressly  provided  for 
by  other  clauses  of  the  policy.'*  Thus  it  is  obvious  that  the  insured 
is  entitled  to  the  full  benefit  of  all  the  written  permits  that  may  be 
regularly  obtained  and  attached  to  the  policy,  for  hazardous  use  or 
occupation,  for  change  of  interest  or  location,  for  rebuilding  or  re- 
pairing, for  vacancy,  for  chattel  mortgages,  for  anything  agreed  to 
by  the  company  in  writing,  regardless  of  the  effect  upon  the  risk; 
provided  only  the  insured  keeps  within  the  terms  of  his  permit.^ 

Whether  the  change  amounts  to  a  material  alteration  in  the  risk 
is  essentially  a  question  of  fact ;  ^  and  must  generally  be  a  question 
for  the  jury.^    Thus  the  Minnesota  court  declares,  "  it  is  rare  that  the 

1  Daniels  v.  Equitable  Fire  Ins.  Co. , 
48  Conn.  105.    See  §  107,  supra. 

2  Imperial  Ins.  Co.  v.  Coos  Co.,  151 
U.  S.  452,  14  S.  Ct.  379;  Hill  v.  Middle- 
sex Ass2ir.  Co.,  174  Mass.  542,  55  N.  E. 
319;  Kijte  v.  Commercial  Union  Assur. 
Co.,  149  Mass.  116,  21  N.  E.  361;  Jen- 
nings V.  Chenango  Co.  Mut.  Ins.  Co. 
2  Den.  (N.  Y.)  75. 

3  For  example.  Traders'  Ins.  Co.  v. 
Catlin,  163  111.  256,  45  N.  E.  255;  Ohio 
Farmers'  Ins.  Co.  v.  Burget,  65  Ohio  St. 
119,  61  N.  E.  712.  See  fuller  discus- 
sion of  this  subject,  §§  114,  247,  supra. 
Burden  is  on  the  underwriter  to  prove 
increase  of  risk,  Taylor  v.  Security  Mut. 
F.  I.  Co.,  88  Minn.  231,  92  N.  W.  952. 

*  Daniels  v.  Equitable  Ins.  Co.,  50 
Conn.  551;  Herrman  v.  Merchants'  Ins. 
Co.,  81  N.  Y.  184.  Thus  if  there  be  an 
express  privilege  to  make  alterations 
and  repairs,  it  is  not  material  to  in- 
quire whether  or  not  they  increase  the 
risk,  Toumseiid  v.  Northwestern  Ins. 
Co.,  18  N.  Y.  168.  Such  inquiry  is 
likewise  immaterial,  on  the  other  hand, 
in  the  case  of  express  prohibitions,  for 
instance,  against  keeping  gasoline  or 
other  explosive,  Norwaysz  v.  Thuringia 
Ins.  Co.,  204  111.  334,  68  N.  E.  551; 
Boyer  v.  Ins.  Co.,  124  Mich.  455,  83 
N.  W.  124,  83  Am.  St.  R.  338.  Under 
sprinkler  clause  it  is  permissible  to 
make  repairs;  therefore  it  is  not  a  fatal 
increase  of  risk  to  discontinue  for  nec- 
essary repairs  the  use  of  the  sprinkler 
service.  So  held  in  Cummer  Lumber 
Co.  V.  Associated  Mfrs.  M.  F.  I.  Corp., 


67   App.    Div.    151,  73   N.   Y.   Supp. 
668. 

^  Betcher  v.  Capital  F.  Ins.  Co.,  78 
Minn.  240,  80  N.  W.  971;  Garrebrant  v. 
Continental  Ins.  Co.  (N.  J.,  1907),  67 
Atl.  90. 

6  Firemen's  Ins.  Co.  v.  Appleton,  etc., 
Co.,  161  111.  9,  43  N.  E.  713;  Runkle  v. 
Hartford  his.  Co.,  99  Iowa,  414,  68 
N.  W.  712. 

7  For  example,  Taulor  v.  Security 
Ins.  Co.,  88  Minn.  231,  92  N.  W.  952; 
Orient  Ins.  Co.  v.  McKnight,  197  111. 
190,  64  N.  E.  339;  Greenwich  Ins.  Co.  v. 
State,  74  Ark.  72,  84  S.  W.  1025; 
Williams  v.  Peoples'  Ins.  Co.,  57  N.  Y. 
274.  The  issue  is  not  always  for  the 
jury,  for  example,  Cassimus  v.  Scot. 
Union  &  Nat.  Ins.  Co.,  135  Ala.  256, 
33  So.  163;  Betcher  v.  Capital  Fire  Ins. 
Co.,  78  Minn.  240,  80  N.  W.  971;  Cole 
V.  Germania  Ins.  Co.,  99  N.  Y.  36; 
School  Dist.  V.  German  Ins.  Co.,  7  S.  D. 
458,  64  N.  W.  527.  Experts  in  general 
cannot  testify  as  to  the  ultimate  fact 
to  be  determined  by  the  jury,  namely, 
whether  a  given  situation  amounts  to 
an  increase  of  risk.  If  it  be  a  matter 
of  common  knowledge  the  issue  is  for 
the  jury,  Carroll  v.  Home  Ins.  Co.,  51 
App.  Div.  149,  64  N.  Y.  Supp.  522; 
Jefferson  Ins.  Co.  v.  Cotheal,  7  Wend. 
(N.  Y.)  72.  But  testimony  regarding 
prevailing  rates  of  premium  is  ad- 
missible as  having  some  bearing, 
Southern  Mid.  Ins.  Co.  v.  Hudson,  113 
Ga.  434,  38  S.  E.  964;  Taylor  v.  Se- 
curity Ins.  Co.,  88  Minn.  231,  92  N.  W 


J34  MEANING    AND    LKGAL    EFFECT    OF    FIRE    POLICY 

question  is  ever  one  of  law  to  be  determined  by  the  court."  ^  Never- 
theless soinctiincs  the  only  permissible  inference  to  be  drawn  from 
the  faets  is  too  elear  to  allow  the  issue  to  pass  beyond  the  judge. 
.Vceordin.i^ly  the  same  court  felt  compelled  to  take  judicial  notice  of 
the  fact  that  the  storage  of  explosive  fireworks  in  the  insured  build- 
ing increascMl  the  risk.^ 

The  clause  in  the  Massachusetts  policy  is  of  similar  purport-:  ^  or  if, 
wiUwut  fiuch  asacnt  [in  writing  or  in  print]  the  situation  or  circumstances 
affecting  the  risk  shall,  by  or  with  the  knowledge,  advice,  agency  or  consent 
of  the  insured,  he  so  altered  as  to  cause  an  increase  of  such  risk. 

The  Massachu-setts  court  decided  that  on  the  erection  by  the  as- 
sured of  a  factory  on  an  adjoining  lot,  increasing  the  risk  of  the  in- 
sured property,  the  policy  at  once  became  void,  without  any  affirma- 
tive action  or  notice  by  the  insurer."*  On  the  other  hand,  the  same 
court  held  that  the  careless  use  of  an  unsafe  stove  on  the  premises 
for  a  single  night,  by  a  visiting  crew  of  sailors,  would  not  avoid  the 
policy.^ 

Under  an  Iowa  statute  whether  the  removal  of  the  property  in- 
sured to  a  new  location,  without  the  insurer's  consent,  increases  the 
risk  presents  a  question  for  the  jury.^ 

§  258.  Mechanics. — Or  if  mechanics  be  employed  in  building,  alter- 
ing, or  repairing  the  within  described  premises  for  more  than  fifteen  days 
at  any  one  time. 

952;  Planters'  Mid.  Ins.  Co.  v.  Roiv-  agency  of  the  insured.     By  the  Iowa 

land,  SO  Md.  236,  7  Atl.  257.    The  rat-  policy  increase  of  hazard  to  be  fatal 

ing  by  the  companies  is  not  conclusive  must  not  only  be  known   to   the   in- 

upon  this  issue,   Monteleone  v.   Rotial  sured,  but  must  also  contribute  to  the 

Ins.  Co.,  47  La.  Ann.  1563,  18  So.  472;  loss.     By  the  New  Hampshire  policy  it 

Carroll  v.  Home  his.  Co.,  51  App.  Div.  must  continue  until  the  loss  to  avoid 

149,  64  N.  Y.  Supp.  522.     And  when  the  policy. 

the  issue  involves  a  matter  of  expert  *  Allen    v.    Massasoit    Ins.    Co.,    99 

knowledge,  experts  may  testify.  Trad-  Mass.  160.     Material  alterations  in  the 

ers'  Ins.  Co.  v.  Catlin,  163  111.  256,  45  insured    premises    increasing   the    risk 

N.  E.  255;  Cornish  v.  Farm  Bldg.  his.  avoid  the  policy,  though  not  connected 

Co.,  74  N.  Y.  295.  with  the  loss.  Hill  v.  Middlesex  Mnt. 

iTa;lor   v.    Securitii   Mut.    F.    Ins.  /^fre  Asswr.  Co.,  174  Mass.  542,  55  N.  E. 

Co.,  88  Minn.  231,  92  N.  W.  952  (erec-  319;  Kvte  v.  Coynmercial  Union  Assur. 

tion  of  adjoining  buildings);  Adams  v.  Co.,  149  Mass.   116,  21   N.   E.  361,  3 

Altns  Mut.  Ins.  Co.  (Iowa,  1907),  112  L.  R.  A.  508. 

N.  W.  651.  ^Loud  v.  Citizens'  Mut.  Ins.  Co.,  2 

^  Betcher  V.  Capital  Fire  Ins.  Co.,  7S  Gray    (Mass.),   221.      The   policy   was 

Minn.  240,  80  N.  W.  971.    The  storage  held  suspended  and  not  avoided  where 

of  dynamite  is  "' material  to  the  risk"  the  owner  of  a  bowling  alley  and  pool 

as  matter  of  law  imdor  the  statutes  table  was  illegally  conducting  his  busi- 

providing  that  only  matters  material  ness  for  a  short  time  without  a  license, 

to  the  risk  will  avoid  the  policy,  Kene-  Hinc' ley  v.  Germania  Fire  Ins.  Co.,  140 

fide  v.  NoriHch  Union  F.  Ins.  Co.    (Mo.,  Mass.  38,  1  N.  E.  737,  54  Am.  Rep  445 

1907),  103  S.  W.  957.  6  Adams  v.  Atlas  Mut.  Ins.  Co.  (la., 

3  South    Dakota    limits    to    act    or  1907),  112  N.  W.  651. 


INTEREST  OF  INSURED  335 

Such  a  provision  is  reasonable  and  binding  on  the  insured.^  The 
limit  of  time,  wisely  inserted  in  this  clause,  tends  to  make  it  more 
free  from  ambiguity  than  formerly,  and  if  the  insured  allows  any 
building  or  repairing  operations  to  go  on  without  permit  for  more 
than  the  specified  time,  he  will  vitiate  his  policy,  although  in  fact 
the  risk  may  not  have  been  increased. ^  The  permission  carries  with 
it  the  right  to  do  the  work  in  a  usual  and  proper  manner,  no  matter 
what  the  effect  on  other  clauses  of  the  policy,  for  instance,  those 
forbidding  an  increase  of  risk,  or  the  shutting  down  of  factory  opera- 
tions.^ 

In  the  Massachusetts  polic}'  this  subject  is  not  specifically  cov- 
ered, but  repairs  fall  within  the  operation  of  the  general  clause  in 
regard  to  an  alteration  in  the  situation  or  circumstances  affecting 
the  risk. 

§  259.  Interest  of  Insured. — Or  if  interest  of  the  insured  be  other 
than  unconditional  and  sole  ownership. 

If  each  one  of  several  persons  having  insurable  interests  in  a 
property  were  allowed  to  take  out  a  separate  insurance  to  its  full 
value,  and  had  the  right  under  his  policy  to  a  separate  collection 
for  the  full  loss,  the  moral  hazard  would  be  greatly  enhanced.  In- 
surance would  at  once  be  regarded  as  a  matter  of  promising  specula-. 

i  Imperial    Fire    I.     Co.     v.     Coos  M/9.  Co.,  24  111.  App.  149,  aff'd  125  111. 

County,  151  U.  S.  452,  38  L.  Ed.  231,  131,  17  N.  E.  771;  Au  Sable  Lumber 

14  S.  Ct.  379.  Co.  V.  Detroit  Ins.  Co.,  89  Mich.  407, 

2  Newport  Imp.  Co.  v.  Home  Ins.  Co.,  50  N.  W.  870.  And  see  Firemen's  Ins. 
163  N.  Y.  237,  57  N.  E.  475,  aff'g  21  Co.  v.  Appleton  Paper  Co.,  161  111.  9, 
App.  Div.  633,  47  N.  Y.  Supp.  1143;  43  N.  E.  713  (in  which  sprinkler 
Mack  V.  Rochester  German  Ins.  Co.,  106  equipment  was  removed);  Burnham  v. 
N.  Y.  560,  13  N.  E.  343.  It  has  been  Roijal  Ins.  Co.,  75  Mo.  App.  394; 
held  that  a  privilege  to  alter  and  re-  Townsend  v.  Northwestern  Ins.  Co.,  18 
pair  does  not  extend  to  a  material  N.  Y.  168.  And  the  time  limit  con- 
enlargement  of  the  building,  Frost  trols,  although  a  continuation  of  the 
Detroit  L.  &  W.  Works  v.  Millers',  etc.,  work  may  be  needful  for  the  preserva- 
Ins.  Co.,  37  Minn.  300,  34  N.  W.  35.  tion  of  the  property,  German  Ins.  Co. 
Often  a  special  privilege  without  time  v.  Hearne,  117  Fed.  289,  54  C.  C.  A. 
limit  to  make  "additions,  alterations,  527,  59  L.  R.  A.  492.  A  breach  of  the 
and  repairs,"  is  obtained  from  the  com-  clause  by  a  tenant  of  the  assured  will 
pany.  As  to  "additions,"  see  §  233,  avoid,  Diehl  v.  Adams  Co.  Mut.  Ins. 
supra.  Sometimes  the  insurer,  unless  Co.,  58  Pa.  St.  443.  The  Michigan 
an  extra  premium  is  paid,  will  consent  court  has  held  that  painters  employed 
only  to  a  more  restricted  form  of  to  paint  the  outside  of  the  building 
privilege  which  does  not  include  re-  insured  are  not  "mechanics,"  but  it 
constructing,  or  enlargement  of  build-  would  be  unsafe  to  rely  upon  any  such 
ings  or  new  buildings.  For  a  proper  distinction  in  most  jurisdictions,  Smith 
premium  a  special  clause  known  as  a  v.  Gerynan  Ins.  Co.,  107  Mich.  270,  65 
builder's  risk  is  given,  Rann  v.  Home  N.  W.  236,  30  L,  R.  A.  368.  Contra, 
Ins.  Co.,  59 'N.Y.ZS7;  Smith  V.German  German  Ins.  Co.  v.  Hearne,  117  Fed. 
Am.  Ins.  Co.,  7  N.  Y.  Supp.  846.  289. 

^  An).    Tn,i.    Co.    V.    Bri/jhtort    Cotton 


336 


MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 


tion,  and  any  loss  by  fire,  so  far  from  being  a  misfortune,  would  be 
a  source  of  gain  to  the  assured.  In  the  view  of  underwriters,  there- 
fore, it  becomes  vital  to  the  jjropcr  conduct  of  the  business  to  know 
whether  a  loss  will  fall  exclusively  upon  the  assured,  or  partly  upon 
him  and  partly  upon  others. 

This  provision  of  the  standard  policy,  inserted  in  the  interest  of 
the  underwriters,  is  by  high  authority  deemed  reasonable  and  valid,^ 
and  a  fulfillment  of  its  terms  is  declared  to  be  a  condition  precedent 
to  any  right  of  recovery  by  the  assured. ^  It  has  reference,  obviously, 
to  the  time  wiien  the  contract  is  made;  ='  and  it  means  that  his  in- 
terest must  at  that  time  be  of  such  a  nature  that  the  substantial 
burden  of  any  fire  loss  will  fall  exclusively  upon  him,  regardless  of 
the  technical  character  of  his  title.''  Thus  a  vendee  under  an  execu- 
tory contract  of  purchase  binding  him  absolutely  to  complete  and 
to  take  the  whole  title,  whether  of  real,-"'  or  personal  property,^  is 
held  to  be  sole  and  unconditional  owner,  though  the  formal  instru- 
ment of  transfer  be  not  yet  delivered;  and,  by  parity  of  reasoning, 
the  vendor  ceases  to  be  sole  and  unconditional  owner  though  still 
holding  the  legal  title.'^     But  where  the  agreement  to  purchase  is 


1  Barnard  v.  National  Fire  his.  Co., 
27  Mo.  App.  26.  In  another  connection 
the  Ohio  court  says:  "Considerations 
of  public  policy  forbid  that  conflagra- 
tions should  be  made  profitable," 
Lae  Erie  &  W.  R.  R.  Co.  v.  Folk,  62 
Ohio  St.  297. 

2  Hunt  V.  Ins.  Co.,  196  U.  S.  47,  25 
S.  Ct.  179;  Matthie  v.  Globe  Fire  h}s. 
Co.,  68  App.  Div.  239,  74  N.  Y.  Supp. 
177,  aff'd  174  N.  Y.  489,  67  N.  E.  57. 

^Collins  V.  London  Assur.  Co..  165 
Pa.  St.  298,  30  Atl.  924. 

■•  Hartford  Fire  Ins.  Co.  v.  Keating, 
86  Md.  130,  38  Atl.  29,  63  Am.  St.  R. 
499  ("to  be  unconditional  and  sole,  the 
interest  must  be  completely  vested  in 
the  insured,  not  conditional  or  con- 
tingent, nor  for  years,  or  for  life  only, 
nor  in  common,  but  of  such  a  nature 
that  the  insured  must  sustain  the 
entire  loss  if  the  property  be  destroyed; 
and  this  is  so  whether  the  title  is  le- 
gal or  equitable")-  Yost  y.  Dwelling 
House  Ins.  Co.,  179  Pa.  St.  381,  36  Atl. 
317;  Steinmey.r  v.  Steinmeyer,  64  S.  C. 
413,  42  S.  E.  184  (•'  ownership  of  the 
assured  is  sole,  when  no  one  else  has 
any  interest  in  the  property  as  owmer; 
and  is  unconditional,  when  the  quality 
of  the  estate  is  not  limited  or  affected 
by  any  condition").  Several  parties 
insured  together  may  be  the  sole  and 


unconditional  owner,  Rankin  v.  Andes 
Ins.  Co.,  47  Vt.  144.  If  the  assured 
has  only  a  conditional  devise,  his 
ownership  does  not  meet  the  require- 
ment. Dwelling-house  Ins.  Co.  v. 
Dowdall,  49  111'.  App.  33.  Nor  have 
stockholders  such  an  interest  in  the 
corporate  property,  Syndicate  Ins.  Co. 
V.  Bohn,  65  Fed.  165,  12  C.  C.  A.  531, 
27  U.  S.  App.  564. 

^  Loventhal  v.  Home  Ins.  Co.,  112 
Ala.  108,  20  So.  419,  33  L.  R.  A.  258, 
57  Am.  St.  R.  17;  Howjh  v.  Citr/  Fire 
Ins.  Co.,  29  Conn.  10;  Knap  v.  F.  Ins. 
Co.,  101  Mich.  359,  50  N.  W.  653;  Hall 
V.  Niagara  Ins.  Co.,  93  Mich.  184,  53 
N.  W.  727;  Dupreau  v.  Hibernia  Ins. 
Co.,  76  Mich.  615,  43  N.  W.  585,  5 
L.  R.  A.  671;  Pres.,  etc.,  of  Ins.  Co.  v. 
Pitts,  88  Miss.  587,  41  So.  5;  Grunauer 
V.  Ins.  Co.  72  N.  J.  L.  289, 62  Atl.  418; 
Stowell  V.  Clark,  47  App.  Div.  (N.  Y.) 
626,  62  N.  Y.  Supp.  155,  aff'd  171  N.  Y. 
673,  64  N.  E.  1125;  Imperial  F.  Ins. 
Co.  v.  Dunham,  117  Pa.  St.  460,  12 
Atl.  668;  Matthews  v.  Capital  Fire  I. 
Co.,  115  Wis.  272,  91  N.  W.  675;  Evans 
V.  Ins.  Co.,  109  N.  W.  952  (1906). 

6  Phoenix  Ins.  Co.  v.  Kerr,  129  Fed. 
723,  64  C.  C.  A.  251;  but  see  Scotti.<ih 
Union  &  Nat.  Ins.  Co.  v.  Strain,  24 
Ky.  L.  R.  958,  70  S.  W.  274. 

7  Hamilton  v.  Dwelling  House  I.  Co., 


INTEREST   OF  INSUBED 


337 


conditional  or  contingent,  whether  of  real,^  or  of  personal  property,^ 
so  that  a  fire  loss  will  not  fall  upon  the  vendee,  then  his  interest  is 
not  sufficient  to  satisfy  the  requirement  of  this  warranty.'  The 
beneficial  owner  of  the  entire  property  is  the  real  owner.^ 

If  the  assured  has  possession  and  use  under  claim  of  right,  the 
court  is  not  disposed  to  pass  upon  the  validity  of  his  title,  or  to  apply 
to  it  any  nice  rules  of  conveyancing.^ 


98  Mich.  535,  57  N.  W.  735,  22  L.  R.  A. 
527;  Rosenstock  v.  Miss.  Home  Ins. 
Co.,  82  Miss.  674,  35  So.  309;  but  see 
Erb  V.  Fidelity  Ins.  Co.,  99  Iowa,  727, 
69  N.  W.  261.  It  does  not  follow, 
however,  that  the  vendor's  insurance, 
if  valid  when  procured,  is  avoided  by 
such  an  executory  contract  of  sale. 
See  §  265,  infra. 

1  Liberty  Ins.  Co.  v.  Boulden.  96  Ala. 
508,  11  So.  771;  Brooks  v.  Erie  Fire 
Ins.  Co.,  76  App.  Div.  275,  78  N.  Y. 
Supp.  748,  aff'd  177  N.  Y.  572,  69 
N.  E.  1120. 

2  Phoenix  Ins.  Co.  v.  Public  Park 
Amusement  Co.,  63  Ark.  187,  37  S.  W. 
959. 

3  Thus  the  owner  of  a  mere  option  to 
purchase  property  is  not  a  sole  and 
unconditional  owner,  Phoenix  Ins.  Co. 
V.  Kerr,  129  Fed.  723,  64  C.  C.  A.  251; 
see  W underlich  v.  Palatine  Ins.  Co.,  104 
Wis.  390,  80  N.  W.  471.  Or  where 
purchaser,  the  assured,  has  made  a 
binding  agreement  to  resell  to  the 
vendor  at  a  given  price  and  time, 
Farmers'  &  Mech.  Ins.  Co.  v.  Hahn 
(Neb.),  96  N.  W.  255.  A  person  in 
possession  of  personal  property,  with 
a  reservation  of  title  in  the  seller  until 
payment  of  the  notes  given  for  the 
purchase  price,  is  not  sole  and  uncon- 
ditional owner,  Geiss  v.  Franklin  Ins. 
Co.,  123  Ind.  172,  24  N.  E.  93  (soda 
water  fountain).  But  if  it  be  equitably 
and  substantially  true  that  the  insured 
is  the  unconditional  and  sole  owner,  as 
regards  the  risk  of  fire  loss,  the  clause 
will  not  be  held  to  have  been  violated, 
Milwaukee  Mech.  his.  Co.  v.  Rhea,  129 
Fed.  9,  60  C.  C.  A.  103,  in  which  the 
jury  was  charged  that  it  w^ould  be 
sufficient  if  vendee  was  in  possession 
by  a  parol  agreement  to  purchase  and 
to  pay.  But  held  otherwise  where  there 
was  no  consideration  for  the  parol 
promise  to  convey  in  Miller  v.  Amazon 
Ins.  Co.,  46  Mich.  463,  9  N.  W.  493; 
Martin  v.  State  Ins.  Co.,  44  N.  J.  L. 
485,  43  Am.  Rep.  397;  Lebanon  Mut. 
Ins.  Co.  V.  Erb,  112  Pa.  St.  149.     But 

22 


see  Westchester  Fire  Ins.  Co.  v.  Weaver, 
.  70  Md.  536,  17  Atl.  401,  5  L.  R.  A.  478 
(policy  held  void  as  to  piano  taken 
under  conditional  purchase  though 
assured  liable  for  fire  loss). 

4  Fire  Assoc,  v.  Calhoun,  28  Tex. 
Civ.  App.  409,  67  S.  W.  153.  So  where 
two  agree  to  carry  on  a  cotton  planta- 
tion, one  to  furnish  stock,  money,  and 
supplies,  the  other  to  furnish  the 
plantation  and  superintend  the  busi- 
ness, the  former  to  be  indemnified  for 
his  advances  out  of  the  proceeds  of  the 
cotton,  and  the  stock  and  implements 
used  to  be  equally  divided  at  the  end 
of  the  year,  it  was  held,  that,  the  cotton 
not  being  worth  enough  to  pay  the 
advances,  the  partner  who  had  made 
them  was  the  sole  and  unconditional 
owner  of  the  cotton,  but  not  of  the 
stock  and  implements,  Noijes  v.  Hart- 
ford Fire  Ins.  Co.,  54  N.  Y.  668.  And 
a  purchaser  at  a  sheriff's  sale  who  has 
not  paid  the  purchase  money,  there 
being  an  outstanding  right  to  claim 
the  premises,  has  not  such  an  owner- 
ship, SecuriUj  Ins.  Co.  v.  Bronger,  6 
Bush  (Ky.),  146.  So  where  the  use  of 
real  estate  was  contributed  as  a  part- 
ner's share  of  the  capital,  there  being 
no  deed  directly  or  in  trust,  the  firm 
cannot  truly  describe  the  property  as 
belonging  to  them  by  an  entire,  uncon- 
ditional, and  sole  ownership.  Citizens' 
Fire  Ins.  S.  &  L.  Co.  v.  Doll,  35  Md. 
83,  6  Am.  Rep.  360. 

3  Thus  it  was  held  that  the  insurance 
company  could  not  take  advantage  of 
the  fact  that  the  building  encroached 
two  feet  upon  the  adjoining  property, 
Haider  v.  St.  Paul  F.  &  M.  Ins.  Co., 
67  Minn.  514,  70  N.  W.  805;  or  that  the 
title  of  the  assured  might  be  success- 
fully assailed  by  his  creditors,  German 
Ins.  Co.  V.  Hyman,  34  Neb.  704,  52 
N.  W.  401;  Burson  v.  Fire  Assn.,  136 
Pa.  St.  267,  20  Atl.  401;  or  by  the 
interested  corporation  of  which  he  was 
a  trustee,  Caraher  v.  Roral  Ins.  Co.,  63 
Hun  (N.  Y.),82,  44  N.  Y.  St.  R.  141, 
17  N.  Y.  Supp.  858;  or  that  the  as- 


338 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


As  a  rule  any  incumbrances  or  liens,  whether  voluntary  or  in- 
voluntary, upon  the  property  of  the  insured,  need  not  be  disclosed 
under  this  clause.  The  assured  is  none  the  less  owner  because  of 
their  existence.' 


Kured  held  by  deed  of  gift,  which,  a 
few  days  after  issuance  of  policy  and 
before  tlie  fire,  had  actually  been  ad- 
judged void  as  against  creditors  of  the 
grantor,  Steinmcuer  v.  Slcinnirijer,  04 
S.  V.  U:?.  42  S.  E.  1 84.  The  owner  of 
an  untlivided  part  interest  is  not  sole 
and  unconditional  owner,  for  this 
ohrase  calls  for  the  fee  simple.  Palatine 
his.  Co.  V.  Dicken.wu,  IIG  Ga.  794,  43 
S  E  n'2;  Hcbner  v.  Palatine  Ins.  Co., 
157  III.  144,  41  N.  E.  G27;  L.  &  L.  & 
G.  Ins.  Co.  V.  Cochran,  77  Miss.  348,  26 
So.  932,  78  Am.  St.  R.  524.  Nor  is  one 
who  holds  jointly  with  others  the  .sole 
and  unconditional  owner,  Schroedel  v. 
Humboldt  his.  Co.,  158  Pa.  St.  459,27 
Atl.  1077;  as,  for  example,  a  partner  in 
the  firm  property,  McGrath  v.  Home 
Ins.  Co.,  88  App.  Div.  (N.  Y.)  153,  84 
N.  Y.  Supp.  374;  McFetridge  v. 
Phcenix  Ins.  Co.,  84  Wis.  200,  54  N.  W. 
326.  But  a  transfer  of  his  interest  in 
the  firm  by  one  partner,  before  policy 
issues,  has' no  effect  on  title  of  firm  to 
firm  real  estate,  Wood  v.  A?n.  Ins.  Co., 
149  N.  Y.  382,  44  N.  E.  80.  Nor  is  a 
surviving  partner,  who  is  also  ad- 
ministrator of  the  deceased  partner, 
the  sole  and  unconditional  owner, 
Crescent  Ins.  Co.  v.  Camp,  71  Tex.  503, 
9  S.  W.  473.  Nor  is  a  tenant  for  life. 
Carver  v.  Ilawke-je  Ins.  Co.,  69  Iowa, 
202;  but  see  Security  Ins.  Co.  v.  Kuhn, 
207  111.  166,  69  N.  E.  822.  Nor  a  tenant 
for  a  term,  ML  Leonard  Mills  Co.  v. 
L.  &  L.  &  G.  Ins.  Co.,  25  Mo.  App.  259, 
though  tenant  is  responsible  for  fire 
loss.  Nor  is  the  trustee  of  a  syndicate, 
holding  the  legal  title  for  the  benefit  of 
himself  and  five  others,  such  sole  and 
unconditional  owner,  Bradley  v.  Ger- 
man-Amer.  I.  Co.,  90  Mo.  App.  369. 
Nor  is  the  owner  of  a  small  part  of  the 
furniture  described,  Dow  v.  National 
Assur.  Co.,  26  R.  I.  379,  58  Atl.  999 
(1904).  Nor  is  a  husband  when  title 
is  in  him  and  his  wife,  Schroedel  v. 
Humboldt  Fire  Ins.  Co.,  158  Pa.  St. 
459,  27  Atl.  1077.  Nor  is  a  mortgagee 
prior  to  sale  in  foreclosure,  Orduaii  v. 
Chase,  57  N.  J.  Eq.  478,  42  Atl.  149. 
But  otherwise  as  to  mortgagee  of  per- 
sonal property  in  possession  after  debt 
is  due,  Carey  v.  L.  &  L.  &  G.  Ins.  Co., 
92  Wis.  .538,  66  N.  W.  693.     One  who 


holds  title  from  a  second  mortgagee  is 
not  sole  and  unconditional  owner, 
Southwick  V.  Atlantic  F.  &  M.  Ins. 
Co.,  133  Mass.  457.  But  as  before 
shown  descriptive  phrases  are  often 
employed  which  override  this  war- 
ranty, and  indicate  that  the  insurable 
interest  of  the  insured,  whatever  it 
may  be,  is  covered,  Ilagan  v.  Scottish 
Ins.  Co.,  186  U.  S.  423,  22  S.  Ct.  862 
("for  whom  it  may  concern");  Cros.s 
v.  N.  F.  Ins.  Co.,  132  N.  Y.  133,  30 
N.  E.  390  ("as  trustee");  Sullivan  v. 
Spring  Garden  Ins.  Co.,  34  App.  Div. 
128,  54  N.  Y.  Supp.  629.  Thus  a  policy 
to  "a  receiver"  shows  upon  its  face 
other  interests  than  that  of  owner, 
L.  &  L.  &  G.  Ins.  Co.  v.  McNeill,  89 
Fed.  131,  59  U.  S.  App.  499.  And  it 
has  been  held  that  where  one  man 
does  business  under  a  partnership 
name,  insurance  in  such  partnership 
name  is  valid.  Phoenix  Ins.  Co.  v.  Mc- 
Kernan,  20  Ky.  L.  R.  337,  46  S.  W. 
10  (in  which  another  even  loaned  his 
name  and  credit  w'ithout  avoiding 
policy);  Delaware  Ins.  Co.  v.  Bonnet, 
20  Tex.  Civ.  App.  107,  48  S.  W.  1104; 
Matter  of  Pelican  Ins.  Co.,  47  La.  Ann. 
935,  17  So.  427. 

1  Hartford  Ins.  Co.  v.  Enoch,  72  Ark. 
47,  77  S.  W.  899;  McClelland  v.  Green- 
wich Ins.  Co.,  107  La.  124,  31  So.  691; 
Dolliver  v.  St.  Joseph  F.  &  M.  Ins. 
Co.,  128  Mass.  315,  35  Am.  Rep.  378; 
Caplis  v.  Am.  Ins.  Co.,  60  Minn.  376, 
62  N.  W.  440;  Hare  v.  Headley,  54 
N.  J.  Eq.  545,  35  Atl.  445;  Huff  v. 
Jeu-ett,  20  Misc.  35,  44  N.  Y.  Supp.  311; 
Steinmeyer  v.  Steinmeyer,  64  S.  C.  413, 
42  S.  E.  184;  Union  Assur.  Soc.  v. 
Nails,  101  Va.  613,  44  S.  E.  896.  A 
lease  from  the  insured  need  not  be 
mentioned,  Ins.  Co.  v.  Haven,  95  U.  S. 
242.  So  a  mortgagor  is  a  sole  and  un- 
conditional owner  prior  to  a  fore- 
closure of  the  property,  Wolf  v. 
Theresa  Village  M.  F.  I.  Co.,  115  Wis. 
402,  91  N.  W.  1014.  Inasmuch  as  the 
moral  hazard  is  increased  where  the 
property  is  heavily  incumbered,  some- 
times the  application  or  policy  re- 
quires a  disclosure  of  incumbrances, 
Essex  Sav.  Bk.  v.  Meriden  Fire  Ins. 
Co.,  57  Conn.  335,  17  Atl.  930;  Lock- 
wood  V.  MiddleseT  Mnf.  Assur.  Co.,  47 


INTEREST  OF   INSURED 


339 


Though  no  extraneous  representation  be  asked  for  by  the  insurer 
or  be  made  by  the  assured  regarding  his  interest,  he  must,  neverthe- 
less, see  to  it  that  the  express  warranties  of  the  policy  in  regard  to 
sole  and  unconditional  ownership  are  fulfilled.  This  is  beyond 
peradventure  the  sound  rule.^  But,  by  an  extraordinarily  liberal 
construction,  several  courts  have  held  that,  if  the  company  make 
no  affirmative  inquiries,  a  legal  presumption  will  be  indulged  in 
to  the  effect  that  the  company  is  content  with  any  insurable  interest 
belonging  to  the  insured;  and  some  judges  have  applied  this  rule 
to  the  standard  policy,  though  it  contains  the  further  warranty  that 
the  interest  must  be  truly  stated  in  the  policy." 

This  clause  is  not  in  the  Massachusetts  policy. 


Conn.  553;  Martin  v.  Fidelity  Ins.  Co., 
119  Iowa,  570,  93  N.  W.  562;  Fitchburg 
Savings  Bank  v.  Amazon  Ins.  Co.,  125 
Mass.  431.  A  deed  intended  as  a 
mortgage  does  not  avoid,  Sun  Fire 
Offlce  V.  Clark,  53  Ohio  St.  414,  42 
N.  E.  248. 

1  For  example,  Hunt  v.  Ins.  Co.,  196 
U.  S.  47,  25  S.  Ct.  179;  Syndicate  Ins. 
Co.  V.  Bohn,  65  Fed.  165,  12  C.  C.  A. 
531,  27  U.  S.  App.  564,  27  L.  R.  A.  614; 
Pelican  Ins.  Co.  v.  Smith,  107  Ala.  313, 
18  So.  105,  92  Ala.  428;  Orient  Ins.  Co. 
V.  Williamson,  98  Ga.  464,  25  S.  E.  560; 
Parsons  v.  Lane,  97  Minn.  98,  106 
N.  W.  485;  Rosenstock  v.  Mississippi 
Home  Ins.  Co.,  82  Miss.  674,  35  So.  309; 
Lasher  v.  St.  Joseph  F.  &  M.  Ins.  Co., 
86  N.  Y.  423.    See  §  141,  supra. 

2  For  example,  Manchester  Assur.  Co. 
V.  Abrams,  89  Fed.  932,  32  C.  C.  A.  426; 
Sharp  V.  Scottish  U.  &  M.  Ins.  Co.,  136 
Cal.  542,  69  Pac.  253  (Beatty,  C.  J., 
dissents  in  able  opinion);  Glens  Falls 
Ins.  Co.  V.  Michael  (Ind.,  1905),  74 
N.  E.  964  (life  interest;  Gillett,  J., 
dissents  in  convincing  opinion);  Ger- 
man  Ins.  Co.  v.  Davis,  6  Kan.  App. 
268,  51  Pac.  60  (but  value  of  insurable 
interest  exceeded  insurance);  Hartford 
Ins.  Co.  V.  McClain  (Ky.),  85  So.  W. 
699;  Miotke  v.  Milwaukee,  etc.,  Ins.  Co., 
113  Mich.  166,  71  N.  W.  463  (standard 
policy;  Ross, C.  J., dissenting);  Farmers' 
&  Merchants'  Ins.  Co.  v.  Mickel,  72  Neb. 
122, 100  N.  W.  130;  Union  Assur.  Soc.  v. 
Nails,  101  Va.  613,  44  S.  E.  896  (stand- 
ard policy);  Dooly  v.  Hanover  Ins.  Co., 
16  Wash.  155,  47  Pac.  507  (standard 
policy).  And  see  many  other  like 
cases  recently  collected  and  disap- 
proved by  the  Minnesota  court  in 
Parsons  v.  Lane,  97  Minn.   108,  109, 


106  N.  W.  485.  By  precisely  the  same 
course  of  reasoning  other  standard 
warranties  could  be  read  out  of  the 
policy,  and  the  common-law  doctrines 
relating,  not  only  to  concealment  but 
also  to  the  force  and  effect  of  express 
warranties,  would  be  substantially  an- 
nulled. The  courts  that  have  intro- 
duced this  innovation  into  the  law  of 
their  respective  states  must  have  over- 
looked the  usual  method  of  closing  in- 
surance contracts  in  the  large  cities, 
§  75,  supra.  Under  the  customs 
there  prevailing  it  would  work  havoc 
with  public  convenience  if  mercantile 
risks  could  not  be  bound  until  the 
old-fashioned  application  blanks,  with 
answers  in  detail,  had  first  been 
exacted  from  the  insured,  and  passed 
upon  by  the  insurance  companies.  The 
companies  foregoing  the  advantage  of 
such  burdensome  practices,  are  at  least 
entitled  to  the  benefit  of  unambiguous 
warranties,  contained  in  the  statutory 
form  of  their  contracts,  relating  to  so 
essential  a  matter  as  title.  As  the 
Minnesota  court  has  recently  declared, 
the  clauses  of  the  policy  themselves 
amount  to  "pointed  inquiries"  upon 
the  subject,  and  demand  a  true  dis- 
closure, Parsons  v.  Lane,  97  Minn.  98, 
113,  106  N.  W.  485.  The  doctrine  of 
waiver  and  estoppel  has  been  very 
frequently  applied  to  this  subject. 
For  example.  Brooks  v.  Erie  Ins.  Co., 
76  App.  Div.  275,  78  N.  Y.  Supp.  748, 
afT'd  on  opinion  below,  177  N.  Y.  572, 
69  N.  E.  1120;  Ayres  v.  Phmiix  Ins. 
Co.,  66  Mo.  App.  288;  State  Ins.  Co.  v. 
Latourette,  71  Ark.  242,  74  S.  W.  300; 
Syndicate  Ins.  Co.  v.  Catchings,  104  Ala, 
176,  16  So.  46. 


6-ii)  MEANING    AND    LKGAL    KFFKCT    OF    FIRE    POLICY 

§  260.  Leased  Ground. — Or  if  the  subject  of  insurance  be  a  build- 
ing on  ground  not  owned  by  the  insured  in  fee  simple. 

This  clause  is  similar  to  the  last  and  must  be  similarly  construed.^ 
If  the  insured  owns  only  part  of  the  fee,  it  has  been  held  that  the 
clause  would  be  violated,  unless,  as  provided,  an  agreement  giving 
necessary  consent  is  indorsed  upon  the  policy;  ^  or  if  he  has  only  a 
life  estate;  ^  but  if  he  has  the  equitable  right  to  a  fee  simple,  it  has 
been  held  that  the  clause  w^ould  not  be  violated,  though  the  special 
written  permission  had  not  been  obtained.'* 

Tiiis  clause  is  not  in  the  Massachusetts  policy. 

§  261.  Chattel  Mortgage. — Or  if  the  subject  of  insurance  be  personal 
property  a7id  be  or  become  incumbered  by  a  chattel  mortgage. 

Buildinfj;s  are  stationary,  subject  to  survey,  rating,  and  location 
upon  insurance  maps.  Personal  property  is  movable,  subject  to 
control  of  the  owner  alone,  and  on  the  average  more  hazardous  than 
buildings.  Real  estate  mortgages  are  very  common.  Chattel  mort- 
gages are  suggestive  of  slender  resources.  Therefore  the  standard 
policy  requires  a  disclosure  of  mortgages  only  when  they  cover 
personalty.'' 

Except  for  this  provision  it  might  not  be  necessary  to  state  the 
existence  of  a  chattel  mortgage,  since  by  the  weight  of  authority  it 
docs  not  constitute  a  change  of  interest,  title,  or  possession,  or,  as 
matter  of  law,  an  increase  of  risk.^  But  the  express  warranty  must 
be  observed. ■^     Accordingly  a  chattel  mortgage  will  avoid,  though 

1  Wi/andotte  B.  Co.  v.  Hartford  F.  (N.  Y.)  48,  73  N.  Y.  Supp.  120  (knowl- 
Ins.  Co.  (Mich.),  108  N.  W.  393;  Elliotl  edge  acquired  by  agent  long  before,  to 
V.  Im.  Co.,  117  Pa.  St.  548,  12  Atl.  676,  work  estoppel  must  be  present  in  his 
2  Am.  St.  R.  703.  mind  at  the  time). 

2  Scottish  Un.  &  Nat.  Ins.  Co.  v.  5  Attwrican  Artistic  G.  S.  Co.  v.  Glens 
Pctti,  21  Fla.  399.  But  compare  Falls  Ins.  Co.,  1  Misc.  (N.  Y.)  114 
Kenton  Ins.  Co.  v.  Wigginton,  89  Ky.  (citing  cases);  Vankirkv.  Citizens'  Ins. 
330,  12  S.  W.  6G8,  7  L.  R.  A.  81.  and  Co.,  79  Wis.  627. 

Haider  v.  St.  Paul  F.  &  M.  Ins.  Co.,  67  «  Orrell  v.   Hampden  Fire  Ins    Co 

Minn.  514,  70  N.  W.  805.  13   Gray    (Mass.),   431;    Hennessey   v. 

3  Carver  v.  Hawkeye  Ins.  Co.,  69  Manhattan  Fire  Ins.  Co.,  28  Hun 
Iowa,  202.  But  a  lease  or  other  in-  (N.  Y.),  98;  Wytheville  Ins.  Co.  v. 
cumbrance  does  not  disturb  the  fee,  Stultz,  87  Va.  629.  Contra,  Lee  v 
Dolliver  v.  Im.  Co.,  128  Mass.  315,  35  Agricidtural  Ins.  Co.,  79  Iowa,  379! 
Am.  Rep.  378.  7  fjome  Fire  Ins.  Co.  v.  Johansen,  59 

*  Swift  v.lt.  Mut.  Fire  Ins.  Co.,  IS  Neb.   349,  80   N.   W.    1047;    Vucci  v. 

Vt.  305.     Waiver  allowed  in  Bern/  v.  North  Britif^h  &  M    I    Co  '  88  N    y' 

Am    Cent.  Ins.  Co.,  132  N.  Y.  49,  30  Supp.  986  (held  void,  though  only  part 

^■^■r^'i'f^f"^-''^'- 'Vfnculturalhis.Co.,  of  personalty   was   covered   bv  mort- 

92  Wis.  233,  65  N.  W.  1036.     Waiver  gage).      As   to   when   the   con^traTis 

not  allowed  m  Martin  v.  Ins.  Co.  of  severable  see  Kiernnn  v    Aqricvltnral 

M  ifr:'-  ^^  ^nA  K^-\'^^  ^^^-  -1^:  ^"•^-  ^«-  81  Hun,  373,  30  N.  Y.  Supo. 

M''v'^o'n   ^Jf'i^^i^''   /n.s'.    Co..    174  892,  and  §§  115,  246,  supra.     But  the 

r'  /ry^T       ^-   ^''  '^«'''9'<^"'  ^'-  (description  in  an  open  or  floating  policy 

L.  &  L.  &  G.  Ins.  Co.,  66  App.  Div.  may  admit  of  the  construction  that  the 


FORECLOSURE 


341 


set  aside  after  loss  as  a  fraud  on  the  creditors  of  the  mortgagor, 
since  as  between  the  latter  and  his  mortgagee  the  mortgage  would 
be  valid. ^  And  a  real  estate  mortgage,  describing  certain  articles  as 
fixtures  and  covered  by  the  mortgage,  will  avoid  a  policy  on  the  per- 
sonalty covering  some  of  the  articles,  for,  so  far  as  it  affects  the  per- 
sonal property,  the  mortgage  will  be  considered  a  chattel  mortgage. - 
This  provision  also  is  absent  from  the  Massachusetts  policy. 


§  262.  Foreclosure. — Or  if,  with  the  knowledge  of  the  insured,  fore- 
closure 'proceedings  he  commenced,  or  notice  given  of  sale,  by  virtue  of 
any  mortgage  or  trust  deed. 

This  clause  by  implication  indicates  that  the  existence  of  a  real 


transfer  of  part  by  a  chattel  mortgage 
leaves  the  insurance  undisturbed  upon 
the  rest  of  the  goods,  Coleman  v. 
Phoenix  Ins.  Co.,  3  App.  Div.  65,  3S 
N.  Y.  Supp.  986.  The  descriptive 
words,  "held  in  trust,  sold  but  not 
delivered,"  are  said  not  to  excuse  a 
chattel  mortgage.  First  Nat.  Bank  v. 
Am.  Cent.  Ins.  Co.,  58  Minn.  492,  60 
N.  W.  345. 

^  Secrest  v.  Hartford  Fire  I.  Co.,  68 
S.  C.  378,  47  S.  E.  680. 

2  Fitzgerald  v.  Atlanta  Home  Ins. 
Co.,  61  App.  Div.  (N.  Y.)  350,  70  N.  Y. 
Supp.  552  (no  particular  form  of  words 
necessary  to  create  a  chattel  mort- 
gage). And  see  Susman  v.  Whyard, 
149  N.  Y.  127,  130,  43  N.  E.  413.  A 
policy  on  both  fixtures  and  personalty, 
where  issued  for  a  gross  sum,  will  be 
avoided,  as  to  both  subjects  of  insur- 
ance, by  a  mortgage  upon  the  personal 
property,  Fitzgerald  v.  Atlanta  Home 
Ins.  Co.,  61  App.  Div.  350,  supra. 
Compare  Taylor  v.  Anchor  Mid.  F.  I. 
Co.,  116  Iowa,  625,  88  N.  W.  807. 
By  an  over  liberal  construction,  it  has 
been  held  that  a  mortgage  upon  part 
of  the  subject  insured  does  not  avoid, 
even  as  to  that  part,  the  contract  being 
entire.  North  Brit.  &  Mer.  Ins.  Co.  v. 
Freeman  (Tex.  Civ.  App.),  33  S.  W. 
1091;  Phoenix  Ins.  Co.  v.  Lorenz,  7  Ind. 
App.  266,  33  N.  E.  444.  See  §  246, 
supra.  But  a  chattel  mortgage  never 
delivered,  will  not  avoid,  Neafie  v. 
Woodcock,  15  App.  Div.  (N.  Y.)  618, 
78  N.  Y.  St.  R.  768,  44  N.  Y.  Supp. 
768.  And  parol  evidence  is  admissible 
to  show  a  conditional  delivery.  So 
held  in  Thorne  v.  .Etna  his.  Co.,  102 
Wis.  593,  78  N.  W.  920.  A  chattel 
mortgage  paid  when  the  policy  issues 
but    unsatisfied    of    record,    will    not 


avoid,  Laird  v.  Littlefield,  34  App.  Div. 
(N.  Y.)  43,  53  N.  Y.  Supp.  1082,  aff'd 
164  N.  Y.  597,  58  N.  E.  1089.  Nor  an 
inoperative  mortgage,  Weigen  v.  Coun- 
cil Bluffs  Ins.  Co.,  104  Iowa,  410,  73 
N.  W.  862.  A  chattel  mortgage  from 
one  partner  to  another,  upon  firm  prop- 
erty when  both  are  the  assured,  will 
not  avoid,  Moulton  v.  .^tna  Fire  I.  Co., 
25  App.  Div.  (N.  Y.)  275,  49  N.  Y. 
Supp.  570;  Alston  v.  Phoenix  Ins.  Co., 
lOOGa.  287,  27S.  E.  981.  Nor  will  an 
instrument  creating  a  lien  for  rent  be 
construed  as  a  chattel  mortgage, 
Caplis  V.  Ins.  Co.,  60  Minn.  376,  62 
N.  W.  440,  51  Am.  St.  R.  535.  But  a 
deed  of  trust  on  personalty  will  be  so 
construed.  Hunt  v.  Ins.  Co.,  196  U.  S. 
47,  25  S.  Ct.  179.  By  the  weight  of 
authority  a  subsequent  discharge  does 
not  restore  the  policy.  For  example, 
German-Am.  Ins.  Co.  v.  Humphrey,  62 
Ark.  348,  35  S.  W.  428;  Ins.  Co.  of 
N.  A.  V.  Wicker,  93  Tex.  390.  55  S.  W. 
740.  Contra,  for  example,  Born  v. 
Home  Ins.  Co.,  110  Iowa,  379,  81  N.  W. 
670.  And  see  §  247,  supra.  As  hereto- 
fore shown  certain  courts  have  held 
that,  if  no  inquiry  is  made  as  to  title 
and  incumbrances,  the  company  can- 
not object  to  a  chattel  mortgage.  Phoe- 
nix Ins.  Co.  V.  Fuller,  53  Neb.  81 1 ,  74 
N.  W.  269;  Allesina  v.  L.  &  L.  &  G. 
Ins.  Co.,  45  Oreg.  441,  78  Pac.  392; 
Lancashire  Ins.  Co.  v.  Monroe,  101 
Ky.  12,  39  S.  W.  434;  Morotock  Ins. 
Co.  V.  Rodefer,  92  Va.  747,  24  S.  E. 
393,  53  Am.  St.  R.  846.  But  this  view 
is  opposed  to  the  current  of  authority, 
§  247,  supra;  Crikelair  v.  7ns.  Co.,  168 
111.  309,  48  N.  E.  167,  61  Am.  St.  R. 
119;  Shaffer  v.  Mil.  Mech.  Ins.  Co.,  17 
Ind.  App.  204,  46  N.  E.  557;  Fitchburg 
Sav.   Bank   v.   Amazon   Ins.   Co.,   125 


;m2 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


estate  mortgage  need  not  be  disclosed  to  the  company  until  the 
commencement  of  a  foreclosure  suit  or,  in  place  of  judicial  proceed- 
ings where  the  mortgage  or  trust  deed  so  provides,  the  receipt  of  a 
notice  of  sale.'  But  the  commencement  of  foreclosure  proceedings,^ 
or  the  giving  of  such  notice  of  sale  ^  with  the  cognizance  "^  of  the  as- 
sured owner  will  avoid  his  i)oIicy.  If  the  assured  gain  knowledge 
of  the  foreclosure  proceedings  after  their  commencement  and  before 
loss,  the  result  is  fatal  to  the  insurance,  provided  no  written  permit 
has  been  obtained  from  the  company.-'^ 

This  clause  is  not  contained  in  the  Massachusetts  policy. 


Mass.  431 ;  Skinnerv.  Norman,  165  N.  Y. 
565,  59  N.  E.  309;  Mna  Ins.  Co.  v. 
Holcomb,  89  Tex.  404.  34  S.  W.  915; 
Wilcox  V.  Ins.  Co.,  85  Wis.  193,  55 
N.  W.  188.  The  doctrine  of  Avaiver 
applies  where  the  facts  warrant,  /?fl6Wn<t 
V.  Springfield  Ins.  Co.,  149  N.  Y.  477, 
44  X.  E.  159;  Skinrier  v.  Norman,  165 
N.  Y.  565,  53  N.  E.  309  {held,  that  com- 
pany waived  because  agent,  though 
naving  no  knowledge,  undertook  to 
investigate);  Wal  er  v.  Phoenix  Ins. 
Co.,  156  N.  Y.  628,  632,  51  N.  E.  392; 
Neafie  v.  Woodcoc'-,  15  App.  Div.  618, 
44  N.  Y.  Supp.  768;  South.  Ins.  Co.  v. 
Stewart  (Miss.),  30  So.  755. 

^  Stenzel  v.  Penn.  Fire  Ins.  Co.,  110 
La.  1019,  35  So.  271. 

2  Springfield  St.  Laundry  Co.  v. 
Traders'  Ins.  Co.,  151  Mo.  90,  52  S.  W. 
238;  Ha'ies  v.  United  States  Ins.  Co., 
132  N.  C.  702,  44  S.  E.  404;  Gibson 
Elec.  Co.  V.  L.  &  L.  &  G.  Ins.  Co.,  159 
N.  Y.  418,  54  N.  E.  23;  Woodside  Brew- 
in')  Co.  V.  Pacific  Ins.  Co..  11  App.  Div. 
68,  42  N.  Y.  Supp.  620,  aff'd  on  opinion 
below,  159  N.  Y.  549;  Quinlnn  v.  Prov. 
Wash.  Ins.  Co.,  133  N.  Y.  .356,  31  N.  E. 
31. 

3  Merchants'  Ins.  Co.  v.  Brown,  77 
Md.  79,  25  Atl.  992;  Medle^f  v.  German 
Alliance  Ins.  Co.,  55  W.  Va.  342,  47 
S.  E.  101.  Advertising  for  sale  under 
trust  deed  is  notice,  Hayes  v.  U.  S. 
Fire  Ins.  Co.,  132  X.  C.  702,  44  S.  E. 
404. 

*  London  &  Lan.  Ins.  Co.  v.  Davis 
(Tex.  Civ.  App.),  84  S.  W.  260. 

5  Delaware  his.  Co.  v.  Greer,  120 
Fed.  916,  57  C.  C.  A.  188,  61  L.  R.  A. 
137;  N orris  v.  Hartford  Fire  Ins.  Co., 
55  S.  C.  4.50,  33  S.  E.  566.  Foreclosure 
proceedings  are  commenced  at  time 
of  the  service  upon  him  of  the  petition 
to  foreclose,  Fi?idlay  v.  Union  Mut.  F. 
I.  Co.,  74  Vt.  211,  52  Atl.  429;  or  serv- 
ice of    summons,   Norn's   v.    Hartford 


Ins.  Co.,  55  S.  C.  450,  33  S.  E.  566. 
But  the  mere  service  of  citation  may- 
carry  with  it  no  such  knowledge,  Lon- 
don &  Lan.  Ins.  Co.  v.  Davis  (Tex.  Civ. 
App.),  84  S.  W.  260.  And  the  forfeit- 
ure is  complete,  though  the  proceed- 
ings be  shortly  abandoned,  Springfield 
Steam  Laundry  Co.  v.  Traders'  Ins.  Co., 
151  Mo.  90,  52  S.  W.  238.  This  condi- 
tion of  the  poUcy  has  been  held  to  be 
promissory  or  subsequent,  and  hence 
not  to  refer  to  pending  foreclosure 
proceedings  instituted  before  the  issu- 
ance of  the  policy,  Orient  Ins.  Co.  v. 
Bnrrus,  23  Ky.  L.  R.  656,  63  S.  W. 
453;  Cooledge  v.  Continental  Ins.  Co., 
67  Vt.  14,  30  Atl.  798;  Chamberlain 
v.  Ins.  Co.  of  N.  A.,  20  N.  Y.  St.  R.  543, 
3  N.  Y.  Supp.  701.  And  see  Benjamin 
V.  Palatine  Ins.  Co.,  80  App.  Div.  260, 
80  N.  Y.  Supp.  256,  aff'd  on  opinion 
below,  177  N.  Y.  588,  70  N.  E.  1095. 
Nor  does  it  refer  to  the  foreclosure  of  a 
vendor's  lien,  Ins.  Co.  v.  Estes,  106 
Tenn.  472,  62  S.  W.  149,  82  Am.  St.  R. 
892,  52  L.  R.  A.  915;  or  mechanic's 
lien,  Colt  v.  Phoenix  Ins.  Co.,  54  N.  Y. 
595;  or  statutory  lien,  Speagle  v. 
Dwelling  House  Ins.  Co.,  97  Ky.  646, 
31  S.  W.  282.  Nor  does  it  refer  to  a 
sale  imder  a  judgment,  though  given 
for  the  same  debt  and  affecting  the 
same  land  as  is  covered  by  the  mort- 
gage, Collins  v.  London  Assur.  Corp., 
165  Pa.  St.  298,  30  Atl.  924.  Waiver 
allowed  by  knowledge  of  countersign- 
ing agent,  at  time  policy  issued,  Benja- 
min V,  Palatine  Ins.  Co.,  80  App.  Div. 
260,  80  N.  Y.  Supp.  256.  aff'd  on  opin- 
ion below,  177  N.  Y.  588,  70  N.  E. 
1095.  And  in  one  case  by  knowledge 
of  solicitor.  Farmers'  &  Merchants'  Ins. 
Co.  V.  Wiard,  59  Neb.  451,  81  N.  W. 
312.  But  a  consent  to  the  mortgage 
is  not  a  consent  to  foreclosure,  Titus 
V.  Glens  Falls  Ins.  Co.,  81  N.  Y. 
410. 


CHAPTER  XIII 
The  Standard  Fire  Policy — Continued 

§  263.  Alienation  Clause. — Or  if  any  change  other  than  hy  the  death 
of  an  insured  take  'place  in  the  interest,  title,  or  possession  of  the  subject 
of  insurance  (except  change  of  occupants  without  increase  of  hazard), 
whether  by  legal  process  or  judgment,  or  by  voluntary  act  of  the  insured 
or  otherivise. 

This  clause,  known  as  the  alienation  clause,  embraces  a  provision 
of  highest  importance  to  the  insurer,  but  furnishes,  at  the  same  time, 
a  frequent  cause  of  stumbling  to  the  ignorant  or  thoughtless  assured.^ 


1  In  early  forms  of  policies  "a  sale 
or  alienation  without  written  assent," 
avoided  the  policy.  Under  such  a 
clause  it  was  held  in  many  cases  that 
to  effect  forfeiture  the  entire  interest 
must  be  transferred.  "So  long  as 
the  insured  retains  such  an  interest 
that  he  may  be  a  sufferer  by  the  loss, 
the  policy  remains  valid  to  protect 
that  interest,"  Hitchcock  v.  Northwest- 
ern Ins.  Co.,  26  N.  Y.  68.  Such  ad- 
judications nullified  the  clause  alto- 
gether since  without  it  the  burden  was 
on  the  assured  to  show  some  insurable 
interest.  To  meet  the  effect  of  this 
ruling  various  new  forms  of  the  aliena- 
tion clause  were  devised  and  employed 
by  the  different  companies  (see  1  May, 
Ins.,  Appendix  to  ch.  XII),  a  large 
number  in  substance  prohibiting  any 
sale  or  change  of  title  or  possession, 
in  whole  or  in  part,  without  written 
consent.  Under  such  form,  it  is  held 
that  while  there  cannot  be  a  transfer 
of  title,  or  possession  in  whole  or  in 
part,  an  incidental  change,  if  it  does 
not  alter  the  character  of  the  interest 
or  ownership  of  the  insured,  will  not 
avoid  the  policy,  Rhode  Island  Un- 
derwriters As.^oc.  V.  Monarch,  98  Ky. 
305,  32  S.  W.  959,  Georgia  Home  Ins. 
Co.  V.  Bartlcft,  91  Va.  305,  21  S.  E. 
476,  50  Am.  ^t.  R.  832.  For  instance, 
by  the  weight  of  authority  giving  a 
real  estate  mortgage,  does  not  avoid 
the  policy.  Commercial  Ins.  Co.  v. 
Spankneble,  52  111.  53,  4  Am.  Rep.  582; 


Judge  V.  Conn.  Fire  Ins.  Co.,  132 
Mass.  521;  Jackson  v.  Mass.  Mut. 
F.  Ins.  Co.,  23  Pick.  418,  34  Am.  Dec. 
69;  Phillips  v.  Merrimack  Mut.  Fire 
Ins.  Co.,  10  Gushing,  350;  Conover  v. 
Mutual  his.  Co.,  1  Comst.  (N.  Y.)  290; 
Morotock  Ins.  Co.  v.  Rodejer,  92  Va. 
747,  24  S.  E.  393,  53  Am.  St.  R.  846. 
Nor  does  giving  a  chattel  mortgage 
avoid  such  a  policy,  Rice  v.  Toner,  1 
Grav  (Mass.),  426;  Hennessey  v.  Man- 
hattan Fire  his.  Co.,  28  Hun  (N.  Y.),  98. 
Nor  does  the  incurring  of  other  liens 
upon  the  property  avoid  such  a  policy, 
H  OS  ford  V.  Hartford  Fire  Ins.  Co.,  127 
U.  S.  404;  Baley  v.  Homestead  Fire 
Ins.  Co.,  80  N.  Y.  21,  36  Am.  Rep.  570. 
Some  courts  also  made  a  distinction 
between  voluntary  and  involuntary 
changes  of  interest,  Baley  v.  Home- 
stead Fire  Ins.  Co.,  80  N.  Y.  21,  36 
Am.  Rep.  570,  and  see  Thompson  v. 
7ns.  Co.,  136  U.  S.  287, 10  Sup.  Ct.  1019, 
34  L.  Ed.  408.  As  to  whether  the 
death  of  the  assured  avoided  the  policy, 
there  was  conflict  in  the  decisions, 
Hine  v.  Woolworth,  93  N.  Y.  75; 
Playiters'  Mut.  I.  Co.  v.  Dewberry, 
69  Ark.  295,  62  S.  W.  1047,  86  Am.  St. 
R.  195;  Forest  Citi/  Ins.  Co.  v.  Har- 
dest'/, 182  111.  39,  55  N.  E.  139.  A  de- 
vise by  will  was  held  to  be  a  change 
of  interest  or  title,  Sherwood  v.  Agri- 
cultural  Ins.  Co.,  73  N.  Y.  147,  29 
Am.  Rep.  180.  But  a  sale  in  fore- 
closure before  being  consummated 
by  the  delivery  of  the  deed  did  not 


[343] 


;m 


1  MEANING    AND    LEUAL    EFFECT    OF    FIKE    POLICY 


Insurers  have  a  right  to  know  with  whom  they  are  contracting. 
No  new  partv  can  be  introduced  into  the  contract  without  their 
consent.'  Nor.  without  like  consent,  may  the  insured  dehberately 
aher  the  risk.  If.  after  ahenating  to  others  a  substantial  part  of  his 
insurable  interest,  he  could  nevertheless  recover  the  original  amount 
of  his  policy,  the  aggregate  insurance  upon  a  property  might  many 
fold  exceed  its  value:  the  moral  hazard  would  obviously  become  an 
uncertain  and  .shifting  quantity;  =  and  the  inducements  to  those  in 
interest  to  l)uru  the  property,  or  to  omit  vigilance  in  guarding  it 
from  fire,  would  b(>  indefinitely  multiplied.  Applying  these  princi- 
ples to  this  clause  of  the  standard  policy,  the  conclusion  is  easily 
reached  that  if  any  prohil)ited  change  of  interest  takes  place,  with- 
out written  consent  of  the  insurers,  whether  by  voluntary  act  of  the 
insured  or  otherwise,  the  party  to  whom  an  interest  may  be  trans- 
ferred acquires  no  rights  in  the  insurance  money,  and  the  assured 
loses  whatever  rights  he  had. 

This  requirement,  though  rigorous,  is  held  to  be  reasonable,^ 
material,  and  enforceable.-*  It  is  a  condition  subsequent,  applying 
only  to  circumstances  which  occur  after  the  inception  of  the  con- 
tract; ^  but  it  embraces  within  its  scope  real  and  personal  property 
alike.*^ 


avoid,  Haight  v.  Continental  Ins.  Co., 
92  N.  Y.  51.  Some  policies  provided 
for  forfeiture  in  case  ttie  property  be- 
came encumbered  in  any  way  without 
the  written  consent  of  tlie  insurer. 
This  was  held  to  bo  confined  to  such 
encumbrances  as  the  insured  volun- 
tarily put  upon  his  property,  and  not 
to  tax  liens  or  judgments,  Jlosford  v. 
Hartford  Fire  Ins.  Co.,  127  U.  S.  404, 
8  S.  Ct.  1199;  Balcij  v.  Homestead 
Fire  Ins.  Co.,  80  N.  Y.  21,  36  Am.  Rep. 
570. 

1  Cummins  v.  National  Fire  Ins.  Co., 
81  Mo.  App.  291. 

2  Rosenstcin  v.  Traders  Ins.  Co., 
79  App.  Div.  481,  487,  79  N.  Y.  Supp. 
736.  The  interest  to  guard  the  prop- 
erty would  be  diminished,  German 
Ins.  Co.  V.  Gibe,  59  111.  Apj).  614; 
Cottingham  v.  Ins.  Co..  90  Ky.  439, 
14  S.  W.  417,  9  L.  R.  A.  G27. 

3  Farmers  &  Merc.  Ins.  Co.  v.  Jensen, 
56  Neb.  284,  76  N.  W.  577,  44  L.  R.  A. 
861. 

*  Northam  v.  Dutchess  Co.  Mid. 
Ins.  Co.,  166  N.  Y.  319,  59  N.  E.  912; 
JasJcids!:i  v.  Citizens  Mid.  F.  I.  Co., 
131  Mich.  603,  92  N.  W.  98  (no  new 


party  insured  allowed,  without  con- 
sent of  insurer). 

^  Coivart  v.  Capital  Ins.  Co.,  114 
Ala.  356,  22  So.  574. 

oWahadt  v.  Phoenix  Ins.  Co.,  136 
N.  Y.  375,  381,  32  N.  E.  1063.  Thus 
the  condition  is  broken  by  a  convey- 
ance to  a  third  person,  if  absolute  upon 
its  face,  though  the  property  be  sub- 
sequently reconveyed,  Bemis  v.  Har- 
bor Creek  M.  F.  I.  Co.,  200  Pa.  St.  340, 
49  Atl.  769,  and  though  at  the  time 
there  be  an  agreement  for  reconveyance, 
Tatham  \.  Commerce  Ins.  Co.,  4  Hun, 
136.  Policy  is  forfeited  by  bill  of 
sale  delivered  to  a  third  party  to  be 
delivered  by  him  to  the  proper  party 
upon  the  payment  of  the  balance  of 
the  consideration.  Excelsior  Foundry 
Co.  V.  Western  Assnr.  Co.,  135  Mich. 
467,  98  N.  W.  9;  or  by  conveyance  by 
assured  to  his  wife,  Melcher  v.  7ns.  Co. 
of  Pa.,  97  Me.  512.  55  Atl.  411.  And 
see  Walton  v.  Agricidtural  Ins.  Co., 
116  N.  Y.  326,  22  N.  E.  443,  in  which 
though  both  husband  and  wife  were 
insured  a  transfer  of  the  barn  from 
former  to  latter  through  a  mere  con- 
duit was  held  to  avoid.    The  condition 


ALIENATION    CLAUSE  345 

The  Home  Insurance  Co.  had  issued  a  poUcy  to  Verdier  on  his 
stock  of  hardware.  During  the  term  of  the  policy,  without  permit  of 
the  insurer,  Verdier  took  in  Brown  as  a  copartner,  giving  him  a  three- 
tenths  interest  in  the  insured  property  of  the  concern,  which  was  sub- 
sequently damaged  by  fire.  The  court  held  that  the  contract  of  in- 
surance in  its  nature  is  strictly  personal,  and  that  the  transfer  of  the 
copartnership  interest  from  Verdier  to  Brown  altogether  avoided 
the  policy.^ 

A  subsequent  decision  in  the  same  court,  although  it  gained  the 
approval  of  all  the  judges  in  the  highest  court,  as  well  as  in  the  courts 
below,  is  not  so  easily  explained.  The  insured,  the  Buffalo  Elevating 
Co.,  owned  and  operated  a  large  grain  elevator  in  Buffalo.  Besides 
its  insurance  on  the  building  and  its  insurance  on  all  the  contents  of 
the  building,  it  took  out  a  third  class  of  insurance  in  46  policies, 
aggregating  $73,250,  to  wit,  $232.93  a  day,  and  known  as  "use  and 
occupancy"  insurance,^  the  object  of  which,  as  already  shown,  is  to 
indemnify  an  owner  or  occupier  for  the  loss  of  commercial  use  during 
the  period  required  for  reconstructing  a  building  destroyed  or  dam- 
aged by  fire.  Shortly  after  some  of  these  policies  were  issued,  and 
shortly  before  the  rest  of  them  were  issued,  the  insured,  without 
knowledge  or  consent  of  the  insurers,  joined  for  the  whole  active 
season  a  secret  pool  or  trust  composed  of  many  elevators.  This  was 
done,  as  in  former  seasons,  under  a  written  pooling  agreement  pro- 
viding, in  substance,  among  other  things,  that,  after  payment  of 
certain  operating  expenses,  the  balance,  to  wit,  eighty  per  cent  of  the 
gross  earnings  of  the  Buffalo  Elevating  Co.,  should  be  turned  over  by 
it  absolutely  to  the  pool,  to  be  divided  up  among  the  many  members 
together  with  their  earnings,  and  that,  in  spite  of  a  fire  destroying 
the  elevator  in  question,  the  Buffalo  Elevating  Co.  should  neverthe- 
less continue  to  receive  its  full  percentage  of  the  entire  pool  earnings 
from  the  pool.  A  fire  destroyed  the  plaintiff's  elevator,  and  the  in- 
sured claimed  from  the  insurers  of  use  and  occupancy  $60,328.87, 

is  broken  by  conveyance  and  receipt  158  111.  149,  41  N.  E.  854;  Northam  v. 
back  of  purchase  money  mortgage,  Dutchess  Co.  Mut.  Ins.  Co.  166  N.  Y. 
Savage  v.  Howard  Ins.  Co.,  52  N.  Y.  319,  59  N.  E.  912;  Ohio  Farmers 
502,  11  Am.  Rep.  741.  Also  by  ex-  his.  Co.  v.  Waters,  65  Ohio  St.  157,  61 
ecution  and  record  of  a  deed  to  the  N.  E.  711;  or  by  conveyance  in  par- 
son of  the  assured,  though  without  tition  between  devisees  where  only  one 
consideration  or  change  of  possession,  was  the  assured,  Robinson  v.  A^orth 
where  given  for  the  purpose  of  avoid-  Brit.  &  M.  Ins.  Co.  (Ky.),  53  S.  W. 
ing   the   enforcement   of   a   judgment,  660. 

Rosenstein  v.  Traders  Ins.  Co. ,  79  App.  i  Germania  F.  his.  Co.  v.  Home  Ins. 

Div.  481,  79  N.  Y.  Supp.  7.36,  102  App.  Co.,  144  N.  Y.  195,  39  N.  E.  77,  26 

Div.  147;  or  by  execution  of  a  vohm-  L.  R.  A.  591,  43  Am.  St.  R.  749. 

tary    assignment    for    the    benefit    of  2  gee   §  20,  supra,  and  Appendix  of 

creditors,  Orr    v.    Hanover    Ins.    Co.,  Forms,  ch.  II. 


:m 


MEANlN'Ci    AN'i;    l.KGAI.    EFFECT    OF    FIRE    POLICY 


to  wii,  for  ail  arbitrated  period  of  259  working  days  required  for 
rebulKling.  The  insurance  companies  of  this  class,  by  the  same 
counsel,  all  set  up  substantially  the  same  defense,  namely,  that 
where  the  policy  was  issued  before  the  transfer  to  the  pool,  the  in- 
sured had  violated  the  warranty  against  making  any  change  of  in- 
terest in  the  subject-matter  insured,  and  that  where  the  policy  was 
issued  after  the  transfer  to  the  pool,  the  insured  had  violated  the 
warranty  of  sole  and  unconditional  ownership  of  the  subject-matter. 
The  case  was  submitted  on  an  agreed  statement  of  facts,  and  the 
plaintiff  recovered  in  full.  The  court  held  that  the  insured  under  a 
use  and  occupancy  policy  is  sole  and  unconditional  owner,  and  has 
made  no  change  of  interest  in  the  subject-matter  insured  thereby, 
although  he  transfer  to  another  the  total  earnings.  The  court  based 
its  conclusion  upon  the  proposition  that  "use  and  occupancy"  and 
"earnings"  or  "profits"  are  not  of  necessity  synonymous  terms,  a 
proposition  which  both  sides  admitted.^ 


^Michael  v.  Prussian  Nat.  Ins.  Co., 
171  N.  Y.  25,  G3  N.  E.  810.  If  the 
earning  power  and  gross  earnings  of 
an  elevator  are  no  part  of  its  commer- 
cial use,  it  is  (iiflicult  to  see  what  is. 
If  an  absohite  transfer  of  the  total 
earnings  is  no  change  of  interest 
whatsoever  in  the  subject-matter  of 
"use  and  occupancy"  insurance,  it 
is  dillicult  to  conceive  what  can  be. 
A  sale  of  the  building  or  contents  would 
not  avoid  such  a  policy,  since  neither 
building  nor  contents  is  its  subject- 
matter.  The  court  inquires,  why  the 
insurer  does  not  say  so  plainly,  in- 
stead of  using  a  vague  phrase  if  he 
means  to  insure  "earnings"  or  "prof- 
its." But  the  phrase  "use  and  occu- 
pancy," while  usually  involving,  to  a 
considerable  extent,  the  notion  of  earn- 
ings or  profits  is  not  intended  to  be  and 
ought  not  to  be  synonymous  with 
either.  The  policies  are  valued.  If 
the  insurance  is  taken  in  good  faith, 
the  insured  expects  to  recover  though 
it  subsequently  transpires  that  he  is 
losing,  and  not  making,  money  in  his 
business.  So  also  it  is  appropriate  to 
take  out  this  same  class  of  insurance 
to  indemnify  for  a  contirmance  of  un- 
profitable expenses  during  the  period 
required  for  reinstatement,  regardless 
of  whether  the  business  is  profitable 
or  unprofitable.  But  all  this  is  far 
from  saying  that  a  sale  of  the  entire 
gross  earnings  is  not  a  most  substantial 
change  of  interest  in  the  subject-mat- 


ter of  this  kind  of  insurance.  If  only 
an  alienation  of  the  whole  interest  were 
prohibited,  as  by  some  statutory 
policies,  instead  of  any  change  in  the 
interest,  a  transfer  of  the  total  profits 
or  total  gross  earnings  clearly  would 
not  avoid  the  policy,  since,  as  the 
learned  court  argues,  the  insured  con- 
ceivably might,  even  after  such  a 
transfer,  make  some  other  business 
use  of  the  premises,  while  still  holding 
the  title  to  the  land.  He  might  at 
least  "occupy  his  premises"  and  enjoy 
the  prospect.  But  surely  the  gross 
earnings  represent  a  most  practical, 
tangible  and  substantial  part  of  the 
use  of  a  commercial  establishment. 
Indeed,  at  page  35,  in  the  opinion  of 
the  court,  Mr.  Justice  Gray  says,  "In- 
surance on  use  and  occupancy  evi- 
dently relates  to  the  business  use  which 
the  property  is  capable  of  in  its  ex- 
isting condition."  To  hold,  then,  that 
the  total  earnings  are  no  part  of  this 
business  use,  it  is  respectfully  sub- 
mitted, is  not  within  the  letter  or  the 
spirit  of  the  contract  evidenced  by  the 
New  York  standard  policy.  Compare 
Castellain  v.  Preston,  11  Q.  B.  D.  308, 
52  L.  J.  Q.  B.  366;  Chi.,  etc.,  R.  Co.  v. 
Pullman  Car  Co.,  139  U.  S.  79,  11  S. 
Ct.  490  (quoting  and  approving  the 
English  doctrine).  The  gross  earnings 
of  the  Buffalo  Elevating  Company 
might  hr.ve  been  insured  by  tlie  pool, 
the  legal  and  equitable  owner  of  eighty 
per  cent  of  them,  by  the  same  kind  o^ 


ALIENATION    CLAUSE 


347 


It  is  appropriate  to  employ  in  this  clause  the  word  "interest"  in 
place  of  the  words  "title,"  or  "ownership,"  for  the  assured  often 
has  an  insurable  interest  where  he  has  no  title  or  ownership;  but  in 
the  phrase  "change  of  interest"  two  words  of  very  broad  significa- 
tion have  been  brought  into  conjunction.^  And  although  expressions 
of  judges  maybe  found  to  the  effect  that  the  phrase  embraces " every 
conceivable  change  of  title  or  interest,"  ^  "any  material  change  of 
interest,"^  "such  a  change  as  would  enable  someone  else  having 
the  right  and  the  title,  to  take  out  a  new  policy,"  ^  nevertheless  a 
rule  of  construction  favorable  to  the  assured  must  be  preferred,  and 
the  main  purpose  of  the  contract  must  be  kept  in  the  foreground. 
Accordingly,  it  is  rightly  held  that  a  policy  will  not  be  avoided  by 
a  mere  paper  transfer  designated  as  a  bill  of  sale,  which  is  merely 
colorable,  there  being  no  consideration  and  no  delivery  of  the  posses- 
sion of  the  property ;  ^  nor  by  a  sale  or  transfer  which  is  invalid  and 
ineffectual  as  between  the  parties;^  nor  by  sales,  purchases  and 

policies,  and  the  same  amount  collected 
a  second  time  in  its  favor,  and  a  third 
time  by  the  next  assignee,  and  so  on 
ad  infmihan  all  under  the  egis  of  an 
obscure  but  appropriate  phrase  for  a 
long  time  in  use,  which  probably 
means  very  much  the  same  thing  to 
all  parties  in  interest  in  such  cases, 
namely,  the  money  earnings,  or  some 
part  thereof,  expected  to  accrue  from 
the  commercial  use.  The  effect  of  the 
insurance  in  litigation,  in  conjunction 
with  the  pooling  agreement,  in  the 
Buffalo  Elevatiyvj  Co.  case  was  patent. 
If  the  plaintiff's  building  and  contents 
were  fully  insured,  he  was  a  gainer  by 
the  fire  before  he  had  collected  a  dollar 
of  his  use  and  occupancy  insurance. 
The  fire  put  a  stop  for  a  season  to  his 
operating  expenses,  or  certainly  les- 
sened them,  while  the  pool  continued 
to  give  him  substantially  all  his  in- 
come. On  top  of  that,  he  collected 
$60,000  more  for  an  alleged  loss  of  use, 
no  part  of  which  was  really  sustained. 
And  this  was  precisely  the  result  which, 
at  the  time  when  he  took  out  his  in- 
surance, he  must  have  anticipated 
was  likely  to  occur,  if  the  elevator 
should  be  destroyed  by  fire.  There  was 
such  a  transfer  of  the  commercial  use 
as  would  enable  the  assignee  to  insure 
it,  and,  according  to  a  test  established 
by  the  Appellate  Division  this  comes 
within  the  ban  of  the  alienation  clause. 
Fuller  V.  Jameson,  98  App.  Div.  53,  90 
N.  Y.  Supp.  456. 

^  Stenzel  v.  Penn.  Fire  Ins.  Co.,  110 


La.  1019,  35  So.  271.  A  transfer  of 
either  legal  or  equitable  interest  avoids. 
Southern  Cotton  Oil  Co.  v.  Prudential 
F.  Asso.,  78  Hun,  373,  60  N.  Y.  St. 
R.  127. 

2  Lappin  v.  Charter  Oak  F.  &  M. 
Ins.  Co.,  58  Barb.  (N.  Y.)    325. 

3  Excelsior  Foundry  Co.  v.  Western 
Assur.  Co.,  135  Mich.  467,  98  N.  W.  9. 

•*  Fuller  V.  Jameson,  98  App.  Div, 
53,  90  N.  Y.  Supp.  456,  aff'd  184  N.  Y. 
605,  77  N.  E.  1187;  and  see  Abbott  v. 
Hampden  Mut.  Fire  Ins.  Co.,  30  Maine, 
414;  Edmunds  v.  Mutual  Safety  Fire 
Ins.  Co.,  1  Allen  (Mass.),  311;  Wei  tern 
Mass.  Ins.  Co.  v.  Piker,  10  Mich.  279. 

^Forward  v.  Continental  Ins.  Co., 
142  N.  Y.  382,  37  N.  E.  615,  59  N.  Y. 
St.  R.  777. 

6  Whitney  v.  American  Ins.  Co., 
127  Cal.  464,  59  Pac.  897  (deed  to 
avoid  policy  must  be  delivered  and 
accepted  as  well  as  recorded);  Phoenix 
Ins.  Co.  V.  Asbury,  102  Ga.  565,  27 
S.  E.  667  (deed  held  void  for  usury); 
Westchester  Ins.  Co.  v.  Jennings,  70 
111.  App.  539  (deed  ineffective  without 
name  of  grantee);  Kitterlin  v.  Mil- 
waukee  Ins.  Co.,  134  111.  647,  25  N.  E. 
772  (deed  void  because  wife  did  not 
join);  Schaeffer  v.  Anchor  Ins.  Co., 
113  Iowa,  652,  85  N.  W.  985  (deed 
delivered  after  grantors'  death  will 
not  avoid  policy);  Hartford  Fire 
Ins.  Co.  V.  Warbritton,  66  Kan.  93, 
71  Pac.  278  (no  delivery  of  deed  and 
no  avoidance  of  policy  because  deed 
was  fraudulently  taken  from  escrow); 


348 


MEANING    AND    UaiAl.    KKFlaT    OF    FlHK    POLICY 


fluctuations  in  a  stock  of  p;ooils,  or  materials  and  equipment,  in  a 
store  or  factory.'  And  it  is  hold  that  a  change  which  increases  the 
interest  of  tiie  assured  will  nut  be  permitted  to  defeat  the  insurance.^ 
The  wording  of  the  New  York  standard  policy  makes  it  clear  that 
a  devolution  of  interest,  by  the  death  of  the  insured,  to  heirs,  de- 
visees, executors  or  administrators  effects  no  forfeiture.^ 

§  264.  The  Same — Incumbrances.— The  standard  policy  expressly 
provides  that  written  consent  must  be  obtained  for  chattel  mort- 
gages, and,  if  known  to  the  assured,  for  proceedings  in  foreclosure. 
These  provisions,  by  implication,  make  it  clear  that  the  giving  of 
real  estate  mortgages  and  the  incurring  of  other  liens  are  not  pro- 
hibited."* 

§  265.  The  Same — Executory  Contracts  of  Sale.— Valuable  build- 
ings are  usually  insured  by  many  policies.'''  Conveyancing  for  the 
most  part  follows  a  well-established  practice.  A  preliminary  or 
executory  contract  of  sale  is  exchanged,  with  part  payment  by  the 


German  Fire  Ins.  Co.  v.  York,  48 
Kan.  488,  29  Pae.  586,  30  Am.  St.  R. 
313  (deed  to  homestead  held  void  be- 
cause signed  by  husband  only);  Pit- 
ney V.  07e«.s  Falls  Ins.  Co.,  6.5  N.  Y. 
6  (transfer  invalid  under  statute  of 
fraud);  Gerlinq  v.  Ins.  Co.,  39  W.  Va. 
689,  20  S.  E.  691  (grantor  mentally  in- 
competent, policy  not  avoided).  Com- 
pare Mihcauhee  Trust  Co.  v.  Lan- 
cashire Ins.  Co.,  95  Wis.  192,  70  N.  W. 
81  (assignment  for  benefit  of  creditors, 
though  void  as  to  them,  is  good  as 
between  assignor  and  assignee  and  is 
therefore  a  change  of  title). 

1  Wolfe  v.  Securit)/  Fire  Ins.  Co., 
39  N.  Y.  49;  Hoffman  v.  /Etna  Fire 
Ins.  Co.,  .32  N.  Y.  405,  88  Am.  Dec. 
337;  Coleman  v.  Phoenix  Ins.  Co., 
3  App.  Div.  65,  38  N.  Y.  Supp.  986; 
Lane  v.  Ins.  Co.,  12  Me.  44,  28  Am. 
Dec.  150.  And  descriptive  phrases 
in  the  policy,  for  instance,  "for  ac- 
count of  whom  it  may  concern,"  may 
imply  a  permit  for  transfer,  Hagan  v. 
7ns.  Co.,  186  U.  S.  423.  22  Sup.  Ct. 
862,  46  L.  Ed.  1229.  And  a  change 
of  receivers  is  said  to  be  allowed, 
Thompson  v.  Ins.  Co.,  136  U.  S.  287, 
10  Sup.  Ct.  1019,  34  L.  Ed.  408. 

2  Continental  Ins.  Co.  v.  Ward,  50 
Kan.  346.  31  Pac.  1079. 

3  Planters'  Mut.  Ins.  Assn.  v.  Dew- 
berry, 69  Ark.  295,  62  S.  W.  1047,  86 


Am.  St.  R.  195;  Fore.^t  City  Ins.  Co.  v. 
Hardesty,  182  111.  39,  55  N.  E.  139,  74 
Am.  St.  R.  161;  Richardson's  Adm'r  v. 
German  Ins.  Co.,  89  Ky.  571,  13  S.  W. 
1,  8  L.  R.  A.  800;  Georgia  Home  Ins. 
Co.  V.  Kinnier's  Adm'x,  28  Grat.  (Va.) 
88 

*  Wolf  V.  Theresa  Village  M.  F. 
I.  Co.,  115  Wis.  402,  91  N.  W.  1014; 
Germania  Ins.  Co.  v.  Stewart,  13  Ind. 
App.  627,  42  N.  E.  286;  Bushnell  v. 
Farmers  Ins.  Co.,  110  Mo.  App.  223, 
85  S.  W.  103;  Sun  Fire  Office  v.  Clark, 
53  Ohio  St.  414,  42  N.  E.  248,  38 
L.  R.  A.  562;  Lampasas  Hotel  Co.  v. 
Phoenix  Ins.  Co.  (Tex  Civ.  App.), 
38  S.  W.  361;  Peck  v.  Ins.  Co.,  16 
Utah,  121,  51  Pac.  255,  67  Am.  St. 
R.  600.  Contra, Sossaman  v.  Pamlico 
Ins.  Co.,  78  N.  C.  145.  So  whare  the 
conveyance  was  absolute  in  form  but 
intended  as  collateral,  held  not  to 
avoid  the  policy,  Henton  v.  his.  Co. 
(Neb.),  95  N.  W.  670;  German  Ins.  Co. 
V.  Gibe,  162  111.  251,  44  N.  E.  490; 
Barry  v.  Hamberg- Bremen  Fire  Ins. 
Co..  110  N.Y.  1,17N.  E.  405. 

5  From  one  hundred  to  two  hundred 
insurance  companies  may  be  liable  on 
a  single  risk  if  it  be  a  large  factory  or 
mercantile  establishment.  The  bulk 
of  insurance  handled  by  brokers  and 
insurance  agents  in  large  cities  is  upon 
business  and  mercantile  properties. 


ALIENATION    CLAUSE — EXECUTORY    CONTRACTS   OF   SALE       349 

vendee,  and  an  obligation  on  both  sides  to  complete  at  a  given  date, 
but  only  provided,  upon  examination,  the  title  is  found  as  represented. 
Until  that  date  the  whole  matter  is  purely  tentative  and  uncertain. 

Where  the  contract  U  silent  upon  the  subject,  courts  differ  as  to 
whether  the  executory  vendee  must  complete  despite  the  inter- 
mediate destruction  of  the  building  by  fire.^  But,  however  that 
issue  may  be  determined,  it  is  obviously  of  great  importance  to  the 
public  to  know  at  what  precise  stage  of  such  a  transaction  numerous 
subsisting  pohcies  of  the  vendor  ought  in  due  course  to  be  canceled, 
and  new  policies  taken  out,  or  indorsement  made  on  the  old,  in  favor 
of  the  vendee.  Convergence  seems  to  demand  that  whether  or 
not  the  vendee  takes  out  insurance  to  protect  his  interest,  the  sub- 
sisting policies  of  the  veidor  should  continue  in  full  force  and  effect 
until  the  deed  of  conveyance  is  delivered  and  the  legal  title  trans- 
ferred. Such  is  the  understood  practice,  and  fortunately  many 
courts  in  construing  tie  standard  policy  have  harmonized  their 
decisions  upon  this  poinc  with  the  exigencies  of  trade. ^ 

But  where  the  executory  "vendee  has  deviated  from  the  usual 
practice  and  has,  in  addition  to  his  executory  contract,  and  pending 
its  fulfillment,  taken  actual  possession  and  control  of  the  property, 
by  the  better  authority  the  policy  is  held  avoided,  despite  the  phrase 
of  the  policy  allowing  a  mere  change  of  occupants  without  increase 
of  hazard.^ 

Frequently  furniture  and  other  articles  of  personalty  are  sold  by 

1  See  cases  §  54,  p.  68  n.,  supra.  59    Minn.    267;    Swank    v.    Farmers' 

2  Jones  V.  Capital  City  Ins.  Co.,  /ns.  Co.,  126  Iowa  (1905),  547,  102  N. 
122  Ala.  421,  25  So.  790;  National  W.  429  (a  mere  option  to  buy);  iV/a^oun 
Fire  Ins.  Co.  v.  Three  States  Lumber  Co. ,  v.  Firemen's  Fund  I.  Co. ,  86  Minn.  486, 
217  III.  115,  75  N.  E.  450;  Phmnix  91  N.  W.  5  (agreement  to  transfer  to 
Ins.   Co.   V.   Caldwell,   187  111.   73,  58  mortgagee  is  no  change). 

N.E.  314;  ^rfev./ns.  Co., 98  Iowa,  606,  s  Skinner    Ship     Building     Co.     v. 

67  N.  W.  583,  40  L.  R.  A.  845;  Wyan-  Houghton,    92    Md.    68,    48    Atl.    85; 

dotte    Brewing  Co.  v.  Hartford    F.  Ins.  Gibb  v.  Phil.  Ins.  Co.,  59  Minn.  267, 

Co.,  144  Mich.  440  (1906)  ("a  condi-  61    N.   W.    137,  50  Am.   St.   R.   405; 

tional  sale  in  the  law  of  fire  insurance  Davidson    v.    Hawkeye    Ins.    Co.,    71 

is    not    an    alienation,"    real    estate),  Iowa,  532,32  N.  W.  514;  Co^ing/jam  v. 

Brunswick,  etc.,  Co.  v.  Northern  Assur.  Ins.  Co.,  90  Ky.  439,  14  S.  W.  417, 

Co.,  142  Mich.  29,   105  N.  W.  76  {id.  9   L.    R.   A.   627;   Grunauer  v.    West- 

personaltv);    Wood    v.    Ins.    Co.,    149  Chester  F.  Ins.  Co.,  72  N.  J.  L.  289, 

N.  Y.  382,  44  N.  E.  80,  52  Am.  St.  62   Atl.    418;    Brighton   Beach   Racing 

R.  733;  Tiemann  v.  Citizens  Ins.  Co.,  Assoc,  v.  Home  Ins.  Co.,  113  App.  Div. 

76  App.  Div.  5,  78  N.  Y.  Supp.  620  728,  93  N.  Y.  Supp.  654  (aff'd  by  the 

(overruling  Germond  v.  Home  Ins.  Co.,  New  York  Court  of  Appeals).     And 

2  Hun,  540);  Home  Ins.  Co.  v.  Tomplies,  see  Fidler  v.  Jameson,  98  App.  Div.  53, 

30  Tex.  Civ.  App.  404,  71  S.  W.  812.  90    N.  Y.  Supp.  546,  aff'd  184  N.  Y. 

But    see    Excelsior    Foundry    Co.    v.  605,  77  N.  E.  1187;  and  many  cases, 

Western   Assur.    Co.,    135   Mich.    467,  §  259,    holding    executory    vendee    in 

98  N.  W.  9;  and  compare  Hamilton  v.  possession  to  be  sole  and  unconditional 

Dwelling    House    Co.,    98    Mich.    535,  owner. 
57  N.  W.  735;  Gibh  v.  Phil.  Ins.  Co., 


350 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


the  dealer  on  the  installment  plan,  with  immediate  delivery  to  the 
purchaser,  who,  however,  acquires  title  only  after  full  payment  of 
the  purchase  price.  It  should  be  observed  that  under  the  terms  of  the 
New  York  standard  fire  policy,  in  the  absence  of  special  permit,  or  of 
such  description  of  interest  and  location  as  impliedly  contemplates 
conditional  sales  and  transfers,  the  dealer  would  forfeit  his  insurance 
upon  property  thus  turned  over  to  the  possession  of  third  parties.^ 

§  266.  The  Same— Joint  Owners— Partners— Joint  Insured.— 
Where  the  insured  are  joint  owners  of  the  property,  or  jointly  in- 
terested in  it,  as,  for  example,  in  the  case  of  partners  or  trustees,  a 
transfer  from  one  to  another  without  the  introduction  of  any  new 
person,  is  held,  by  the  weight  of  authority,  to  be  no  violation  of  the 
alienation  clause.  This  conclusion  rests  upon  the  ground  that,  the 
company  having  exhibited  its  willingness  to  grant  insurance  to  all 
those  named  in  the  policy,  a  mere  shifting  of  interest  among  them 
should  not  be  regarded  as  objectionable  by  the  company.^  And  the 
same  indulgence  also  seems  to  be  extended  to  those  who  are  jointly 
insured,  though  not  joint  owners.^ 

1  California  Ins.  Co.  v.  Union  Com- 
press Co.,  133  U.  S.  387,  10  S.  Ct.  3G5, 
33  L.  Ed.  730;  AUemania  F.  Ins.  Co.  v. 
Pec':,  133  111.  220,  24  N.  E.  538,  23 
Am.  Rep.  GIO;  Jo)ies  v.  Phoenix  Ins. 
Co.,  97  la.  275,  66  N.  W.  169;  Northern 
Assxir.  Co.  V.  CiUi  Savings  Bl:.,  18  Tex. 
Civ.  App.  721,  45  S.  W.  737.  But  see 
Brunstcic\-Bal  .e  Collender  Co.  v.  North- 
ern Assur.  Co.,  142  Mich.  29.  As  to 
A\hether  the  purchaser  in  possession, 
being  obligated  to  pay  the  full  purchase 
price  would  be  an  "unconditional  and 
sole  owner"  under  his  own  policy,  see 
cases  cited  pro  and  con,  §  259,  supra. 

2  German  Ins.  Co.  v.  Fox  (Neb.),  96 
N.  W.  652  (1903);  Phaetiix  his.  Co.  v. 
Holconbe,  57  Neb.  622,  78  N.  W.  300; 
Georgia  Home  Ins.  Co.  v.  Hall,  94  Ga. 
630,  21  S.  E.  828;  Loeb  v.  Firemen's 
Ins.  Co.,  38  Misc.  107,  77  N.  Y.  Supp. 
106;  Walradt  v.  Phoenix  his.  Co.,  136 
N.  Y.  375,  32  N.  E.  1063;  Pierce  v. 
Nashua  Ins.  Co.,  50  N.  H.  297;  Bur- 
nett V.  Eufaula  Home  I.  Co.,  46  Ala.  11, 
7  Am.  Rep.  581;  AUemania  Fire 
Ins.  Co.  V.  Peck,  133  111.  220;  Der- 
maJii  V.  Home  Mutual  I.  Co.,  26  La. 
Ann.  69,  21  Am.  Rep.  544;  Texas 
B  g.  &  I.  Co.  V.  Cohen,  47  Tex.  406, 
26  Am.  Rep.  298;  Virqinia  F.  &  M. 
Ins.  Co.  V.  Saunders,  84  Va.  969,  11 
S.  E.  794;  Contra,  Keith  v.  Royal 
Ins.  Co.,  117  Wis.  531,  94  N.  W.  295; 


Shuggart  v.  7ns.  Co.,  55  Cal.  408; 
Oldham  v.  Anchor  Ins.  Co.,  90  Iowa, 
225,  57  N.  W.  861;  Jones  v.  Phoenix 
Ins.  Co.,  97  Iowa,  275,  66  N.  W.  169; 
Finley  v.  Lvcoming  County  M.  I.  Co., 
30  Pa.  St.  311,  72  Am.  Dec.  705.  Be- 
cause of  the  peculiar  character  of 
ownership  in  firm  property,  the  assign- 
ment by  one  of  several  partners  to  an 
outsider  of  an  undivided  interest  will 
not  transfer  the  right  to  the  title  or 
possession  of  any  part,  but  simply 
carries  to  the  assignee  the  right  to  call 
upon  the  firm  for  an  accounting. 
Therefore  such  a  transfer  will  not  de- 
feat the  firm  insurance,  Wood  v.  Ins. 
Co.,  149  N.  Y.  382,  44  N.  E.  80,  52 
Am.  St.  R.  733;  Hanover  Fire  Ins. 
Co.  V.  Leu-is,  28  Fla.  209.  10  So.  297. 
But  where  the  partner  gives  a  chattel 
mortgage  upon  the  firm  property  to 
a  third  party  the  policy  is  avoided, 
Olney  v.  German  Ins.  Co.,  88  Mich.  94, 
50  N.  W.  100,  13  L.  R.  A.  684,  26  Am. 
St.  R.  281.  But  not  so  if  the  chattel 
mortgage  is  given  to  a  copartner, 
Moulton  V.  Atna  Fire  Ins.  Co.,  25 
App.  Div.  275,  49  N.  Y.  Supp.  570. 

3  Germania  Fire  Ins.  Co.  v.  Home 
Ins.  Co.,  144  N.  Y.  195,  39  N.  E.  77, 
26  L.  R.  A.  591  ("It  is  only  where  a 
stranger  is  to  be  brought  into  con- 
tractual relations  with  the  insurance 
company  that  the  consent  of  the  latter 


ALIENATION   CLAUSE — LEGAL   PBOCESS   OR  JUDGMENT        351 

Whatever  may  be  the  sound  rule  in  the  case  of  different  part 
owners,  jointly  insured  but  not  joint  owners,  there  is  no  doubt 
that  the  introduction  of  a  new  interest  or  person  without  permit 
avoids  the  policy  under  this  clause  at  the  option  of  the  insurer.^ 


§  267.  The  Same — Legal  Process  or  Judgment. — The  institution 
of  legal  proceedings  does  net  avoid  the  policy  under  this  clause;  nor 
does  a  judicial  sale  have  that  effect  until  expiration  of  any  period 
allowed  for  redemption;  -  and  until  confirmation  by  the  court  where 
that  is  required.^    And  such  sale  must  be  consummated  by  delivery 


is  essential,"  Court  by  E.  Bartlett,  J.), 
Hoffman  v.  JEtna  Ins.  Co.,  32  N.  Y. 
405;  Lockirood  v.  Middlesex  Ins.  Co., 
47  Conn.  553;  Royal  Ins.  Co.  v.  Sock- 
man,  15  Ohio  C.  C.  105;  West  v.  Cit- 
izens Ins.  Co.,  27  Ohio  St.  1,  22  Am. 
Rep.  204.  But  see  Collings  v.  Ameri- 
can Cent.  Ins.  Co.,  70  Mo.  App.  14; 
Walton  V.  Agricultural  Ins.  Co.,  116 
N.  Y.  317,  22  N.  E.  443,  5  L.  R.  A. 
677,  4  judges  to  3  (in  this  case  both 
husband  and  wife  were  insured,  but 
the  policy  was  held  avoided,  because 
husband  transferred  to  v/ife  the  barn 
which  with  other  property  was  insured. 
Unfortunately  only  the  dissenting 
opinion  discusses  these  close  and  in- 
teresting questions  involved,  to  wit, 
whether  a  transfer  without  introduc- 
tion of  a  stranger  is  not  permissible, 
and  whether  the  employment  of  a 
third  party  as  a  mere  conduit  for 
passing  title  from  husband  to  wife 
should  have  any  effect  in  causing 
forfeiture). 

1  Germania  Fire  Ins.  Co.  v.  Home 
Ins.  Co.,  144  N.  Y.  195,  39  N.  E.  77, 
63  N.  Y.  St.  R.  91,  43  Am.  St.  R.  749, 
26  L.  R.  A.  591;  Malley  v.  Atlantic 
F.  &  M.  Ins.  Co.,  51  Conn.  222;  Biggs  v. 
North  Carolina  Home  Ins.  Co.,  88  N.  C. 
141.  In  the  same  way  a  transfer  by 
the  assured  to  a  firm  in  which  he  is  a 
silent  partner  defeats  the  insurance, 
Ro^al  his.  Co.  V.  Martin,  192  U.  S. 
149,  24  S.  Ct.  247.  It  is  so  common 
an  occurrence  for  a  large  business  con- 
cern to  advance  a  valued  clerk  and 
give  him  an  interest  in  the  firm  prop- 
erty and  profits  in  place  of  a  salary 
that  it  is  manifestly  of  pressing  im- 
portance that  they  should  be  advised 
in  what  form  to  take  out  insurance,  in 
order  to  avoid  forfeiture  in  the  event 
of  any  addition  to  the  personnel  of  the 
copartnership.  To  meet  this  point, 
the  prudent  broker  always  insists  upon 


an  insertion  in  the  policy,  after  the 
name  of  the  assured  firm,  of  the  words 
"as  now  or  hereafter  may  be  consti- 
tuted," or  some  such  phrase,  Loeb  v. 
Firemen's  Ins.  Co.,  78  App.  Div.  113, 
77  N.  Y.  Supp.  106  (insurance  with 
such  a  phrase  held  good,  though  word 
"Co."  was  used  contrarj'-  to  statute). 
A  mere  dissolution  of  a  partnership 
does  not  avoid  insurance  on  firm  prop- 
erty. Dresser  v.  United  Firemen's 
I.  Co.,  45  Hun  (N.  Y.),  298,  12  N.  Y. 
St.  R.  434,  aff'd  122  N.  Y.  642,  25 
N.  E.  956.  Nor  giving  a  new  partner 
an  interest  only  in  profits,  Hanover 
Ins.  Co.  v.  Lewis,  28  I  la.  209,  10  So. 
297.  Nor  does  an  executory  agreement 
to  change  firm  into  a  corporation  avoid 
the  insurance,  Drennen  v.  London 
Assur.  Co.,  113  U.  S.  51,  5  S.  Ct.  341, 
116  U.  S.  461,  6  S.  Ct.  442.  But 
changing  partnership  into  limited 
liability  company  without  permit  may 
avoid,  Penchen  Co.  v.  City  Ins.  Co., 
18  Ont.  App.  446.  So  also  a  reorgan- 
ization of  a  corporation  into  a  new  cor- 
poration, Cremo  Light  Co.  v.  Parker,  118 
App.  Div.  (N.  Y.)  845. 

2  Greenlee  v.  North  Brit.  Mer.  Ins. 
Co.,  102  Iowa,  427,  71  N.  W.  534,  63 
Am.  St.  R.  455  in  which  mechanic's 
lien  was  foreclosed.  Wood  v.  Ainerican 
Fire  Ins.  Co.,  149  N.  Y.  382,  44  N.  E. 
80,  52  Am.  St.  R.  733;  Broune  National 
Bank  v.  Southern  Ins.  Co.,  22  Wash. 
379,60  Pac.  1123,  judgment  in  forcible 
detainer,  Hammel  v.  Queens  Ins.  Co.,  54 
Wis.  72,  11  N.  W.  349,  41  Am.  Rep.  1. 

3  Hanover  Fire  Ins.  Co.  v.  Broun, 
77  Md.  64,  25  Atl.  929;  Slohodisky  v. 
Phoenix  Ins.  Co.,  53  Neb.  816,  74  N.  W. 
270.  When  sale  is  complete  it  will 
avoid  the  standard  policy,  Hartford 
Fire  Ins.  Co.  v.  Ransom  (Tex.  Civ. 
App.  1901 ,  61  S.  W.  144).  But  if  order 
of  confirmation  is  set  aside,  a  judicial 
sale  will  not  avoid,  Richland  Co.  Ins. 


352  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

of  the  instrument  of  conveyance  pursuant  to  the  statute.^  Setting 
apart  in  purtilion  to  the  widow  for  life,  after  the^death  of  the  assured, 
constitutes  a  change  in  interest  and  possession.^ 

A  levy  by  the  sheriff  without  actual  taking  possession  does  not 
avoid  the  policy;  •''  nor  does  it,  so  it  has  been  held,  though  he  take 
actual  possession;  such  change  of  possession,  whether  of  real  or  of 
personal  property,  being  expressly  permitted  by  virtue  of  the  words 
"except  change  of  occupants  without  increase  of  hazard."^ 

The  appointment  of  one  of  the  partners  as  receiver  of  the  firm 
property  effects  no  change  of  interest  or  possession;^  and  if  a  re- 
ceiver is  insured  as  such  a  new  appointment  does  not  avoid. '^  An 
adju  lication  in  bankruptcy  effects  no  forfeiture  until  the  estate  of 
the  bankrupt  becomes  vested  in  the  trustee.'  But  a  transfer  or 
assignment  in  bankruptcy  or  insolvency,  whether  voluntary  or  in- 
voluntary, is  a  change  of  interest,  and  unless  consented  to  by  the 
insurer  will  vitiate  the  policy.* 

The  Massachusetts  policy  is  simpler.  It  forbids  a  sale  of  the 
property  without  assent  of  the  company,  in  writing  or  in  print.* 
Under  such  a  provision  so  long  as  the  insured  retains  any  insurable 
interest,  the  policy  will  protect  it.^°  But  a  voluntary  alienation  is 
as  much  a  breach  of  the  condition  as  a  sale  for  value  received. ^^ 

Co.  V.  Sarnps^on,  38  Ohio  St.  672.      Nor  5  Keeney  v.  Home  Ins.  Co.,  71  N.  Y. 

will  it,  if  purcliaser  fails  to  complete,  396. 

Lodqev.  Capital  Ins.  Co., 91  Iowa,  105,  ^Thompson    v.    Phoenix    Ins.    Co., 

58  N.  W.  1089;  Marts  v.  Cumberland  136  U.  S.  287,  10  Sup.  Ct.  1019. 

Ins  Co    44  N.  J.  L.  478.  t  Fuller  v.  New  York  Ins.  Co.,  184 

I  International    Wood    Co.     v.     Na-  Mass.  12,  67  N.  E.  879;  Fuller  v.  Jame- 

tional  Assur.  Co.,  99  Me.  415,  59  Atl.  son, 98  App.  Div.  53,90  N.  Y.  Supp.  4.56. 

544  8  Birdseye  v.  City  Fire  Ins.  Co.,  26 

^Trabue  v.  Dwelling  House  Ins.  Co.,  Conn.   165;   Young  v.  Eagle  Fire  Ins. 

121  Mo.  75,  25  S.  W.  848.  Co.,   14   Gray    (Mass.),    150;   Hine   v. 

3  McClelland  v.  Greenwich  Ins.  Co.,  Woolicorth,  93  N.  Y.  75.  So  in  Massa- 
107  La.  124,  31  So.  691;  Caraher  v.  chusetts  it  is  decided  that  a  convey- 
Royal  Ins.  Co.,  63  Hun,  82,  17  N.  Y.  ance  by  a  wife,  of  the  property  in- 
Supp.    858.  sured,  to  a  trustee  in   insolvency  for 

4  Walradt  v.  Phoenix  Ins.  Co.,  136  her  husband  is  a  violation  of  the  con- 
N.  Y.  375,  32  N.  E.  1063,  32  Am.  St.  dition  as  to  alienation,  Brown  v. 
R  752  (Court  stood  4  to  3);  Herman  v.  Cotton  6c  W.  M.  M.  I.  Co.,  156  Mass. 
Katz,  101  Tenn.  118,  47  S.  W.  86,  and  587,  31  N.  E.  691. 

see   Collins   v.    Lojidon    Assur.    Corp.,  ^Stuart    v.    Reliance    Ins.    Co.,    179 

165  Pa.  St.  298,  30  Atl.  924;  Contra,  Mass.  434,  60  N.   E.  929;  Clinton  v. 

Care?/ V.  German- Am. /ns.  Co.,  84  Wis.  Norfolk  Ins.    Co.,   176   Mass.    486,   57 

80,  54  N.  W.  18  (writ  of  attachment).  N.  E.  998;  Bryan  v.  Traders  Ins.  Co., 

This  and  the  Walradt   case  were  both  145  Mass.  389,  14  N.  E.  454;  Foote  v. 

decided  in  January,  1893,  and  neither  Hartford    Ins.     Co.,    119    Mass.    259; 

court  had  the  benefit  of  the  views  of  International  Wood  Co.  v.  Nat.  Assur. 

the  other,  St.  Paid  F.  &  M.  Ins.  Co.  v.  Co.,  99  Me.  415,  59  Atl.  544. 

Archibald  (Tex.),  16  Ins.  L.  J.  153.  lo  Clinton  v.  Norfolk  Mut.  F.  Ins.  Co.. 

ii  Brownv.  Cotton,  etc.,  Mut.  Ins.  Co.,      Stuart  v.  Reliance  Ins.  Co.,  179  Mass. 
156  Mass.  587,  31  N.  E.  691.     So  also      434,  60  N.  E.  929. 
a    temporary    alienation    will    avoid, 


ASSIGNMENT   OF    POLICY 


353 


§  268.  Assignment  of  Policy. — Or  if  this  policy  be  assigned  before 
loss. 

Even  without  express  prohibition  in  the  poUcy,  it  has  been  held 
that  a  fire  pohcy  is  not  assignable  except  with  the  consent  of  the 
insurer,  since  it  is  peculiarly  a  personal  contract,  and  no  new  party 
assured  can  be  introduced  into  it  without  consent  of  the  insurer.^ 

This  warranty  must  not  be  disregarded,  on  pain  of  forfeiture,^ 
and  the  consent  of  the  company  must  be  obtained  in  writing;  ^  but 
there  is  no  necessit}'  that  the  assignment  itself  be  evidenced  by 
written  instrument."*  The  company's  indorsement  consenting  to  the 
assignment  of  the  policy  carries  with  it  an  implied  consent  to  the 
transfer  of  interest  in  the  property.^ 

A  pledge  or  deposit  of  the  policy  as  collateral  security  is  not 
prohibited  by  this  clause.^ 


176  Mass.  486,  .57  N.  E.  998,  50  L.  R.  A. 
833,  79  Am.  St.  R.  325;  Brran  v. 
Traders'  Ins.  Co.,  145  Mass.  389,  14 
N.  E.  454;  Hitchcock  v.  Northuestern 
Ins.  Co.,  26  N.  Y.  68.  Similarly  the 
South  Dakota  policy  provides  that  the 
policy  shall  be  void  "  if  without  such 
assent  [oral  or  written]  the  insured 
shall  sell  and  dispose  of  all  insurable 
interests  in  the  insured  property." 
An  alienation  of  one  of  several  estates 
insured  by  one  policy  avoids  the  policy 
only  as  to  that  estate,  Clark  v.  Ins.  Co., 
6  Cush.  (Mass.)  342,  53  Am.  Rep.  44. 
Sale  by  one  partner  of  his  share  to  an- 
other partner  and  taking  a  mortgage 
are  no  breach  of  the  condition,  Pouers 
V.  7ns.  Co.,  136  Mass.  108,  49  Am.  Rep. 
20. 

1  New  England  Loan  &  Tr.  Co.  v. 
Kennealhj,  38  Neb.  895,  57  N.  W.  759; 
Lett  v.  Guardian  Fire  Ins.  Co.,  125 
N.  Y.  82,  25  N.  E.  1088;  Rai7ier  v. 
Preston,  18  Ch.  Div.  1.  In  a  dissenting 
opinion  in  the  last  case,  James,  L.  J., 
was  of  opinion  that  the  contract  should 
be  held  to  run  w-ith  the  title  to  the 
land  to  the  extent  of  inuring  to  the 
benefit  of  the  vendee  under  an  execu- 
tory contract  of  sale.  Marine  policies 
at  common  law  were  considered  as- 
signable without  express  consent  of 
the  insurers,  because  of  custom  and 
commercial  convenience,  which  made 
it  important  that  interests  in  vessels 
and  cargoes  should  pass  freely  without 
consultation  with  distant  insurance 
companies,  Pellas  v.  Neptune  Marine 
Ins.  Co.,  5  C.  P.  D.  34.  See  cases 
§§60,  63,  supra. 

23 


^  Hall  V.  Continental  Ins.  Co.  (Ky., 
1905),  84  S.  W.  519;  Lyford  v.  Con- 
necticut Fire  Ins.  Co.,  99  (Me.,  273),  58 
Atl.  916;  Miles  Lamp  Chiryiney  Co.  v. 
Erie  Fire  Ins.  Co.,  164  Ind.  181,  73 
N.  E.  107  (the  property  and  a  standard 
policy  were  transferred  without  con- 
sent of  insurer  to  new  corporation 
with  same  stockholders). 

^  New  V.  German  Ins.  Co.,  5  Ind. 
App.  82,  31  N.  E.  475  (1892). 

*  Western    Assur.    Co.    v.    McCarty, 

18  Ind.  App.  449,  48  N.  E.  265;  Can- 
non V.  Farmers'  Mut.  Ins.  Co.,  58 
N.  J.  Eq.  102,  43  Atl.  281.  If  statute 
requires  it,  assignment  also  must  be 
written,  St.  Paul  F.  &  M.  Ins.  Co.  v. 
Brunsinck  Grocery  Co.,  113  Ga.  786,  39 
S.  E.  483.  No  particular  form  of 
words  either  by  the  assured,  Pierce  v. 
Nashua  Fire  Ins.  Co.,  50  N.  H.  297; 
Bentley  v.  Ins.  Co.,  40  W.  Va.  729,  23 
S.  E.  584;  or  by  the  company.  Queen 
Ins.  Co.  V.  Block  (Ky.,  1900),  58  S.  W. 
471 ;  is  requisite  to  constitute  an  assign- 
ment. 

5  Benninghoff  v.  Agricultural  Ins. 
Co.,  93  N.  Y.  495;  Gould  v.  Duelling 
House  Ins.  Co.,  134  Pa.  St.  570,  590, 

19  Atl.  793. 

^Griffey  v.  N.   Y.  Central  Ins.  Co., 

100  N.  Y.  417,  3  N.  E.  309,  53  Am. 
Rep.  202;  Kei/  v.  Continental  Ins.  Co., 

101  Mo.  App.'  344,  74  S.  AV.  162.  An 
assignment  by  the  mortgagee  of  his 
mortgage  and  interest  in  a  policy,  if 
payable  to  him  "as  his  interest  may 
appear,"  does  not  fall  within  the  ban, 
Whiting  v.  Burkhardt,  178  Mass.  535, 
60  N.  E.   1,  86  Am.  St.  R.  503,  52 


351  MEANING    ANU    LEGAL    EFFECT    OF    FIRE    POLICY 

Where  the  policy  has  been  transferred  as  collateral  security  either 
with  or  without  the  consent  of  the  insurer,  the  assignee  may  be 
merely  an  appointee  or  payee  to  receive  any  insurance  money  to  the 
extent  of  the  debt.  In  such  a  case  it  is  not  necessary  that  he  should 
.show  any  title  or  insurable  interest  in  the  property  itself.  An 
equitable  assignee  of  the  proceeds  of  insurance,  if  any,  need  have  no 
interest  in  the  property  itself.^ 

The  assured  does  not  violate  the  terms  of  the  standard  policy  by 
accepting  from  a  common  carrier  a  bill  of  lading  containing  as  one 
of  its  provisions  that  the  carrier  is  to  have  full  benefit  of  any  insur- 
ance upon  the  property.^ 

Where  the  property  or  subject  of  the  fire  insurance,  as  well  as  the 
policy,  are  transferred  to  the  assignee  with  the  assent  of  the  com- 
pany, a  new  contract  is  thus  formed  between  the  company  and  the 
assignee  which  will  not  be  disturbed  by  any  subsequent  breach  of 
condition  by  the  assignor;  •''  or  by  any  agreement  between  him  and 
the  company."*  As  to  whether  the  insurers  can  avail  themselves  of 
prior  breaches  of  contract  unknown  to  them  at  the  time  of  the  assign- 
ment, or  whether  the  contract,  though  evidenced  by  the  same 
policy  and  without  further  consideration,  is  to  be  regarded  as  a 
wholly  independent  contract,  there  is  lack  of  harmony  in  the  de- 
cisions. By  the  weight  of  authority  the  assignee  seems  to  be  given 
a  fresh  start,  precisely  as  though  a  new  policy  were  issued  to  him; 
and  he  is  held  to  be  relieved  from  the  consequences  of  past  forfeitures 
incurred  by  the  assignor.^ 

L.  R.  A.  788;  Breeyear  v.  Rockingham  139  Mass.  508,  2  N.  E.  103,  52  Am. 

Farmers'  Mut.  F.  I.  Co.,  71  N.  H.  445,  Rep.    728.      But   compare   under   the 

52Atl.860.    An  assignment  of  a  policy,  doctrine  of  concealment  the  following 

though  on  its  face  absolute,  may  be  cases,  Pelzer  Mfg.  Co.  v.  St.  Paul  F.  & 

shown  to  have  been  intended  as  col-  M.  Ins.  Co.,  41  Fed.  271;  Pelzar  v.  Sun 

lateral     security    only,     Matthews     v.  Fire  Office,  36  S.  C.  213,  15  S.  E.  562 

Capital   Ins.    Co.,    115    Wis.    272,    91  (non-disclosure   of   provision    in   lease 

N.  W.  675,  and,  on  the  other  hand,  if  depriving  insurer  of  right  of  subroga- 

the  policy  is  delivered  with  the  intent  tion  presents  issue  for  jury,  policy  not 

that  it  shall  serve  as  collateral  security,  avoided);    Tate   v.   Hyslop    (1885),    15 

the  character  of  the  transaction  may  Q.  B.  D.  368  (non-disclosure  of  release 

be  shown  by  parol,  though  there  be  no  of  common-law  liability  of  lighterman 

written   assignment.   Die' ey   v.    Poco-  avoided  policy).     And  see  Mercantile 

mo'e  City  Bank,  89  Md.  280,  43  Atl.  33.  S.  Co.  v.  Tyser  (1881),  7  Q.  B.  D.  73 

^Merrill  v.   Colonial  Fire  Ins.   Co.,  (non-disclosure  of  canceling  clause). 

169  Mass.  10,  47  N.  E.  439;  Baughman  3  Pollard  v.  Somerset  Miit.  Fire  Ins 

V.  Camden  Mfg.  Co.,  65  N.  J.  Eq.  546,  Co.,  42  Me.  221;  Fogg  v.  Middlesex  Mut 

56  Atl.  376;  Bibend  v.  L.  &  L.  &  G.  Fire  Ins.  Co.,  10  Cush.  (Mass.)  337. 

Ins.  Co.,  30  Cal.  78.    He  has  simply  an  *  Georgia  Co-operative  Fire  Assoc,  v. 

equitable  lien  on  any  proceeds  of  the  Borchardt,  123  Ga.  181,  51  S.  E.  429; 

policy  to  the  amount  of  the  indebted-  Am.  Cent.  Ins.  Co.  v.  Sweetser,  116  Ind! 

ness  due  him,  Key  v.  Continental  Ins.  370,  19  N.  E.  159. 

Co.,  101  Mo.  App.  344,  74  S.  W.  162.  s  For     example,     Virginia-Carolina 

^Jackson  v.  Boylston  Mut.  Ins.  Co.,  Chem.  Co.  v.  Ins.  Co.,  108   I''cd.  451; 


ASSIGNMENT   OF    POLICY  355 

This  conclusion  is  defended  by  the  argument  that  the  compeny 
vvould  presumably,  if  requested,  cancel  the  old  and  issue  a  new  policy, 
but  only  at  greater  inconvenience  to  itself  and  that,  therefore,  the 
method  adopted  is  for  the  benefit  of  the  company  exclusively.  The 
weakness  in  this  line  of  reasoning  comes  from  the  fact  that  the  as- 
sured can  cancel  only  at  short  rates,  which  means  that  the  insurer 
in  that  event  retains  more  than  the  proportionate  amount  of  premium. 
Accordingly,  other  decisions  enforce  the  more  logical  but  harsher  rule 
that  the  assignee  will  take  only  such  rights  as  belong  to  the  assignor 
at  the  time  of  the  assignment.^  If,  however,  with  the  knowledge 
of  past  forfeiture,  the  company  gives  written  consent  to  change  of 
interest  or  to  assignment,  then  a  clear  ground  of  estoppel  is  estab- 
lished in  favor  of  the  assignee.^ 

No  one  except  the  company  can  make  objection  to  the  assign- 
ment from  the  original  insured  to  the  assignee,  on  the  ground  that 
the  company's  consent  was  not  obtained.^ 

After  a  loss  by  fire  has  occurred,  the  claim  of  the  assured  for  dam- 
ages is  a  chose  in  action,  which  he  has  a  right  to  assign,  in  spite  of 
this  clause,  without  asking  permission  of  the  company,^  and  the 
assignee  then  takes,  subject  to  all  defenses  available  to  the  insurer 
as  against  the  assignor.^  But  any  excess  of  insurance  over  and 
above  the  fire  loss  still  belongs  to  the  assured  assignor,  and  he  can 
no  more  assign  the  policy  as  to  that  without  consent  than  he  could 
do  so  before  the  fire. 

Continental  Ins.  Co.  v.  Munns,  120  Ind.  Shearman  v.  Niagara  his.  Co.,  46  N.  Y. 

30,  22  N.  E.  78;  Ellis  v.  Council  Bluffs  526. 

7ns.    Co.,  64   Iowa,   507;    Bullman   v.  ^ Leinkauf  v.  Caiman,  110  N.  Y.  50, 

North  Brit.  Mer.  Ins.  fo.,  159  Mass.  17  N.  E.  389. 

118,  34  N.  E.  169;  Rines  v.  German  Ins.  *  Frels  v.  Little  Black  Farmers'  Ins. 

Co.,  78  Minn.  46,  80  N.  W.  839;  Hall  v.  Co.,  120  Wis.  590,  98  N.  W.  522;  West- 

Niaqara   Ins.    Co.,   93    Mich.    184,   53  Chester  Fire  Ins.    Co.    v.    Blackford,  2 

N.  W.  727;  Steen  v.  Niagara  Ins.  Co.,  Indian  Terr.  370,  51  S.  W.  978;  Hall 

89  N.  Y.  315,   327;   Batjess   v.  Mer-  v.  Dorchester  Mut.  Fire  Ins.  Co.,  Ill 

chants'  Ins.  Co.,  106  Mo.  App.  684,  80  Mass.    53    (company    with    notice    of 

S.  W.  289;  Home  Ins.  Co.  v.  Nichols  assignment  is  liable  to  assignee);  Mel- 

(Tex.  Civ.  App.),  72  S.  W.  440  (1903).  len  v.  Hamilton  Fire  Ins.  Co.,  17  N.  Y. 

1  Wilson  V.  Hakes,  36  III.  App.  539;  609;  Imperial  F.  Ins.  Co.  v.  Dunham, 

McCluskey  v.   Prov.    Wash.   Ins.    Co.,  117  Pa.  St.  460,  12  Atl.  668.    Insurers 

126     Mass.     306;     Commonwealth     v.  cannot  by  their  contract  restrain  this 

National    Ins.    Co.,    113    Mass.    514;  right  to  dispose  of  this  chose  in  action, 

Citizens'  Ins.  Co.  v.  Doll,  35  Md.  89;  Aikan  v.  New  Hampshire  Ins.  Co.,  53 

Waters  v.  Allen,  5  Hill  (N.  Y.),  421;  Wis.    136,    10    N.    W.    91;    Carroll   v. 

Wilson  V.  Mutual  Ins.  Co.,  174  Pa.  St.  Charter  Oak  Ins.   Co.,   38  Barb.   402, 

554,  34  Atl.  122;  Reed  v.  Windsor  Mut.  40  Barb.  292;  Greene  v.  Republic  Ins. 

Zns.  Co.,  54  Vt.  413.    And  see  Sun  Ins.  Co.,  84  N.  Y.  572. 

Co.  V.  Greenville  Bldg.  &  L.  Assoc,  58  ^Johnston   v.   Phoenix  Ins.    Co.,   39 

N.  J.  L.  367,  33  Atl.  962.  Md.  233.    Also  takes  all  rights,  for  in- 

^  Haves    v.    Saratoga    Ins.    Co.,    81  stance,  right  of  reformation,  5enes/i  v. 

App.  Div.  287,  80  N.  Y.  Supp.  888,  Mill  Owners'  Ins.Co,,  103  Iowa,  465, 

aff'd  179  N.  Y,  535,  71  N.  E,  1131;  72  N,  W.  674. 


3")()  MEANINCJ    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

The  Massachusetts  policy  forbids  an  assignment  without  assent 
of  the  company  in  writing  or  in  print. 

§  269.  Memorandum  Clause.— Or  if  illuminating  gas  or  vapor  be 
gnuratcd  in  the  described  building  (or  adjacent  thereto)  for  use  therein; 
o)\  if  (any  usage  or  custom  of  trade  or  manufacture  to  the  contrary 
notwithstanding)  there  be  kept,  used,  or  allowed  benzine,  benzole,  dyna- 
mite, ether,  jireicorks,  gasoline,  etc. 

This  clause  contains  memorandum  articles,  that  is,  a  list  of  in- 
flammable substances,'  peculiarly  liable  to  destruction  by  fire,  and 
of  a  nature  likely  to  cause  a  spread  of  the  fire.  The  restrictions  are 
proper  and  must  not  be  infringed,  except  as  provided  in  the  contract, 
by  written  agreement  indorsed  upon  the  policy.  It  is  immaterial 
that  the  breach  may  not  increase  the  risk  or  contribute  to  the  loss.^ 

The  word  "premises"  as  used  in  this  clause  is  to  be  construed  to 
mean  the  buildings  mentioned.  It  does  not  include  an  adjoining 
lot.^  It  will  be  applied  to  so  much  of  a  building  designated  as  is 
used  and  controlled  by  the  insured.^ 

But  the  warranty  is  absolute,  hence  if  the  insured,  though  un- 
wittingly, allow  his  tenants,  or  other  persons  lawfully  in  possession 
of  the  premises,  to  violate  the  provisions  of  the  memorandum  clause, 
the  policy  will  be  avoided.^ 

Where,  however,  it  comes  to  any  question  of  interpretation,  such 
sweeping  provisions  must  receive  reasonable  construction.  It  is  not 
to  be  readily  presumed  that  the  underwriters  intended  by  the 
phraseology  of  the  standard  policy  to  interfere  with  the  orderly  and 
natural  use  of  the  property  insured.  If  a  grocery  man  or  artisan 
should  pass  through  the  kitchen  of  the  insured  building  with  pro- 

1  See  policy,  in  Appendix,  ch.  II,  for  Soc.  (Pa.),  11  Atl.  572;    but  see  case 

full  list  and  description.  cited  p.  141,  supra. 

^  Bastian    v.    Brit.-Am.    Assur.    Co.,  *  Kohlmann  v.  Selvage,  34  App.  Div. 

143  Cal.  287,  77  Pac.  63,  66  L.  R.  A.  380,  54  N.  Y.  Supp.  230.    See  Boyer  v. 

255  (dynamite  was  kept);  Ins.  Co.  v.  Grand  Rapids  F.  I.  Co.,  124  Mich.  455, 

Commissioners,  54  Kan.  732  (gasoline  83  N.  W.  124. 

was  used  for  several  days) ;  Htdton  v.  &  Gunther  v.  Liverpool  &  L    &  G   I 

Patrons'  Mid.  Ins.  Co.,  191  Pa.  St.  369,  Co.,  134  U.  S.  110,  10  S.  Ct.  448, "SS 

43  Atl.   219    (gasoline  was   kept  and  L.  Ed.  857,  116  U.  S.  113,  29  L.  Ed. 

sold);   Williams  v.   People's  Fire  Ins.  575  (kerosene);  Norwayss  v.  Thurinnia 

Co.,  57  N.  Y.  274  (petroleum  used  in  Ins.  Co.,  204  111.  334.'  08  N.  E.  551- 

small  quantities);  Gunther  v.  L.  &  L.  &  Badger  v.  Platts,  68  N   H    222   44  Atl' 

G.  In^.  Co.,  134  U.  S.  110,  10  S.  Ct.  448  296,  73  Am.  St.  R.  572  (naphtha  used 

(kerosene    used    contrary    to    special  by  tenant);  Kohhnann  v.  Selvage    34 

provisions  of  policy).  App.  Div.  380,  54  N.  Y.  Supp    230- 

^Rau  V.    Westchester  F.  I.   Co.,  36  Westchester  F.  Ins.  Co    v    Ocean  View 

App.  Div.   179,  55  N.  Y.  Supp.  459,  Pleasure    Pier    Co.,  106  Va      633    56 

50  App.  Div.  428,  64  N.  Y.  Supp.  290.  S.  E.  584    (fireworks  for   the    Fourth 

aff'd  168  N.  Y.  665,  61  N.  E.  1134;  of  July,  unknown  to  insured;    policy 

Allemania  In^.   Co.  v.  Pittsburg  Exp.  void). 


MEMORANDUM  CLAUSE— AS  AFFECTED  BY  SUBJECT     357 

hibited  articles  in  his  pocket,  or  if  a  physician  in  case  of  necessity 
should  administer  ether  on  the  floor  above,  it  is  hardly  supposable 
that  the  insurance  on  house  or  contents  is  to  be  held  forfeited  in 
consequence. 

As  matter  of  interpretation  certain  important  modifications  are 
read  into  this  clause  with  general  approval.^  Thus,  its  prohibition 
does  not  extend  to  such  insignificant  quantities  of  the  articles 
enumerated  as  one  would  use  for  medicine  or  for  cleaning  clothes  or 
machinery,^  or  for  any  similar  use  which  must  be  presumed  to  be 
allowed  by  the  contract  of  insurance  in  view  of  the  character  of  the 
property  insured.^  And  it  is  said  that  the  word  "used"  means 
something  more  than  an  isolated  occasion; ''  but  it  was  held  other- 
wise where  fireworks  were  brought  into  the  house  the  day  before 
the  Fourth  of  July,  causing  a  conflagration  the  same  night. ^ 

Another  modification  of  great  practical  consequence  read  into  the 
clause  by  interpretation  will  be  considered  in  the  next  section. 

§  270.  The  Same— As  Affected  by  the  Subject  and  the  Written 
Description. — It  has  been  remarked  that  the  written  description 
controls  the  general  printed  clauses  of  the  policy  if  there  is  any  in- 
consistency between  them.^  With  the  aid  of  this  rule  many  courts 
have  held  that  wherever  the  prohibited  article  naturally  or  usually 
belongs  to  the  stock  of  goods  or  other  subject-matter  insured,  the 
written  description  of  the  subject  will  by  implication  be  regarded 
as  a  permit  to  use  the  article,  in  spite  of  the  repugnant  provision 
of  the  printed  clause.^ 

1  The  prudent  broker,  however,  gets  L.  R.  A.  714,  93  Am.  St.  R.  870.    And 

special  permit  to  use  benzine,  gasoline,  see  Hinckley  v.  Ins.  Co.,  140  Mass.  38. 

etc.,  in  small  quantities,  for  cleaning  Even    the   word    "having"    has    been 

or  similar  purposes,  for  which  there  construed    to   mean    an    habitual    use 

should  be  no  charge.  as  applied  to  benzine,  Bentley  v.  Lum- 

^Mears  v.  Ins.  Co.,  92  Pa.  St.  15.  berme-n's  Ins.  Co.,  191  Pa.  St.  276,  43 

3  Norwaysz  v.  Thuringia  Ins.  Co.,  204  Atl.  209. 

111.  334,68  N.  E.  551;  Car/wv.  TFes^em  ^  Heron  v.   Phoenix  Mut.   Fire  Ins. 

Assur.  Co.,  57  Md.  515,  40  Am.  Rep.  Co.,  180  Pa.  St.  257,  36  Atl.  740.     So 

440;    First    Cong.    Church    v.    Holyoke  also   Westcliester  F.  Ins.   Co.  v.  Ocean 

Ins.  Co.,  158  Mass.  475,  32  N.  E.  572;  View  Pleasure  Pier  Co.  (Va.,  1907),  56 

Smith  V.  German  Ins.  Co.,  107  Mich.  S.  E.  584.    The  word  " allowed "  in  this 

270,  65  N.  W.  236,  30  L.  R.  A.  368;  clause  means  allowed  to  be  kept  or 

Wood    V.    Northwestern    Ins.    Co.,    46  used.     So  there  is  held  to  be  no  viola- 

N.  Y.  421;  Williams  v.  People's  Fire  tion  of  the  provision  where  gasoline  is 

Ins.    Co.,    57    N.    Y.    274;    Fraim   v.  taken  from  a  shed  in  the  rear  and  car- 

National  Fire  Ins.  Co.,  170  Pa.  St.  151,  ried  through  the  store  for  immediate 

32  Atl.  613  (gasoline  kept  outside  but  delivery  to  a  customer,  London  &  L. 

brought    into    the    factory,   held,    no  F.  I.  Co.  v.  Fischer,  92  Fed.  500,  34 

breach   because   a   necessary   incident  C.  C.  A.  503. 

of  the  business).  *  See  §  87,  supra. 

*  Springfield  F.   &  M.  Ins.   Co.   v.  7  Tubb  v.  L.  &  L.  &  G.  Ins.  Co.,  106 

Wndr,  95  Tex.  .598,  68  S.  W.  077,  .58  Ala.  651,  17  So.  615  ("stock  usually 


35S  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

Thus  where  a  stock  of  fancy  goods  was  insured  with  privilege  to 
iceep  firecrackers  on  sale,  it  was  held  by  the  New  York  court  that 
keeping  fireworks  would  not  avoid  the  policy,  although  by  the 
jirintcd  memorandum  clause  fireworks  were  prohibited.^  But  the 
Federal  Supreme  Court  came  to  the  opposite  conclusion  on  the  same 

facts.- 

And  where  privilege  was  given  to  use  the  property  for  a  printing 
office,  the  keeping  of  camphene  was  held  to  appertain  naturally  to 
the  permitted  l)usiness,  although  camphene  appeared  in  the  printed 
memorandum  of  prohibited  articles/"'    Hence  there  was  no  forfeiture. 

Despite  the  attempt  in  the  standard  form  to  limit  this  rule  of  con- 
struction, the  rule  still  prevails,^  and  the  only  effect  of  the  clause, 
"any  usage  or  custom  of  trade  to  the  contrary,"  is,  perhaps,  to  im- 
pose upon  the  insured  the  burden  of  showing  with  greater  clearness 
that  the  written  description  fairly  covers  the  prohibited  articles  in 
question. 

A  group  of  cases  will  give  sharper  definition  to  the  views  of  the 
courts  upon  this  important  subject.  A  policy  in  the  Michigan 
standard  form  was  procured  on  the  Eaton  county  courthouse.  Like 
the  New  York  policy  it  provided  against  increase  of  hazard,  also 
against  the  keeping,  using,  or  allowing  of  gasoline  or  other  explosives 
on  the  premises;  but  permitted  repairing  by  mechanics  for  fifteen 
days  at  any  one  time.  A  committee  appointed  by  the  board  of 
supervisors  took  charge  of  the  repainting  of  the  building;  and,  in 
connection  with  the  work,  a  five-gallon  can  of  gasoline  was  kept  in 
the  building  by  the  painters  for  at  least  twenty-four  days.     From 

kept  in  a  country  store "  permits  use  of  ^  Harper  v.  A'.  Y.  City  Ins.  Co.,  22 

benzine  and  fireworks);    Yoch  v.  Ijis.  N.    Y.    444.      Insurance    upon    stock 

Co.,    ill    Cal.    503,   44    Pac.    189,   34  "such  as  is  usually  kept  for  sale  in  a 

L.  R.  A.  857;   Phoenix  Ins.  Co.  v.  Wal-  drug  store"  will  not  be  avoided,  where 

ters,  24  Ind.  App.  87  ("retail  hardware  benzine  is  kept  in  a  manner  customary 

store"    covers    dynamite);    AcMey    v.  with    druggists,    Phoenix    Ins.    Co.    v. 

Ins.  Co.,  25  Mont.  272,  64  Pac.  665  Flemming,  65  Ark.  54,  44  S.  W.  464, 

(description  in  a  policy  amounts  to  a  67  Am.  St.  R.  900,  39  L.  R.  A.  789. 

^v^itten  permit,  and  "stock  of  drugs,"  It  is  permissible  to  show  by  parol  evi- 

etc,    covers    gasoline,     benzine,    and  dence  what  articles  naturally  apper- 

ether);  Hall  v.  Ins.  Co.,  58  N.  Y.  292,  tain  to  the  property  which  is  the  sub- 

17  Am.  Rep.  255  (all  stock  and  ma-  ject  of  insurance,  Pindar  v.  Kings  Co. 

terials    ordinarily    used    in    photogra-  Fire  Ins.  Co.,  36  N.  Y.  648,  93  Am. 

pher's  business  are  protected  and  the  Dec.     544;     Northern    Assur.     Co.     v. 

insurer  is  presumed  to  know  what  be-  Crawford,  24  Tex.  Civ.  App.  574,  59 

longs  to  the  business  insured);  Mascott  S.  W.  916;  Carrigan  v.  Lycoming  Fire 

V.  Granite  State  Fire  Ins.  Co.,  68  Vt.  Ins.  Co.,  53   Vt.  418,    38    Am.    Rep. 

253,  35  Atl.  75.  687. 

1  Steinbach  v.  Lafayette  Fire  Ins.  Co. ,  *  Phoenix  Ins.  Co.  v.  Walters,  24 
54  N.  Y.  90.  Ind.  App.  87,  56  N.  E.  257,  79  Am 

2  Steinbach  v.  R,  F.  Ins.  Co.,  13  St.  R.  257;  Mascott  v.  Granite  State 
Wall.  a".  S.)  183.  Fire  his.  Co.,  68  Vt.  253,  35  Atl.  75. 


MEMORANDUM    CLAUSE— AS    AFFECTED    BY    SUBJECT  359 

this  can  torches  were  filled  with  gasoline  and  were  then  used  to  burn 
off  or  blister  the  old  paint  on  the  outside  of  the  building.  The  court 
allowed  the  verdict  of  the  jury  in  favor  of  the  insured  to  stand, 
Justice  Grant,  writing  a  strong  dissenting  opinion.  The  majority  of 
the  court  decided  that  painters  are  not  "mechanics,"  that  "keep- 
ing, using,  or  allowing"  explosives  refers  onl}-  to  an  habitual  keeping 
or  storage,  and  that  repairs  by  painters,  deemed  b}^  the  jury  to  be  a 
reasonable  and  necessarj^  incident  to  the  use  of  the  property,  though 
continued  for  more  than  fifteen  days,  would  not  avoid  the  policy.^ 

The  New  Jersey  Court  of  Errors  and  Appeals,  with  the  Michigan 
case  before  it,  was  unable  to  construe  the  same  clause  of  the  stand- 
ard policy  with  like  liberality  to  the  insured;  but  left  a  verdict  for 
the  plaintiff  undisturbed,  based  on  a  different  state  of  facts.  The 
court,  in  an  opinion  by  Justice  Swa3^ze,  concludes  that  painters  are 
"mechanics",  within  the  meaning  of  the  policy;  but  holds  that 
mechanics  are  impliedly  allowed  b}'  the  express  privilege  for  repairs 
to  make  repairs  in  "a  reasonable,  proper,  and  usual  way,"  although 
the  hazard  may  thereby  be  temporarily  increased,  and  although  the 
use  of  the  generally  prohibited  article,  gasoline,  may  be  necessitated, 
but  all  within  the  limits  of  the  specified  period  of  fifteen  days.^ 

The  case  last  cited  is  more  in  harmony  with  an  earlier  Massachu- 
setts case,  involving  a  policy  which  prohibited  the  "keeping"  of 
naphtha  and  the  increasing  of  the  risk,  but  contained  no  express 
provision  regarding  repairs.  The  right  to  make  ordinar}''  repairs,  the 
court  concluded,  must  be  implied  as  an  incident  to  the  use  of  the 
property.  Though  naphtha  was  used  by  workmen  for  nearly  four 
weeks  in  burning  off  the  outside  paint,  preparatory  to  repainting  the 
church  insured,  it  was  for  the  jury  to  say,  under  that  policy,  whether 
the  repairs  were  reasonable  and  reasonably  conducted.^ 

A  manufacturing  concern  in  Pennsylvania  was  engaged  in  the 
business  of  gold,  silver  and  nickel  plating.  A  policy  covered  their 
tools,  machinery,  and  fixtures.  Gasoline,  though  prohibited  by  the 
general  printed  clause  of  the  policy,  and  though  not  specifically 
permitted,  was  used  in  their  plating  process  and  for  cleaning  pur- 
poses. It  was  thus  allowed  and  used  in  the  building  described  in  the 
policy,  but  was  stored  elsewhere.  The  jury  having  found  that  the 
use  of  gasoline  was  a  necessary  incident  to  the  conduct  of  their  busi- 
ness, the  judgment  for  the  plaintiffs  was  affirmed.'* 

1  Smith    V.    German    Ins.    Co. ,    107  3  Pirst  Cong.  Church  v.  Holyoke  Ins 
Mich.  270,  65  N.  W.  236,  30  L.  R.  A.  Co.,  158  Mass.  475,  32  N.  E.  572. 
368.  **  Fraim  v.  National  Fire  Ins.   Co., 

2  Garrebrant  v.  Continental  Ins.  Co.  170  Pa.  St.  151,  32  Atl.  613. 
(N.  J.,  1907),  67  Atl.  90. 


;jC(l  MEANING    AND    LEGAL    El-FECT    Uk'    FIKE    POLICY 

The  North  Carolina  court,  on  the  other  hand,  in  construing  the 
later  nicinorandum  clause  of  the  New  York  standard  policy,  con- 
cludetl  that  there  was  no  necessary  inconsistency  between  the  lan- 
guage of  the  printed  exception  and  the  language  of  the  written  de- 
scription of  the  plaintiff's  policy.  The  written  description  covered- 
"stock  of  cloth,  cassimeres,  clothing,  trimmings,  and  all  other  articles 
usual  in  a  merchant  tailor's  establishment."  "Patterns"  are  named 
in  the  jmnted  memorandum  clause,  and  excepted,  unless  lialjility  is 
specifically  assumed  thereon.  A  witness  for  the  plaintiff  testified, 
"  all  tailors  usually  keep  patterns;  can't  well  get  along  without  them." 
The  court,  however,  held  that  effect  might  be  given  both  to  the 
written  and  printed  parts  of  the  policy,  and  excluded  from  the  plain- 
tiff's recovery  the  value  of  the  patterns.^ 

The  constant  aim  of  the  courts  is  to  carry  out  the  apparent 
intent  of  the  parties.  Beyond  this  no  indulgence  can  be  extended  to 
the  assured.  Thus  an  implied  permit  to  sell  flashlight  powder  as  a 
part  of  photographers'  supplies  does  not  warrant  its  manufacture.^ 

The  memorandum  clause  of  the  Massachusetts  policy  is  as  follows: 
or  if  gunpowder  or  other  articles  subject  to  legal  restriction  shall  be  kept 
in  quantities  or  manner  different  from  those  allowed  or  prescribed  by 
law — or  if  camphene,  benzine,  naphtha,  or  other  chemical  oils  or  burn- 
ing fluids  shall  be  kept  or  used  by  the  insured  on  the  premises  insured, 
except  that  what  is  known  as  refined  petroleum,  kerosene,  or  coal  oil, 
may  be  used  for  lighting,  and  in  dwelling  houses  kerosene  oil  stoves 
may  be  used  for  doynestic  purposes — to  be  filled  when  cold,  by  daylight, 
and  with  oil  of  lawful  fire  test  only.  ^ 

§  271.  Vacancy  Clause. — Or  if  a  building  herein  described,  whether 
intended  for  occupancy  by  owner  or  tenant,  be  or  become  vacant  or  un- 
occupied and  so  remain  for  ten  days. 

1  Johnston  v.  Niagara  Fire  Ins.  Co.,  Fire  Ins.  Co.,  124  Mich.  455,  83  N.  W. 

118  N.  C.  643,  24  S.  E.  424.    Compare  124  (use  of  gasoline  in  a  stove  avoided 

Lovewell  v.   Westchester  Fire  Ins.   Co.,  tlie    policy);     Vandervolgen    v.    Man- 

124  Mass.  418,  2G  Am.  Rep.  671  ("pat-  Chester  F.  Assur.  Co.,  123  Mich.  291, 

terns,"  though  excepted  by  the  printed  82  N.  W.  46   (improper  use  of  kero- 

memorandum  clause,  were  held  covered  sene).      But    compare    following    two 

under  the  word  "tools"  in  the  descrip-  cases,    in    which    policy    was    not    of 

tion).  standard    form,    Snyder    v.    Dwellinq 

-  Lutz  V.  Roml  Ins.  Co.,  205  Pa.  St.  House  Ins.  Co.,  59  N.  J.  L.  544,  34  Atl. 

159,  54  Atl.  721;  Kennc fie' -Hammond  931;  Bentley  v.  Lvmbermen's  Ins.  Co., 

Co.  v.  Norwich  Union  F.  Ins.  Co.  (Mo.  191  Pa.  St.  276,  43  Atl.  209  (benzine). 

App.),  80  S.  W.  694  (stock  of  railroad  The    elaborate    classification    of    risks 

contractors  was  not  construed  to  cover  which    was    formerly    indorsed    upon 

dynamite).       And     see     Fir.d     Cong.  manv  of  the  policies  has  been  omitted 

Church  V.  Hoh'o' e  Ins.  Co.,  158  Mass.  in  the  standard  form. 
475,  32  N.  E.  572  (naphtha  was  used  to  3  First     Congregational     Church     v. 

burn  off  paint);  Boyer  v.  Grand  Rapids  Holyoke  Mut.  F.  Ins.  Co.,  158  Mass. 


VACANCY    CLAUSE 


361 


The  addition  of  a  definite  length  of  time,  ''ten  days,"  is  an  im- 
provement upon  the  old  form.  The  provision  of  the  standard  policy 
is  reasonable  and  must  be  observed,  inasmuch  as  the  insurers  have 
a  right  to  know  whether  the  subject  of  insurance  is  receiving  ordi- 
nar}'  supervision  or  is  being  neglected.^  Before  the  time  limit  was 
added  to  this  clause  considerable  uncertainty  existed  as  to  the 
length  of  disuse  which  would  constitute  a  vacancy,  and  it  was  held, 
among  other  things,  that  a  temporary  absence  from  a  dwelling- 
house  without  deliberate  purpose  to  stay  away,  and  especially  where 
the  occupants  left  the  furniture  and  household  goods,  would  not 
avoid  the  policy  or  require  a  written  consent;  ^  but  under  the  stand- 
ard policy  the  period  of  unoccupancy  of  any  building  described  must 
not  exceed  ten  days  as  expressly  permitted.^  And  though  the  in- 
sured premises  are  leased  by  the  insured  to  another,  the  breach  of 
this  condition,  committed  by  the  tenant,  will  be  equally  fatal.'* 

The  word  "unoccupied"  has  been  added  to  the  word  "vacant," 
to  give  the  restriction  a  broader  effect  in  favor  of  the  insurance  com- 
pany. By  a  technical  construction,  "vacant"  had  been  held  to 
mean  empty  of  everything  but  air.^ 


475,  33  N.  E.  572,  19  L.  R.  A.  587,  35 
Am.  St.  R.  508  (naphtha  avoided); 
Whitmarsh  v.  Charier  Oak  F.  Ins.  Co., 
2  Allen  (Mass.),  581  (keeping  oil,  etc., 
avoided). 

1  Baldwin  v.  German  Ins.  Co.,  105 
Iowa,  379,  75  N.  W.  326;  Names  v. 
House  Ins.  Co.,  95  Iowa,  642,  650,  64 
N.  W.  628  (purpose  of  the  clause  is 
"an  added  safety  or  security  to  the 
building");  Ilac.ett  v.  Phila.  Under- 
ivriters,  79  Mo.  App.  16;  Hill  v.  Equita- 
ble M.  F.  Ins.  Co.,  58  N.  H.  82;  Barilett 
v.  Brit.-Am.  Assur.  Co.,  35  Wash.  525, 
77  Pac.  812. 

2  Unio7i  Ins.  Co.  v.  McCullough 
(Neb.),  96  N.  W.  79;  .Etna  Ins.  Co.  v. 
Meyers,  63  Ind.  238;  Worley  v.  State 
Ins.  Co.,  91  Iowa,  150,  59  N.  W.  16; 
Woodruff  V.  Imperial  Ins.  Co.,  83  N.  Y. 
133;  Cuynmins  v.  Agricultural  Ins.  Co., 
67  N.  Y.  260,  23  Am.  Rep.  Ill;  East 
Tex.  Ins.  Co.  v.  Kempner,  87  Tex.  229, 
27  S.  W.  122. 

•<  Huber  v.  Manchester  Fire  Ins.  Co., 
92  Hun,  223,  72  N.  Y.  St.  R.  396,  36 
N.  Y.  SupD.  873;  Roe  v.  D'relling 
House  Ins.  Co.,  149  Pa.  St.  94,  23  Atl. 
718;  Ohio  Farmers'  Ins.  Co.  v.  Vogel 
(Ind.  App.),  73  N.  E.  612.  Some 
cases,  however,  seem  to  intimate  that 
the  specified  period  does  not  begin  to 
run  until  there  is  a  deliberate  purpose 


to  vacate  or  stay  away  for  some  defi- 
nite period,  Burlington  Ins.  Co.  v. 
Louery,  61  Ark.  168,  32  S.  W.  383; 
McMurraif  v.  Capital  Ins.  Co.,  87 
Iowa,  453,  54  N.  W.  354;  Home  Ins. 
Co.  V.  Peyson,  54  Neb.  495,  74  N.  W. 
960;  Laselle  v.  Hobolen  F.  Ins.  Co.,  43 
N.  J.  L.  468;  Cummins  v.  Agricultural 
Ins.  Co.,  67  N.  Y.  260,  23  Am.  Rep. 
111.  ^ 

*  Knoulton  v.  Patrons',  etc.,  Ins.  Co., 
100  Me.  481,  62  Atl.  289;  Hill  v.  Ohio 
Ins.  Co.,  99  Mich.  466,  58  N.  W.  359; 
Johnson  v.  Norualk  F.  I.  Co.,  175 
Mass.  529,  56  N.  E.  569  (which  turned 
on  peculiar  phraseology);  Johnsoii  v. 
N.  Y.  Bouery  Fire  Ins.  Co.,  39  Hun 
(N.  Y.),  410;'  Raymond  v.  Farmers' 
Mut.  F.  I.  Co.,  114  Mich.  386,  72 
N.  W.  254  (tenant  left  to  remove  sick 
wife  on  approach  of  forest  fire,  held, 
no  unoccupancy);  Phwnix  Ins.  Co,  v. 
Burton  (Tex.  Civ.  App.),  39  S.  W.  319. 

^  Herrman  v.  Adriatic  Fire  Ins.  Co., 
85  N.  Y.  162,  39  Am.  Rep.  644;  Herr- 
man  v.  Merchants'  Ins.  Co.,  44  N.  Y. 
Super.  Ct.  444,  81  N.  Y.  184,  37  Am. 
Rep.  488.  "Vacant"  means  deprived 
of  contents,  Limburg  v.  German  F.  Ins. 
Co.,  90  Iowa,  709,  57  N.  W.  626;  Pabst 
Brewing  Co.  v.  Union  Ins.  Co.,  63  Mo. 
App.  663.  The  building  is  not  vacant 
if  furniture  is  left,  Shackelton  v.  Sun 


362 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


Tliis  provision  is  to  be  construed  with  special  reference  to  the 
character  of  the  building  and  its  contemplated  use.^ 


F.  Office,  55  Mich.  288,  21  N.  W.  343; 
GcTwnn-Am.  hi.t.  Co.  v.  Evants,  94 
Tex.  4'.tl),  02  S.  W.  417,  or  articles 
storeil,  tliouf!;li  no  person  is  occupying 
the  hoiis(\  Sorman  v.  Iur.  Co.,  74  Mo. 
App.  4r)().  "  rnoccupied"  means  "un- 
inhabited," Dohlautry  v.  Ins.  Co.,  83 
Wis.  181,  53  N.  W.  "448.  Vacancy  or 
unoccupancy  is  not  per  .se  an  increase 
of  risk,  see  §  257.  Compare  Farmers' 
cfr  M.  his.  Co.  V.  Bodge  (Neb.,  1907), 
110  N.  W.  1018.  And  where  there  is 
no  suspicion  as  to  tlie  moral  hazard  it 
is  a  common  thing  for  the  insurers, 
without  extra  charge,  to  grant  privi- 
lege "to  be  unoccupied  during  a  part 
of  the  year."  It  has  been  iield  that 
except  for  the  vacancy  clause,  the  fact 
of  vacancy  need  not  be  disclosed  with- 
out special  inquiry.  Browning  v.  Honie 
Ins.  Co.,  71  N.  Y.  508,  27  Am.  Rep. 
86.  The  burden  of  alleging  and  prov- 
ing a  breach  is  upon  the  defendant, 
Moody  V.  Ins.  Co.,  52  Ohio  St.  12,  38 
N.  E.  1011,  26  L.  R.  A.  313  (which 
also  defines  what  plaintiff  must  allege 
and  prove  under  a  policy). 

1  Hampton  v.  Hartford  Ins.  Co.,  65 
N.  J.  L.  265,  47  Atl.  433,  52  L.  R.  A. 
344  (the  words  "occupied"  and  "un- 
occupied" in  a  policy  of  insurance  will 
be  given  force  with  reference  to  the 
nature  and  character  of  the  building, 
the  purpose  for  which  it  is  designated 
and  the  uses  contemplated  by  the 
parties  as  expressed  in  the  contract. 
The  construction  given  to  these  words 
as  applied  to  a  dwelling  will  not  of 
course  cover  a  barn,  a  mill,  a  sawmill, 
a  factory,  music  halls,  theaters,  or 
churches);  Fritz  v.  Home  Ins.  Co.,  78 
Mich.  565,  44  N.  W.  139  (outbuildings 
need  not  be  inhabited,  but  only  used 
as  intended);  Central  Montana  Mines 
Co.  v.  Firemen's  Fund  Ins.  Co.,  92 
Minn.  223,  99  N.  W.  1120;  Halpin  v. 
Phoenix  Ins.  Co.,  118  N.  Y.  165,  23 
N.  E.  482  (under  standard  form  the 
condition  operates  against  personal 
property  also) ;  Whitney  v.  Black  River 
I.  Co.,  72  N.  Y.  117,  28  Am.  Rep.  116; 
Caraher  v.  Roiial  Ins.  Co.,  63  Hun 
(N.  Y.),  82,  44  N.  Y.  St.  R.  141,  17 
N.  Y.  Supp.  858,  aff'd  136  N.  Y.  645, 
32  N.  E.  1015;  Hoover  v.  Mercantile 
Town  I.  Co.,  93  Mo.  App.  Ill,  69  S.  W. 
42  (the  intended  use  of  the  premises 
must  in  all  cases  be  considered);  East 


Tex.  Ins.  Co.  v.  Kempner,  12  Tex.  Civ. 
App.  534,  34  S.  W.  393,  35  S.  W.  1069. 
Whether  the  nature  of  the  business 
reasonably  calls  for  continuous  or  oc- 
casional use  is  a  pertinent  fact  to  be 
regarded,  Des  Moines  Ice  Co.  v. 
Niagara  F.  Ins.  Co.,  99  Iowa,  193,  68 
N.  W.  600  (ice  house);  Morotock  Ins. 
Co.  v.  Pankey,  91  Va.  259,  21  S.  E.  487. 
The  word  "premises"  if  used  in  this 
connection  should  be  applied  to  the 
dwelling  house  and  not  to  the  other 
buildings  insured,  Thomas  v.  Hartford 
F.  Ins.  Co.,  21  Ky.  L.  Rep.  914,  53 
S.  W.  297,  56  S.  W.  264.  That  the 
land  is  occupied  is  no  excuse  for 
vacancy  of  the  dwelling  house,  Sexton 
V.  Haivkeye  Ins.  Co.,  69  Iowa,  99,  28 
N.  W.  462.  Vacancy  clause  was  ap- 
plied to  a  scow,  Enos  v.  Sun  Ins.  Co., 
67  Cal.  621,  8  Pac.  379;  to  a  vessel, 
Reid  V.  Lancaster  F.  Ins.  Co.,  90  N.  Y. 
382.  A  building,  if  known  to  be  in 
course  of  construction,  though  de- 
scribed in  the  policy  as  a  dwelling 
house,  is  not  to  be  regarded  as  "un- 
occupied" because  no  one  is  living  in 
it  while  unfinished,  Harris  v.  North 
Am.  Ins.  Co.,  190  Mass.  361  ("the 
clause  ...  as  no  change  appears  to 
have  taken  place  must  be  construed 
in  connection  with  these  conditions 
under  which  the  parties  entered  into 
their  contracts").  And  see  German 
Ins.  Co.  V.  Penrod,  35  Neb.  273,  53 
N.  W.  74  (building  in  process  of  erec- 
tion). Rules  and  rates  of  undei'writers 
and  their  associations  do  not  control 
the  question  of  forfeiture  for  alleged 
unoccupancy,  Quinsiqamond  S.  Co.  v. 
Phoenix  Ins.  Co.,  \T2  Mass.  367,  52 
N.  E.  531,  177  Mass.  10,  58  N.  E.  174; 
Stone  V.  Granite  State  Ins.  Co.,  69  N.  H. 
438,  45  Atl.  235.  Nor  does  any  rule  of 
the  particular  company  as  to  granting 
or  withholding  permits  control  the 
question,  Rogers  v.  Phoenix  Ins.  Co., 
121  Ind.  570',  23  N.  E.  498.  Nor,  on 
the  other  hand,  does  the  breach  depend 
upon  knowledge  by  the  assured  of  the 
unoccupancy,  Schuermann  v.  Dwelling 
House  Ins.  Co.,  161  111.  437,  43  N.  E. 
1093;  or  upon  his  control  of  the  situa- 
tion, Moriarty  v.  Home  Ins.  Co.,  53 
Minn.  549,  55  N.  W.  740;  or  upon  his 
intent  or  good  faith,  Watertown  Ins, 
Co.  V.  Cherry,  84  Va  72,  3  S.  E 
876. 


Vacancy  clause  363 

If  vacancy  of  a  separable  part  of  the  insured  prenriises  affects  the 
risk  of  that  part  only,  in  some  jurisdictions  the  contract  is  held 
divisible.^  For  example,  in  a  Virginia  case  a  policy  for  $3,000,  covered 
sixteen  tenement  houses,  $187.50  being  apportioned  to  each  house. 
During  the  life  of  the  policy  eight  of  the  buildings  became  unoccupied, 
and  so  remained  for  more  than  ten  days.  The  court  held  that  the 
insurance  was  valid  as  to  the  occupied  houses  and  void  as  to  those 
unoccupied.^ 

But  where  the  vacancy  affects  the  risk  on  the  item  of  property 
destroyed  a  different  rule  applies.  For  a  single  premium  Johnson 
took  out  a  policy  against  fire,  lightning,  and  windstorm,  apportioned, 
$125  on  dwelling  house;  $95  on  corncrib  with  stable  addition;  $80 
on  hay  and  grain.  At  the  date  of  the  policy  a  tenant  was  in  occu- 
pancy. Subsequently,  the  tenant  moved  away,  and  the  owner  of 
the  land  farmed  it  from  his  residence  on  an  adjoining  tract,  leaving 
in  the  corncrib  certain  unused  farming  implements.  A  windstorm 
wrecked  the  corncrib.  The  judgment  below  in  favor  of  the  plaintiff 
was  reversed  on  appeal.^ 

In  case  of  doubt,  however,  the  question  whether  the  premises  in- 
sured were  unoccupied  must  go  to  the  jury;  and  in  the  Michigan 
reports  we  find  a  good  illustration.  The  plaintiff's  house  insured  was 
on  a  farm,  and  situated  about  ten  miles  from  the  city  of  Menominee. 
Although  the  plaintiff  was  engaged  in  cultivating  this  farm,  yet  she 
spent  more  than  half  her  time  in  her  city  home;  but  she  or  members 
of  her  family  were  on  the  insured  premises,  so  a  witness  testified, 
"a  few  days  in  every  week."  They  slept  and  ate  in  the  farmhouse 
while  so  staying  on  the  farm,  and  the  plaintiff's  husband  was  in  the 
insured  building  when  the  fire  occurred.  From  this  testimony  the 
jury  was  allowed  to  infer  that  both  city  and  farmhouse  were  occupied 
as  dwelling  houses;  and  the  judgment  in  favor  of  the  plaintiff  was 
affirmed  on  appeal. ■* 

Where  a  ten  tenement  frame  block,  insured  as  an  entirety,  had 

1  Republic  Mut.  F.  Ins.  Co.  v.  voted  merely  to  the  shelter  of  unused 
Johnson,  69  Kan.  146,  76  Pac.  419.  implements  and  machinery  and  sub- 
And  see  §§  115,  246,  swpra.  ject   to    be   made    the   rendezvous   of 

2  Connecticut  Fire  Ins.  Co.  v.  Tilley,  tramps.  .  .  .  Any  ordinary  individual 
S8  Va.  1024,  14  S.  E.  851,  29  Am.  St.  in  charge  of  the  premises  would  exer- 
R.  770.  cise    a    preservative    superintendence 

3  Republic  Co.  Mut.  F.  Ins.  Co.  v.  over  them — would  secure  loosened 
Johnson,  69  Kan.  146,  76  Pac.  419  boards  about  the  crib,  close  widening 
("there  is  nothing  to  indicate  that  apertures,  brace  racked  timbers,  and 
the  company  would  have  entertained  otherwise  fortify  the  rigidity  of  the 
an  application  for  the  insurance  of  an  structure  against  storms"), 
isolated,  unfrequented  corncrib  and  *  Maas  v.  Anchor  Fire  Ins.  Co 
stable,  the  prey  of  the  elements,  de-  (Mich.,  1907),  111  N.  W.  1044. 


364 


MEANING    AM)    LEGAL    EFFECT    OF    FIRE    POLICY 


two  of  its  tenements  occupied,  the  court  was  of  the  opinion  that  it 
was  not  vacant  or  unoccupied.^  But  if  buildings  arc  separate,  the 
condition  of  the  policy  is  to  be  applied  distributively  to  them,  and 
the  occupancy  of  one  of  the  buildings  named  in  the  policy  will  not 
excuse  a  vacancy  in  tiie  othere.^ 

If  a  violation  of  this  clause  occurs,  by  the  better  opinion  the  policy 
is  absolutely  avoided,  and  not  merely  suspended  until  reoccupancy;  ^ 
the  phrase  of  the  standard  po'icy  "this  entire  contract  shall  be  void 
if,"  etc.,  cannot  well  be  construed  in  any  other  sense.^  A  New  York 
case  under  the  standard  fire  policy  is  apposite.  The  insured  had  a 
policy  on  her  dwelling  house  and  household  furniture.  About 
Thanksgiving  time  she  went  off  with  her  daughter  to  make  a  visit  in 
New  York  and  Philadelphia,  lemaining  away  until  April  22d.  During 
that  time  no  one  either  occupied  the  house  or  went  into  it.  The  in- 
sured intended  to  return  about  the  middle  of  January,  but  was  pre- 
vented from  doing  so  by  sickness.  The  fire  occurred  April  24,  two 
days  subsequent  to  her  reoccupancy  of  the  house.  There  was  no 
proof  that  the  unoccupancy  had  increased  the  risk  or  contributed 
to  the  loss.  The  court  by  Judge  Hirschberg  held  that  the  insurance 
was  avoided."'' 


1  Harrington  v.  Fitchhurg  Mid.  Fire 
Ins.  Co.,  124  Mass.  126.  So  also  as  to 
house  and  barn,  Worley  v.  (State  Ins. 
Co.,  91  Iowa,  150,  .59  N.  W.  16.  And 
as  to  a  mining  plant  with  several 
buildings,  Central,  etc.,  Mines  Co.,  92 
Minn.  223,  99  N.  W.  1120.  And  see 
Bryan  v.  Feabodij  Ins.  Co.,  8  W.  Va.  605. 

^ Hartshorne  v.  Agricultural  Ins.  Co., 
50  N.  J.  L.  427,  14  Atl.  615;  Herrman  v. 
Adriatic  Fire  Ins.  Co.,  85  N.  Y.  163, 
39  Am.  Rep.  644;  Herrman  v.  Mer- 
chants Ins.  Co.,  81  N.  Y.  184.  But 
non-ocoupancy  of  an  outbuilding  is  in 
itself  no  breach,  Kimball  v.  Monarch 
Ins.  Co.,  70  Iowa,  513,  30  N.  W.  862. 
Privilege  given  by  the  standard  policy 
to  employ  mechanics  fifteen  days  does 
not  impliedly  allow  unoccupancy  dur- 
ing the  same  extended  period,  Lim- 
burg  v.  German  F.  Ins.  Co..  90  Iowa, 
709,  57  N.  W.  626.  But  a  partial 
fire  loss  excuses  an  incidental  unoccu- 
pancy ensuing,  Lancashire  Ins.  Co.  v. 
Bush,  60  Neb.  116,  82  N.  W.  313. 

3  German  Ins.  Co.  v.  Russell,  65 
Kan.  373,  69  Pac.  345;  Wainer  v.  Mil- 
ford  Mut.  Fire  Ins.  Co.,  153  Mass.  335; 
Hoover  v.  Mercantile  Toirn  M.  I.  Co., 
93  Mo.  App.  Ill,  69  S.  W.  42;  Moore  v. 
Phoenix  Ins.  Co.,  62  N.  H.  240,  13  Am. 
St.  R.  556;  Couch  v.  Farmers  Ins.  Co., 


64  App.  Div.  367,  72  N.  Y.  Supp.  95; 
Hardiman  v.  Fire  Assn.,  212  Pa.  St. 
383,  61  Atl.  990;  East  Tex.  F.  Ins. 
Co.  V.  Kernptner,  87  Tex.  229,  27  S.  W. 
122.  The  effect  of  a  violation  of  this 
clause  is  often  controlled  by  statute, 
McGannon  v.  Michigan  Millers'  M. 
F.  I.  Co.,  127  Mich.  636,  87  N.  W.  61, 
54  L.  R.  A.  739.  See  Cronin  v.  Fire 
Assn.  of  Phila.,  123  Mich.  277,  82 
N.  W.  45. 

•*  Other  courts,  however,  take  the 
opposite  view,  Stephens  v.  Phoenix 
Assur.  Co.,  85  111.  App.  671;  Ring  v. 
Phoenix  Assur.  Co.,  145  Mass.  426,  14 
N.  E.  525;  Pres.,  etc.,  of  Ins.  Co.  v. 
Pitts  (Miss.,  1906),  41  So.  5  ("insur- 
ance is  revived  by  occupancy  though 
suspended  during  vacancy").  And 
see  cases  pro  and  con,  §§  114,  247. 

^  Couch  V.  Farmers'  Fire  Ins.  Co., 
64  App.  Div.  367,  72  N.  Y.  Supp.  95 
("the  stipulation  in  regard  to  occu- 
pancy was  an  express  warranty,  and, 
unless  it  was  either  performed  or 
waived,  the  policy  became  void"), 
contra.  President,  etc.,  v.  Pitts  (Miss., 
1906),  41  So.  5.  But  by  several  stand- 
ard policies  a  temporary  breach  in 
effect  suspends  and  does  not  avoid  the 
policy,  for  example,  Iowa,  Michigan, 
New  Hampshire,  Wisconsin. 


VACAXCY    CLAUSE-— DWELLINGS 


365 


It  is  not  permissible  to  call  experts  and  ask  them  whether  it  in- 
creases the  risk  to  leave  a  house  unoccupied;  ^  and  the  unambiguous 
time  limit  contained  in  this  clause  cannot  be  disturbed  by  evidence 
of  custom  to  the  contrary  in  the  case  of  the  same  or  similar  property.^ 
As  different  classes  of  property  naturally  require  different  kinds  of 
occupancy,  the  question  whether  the  building  is  occupied  or  not 
may,  however,  be  a  question  for  the  jury;^  but  what  is  meant  by 
"vacant"  or  "unoccupied"  is  in  general  a  question  of  law.^ 


§  272.  Vacancy  Clause — Dwellings. — If  the  property  insured  is 
described  in  the  policy  as  a  dwelling  house,  to  meet  the  requirements 
of  the  vacancy  clause,  it  may  be  said  in  general,  someone  must  be 
living  in  it  as  a  place  of  abode.^  A  house  is  not  vacant  or  unoc- 
cupied so  long  as  someone  is  habitually  living  and  sleeping  there, 
for  instance,  several  days  a  week.^    On  the  other  hand,  many  cases 


1  Luce  V.  Dorchester  Mut.  Fire  Ins. 
Co.,  105  Mass.  297,  7  Am.  Rep.  522. 

2  Stone  V.  Howard  Ins.  Co.,  153  Mass. 
475.  Permit  for  vacancy  for  a  specified 
number  of  days  will  be  strictly  limited 
to  that  period,  Ranspach  v.  Teutonia 
F.  Ins.  Co.,  109  Mich.  699,  67  N.  W. 
967;  Maness  v.  Sun  Ins.  Co.  (Tex. 
Civ.  App.),  32  S.  W.  326. 

3  Hunt  V.  State  Ins.  Co.,  66  Neb.  121, 
92  N.  W.  921;  Home  Ins.  Co.  v.  Men- 
denhall,  164  111.  458,  45  N.  E.  1078; 
Rock  ford  Ins.  Co.  v.  Storig,  31  111.  App. 
486;  Maas  v.  Anchor  Fire  Ins.  Co. 
(Mich.,  1907),  36  Ins.  L.  J.  600;  Wood- 
ruff V.  Imperial  Ins.  Co.,  83  N.  Y.  133. 

*  Schuermann  v.  Dwelling  House  Ins. 
Co.,  161  111.  437,  43  N.  E.  1093;  Harts- 
horne  v.  Agricultural  Ins.  Co.,  50  N.  J. 
L.  427,  14  Atl.  615.  Cancellation  of 
policy  after  loss  and  return  of  unearned 
premium  is  no  waiver  of  a  known  for- 
feiture, Farmers  &  M.  Ins.  Co.  v. 
Bodge  (Neb.,  1907),  110  N.  W.  1018. 

5  McMurray  v.  Capital  Ins.  Co. , 
87  Iowa,  453,  54  N.  W.  354;  Thomas  v. 
Hartford  Fire  Ins.  Co.,  21  Kv.  L.  Rep. 
914,  53  S.  W.  297,  56  S.  W.  264;  Agri- 
cultural Ins.  Co.  V.  Hamilton,  82  Md. 
88,  33  Atl.  429,  30  L.  R.  A.  633; 
Bonefant  v.  American  F.  I.  Co.,  76 
Mich.  653,  43  N.  W.  682;  Hoover  v. 
Mercantile  Toum  M.  F.  I.  Co.,  93  Mo. 
App.  Ill,  69  S.  W.  42  (mere  super- 
vision without  someone  sleeping  in 
dwelling  is  not  enough);  Herrman  v. 
Adriatic  Fire  Ins.  Co.,  85  N.  Y.  162, 
39  Am.  Rep.  644  (there  must  be  a 
regular    sleeper).      Leaving    furniture 


in  a  house  is  not  occupancy,  Hanscom  v. 
Home  Ins.  Co.,  90  Me.  333,  38  Atl.  324; 
Home  Ins.  Co.  v.  Boyd,  19  Ind.  App. 
173,  49  N.  E.  285;  though  the  presence 
of  furniture  prevents  the  house  from 
being  vacant,  Norman  v.  Missouri 
Town  Ins.  Co.,  74  Mo.  App.  456; 
Omaha  Ins.  Co.  v.  Sinnott,  54  Neb.  522, 
74  N.  W.  955.  Control  and  use  by  a 
tenant  are  no  adequate  substitutes 
for  living  and  sleeping  in  a  dwelling 
house,  Stoltcnberg  v.  Continental  Ins. 
Co.,  106  Iowa,  565,  76  N.  W.  835. 
Supervision  by  a  third  party  living 
within  the  same  inclosure  may  not 
save  from  forfeiture  of  the  policy. 
Burner  v.  Gennan-Am.  Ins.  Co.,  103 
Ky.  370,  45  S.  W.  109.  Frequent 
visits  are  not  enough,  Hanscom  v. 
Home  Ins.  Co.,  90  Me.  333,  38  Atl. 
324;  Lester  v.  his.  Co.  (Miss.),  19  So. 
99;  Stapleton  v.  Greenwich  Ins.  Co., 
16  Misc.  483,  38  N.  Y.  Supp.  973.  Son 
of  owner  slept  in  house  in  daytime 
but  not  at  night,  policy  was  avoided, 
Eureka,  etc.,  Ins.  Co.  v.  Baldwin,  62 
Ohio  St.  368,  57  N.  E.  57.  In  one  case, 
it  was  held  that  occupancy  by  one 
conspiring  to  burn  the  house  did  not 
fulfill  a  special  warranty  of  the  policy 
regarding  occupancy,  Names  v.  Duell- 
ing House  Ins.  Co.,  95  Iowa,  642,  64 
N.  W.  628. 

6  Thieme  v.  Niagara  Fire  I.  Co., 
100  App.  Div.  278.  91  N.  Y.  Supp. 
499.  And  see  N.  Y.  Mut.  S.  &  Loan 
Assn.  v.  Westchester  Fire  Ins.  Co.,  110 
App.  Div.  760,  aff'd  N.  Y.  Ct.  App. 
1907. 


366 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


convincingly  hold,  that  to  constitute  an  "occupied  dwelling  house" 
the  jDresence  of  someone  sleeping  in  the  house  is  not  in  all  cases 

essential.* 

A  permit  by  the  company  to  leave  the  house  vacant  for  the  sum- 
mer will  he  lil)erally  construed  as  meaning  the  season  broadly  rather 
than  the  summer  months. - 

By  the  Massachusetts  form,  "this  policy  shall  be  void  if  the  prem- 
ises hereby  insured  shall  become  vacant  by  the  removal  of  the  owner 
or  occupant,  and  so  remain  vacant  for  more  than  thirty  days  without 
such  assent,"  that  is,  assent  of  the  company  in  writing  or  in  print. 
Under  this  clause,  which  says  nothing  about  unoccupancy,  the  court 
concluded  that  a  mere  temporary  absence  on  a  visit  would  not  even 
set  the  time  running.^ 


1  When  house  was  furnished  and 
frequently  visited  the  Ohio  court 
without  dissent  said:  "Nor  does  it 
follow,  as  a  matter  of  law,  that  a 
dwelling  house  is  to  be  considered 
as  unoccupied  merely  because  it  has 
ceased  to  be  used  as  a  family  residence, 
when  the  household  goods  remain 
ready  for  use,  and  it  continues  to  be 
occupied  by  one  or  more  members 
of  the  family,  who  have  access  to  the 
entire  building  for  the  purpose  of 
caring  for  it,  and  who  do  care  for  it, 
and  make  some  use  of  it  as  a  place  of 
abode,"  Moody  v.  Ins.  Co.,  52  Ohio 
St.  12,  22,  38  N.  E.  1011,  26  L.  R.  A. 
313,  49  Am.  St.  R.  G99.  To  similar 
effect,  Home  Ins.  Co.  v.  Wood.  47 
Kan.  521,  28  Pac.  167;  RocK- ford  Ins. 
Co.  V.  Storig,  31  111.  App.  486;  Dwell- 
ing House  Ins.  Co.  v.  Osborn,  1  Kan. 
App.  197,  40  Pac.  1093;  Hill  v.  Ohio 
Ins.  Co.,  99  Mich.  466,  58  N.  W.  359; 
Omaha  F.  his.  Co.  v.  Sinnott,  54  Neb. 
522,  74  N.  W.  955.  So  also  the  Massa- 
chusetts court  has  held  that  a  building, 
though  waiTanted  to  be  a  dwelling 
house,  is  not  to  be  regarded  as  unoccu- 
pied, because  uninhabited,  if  when  the 
policy  issued  both  parties  knew  that 
it  could  not  be  inhil>ited  until  com- 
pleted, Harris  v.  Xorth  Am.  his.  Co., 
190  Mass.  361,  77  N.  E.  493.  The 
many  separate  structures  making  up 
a  modern  Adirondack  camp  may 
fairly  be  described  as  a  dwelling,  but 
in  many  instances  only  a  fraction  of 
them  are  ever  occunied  by  sleepers. 
There  is  no  hard  and  fast  rule  of  law. 
It  is  enough  if  only  one  person  sleens 
there,  and  it  is  not  essential  that  he 
should  have  access  to  all  the  rooms. 


Ins.  Co.  V.  Hancock,  106  Tenn.  513,  62 
S.  W.  145.  Where  the  building  was 
described  as  "a  store  and  dwelling," 
ceasing  to  use  it  as  a  dwelling  does  not 
make  it  unoccupied,  Burlington  Ins. 
Co.  V.  Brockway,  138  111.  644,  28  N.  E. 
799.  Holding  the  keys  of  a  house, 
however,  is  not  occupancy,  and  this 
is  true  though  some  of  the  furniture 
remains  in  the  house,  hitch  v.  North 
Brit.  &  Mer.  Ins.,  136  Mass.  491; 
Corrigan  v.  Conn.  Fire  Ins.  Co.,  122 
Mass.  298.  Nor  is  the  placing  of  farm 
utensils  in  a  house  an  occupancy, 
Martin  v.  Rochester  German  I.  Co., 
86  Hun,  35,  67  N.  Y.  St.  R.  237,  33 
N.  Y.  Supp.  404.  W^here  a  house  is 
only  used  for  taking  meals,  and  a  barn 
only  for  storing  hay,  both  are  unoccu- 
pied, Ashworth  v.  Builders  Ins.  Co., 
112  Mass.  422.  If  a  lessee  of  rented 
premises  has  not  entered,  the  premises 
are  unoccupied,  Stoltenberg  v.  Con- 
tinental Ins.  Co.,  106  Iowa,  565,  76 
N.  W.  835. 

2  Vanderhoef  v.  Agricultural  Ins.  Co., 
46  Hun  (N.  Y.),  328;  Barker  v.  Citizens 
Mut.  Fire  Ins.  Co.,  136  Mich.  626, 
99  N.  W.  866  (permit  for  winter  season 
construed).  A  house  insured  as  a 
summer  residence  need  only  be  occu- 
pied as  such.  Western  As.mr.  Co.  v. 
Mason,  5  111.  App.  141  ("the  plaintiff 
was  only  bound  to  maintain  such 
occupancy  as  pertained  to  the  ordinary 
use  of  the  building  in  the  manner  and 
for  the  purposes  for  which  it  was  de- 
signed to  be  used,"  held,  question  of 
fact). 

^Johnson  v.  Norwalk  Fire  Ins.  Co., 
175  Mass.  529,  56  N.  E.  569.  The 
South  Dakota  policy  prohibits  vacancy 


VACANCY   CLAUSE — BUILDINGS   OTHER   THAN   DWELLINGS      367 

The  plaintiff  had  a  poHcy  in  the  New  Hampshire  standard  form 
which  contains  a  vacancy  clause  like  the  Massachusetts.  The  occu- 
pant of  the  house  insured,  on  account  of  the  state  of  her  health, 
left  the  house  unoccupied  for  three  months,  and  until  the  fire,  tak- 
ing with  her,  however,  only  her  clothing.  When  she  left  she  in- 
tended to  be  absent  for  three  or  four  months,  but  a  man  in  charge 
of  the  premises  visited  them  in  the  daytime  at  least  twice  a  week. 
The  court  was  of  opinion  that  there  is  a  difference  in  meaning  be- 
tween "absence"  and  "removal,"  and  held  that  it  was  for  the  jury 
to  determine  under  all  the  facts  of  the  case  whether  the  dwelling 
house  was  "vacant  by  removal."  ^ 

§  273.  Vacancy  Clause — Buildings  Other  than  Dwellings. — Build- 
ings or  premises  insured,  other  than  dwelling  houses,  must  have 
that  kind  of  use  and  occupancy  which  naturally  belong  to  the  char- 
acter of  the  property  described  in  the  policy.^  Thus  a  factory  or 
mill  need  have  no  one  sleeping  in  it  at  night;  but  must  be  put  to 
some  practical  and  actual  use,  and  not  treated  simply  as  a  store- 
house.^ And  where  a  sawmill  was  insured,  the  court  held  that  it 
could  not  be  the  intention  to  occupy  such  a  building  like  a  domicile. 
The  conclusion  was  arrived  at  that  a  vacancy  clause  must  be  con- 
strued in  view  of  the  situation  and  character  of  the  property  insured, 
and  the  contingencies  affecting  its  use,  to  which  property  of  like 
character  to  that  insured  and  similarly  situated  is  ordinarily  sub- 
ject; and  that  interruptions  of  business  and  discontinuance  of  active 
use  were  in  such  a  case  to  be  anticipated,  and  would  no  more  avoid 
the  poHcy  than  would  the  omission  to  use  a  church  building  during 
week  days;  ^  but  where  a  trip-hammer  shop  was  not  in  operation, 

and  unoccupancy  for  more  than  thirty  late  the  condition,  Bellevue  Roller  Mill 

days  without  the  assent  of  the  com-  Co.   v.   London   &   L.   F.   Ins.   Co.,  4 

pany — written  assent  is  not  specified.  Idaho,  307,39  Pac.  196;  Ladd  v.  /Etna 

A  permit  for  vacancy  does  not   im-  7ns.  Co.,  147  N.  Y.  478,  42  N.  E.  197; 

pliedly  include  a  permit  for  repairs,  Wankau  Milling  Co.   v.  Citizens,  etc.. 

Hill  V.  Commercial  Union  Ins.  Co.,  164  Ins.  Co.    (Wis.,   1906),  lO'J  N.  W.   <.37 

Mass.  406,  41  N.  E.  657.  So  where  a  mill  shuts  down  for  re- 

^  Stone  V.  Granite  State  F.  Ins.  Co.,  pairs,  Ain.  Ins.  Co.  v.  Brighton  Cotton 

69  N.  H.  438,  45  Atl.  235.  Mfg.  Co.,  125  111.  131,  17  N.  E.  771. 

2  RocLford  Ins.  Co.  v.  Wright,  39  A  manufacturing  plant,  insured  as 
111.  App.  574;  Poor  v.  Humboldt  Ins.  an  entirety,  is  not  unoccupied  so  long 
Co.,  125  Mass.  274,28  Am.  Rep.  228;  as  a  part  is  in  use.  Cent.  Montana  Mines 
Hnlpin  V.  Phrenix  Ins.  Co.,  118  N.  Y.  Co.  v.  Firemen's  Fund  Itis.  Co.,  92 
172,  23  N.  E.  482;   Morotock  Ins.  Co.  Minn.  223,  99  N.  W.  1120. 

v.  PanHii,  91  Va.  259,  21  S.  E.  487.  *  Whitney  v.   Black  River  Ins.   Co., 

3  Halrrin  v.  Mna  Fire  Ins.  Co.,  120  72  N.  Y.  117,  28  Am.  Rep.  116;  Lock- 
N.  Y.  70.  A  temporary  cessation  of  wood  v.  Middlesex  Mid.  Assur.  Co., 
operation  of  machinery  because  ^f  47  Conn.  553.  A  flouring  mill,  though 
sickness,  breakdown,  low  water,  or  shut  dowTi,  was  held  to  be  not  unoccu- 
other  unavoidable  cause  does  not  vio-  pied,  Bellevue  Roller  Mill  Co,  v.  London 


368  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

though  a  man  visited  it  almost  every  day  to  inspect  it,  it  was  held 
tiiiit  the  policy  was  avoided,  and  that  such  visits  did  not  constitute 
an  occupancy.^  On  the  other  hand,  where  a  schoolhouse  was  left 
vacant  during  the  time  of  the  ordinary  vacations,  and  the  furniture 
was  not  removotl,  it  was  held  that  the  provisions  of  the  vacancy 
clause  were  not  violated.^  And  likewise  a  church  is  not  unoccupied 
because  services  are  discontinued  in  the  absence  of  the  pastor  where 
the  edifice  is  left  in  charge  of  the  sexton.-'' 

§  274.  Certain  Causes  of  Loss  Excepted. —This  company  shall  not 
be  liable  for  loss  caused  directly  or  indirectly  by  invasion,  insurrection, 
riot,  civil  war,  or  commotion,  or  military  or  usurped  power,  or  by  order 
of  any  civil  authority;  or  by  theft,  or  by  neglect  of  the  insured  to  use  all 
reasonable  means  to  save  the  property  at  and  after  a  fire,  or  when  the 
property  is  endangered  by  fire  in  neighboring  premises;  or  (unless  fire 
ensues,  and,  in  that  event,  for  the  damage  by  fire  only)  by  explosion  of 
any  kind,  or  lightning,  but  liability  for  direct  damage  by  lightning  may 
be  assumed  by  specific  agreement  hereon. 

Some  of  these  exceptions  to  the  liability  of  the  insurers  may  not 
be  at  all  likely  to  happen,  but  if  they  should  happen  their  results 
might  be  so  disastrous  as  to  remove  them  from  the  operation  of  any 
general  rule  of  average.  "Invasion"  means  the  entrance  of  an 
armed  force  from  abroad  with  hostile  intent.^ 

&  Lan.  Ins.  Co.,  4  Idaho,  307,  39  Pac.  344;  Caraher  v.  Royal  Ins.  Co.,  63  Hun, 

196.    So  of  a  tannery  occupied  in  part,  82,  44  N.  Y.  St.  R.  141,  17  N.  Y.  Supp. 

Lebanon  Ins.  Co.  v.  Erb,  112  Pa.  St.  858,  aff'd  136  N.  Y.  645,  32  N.  E.  1015. 

149,  4  Atl.  8.     As  to  when  a  vessel  is  In  the  case  of  a  saloon,  it  is  enough 

unoccupied,    see    Reid    v.     Lancaster  if   a  clerk  lives   in   the   building  and 

Ins.  Co.,  19  Hun  (N.  Y.),  284.    As  to  a  sleeps  there,  Stensgaard  v.  Natl.  Fire 

storehouse    see    Rockjord    Ins.    Co.    v.  Ins.  Co.,  36  Minn.  181. 

Wright,  39  111.   App.   574;   Home  Ins.  ^Portsmouth    Ins.   Co.   v.   Reynolds, 

Co.  V.  Scales,  71  Miss.  975,  15  So.  134.  32   Grat.    (Va.)   613;   Harris   v.    York 

As  to  a  store,  see  Limburg  v.  German  Mut.  his.  Co.,  50  Pa.  St.  341   (riot); 

Fire  Ins.  Co.,  90  Iowa,  709,  57  N.  W.  Lycoming  Fire  Ins.  Co.  v.  Schwenk,  95 

626.      As  to  an  ice  factory,  Morotock  Pa.   St.  89,  40  Am.  Rep.  629   (riot); 

7ns.   Co.   V.   Pankey,  91    Va.    259,  21  Spruill  v.  Ins.  Co.,  46  N.  C.  126  (in- 

S.  E.  487.     As  to  an  ice  house,  see  surrection);    ^tna    Fire    Ins.    Co.    v. 

Des  Moines  Ice  Co.   v.   Niagara  Ins.  Boon,  95   U.    S.    117,  24   L.   Ed.   395 

Co.,  99  Iowa,  193,  68  N.  W.  600.    Ele-  (military  or  usurped  power  held  to  be 

vators  held  to  be  occupied,  Williams  v.  proximate   cause   of   loss   though   the 

North  German  Ins.  Co.,  24  Fed.  625;  fire  thereby  caused  extended   through 

Clijto7i  Coal  Co.  V.  Scottish  Union  &  three    intermediate    buildings).      And 

Nat.  Ins.  Co.,  102  Iowa,  300,  71  N.  W.  as  to  this  clause  see  Roval  Ijis.  Co.  v. 

433    (though  not  operating  for   more  Martin,  192  U.  S.  149,  24  S.  Ct.  247, 

than   ten   days.  48  L.  Ed.  385;  Mich.  F.   &  M.  Ins. 

^  Keith  V.  Quincy  Mut.  Fire  Ins.  Co.,  Co.  v.   Whitelaw,  25  Ohio  C.  C.   197. 

10  Allen   (Mass.),  228.  It  has  been  held  under  the  Wisconsin 

2  Am.  Ins.  Co.  v.  Foster,  92  111.  334,  statute  that  it  is  unlawful  for  the  par- 
34  Am.  Rep.  134.  ties  by  agreement  to  add  to  the  list 

3  Hampton  v.  Hartford  Fire  I.  Co. ,  of  exemptions  as  enumerated  in  the 
Ho  \.  .1.  T>.  265.  47  Atl.  433,  .52  1..  R.  A.  standard    policy    an    additional    and 


LOSS  BY   EXPLOSION   EXCEPTED   UNLESS,   ETC.  36S 

§  275.  Loss  by  Order  of  Civil  Authority  Excepted. — To  destroy 
insects,  the  town  supervisors  started  a  fire  which,  getting  beyond 
control,  destroyed  grain  belonging  to  the  insured;  the  loss  thereby 
occasioned  was  held  to  be  within  this  exception  of  the  policy.^  But 
where  a  building  already  doomed  to  destruction  by  approaching 
conflagration  is  intentionall}'  destroyed  with  explosives  to  check 
the  fire  it  is  held  to  be  loss  by  fire  exclusively,  as  the  proximate  cause, 
and  not  a  loss  by  explosion,  or  by  order  of  civil  authority.^ 

§  276.  Loss  by  Theft  Excepted. — Loss  by  theft,  otherwise  proxi- 
mate,^ is  now  within  this  express  exception  to  the  insurer's  liability.'' 

§  277.  Neglect  of  Insured  After  Fire. — From  liability  for  loss 
caused  directly  or  indirectly  by  the  neglect  of  the  assured  himself 
to  use  reasonable  precautions  after  the  fire,  as  described  in  the 
standard  policy,  the  company  is  exonerated.  The  burden,  however, 
is  upon  the  insurer  to  plead  any  such  neglect  on  the  part  of  the  in- 
sured ;  ^  and  also  to  establish  it  on  the  trial  to  the  satisfaction  of  a 
jury.^ 

§  278.  Loss  by  Explosion  Excepted  Unless,  etc. — The  exception 
of  loss  by  explosion  was  inserted  in  the  policy  because  of  a  line  of 
decisions  holding  that  an  explosion  of  gunpowder  was  in  its  nature 
fire,  though  occasioned  without  hostile  fire  or  antecedent  conflagra- 
tion J  Therefore  where  the  loss  is  caused  by  explosion  and  explosion 
is  the  proximate,  that  is,  the  primary,  fault  or  catastrophe,  the  under- 
writer is  relieved  from  liability  under  this  exception  ^  unless  fire 
ensue,  and  then  is  liable  for  the  fire  loss  only.^ 

inconsistent  exemption,  in  tliat  case,  App.  429;  Stanley  v.  Ins.  Co.,  L.  R.  3 

loss    by    fire    caused    by    an    electric  Exch.  71,  74. 

current,    Wausau     Telephone    Co.    v.  ^  gee  §231,  supra. 

United   Firemen's   Ins.    Co.,  123   Wis.  *  L.  &  L.  &  G.  Ins.  Co.  v.  Creighton, 

535,  101  N.  W.  1100.  51  Ga.  95.     But,  it  is  said,  the  excep- 

1  Conner  v.  Manchester  Assur.   Co. .  tion  applies   only  to   theft  happening 

130  Fed.   743.      So  also  where  a  fire  during  the  fire,  not  during  necessary 

was  started  to  check  bubonic  plague,  removal,  Sllencher  v.  Fire  Assoc,  72 

Hauaii    Land    Co.    v.    Ins.    Co.,    13  N.  J.  L.  48,  60  Atl.  232. 

Hawaii,  164.  ^Fletcher    v.   Gervan-Amer.  I.   Co., 

2Greenuald    v.    his.    Co.,    3    Phila.  79  Minn.  337,  82  N.  W.  647. 

(Pa.)  323.     Same  rule  is  declared  in  '^  Ellsworthv.  jEtna  Ins.  Co., 89'N.Y. 

other  cases,  Foster  v.  Fidelity  F.  Ins.  186;  Brings  v.  North  Amer.  &  M.  Ins. 

Co.,  24  Pa.  Sup.  Ct.  585  (1904);   Cohn  Co.,  53  N.  Y.  446. 

V.  Ins.  Co.,  96    Mo.  Aop.    315    (1902);  7  See  §  231,  supra. 

Heuer  V.Westchester  F.  Ins.  Co.,  4:il\\.  ^  Mitchell  v.  Potomac  Ins.  Co.,  183 

8  Orient  Ins.  Co.  v.  Leonard,  120  Fed.  Faneuil  Hall  Ins.  Co.,  127  Mass.  346, 
808;  Leonard  v.  Orient  Ins.  Co.,  109  34  Am.  Rep.  384;  John  Davis  v.  Ins. 
Fed.  286,  48  C.  C.   A.  369;   Dow.<^  v.       Co.,  115  Mich.  382,  73  N.  W.  393. 

24 


370 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


Mitchell  had  a  policy  for  S5,000  on  his  stock  of  stoves  and  tinware 
in  Georgetown,  D.  C.  His  clerk  went  down  into  the  cellar  of  the 
store,  and  lighted  a  match  there,  because  it  was  dark.  The  lighted 
match  came  in  contact  with  the  vapor  of  gasoline  kept  in  the  cellar, 
and  a  violent  explosion  at  once  followed,  causing  a  collapse  of  the 
building.  The  damage  to  the  insured  stock  was  due  to  the  falling 
of  the  iruilding  and  the  crushing  of  the  stock.  The  jury  having  found 
these  facts,  the  court  held  that  the  loss  was  by  explosion  and  that 
the  insured  could  not  recover  under  his  policy.^ 

If,  however,  the  explosion,  no  matter  how  violent,  is  but  a  re- 
sulting incident  of  an  already  existing  conflagration,^  then  the  ex- 
plosion is  not  accounted  a  cause  at  all,  but  only  an  inevitable  physical 
effect  of  the  predominant,  still  operating,  and  all-embracing  peril 
insured  against,  and  the  results,  if  not  unreasonably  remote,  are 
included  as  fire  loss  exclusively.  Notwithstanding  two  or  three 
decisions  to  the  contrary,  this  rule,  many  times  reiterated  by  the 
United  States  Supreme  Court,  and  other  tribunals,  must  be  con- 
sidered clear  and  well  established.^    Nor  in  such  a  case  should  it  be 


U  S.  42,  22  S.  Ct.  22,  46  L.  Ed.  74; 
Ins.  Co.  V.  Tweed,  7  Wall.  (U.  S.)  44; 
Tanneret  v.  Ins.  Co.,  34  La.  Ann.  249; 
United  L.  F.  &  M.  his.  Co.  v.  Foote, 
22  Ohio  St.  340;  Home  Lodge  Assn.  v. 
Qneen  Ins.  Co.  (So.  Dak.,  1907),  110 
N.  W.  778  (explosion  from  gas  jet). 
And  even  without  any  exception,  if 
the  cause  of  explosion  is  sufficiently 
remote,  the  underwriter  wuU  not  be 
liable  under  a  fire  policy,  Everett  v. 
London  Assiir.  Co.,  19  C.  B.  N.  S.  126, 
11  Jur.  N.  S.  546,  34  L.  J.  C.  P.  299 
(loss  by  concussion  only  from  a  gun- 
powder explosion  nearly  a  mile  dis- 
tant). 

i^  Mitchell  v.  Potomac  Ins.  Co.,  183 
U.  S.  42,  22  S.  Ct.  22,  46  L.  Ed.  74 
("a  loss  occurring  solely  from  an  ex- 
plosion not  resulting  from  a  preceding 
fire  is  covered  by  the  exception  in  the 

policy"). 

2  The  natural  and  ordinary  com- 
bustion of  gunpowder  and  other  high 
explosives  is  accompanied  by  violent 
concussion. 

3  Mitchell  v.  Potomac  Ins.  Co. ,  183 
U.  S.  42,  22  S.  Ct.  22  (loss  by  explosion 
of  gasoline  not  covered);  The  G.  R. 
Booth,  171  U.  S.  450,  19  S.  Ct.  9,  43 
L.  Ed.  234  (carrier  was  liable  where 
explosion  was  insured  against  and  sea 
peril  was  excepted,  though  only  sea 
water  came  in  contact  and  did  the 
damage   to  the   cargo);   Washbvrv   v. 


Ins.  Co.,  2  Fed.  304  Goss  by  explosion 
covered,  because  of  antecedent  fire); 
Washburn  v.  Ins.  Co.,  29  Fed.  Cas.  308, 
329,  330;  Heuer  v.  Northwestern  Ins. 
Co.,  144  111.  393,  33  N.  E.  411;  Trans. 
Fire  Ins.  Co.  v.  Dorsey,  56  Md.  70,  40 
Am.  Rep.  403  (loss  by  explosion  of 
sulphuric  acid  caused  by  preceding  fire 
is  covered);  Davis  v.  Ins.  Co.  of  North 
Am.,  115  Mich.  382,  73  N.  W.  393; 
La  Force  v.  Ins.  Co.,  43  Mo.  App.  518 
(loss  by  explosion  of  gasoline  vapor 
caused  by  preceding  fire  is  covered); 
Cohn  v.  Nat.  Ins.  Co.,  96  Mo.  App.  315, 
319,  70  S.  W.  259;  Renshaw  v.  Missouri 
State  Ins.  Co.,  103  Mo.  606,1 5  S.  W.  945; 
Briggs  v.  Ins.  Co.,  53  N.  Y.  446  Goss  by 
explosion  held  not  covered  because  no 
antecedent  fire);  Brown  v.  St.  Nicholas 
Ins.  Co.,  61  N.  Y.  332  (underwriter 
liable  where  stranding  was  insured 
against  and  ice  detention  excepted,  yet 
the  latter  did  the  damage);  Hall  v. 
Nat.  F.  Ins.  Co.,  115  Tenn.  530  (1906), 
92  S.  W.  402  (criticising  Hiistace  v. 
Pha}ni.T  Ins.  Co.,  175  N.  Y.  292,  67 
N.  E.  592).  Same  doctrine  is  applied 
in  accident  insurance.  And  see  Hart- 
ford Steam  B.,  etc.,  Ins.  Co.  v.  Sonne- 
bom,  96  Md.  616,  54  Atl.  610;  see  also 
§231,  supra.  Contra,  Hustace  v. 
Phoenix  Ins.  Co.,  175  N.  Y.  292,  67 
N.  E.  592,  62  L.  R.  A.  651  (one  judge 
dissenting  and  reversing  five  judges 
below),     Here  an  explosion  purely  in- 


LOSS    BY   EXPLOSION    EXCEPTED    UNLESS,    ETC. 


371 


regarded  as  at  all  material  that  the  conflagration  originates  outside 
the  premises  insured/  since  the  laws  of  nature  in  their  operation 
pay  no  respect  to  intangible  boundaries  of  ownership  or  limits  of 
insurance.^  Nor  should  the  circumstance  that  the  effects  of  the 
incidental  explosion  alone,  without  accompanying  ignition  or  com- 
bustion, reach  the  particular  property  insured,  be  considered  as 
necessarily  decisive  in  determining  the  issue  of  proximate  cause;  ^ 
though  upon  this  point  the  authorities  seem  not  to  be  in  accord. 

The  better  rule  in  such  cases  is  the  one  approved  by  the  Federal 
Supreme  and  other  courts,  that  where  the  question,  what  is  the 
proximate  cause,  comes  to  the  border  line  of  uncertainty,  it  should 
be  disposed  of  as  a  question  of  fact/  In  the  treatment  of  this  diffi- 
cult subject  an  important  circumstance  has  been  too  often  over- 


cidental  to  a  raging  conflagration  in  a 
neighboring  building  did  the  damage, 
the  fire  subsequently  swept  the  plain- 
tiff's premises  also;  and  what  is  known 
as  explosion  insurance  would  not  have 
met  the  loss.  The  last  case  has  intro- 
duced uncertainty  in  rules  of  adjust- 
ment long  considered  settled  in  New 
York.  In  spite  of  the  Hustace  case, 
recovery  was  allowed  on  somewhat 
similar  facts  in  actions  of  other  neigh- 
boring o\%Tiers  growing  out  of  same 
catastrophe,  Eppens,  etc.,  Co.  v.  Hart- 
ford F.  Ins.  Co.,  99  App.  Div.  221,  90 
N.  Y.  Supp.  1035;  Mattlage  v.  German- 
Am.  Ins.  Co.,  139  Fed.  704.  The  New 
York  court,  in  another  case,  has  stated 
the  general  rule  concisely  as  follows: 
"The  proximate  cause  of  an  event 
must  be  held  to  be  that  which  in  a 
natural  sequence  unbroken  by  any 
new  cause,  produces  that  event,  and 
without  which  that  event  would  not 
have  occurred,"  Rider  v.  Stiracuse  Ry. 
Co.,  171  N.  Y.  139,  147,  63  N.  E.  836. 

1  Heuer  v.  Northeastern  Ins.  Co.,  144 
111.  393,  33  N.  E.  411. 

2  Effects  which  follow  by  mere  physi- 
cal necessity  must  be  attributed  to  the 
predominant  cause,  see  Bailey's  defini- 
tion, McArthur,  Ins.  (2ded.),  108  n.  A 
half  interest  in  an  entire  block  may  be 
owned  and  insured  by  one  man,  the 
other  half  interest  in  each  house  may 
be  separately  owned  and  separately 
insured,  but  the  fire  burns  and  the 
explosion  occurs  unaffected  by  such 
lines  of  demarkation.  On  the  other 
hand,  underwriters  take  into  account 
neighboring  exposures,  as  well  as  in- 
trinsic hazards.  Capital  City  Ins.  Co.  v. 
Caldwell,  95  Ala.  77,  85,  10  So.  355. 


^Russell  V.  German  F.  Ins.  Co.,  100 
Minn.  528,  111  N.  W.  400;  Ermen- 
trout  V.  Girard  F.  &  M.  Ins.  Co.,  63 
Minn.  305,  65  N.  W.  635,  30  L.  R.  A. 
346;  Johnston  v.  West.,  etc.,  Ins.  Co., 
7  Shaw  &  D.  Scot.  Ct.  Sess.  52.  And 
see  Lynn  Gas  &  Elec.  Co.  v.  Meriden 
F.  Ins.  Co.,  158  Mass.  570,  33  N.  E. 
690  (resulting  loss  was  far  from  fire); 
Transatlantic  F.  Ins.  Co.  v.  Dorsey,  56 
Md.  70,  79,  40  Am.  Rep.  403  (disap- 
proving Stanley  v.  Western  Ins.  Co., 
L.  R.  3  Exch.  "71,  17  L.  T.  N.  S.  513). 
Contra,  Hustace  v.  Phoenix  Ins.  Co., 
175  N.  Y.  292,  67  N.  E.  592.  And  see 
Miller  v.  London  &  L.  Ins.  Co.,  41  111. 
App.  395;  Caballero  v.  Home  Ins.  Co., 
15  La.  Ann.  217;  Ins.  Co.  v.  Roost,  55 
Ohio  St.  581,  588,  36  L.  R.  A.  236;  Hall 
V.  Nat.  F.  Ins.  Co.,  115  Tenn.  530,  92 
S.  W.  402.  In  an  unreported  case 
(AitLen  v.  Midland,  etc.,  Ins.  Co.)  the 
condition  was,  "This  company  shall 
not  be  responsible  for  loss  arising  from 
explosion  of  gunpowder  or  in  conse- 
quence thereof."  A  fire  arose  in  a 
fireproof  compartment  on  the  ground 
floor  not  comprised  in  the  policy. 
This  compartment  was  used  for  storing 
inflammable  oils,  and  with  them  were 
stored  about  sixty-five  pounds  of 
blasting  powder.  Except  for  the  ex- 
plosion of  powder  the  fire  would  have 
been  confined  to  the  fireproof  com- 
partment, and  the  court  of  session 
held  that  the  damage  came  within  the 
exception  and  that  the  insurer  there- 
fore was  not  liable,  Bunyon  (5th  ed.), 
86. 

■*  Kellogg  v.  Mil.  &  St.  Paid  R.  Co.. 
94  U.  S.  469;  Russell  v.  German  Fire 
Ins.  Co.  (Minn.,  1907),  111  N.  W.  40. 


372  MEANING    AM)    LKGAL    EKFI^CT    OF    FIRE    POLICY 

looked.  In  most  instances,  at  the  time  when  risks  are  rated  by  in- 
surers, the  insurers  have  no  knowledge  of  the  scope  of  the  poUcies 
to  which  the  rates  will  be  applied,  or  of  the  extent  of  the  ownership 
of  the  various  persons  to  whom  the  policies  are  to  be  issued.  One 
man  may  own,  and  insure  by  one  policy  or  by  fifty  specific  policies 
a  block  of  fifty  houses,  or  every  house  in  the  block  may  be  separately 
owned  and  separately  insured.  It  matters  not  to  the  insurance  com- 
panies which  situation  is  to  exist.  To  hold,  then,  as  matter  of  law, 
that  the  same  natural,  physical  results,  produced  by  the  one  cause 
and  in  the  one  casualty,  happening  within  the  one  block,  are  proxi- 
mate as  to  the  blanket  policy,  but  not  as  to  all  the  specific  policies, 
is  an  unreasonable  and  needless  distinction.  No  conflagration  of 
ordinary  buildings  can  long  continue  without  numberless  incidental 
explosions,  some  of  greater  and  some  of  lesser  violence.  In  general, 
the  only  indemnity  offered  to  the  public  by  underwriters  for  the  loss 
occasioned  by  such  incidental  explosions  is  under  the  usual  fire  policy. 
The  value  and  utility  of  this  instrument  should  not  be  unreasonably 
curtailed. 

La  Force  had  a  policy  on  his  dwelling,  which  like  the  standard 
policy  excepted  loss  caused  by  explosion  of  any  kind  unless  fire  en- 
sued, and  then  included  the  loss  by  fire  only.  His  housekeeper  for 
the  purpose  of  driving  away  cockroaches  poured  some  gasoline  on 
different  parts  of  the  kitchen  floor.  Some  of  the  gasoline  dripped 
through  the  cracks  and  evaporated,  the  vapor  being  confined  between 
the  floor  and  the  ground  underneath.  There  was  no  vapor  in  the 
kitchen,  though  on  the  kitchen  floor  there  was  liquid  gasoline,  which 
is  not  explosive.  About  half  an  hour  later  the  housekeeper  dropped 
a  lighted  match  on  the  floor,  which  caused  a  fire  but  no  immediate 
explosion.  After  the  fire  had  extended  entirely  around  the  room  and 
had  burned  the  gasoline  for  from  three  to  five  minutes,  and  after 
the  wainscoting  around  the  wall  had  been  ignited,  the  flames  came 
in  contact  with  the  vapor  beneath  the  floor  and  it  exploded,  blowing 
the  floor  up  and  shaking  the  walls  down.  The  court  held  that  the 
damage  done  to  the  building,  both  by  reason  of  the  actual  burning 
and  by  reason  of  the  concussion,  was  occasioned  by  fire  within  the 
meaning  of  the  policy,  and  that  the  exception  in  favor  of  the  insurer 
was  not  applicable.^ 

1  La  Force  v.  The  Williams  City  Ins.  natural  results  of  the  combustion   of 

Co.,  43  Mo.  App.  .518  ("it  is  no  suffi-  combustible    substances;    and    as    the 

cient  answer  to  say  that  some  of  the  combustion  is  the  action  of  fire,  this 

phenomena  prockiced  were  in  the  form  must  be  held  to  be  the  proximate  and 

of  an  explosion.    All  the  effects,  what-  legal   cause   of  all   damages  done   the 

ever   they   may   be   in   form,   are   the  premises  of  the  plaintiff.     There  was  a 


LOSS  BY   EXPLOSION   EXCEPTED   UNLESS,   ETC.  373 

In  another  case  the  plaintiff  had  insurance,  with  the  same  explosion 
clause,  covering  his  stock  of  furniture  and  housefurnishing  goods 
kept  for  sale.  In  a  neighboring  warehouse,  the  second  building  to 
the  south,  a  raging  fire,  in  progress  for  the  space  of  an  hour,  extended 
to  powder  and  dynamite  stored  in  the  warehouse,  and  occasioned  a 
terrific  explosion,  the  concussion  from  which  did  all  the  damage  to 
the  plaintiff's  goods.  No  fire  reached  the  plaintiff's  store.  The  court 
while  admitting  that  abstractly  the  contention  of  the  plaintiff 
seemed  sound,  considered  itself  concluded  by  certain  authorities 
cited,  and  held,  reversing  the  court  below,  that  on  the  facts  as  stated 
the  plaintiff  could  not  recover  unless  there  was  fire  on  the  insured 
premises.^ 

The  sound  distinction  is  illustrated  by  a  New  York  case  in  which 
lightning  was  the  peril  assumed  and  windstorm  the  exception. 
The  damage  in  question  was  caused  by  windstorm  following  the 
stroke  by  lightning.  The  windstorm,  however,  was  an  altogether 
independent  agency,  in  nowise  caused  by  lightning,  and  therefore 
the  judgment  in  favor  of  the  insured  was  reversed.^  But  where  a 
whirlwind,  itself  caused  by  a  raging  conflagration,  presently  topples 
a  wall  over,  the  damage  is  by  fire  alone.  The  wind  is  accounted  an 
effect  and  not  a  cause.  And  this  rule  has  been  extended  to  the  case 
where  a  wind,  arising  several  days  after  the  fire,  precipitated  upon 
the  adjoining  premises  of  the  plaintiff,  the  insured,  a  wall  previously 
weakened  by  a  fire  which  never  reached  the  plaintiff's  premises  at 
all  in  the  shape  of  combustion.^  The  peril  of  fire  insured  against, 
though  the  primar}^  cause  in  point  of  time  may,  however,  be  too 
remotely  connected  with  the  damage  in  question  to  be  accepted  as 
the  responsible  cause.  For  instance,  where  fire  starting  in  a  vessel 
which  was  lying  temporarily  in  the  River  Mersey  resulted  in  a 
violent  gunpowder  explosion  aboard,  which  in  turn  shattered  the 
windows  of  buildings  on  the  banks,  it  was  conceded  that  the  ex- 
plosion must  be  deemed  the  responsible  cause  of  the  damage  to  the 

fire  within  the  policy  which  preceded  concussion  on  tlieir  stock,  they  could 

the  explosion,  and  it  logically  results  have  recovered  for  loss  by  concussion 

that  the  insurer  is  liable  to  the  assured  on  the  building  in  which  the  stock  was 

for  the  damages  done  by  both  fire  and  located. 

explosion,"  by  Smith,  P.  J.).  ^  Beakes   v.    Phoenix   Ins.    Co.,    143 

1  Hall  &  Hawkins  v.  National  Fire  N.  Y.  402,  38  N.-  E.  453,  26  L.  R.  A. 

Ins.  Co.  (Tenn.,  1906),  92  S.  W.  402.  267  (by  Bartlett,  J.,  who  also  dissented 

According  to  the  rule  laid  down  in  the  in  the  Hustace  case,  175  N.  Y.  292,  67 

last  case,  if  Messrs.  Hall  &  Hawkins  N.  E.  592). 

had  been  owners  of  the  whole  block  3  Russell    v.    German    F.    Ins.    Co. 

of  buildings,  insured  by  a  policy  cover-  100  Minn.  528,  111  N.  W.  400.      "  For 

ing  all  the  buildings,  in  blanket  form,  full  discussion  of  proximate  cause,  see 

while  recovering  nothing  for  loss  by  ch.  XX." 


374 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


windows.^  Ilorc  was  a  casual  exposure  which  the  underwriters,, 
perhaps,  could  hnrdly  have  been  expected  to  take  into  their  calcula- 
tions, and  which  certainly  was  not  to  be  found  scheduled  upon  their 
insurance  maps  and  surveys.  It  must  be  observed,  however,  that 
the  issue  in  the  case  arose  between  stockholders  of  the  insurers,  and 
the  insurers,  who,  it  was  claimed,  had  made  payment  ultra  vires  to 
the  insured  on  account  of  the  loss.  The  court  rendered  judgment 
adverse  to  the  contention  of  the  stockholders. 

§  279.  Falling  Building.— Or  if  a  building  or  any  part  thereof  fall, 
except  as  the  result  of  fire,  all  insurance  on  such  building  or  its  con- 
tents shall  immediately  cease. 

If  any  substantial  portion  of  the  structure  falls,  except  as  the 
result  of  antecedent  fire,  the  insurance  forthwith  terminates;  ^  but 
the  rule  is  otherwise,  if  only  a  trifling  portion  falls.^'  If,  however, 
the  fall  is  caused  by  an  explosion  and  fire  ensues,  then,  as  is  mani- 
fest, the  company  is  liable  for  the  fire  loss,  by  virtue  of  the  clause 
considered  in  the  preceding  section.'* 


1  The  Lottie  Sleigh  case,  Taunton  v. 
Roijal  Ins.  Co.,  2  H.  &  M.  135,  10 
Jur.  N.  S.  291,  33  L.  J.  Ch.  406,  10 
L.  T.  N.  S.  156.  Even  in  that  case  the 
underwriters  saw  fit  to  settle,  Bunyon, 
Ins.  (5th  ed..  1906),  79.  I^pon  this 
ground  alone,  if  at  all,  it  would  have 
seemed  possible  to  justify  a  decision 
in  favor  of  the  insurer  in  the  Hnstace 
case,  in  which  two  buildings  and  a 
street  intervened  between  the  Tarrant 
and  Hustace  buildings,  175  N.  Y.  292. 
67  N.  E.  592.  Explosion  and  not  fire 
is  the  proximate  cause,  within  the 
meaning  of  the  exception,  if  the  only 
fire  causing  the  explosion  is  from  a 
match,  Mitchell  v.  Ins.  Co.,  183  U.  S. 
42,  22  S.  Ct.  22;  Heiier  v.  Ins.  Co.,  144 
111.  393,  33  N.  E.  411;  or  a  fuse,  Phoenix 
Ins.  Co.  V.  Greer,  61  Ark.  509,  33  S.  W. 
840;  or  a  lamp,  Briggs  v.  Ins.  Co.,  53 
N.  Y.  446;  or  lightning,  German  Ins. 
Co.  v.  Roost,  55  Ohio  St.  581,  45  N.  E. 
1097;  or  a  gas  jet,  United  L.  F.  &  M. 
Ins.  Co.  V.  Foote,  22  Ohio  St.  340; 
Home  Lodge  Assn.  v.  Queen  Ins.  Co. 
(So.  Dak.,  1907),  110  N.  W.  778.  But 
see  Heffron  v.  Kittanninq  Ins.  Co.,  132 
Pa.  St.  580,  20  Atl.  698  (fire  caused  by 
explosion  of  a  lamp;  underwriters  held 
liable).  A  lightning  clause  should  be 
obtained  by  the  assured.  It  usually 
costs  nothing.  Lightning  clause  con- 
strued, Bea'es  v.  Phoenix  Ins.  Co.,  143 
N.  Y.  402,  38  N.  E.  453;  Kettelmann  v. 


Fire  Asso.,  79  Mo.  App.  447;  Warm- 
castle  V.  Scot.  Union  &  Nat.  Ins.  Co., 
201  Pa.  St.  302,  50  Atl.  941,  59  Atl. 
1105;  Clark  v.  Franklin,  HI  Wis.  65, 
86  N.  W.  549. 

2  Kiesel  v.  Sun  Ins.  Office,  88  Fed. 
243,  31  C.  C.  A.  515;  Foster  v.  Home 
Ins.  Co.,  74  C.  C.  A.  445,  143  Fed.  307; 
Nelson  v.  Traders'  Ins.  Co.,  181  N.  Y. 
472,  74  N.  E.  421. 

3  London  &  L.  Ins.  Co.  v.  Crunk,  91 
Tenn.  376,  23  S.  W.  140;  Ho7ne  Mut. 
Ins.  Co.  V.  Tomkies,  96  Tex.  187,  71 
S.  W.  814.  And  see  Breuner  v.  L.  &  L. 
&  G.  Ins.  Co.,  51  Cal.  101.  But  it  is 
said  that  if  the  building  is  simply 
blown  off  of  blocks  and  turns  over,  the 
company  is  still  liable,  Teutonia  Ins. 
Co.  V.  Bonner,  81  111.  App.  231.  With- 
out tins  clause  the  company  would  be 
liable  for  loss  of  a  building  by  fire 
unless  before  the  fire  started  the  build- 
ing had  lost  its  character  as  such  and 
had  become  a  mere  congeries  of  ma- 
terials in  consenuence  of  a  collapse, 
Nave  V.  Home  Miit.  Ins.  Co.,  37  Mo. 
430,  90  Am.  Dec.  394;  Farrell  v.  Ins. 
Co.,  66  Mo.  App.  153;  L.  cfe  L.  &  G. 
Ins.  Co.  V.  Ende,  65  Tex.  118. 

*  Leonard  v.  Orient  Ins.  Co.,  109  Fed. 
286.  48  C.  C.  A.  369,  54  L.  R.  A.  706; 
Friedman  v.  Atlas  Assur.  Co..  133  Mich. 
212,  94  N.  W.  757;  Davis  v.  Ins.  Co.. 
115  Mich.  382,  73  N.  W.  393;  Dow  v. 
Fanevil  Hall  Ins.  Co.,  127  Mass.  346. 


MEMOKANDUM    ARTICLES  375 

The  Massachusetts  standard  policy  contains  no  similar  provi- 
sion. 

§  280.  Earthquake  and  Volcano  Clause. — In  California  and  in 
other  localities  an  earthquake  clause  is  sometimes  employed.^  Its 
purpose  is  to  relieve  the  compan}^  from  loss  caused  by  a  convulsion 
of  nature.  A  defense  under  this  exception  usually  presents  an  issue 
of  fact  for  the  jury  as  to  whether  the  fire  in  question  ma}^  not  have 
been  proximately  due  to  some  other  cause  than  the  earthquake. 
The  burden  is  on  the  insurer.- 

§  281.  Memorandum  Articles. — This  company  shall  not  be  liable  for 
loss  to  accounts,  bills,  currency,  deeds,  evidences  of  debt,  money,  notes,  or 
securities;  nor  unless  liability  is  specifically  assumed  hereon,  for  loss  to 
awnings,  bullion,  casts,  curiosities,  drawings,  dies,  implements,  jewels, 
manuscripts,  medals,  models,  patterns,  pictures,  scientific  apparatus, 
signs,  store  or  office  furniture  or  fixtures,  sculpture,  tools,  or  property 
held  on  storage  or  for  repairs;  nor  beyond  the  actual  value  destroyed  by 
fire,  for  loss  occasioned  by  ordinance  or  law  regulating  construction  or 
repair  of  buildings,  or  by  interruption  of  business,  manufacturing 
processes,  or  otherwise;  nor  for  any  greater  proportion  of  the  value  of 
plate  glass,  frescoes,  and  decorations  than  that  which  this  policy  shall 
bear  to  the  ivhole  insurance  on  the  building  described. 

If  the  property  enumerated  in  this  memorandum  clause  were 
covered  by  the  policy,  the  insurers  would  be  subjected  to  claims  of 
uncertain  amount  and  sometimes  difficult  of  verification.     For  ex- 

And  a  building  may  be  shattered  with-  see  Russell  v.  German  F.  Ins.  Co.,  100 
out  falling,  Eppens  v.  Hartford  Ins.  Minn.  528,  111  N.  W.  400;  Ermen- 
Co.,  99  App.  Div.  221,  90  N.  Y.  Supp.  trout  v.  Girard  Fire  &  M.  I.  Co.,  63 
1035.  The  collapse  of  a  building  with  Minn.  305,  65  N.  W.  635,  56  Am.  St.  R. 
fires  in  active  operation  in  furnaces,  485,  30  L.  R.  A.  346.  In  both  of  the 
stoves,  or  other  appliances  is  apt  to  be  last  two  cases  a  wall  of  the  adjoining 
immediately  followed  by  a  conflagra-  building  fell  over  on  the  insured 
tion,  therefore  in  such  cases  the  vital  premises  as  the  result  of  a  fire  con- 
inquiry  arises  whether  the  fall  or  the  fined  to  the  adjoining  building.  But 
conflagration  started  first.  In  the  one  where  seven  days  elapsed  between  the 
case  the  company  is  exonerated.  In  fire  and  the  fall  of  the  building  it  was 
the  other  it  is  liable.  The  testimony  held  that  the  loss  by  the  latter  was  not 
is  apt  to  be  sharply  conflicting.  The  the  proximate  result  of  fire,  Gaskarth 
issue  is  one  for  the  jury,  and  the  burden  v.  Law  Union  Ins.  Co.,  6  Ins.  L.  J. 
of  proof  rests  on  the  insurance  com-  159  [Manchester  (Eng.)  Civil  Court]; 
pany,  Phevix  Ins.  Co.  v.  Luce,  123  Cuesta  v.  Ronal  Ins.  Co.,  98  Ga.  720, 
Fed.  257,  60  C.  C.  A.  655;  Western  27  S.  E.  172  (fall  of  walls  occurred 
Assur.  Co.  V.  Mohlman,  83  Fed.  811,  twenty-five  davs  after  fire).  Com- 
51  U.  S.  App.  577,  28  C.  C.  A.  157;  pare  7?w.<!.sc/Z  v. /«.s.  Co.,  100  Minn.  528, 
Kiesel  v.  Sun  Ins.  Co.,  88  Fed.  243;  111  N.  W.  400. 
Friedman  v.  Atlas  Assur.  Co.,  133  i  See  Appendix  of  forms,  ch.  II. 
Mich.  212,  94  N.  W.  757;  Nichols  v.  2  Recent  cases  in  lower  California 
Sun  Mut.  Ins.  Co.,  71  Miss.  326.    And  courts. 


;J7t)  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

iimplc.  patterns  in  factories  may  be  of  great  value  when  new,  but 
worthless  when  out  of  date. 

"Storage"  means  keeping  for  safe  custody  to  be  delivered  agam 
in  the  same  condition  substantially  as  when  received,  and,  as  em- 
ployed in  this  clause  of  the  policy,  the  prohibition  is  applicable  only 
when  the  storing  or  safe-keeping  is  the  sole  or  principal  object  of  the 
deposit.  If  the  goods  are  merely  kept  for  consumption  or  sale,  the 
prohibition  of  this  clause  does  not  apply.^  For  example,  wine  kept 
in  a  cellar  either  to  l)e  sold  or  consumed  is  not  on  storage;'  nor  is 
raw  material,  when  kei)t  in  a  factory  to  be  manufactured;'"*  nor  is 
furniture,  when  kei^t  in  a  hotel  awaiting  use;  '*  nor  are  materials, 
when  casually  or  temporarily  left  in  a  room.^ 

The  Massachusetts  policy  contains  a  list  of  memorandum  articles, 
"bills  of  exchange,  notes,  accounts,  evidences  and  securities  of  prop- 
erty of  every  kind,  books,  wearing  apparel,  plate,  money,  jewels, 
medals,  patterns,  models,  scientific  cabinets  and  collections,  paintings, 
sculpture  and  curiosities  are  not  included  in  said  insured  property, 
unless  specially  mentioned." 

1  If  there  is  any  doubt,  it  is  the  part  factory,   Thurston  v.    Union  Ins.   Co., 

of  prudence  to  got  written  privilege,  17  Fed.   127.      Movable  counters  and 

which  usually  costs  nothing.  shelving   are   not   permanent   fixtures, 

^N  Y  Equitable  Ins.  Co.  v.  Lang-  Bamjer  v.  Albany  Ins.  Co.,  85  App. 
don  6  Wend  (N.  Y.)  623;  O'Neil  v.  Div.  122,  83  N.  Y.  Supp.  6.5,  aff'd  179 
Buffalo  Fire  Ins.  Co.,  3  Comst.  (N.  Y.)  N.  Y.  554,  71  N.  E.  1140.  One  court 
122.  Insurance  on  property  "its  own  has  held  that  the  exception  of  "pat- 
...  or  in  storage,  or  for  repairs"  ini-  terns"  in  this  general  clause  will  re- 
plies property  belonging  to  others,  lieve  the  company,  though  they  are 
Johnston  v.  Chas.  Abresch  Co.,  123  usually  kept  as  part  of  a  tailor's  stock 
Wise.  130,  101  N.  W.  395.  which  was  insured  as  such,  Johnston 

^Voiel   V    People's   Mut.   Fire  Ins.  v.  Niagara  Fire  Ins.  Co.,  IIHN.  C.  6iS, 

Co.,  9  Gray  (Mass.),  23.  24   S.   E.   424.        But  see    §§87,   270, 

4  Continental  Ins.  Co.  v.  Pruitt,  65  supra.  As  to  exemption  of  all  prop- 
Tex.  125.  erty  on  which   there  was  specific   in- 

5  Hynds  v.  Schenectady  Co.  Mut.  Ins.  surance,  see  Peabody  v.  L.  &  L.  &  G. 
Co.,  n  N.  Y.  554.  The  phrase  "store  Ins.  Co.,  171  Mass.  114,  50  N.  E.  526; 
or  office  fixtures "  in  this  clause  will  not  London  Assur.  v.  Paters'm,  106  Ga. 
be  extended  to  embrace  fixtures  in  a  538,  32  S.  E.  650. 


CHAPTER  XIV 

The  Standard  Fire  Policy — Continued 

§  282.  Survey,  etc.,  When  a  Warranty. — //  an  application,  survey, 
plan  or  description  of  property  be  referred  to  in  this  policy  it  shall  be 
a  part  of  this  contract  and  a  warranty. 

Before  the  introduction  of  this  provision  in  favor  of  the  insurance 
company,  there  was  much  difficulty  in  determining  what  sort  of  a 
reference  to  extraneous  papers  was  sufficient  (1)  to  make  them  a 
part  of  the  contract,  and  (2)  to  incorporate  their  contents  into  the 
contract  as  warranties  rather  than  as  mere  representations.^ 

This  clause  refers  to  papers  outside  the  policy,  and  not  to  what 
is  written  or  printed  in  it.^  Occasionally  the  insurers  require  the 
execution  of  a  detailed  application  by  the  insured  and  by  express 
reference  make  "it  a  part  of  the  contract,  in  which  event  its  state- 
ments, by  virtue  of  this  clause,  become  w-arranties;  ^  and  when 
warranties,  as  already  shown,  they  must  be  literally  true,  or  exactly 
fulfilled,  or  the  contract  will  be  avoided."* 

For  example,  if  an  owner  insures  his  building  as  "a  dwelling- 
house"  when  in  reality  it  is  in  part  dwelling-house  and  in  part 
stores.^  Or  if  he  insures  it  as  "a  dw^elling-house,"  when  in  reality  it 
is  a  hotel,  the  insurance  is  avoided.^     But  a  building  described  in 

1  See  §§  106,  110.  supra.    The  court  will,  if  possible,  con- 

2  Ki7ig  Brick  Mfg  Co.  v.  Phoenix  I.  strue  as  representation  rather  than 
Co.,  164  Mass.  291,  41  N.  E.  277.  warranty,  Houghton  v.  Mfrs.,  etc.,  Ins. 

^Cerxjs  V.  State  Ins.   Co.,  71  Minn.  Co.,  8  Mete.  (Mass.)  114;  §  110,  note  1. 
338,  73  N.  W.  849;  King  v.  Tioga   Co.  As  to  expressions  of  opinion,  expecta- 
Patrons'    R.    Ins.    Co.,    35    App.    Div.  tion    or    belief    see    §§98,    111.      The 
(N.    Y.)    58,   54    N.    Y.    Supp.    1057;  phraseology  of  the  application,  where 
Phoenix   Ins.    Co.    v.    Benton,   87   Ind.  it  is  made  a  part  of  the  contract,  may 
132;  Am..  Credit  Indem.  Co.  v.  Carroll-  itself  limit  the  conditions  of  the  poi- 
son  Furniture   Co.,  95   Fed.    Ill;    but  icy  in  favor  of  the  insured,  Washing- 
see  Throop  v.  North  Am.  F.  Ins.  Co.,  ton  Life  Ins.   Co.   v.   Haney,  10   Kan. 
19   Mich.    423.      t^nless   expressly   in-  525. 
forporated  the  statements  in  the  ap-  *  See  §  107,  supra. 
plication     are     mere     representations,  &  Bowditch  v.  Norwich  Union  F.  Ins. 
Vilas  V.  A^  Y.  Cent.  Ins.  Co..  72  N.  Y.  Co.  (Mass.,  1907),  79  N.  E.  788. 
590,  28  Am.  Rep.  186;  Bnrritt  v.  Sara-  ^  Thomas  v.  Commercial  Union  Assur. 
toga  Co.  Mut.  F.  /?(.s.  To.,  5  Hill  (N.  Y.),  Co.,  162  Mass.  29;  Dougherty  v.  Green- 
188,  40  Am.  Dec.  345;  and  see  §  106.  wich  Ins.  Co.,  64  N.  J.  L.  716. 

[377] 


.•■178 


MEANING    AM;    I.EGAL    lOFFKCT    OF    KIHK    POLICV 


tlic   appliratiou  as  ^'woodhouse"   was  held   covered,  though  only 
iwo-thirds  of  it  was  used  for  that  purpose.^ 

Any  statements  in  the  appUcation,  however,  which  have  nothing 
to  do  With  the  subject  of  the  contract,  or  with  the  risk,  will  be  held 
t(i  be  iinniatorial,  and  will  be  regarded  as  having  been  gratui- 
tously volunteered.  For  an  innocent  error  in  making  them  the 
policy  will  not  be  avoided. - 


'  White  V.  Mat.  F.  .4.s.s»r.  Co.,  8 
(iray  (Mass.),  o()().  Description  in  ap- 
plication "occupied  a.>5  hotel  by  a 
tenant;"  in  fact  the  building  was  used 
a.s  a  liouse  of  ill-fame;  held,  no  forfeit- 
ure, Hall  V.  People's  Miit.  F .  Ins.  Co., 
(i  (Jray  (Mass.),  185.  It  is  said  in 
general  that  a  false  description  of  the 
material  of  which  a  building  is  con- 
structed avoids  the  policy,  Parrish  v. 
Rosebud  M.  &  M.  Co.,  140  Cal.  635, 
74  Pac.  312.  But  see  Landes  v.  Sajetjj 
Mut.  F.  Ins.  Co.,  190  Pa.  St.  536,  42 
.\tl.  961;  Farmers'  Ins.  &  L.  Co.  v. 
Swjder,  16  Wend.  (N.  Y.)  481,  30  Am. 
Dec.  lis.  Misdescription  as  to  division 
walls  was  held  fatal,  Xorthrup  v.  Piza, 
43  App.  Div.  284,  60  N.  Y.  Supp.  363, 
aff' d  167  N.  Y.  578;  Northrup  v.  Porter, 
17  App.  Div.  SO,  44  N.  Y'.  Supp.  814. 
Erroneous  statements  as  to  the  dis- 
tance of  other  buildings  or  exposures 
in  the  vicinity  will  avoid,  Burritt  v. 
.Saratoga  Co.  Mut.  F.  Ins.  Co.,  5  Hill 
(N.  Y.),  188,  40  Am.  Dec.  345;  Jen- 
nings V.  Chenango  Co.  Mid.  Ins.  Co.,  2 
Denio  (N.  Y.),  75;  Keller  v.  L.  &  L.  & 
a.  Ins.  Co.,  27  Tex.  Civ.  App.  102,  65 
S.  W.  695.  So  also  under  Massachu- 
.setts  statute,  the  risk  being  increased 
by  the  existence  of  the  other  buildings, 
Ring  v.  Phoenix  Assur.  Co.,  145  Mass. 
426,  14  N.  E.  525.  But  see  Dennison 
V.  Ins.  Co.,  20  Me.  125,  37  Am.  Dec.  42. 
Misstatement  as  to  age  of  building  was 
held  fatal,  Lama  v.  Dwelling  House  Ins. 
Co.,  51  Mo.  App.  447.  Otherwise, 
Ror/ers  v.  Phcenix  Ins.  Co.,  121  Ind. 
570,  23  N.  E.  498  (matter  of  opinion); 
Fddg  v.  Hawkeye  Ins.  Co.,  70  Iowa, 
472,'  30  N.  W.  808;  Manufacturers'  & 
M.  Ins.  Co.  v.  Zeitinger,  168  111.  286, 
48  N.  E.  179,  61  Am.  St.  R.  105.  But 
see  Phoenix  Ins.  Co.  v.  Pic^  el,  3  Ind. 
App.  332,  29  N.  E.  432.  When  the  ap- 
plication calls  for  a  disclosure  of  in- 
cumbrances, to  mention  only  one  of 
two  mortgages  avoids  the  policy, 
Toivne  v.  Fitchburg  Mut.  F.  Ins.  Co.,  7 
Allen  (Mass.),  5i.  An  estimate  of 
value  of  the  insured  property  in  the 


application  is  generally  regarded  as 
matter  of  opinion  rather  than  fact 
which,  if  given  in  good  faith,  docs  not 
avoid  the  policy,  Wheaton  v.  Ins.  Co., 
76  Cal.  415;  Helbing  v.  Svca  Ins.  Co., 
54  Cal.  156,  35  Am.  Rep.  72;  Susque- 
hanna Mut.  F.  Ins.  Co.  V.  Stoats,  102 
Pa.  St.  529.  And  see  §111,  supra. 
Especially  is  this  the  rule  where  the 
policy  is  open  and  not  valued,  Ins.  Co. 
V.  Phoenix  Ins.  Co.,  26  Ind.  App.  88, 
59  N.  E.  181.  Construction  under 
statutes  making  warranties  representa- 
tions, Rosser  v.  Georgia  Home  Ins.  Co., 
101  Ga.  716,  29  S.  E.  286.  False  and 
fraudulent  statements  regarding  the 
character  and  origin  of  an  insured 
painting  alleged  to  be  by  Leonardo  da 
Vinci  avoided  the  policy.  Wood  v. 
Firemen's  Ins.  Co.,  426  Mass.  316. 

2  Hartford  Protection  Ins.  Co.  v. 
Harmcr,  2  Ohio  St.  452,  59  Am.  Dec. 
684;  Anderson  v.  Fitzgerald,  4  H.  L. 
Cas.  484.  In  the  case  of  a  promissory 
warranty ,  circumstances  may  so  change 
that  the  warranty  will  be  held  to  be 
inapplicable;  for  example,  if  a  loss 
occurs  before  the  time  for  the  fulfill- 
ment of  the  warranty  has  arrived,  the 
loss  will,  nevertheless,  be  covered  by 
the  policy,  Gloucester  Mfg.  Co.  v. 
Howard  Fire  Ins.  Co.,  5  Gray  (Mass.), 
497,  66  Am.  Doc.  376.  A  warranty  of 
the  existence  of  a  force  pump  on  the 
insured  premises,  at  all  times  ready  for 
use,  implies  that  there  is  sufficient 
power  to  work  the  pump,  Sayles  v. 
A'.  W.  Ins.  Co.,  2  Curtis  (C.  C),  610. 
And  .see  Mechanics'  &  Traders'  Ins. 
Co.  V.  Thompson,  57  Ark.  279,  21  S.  W. 
468.  Where  the  insured,  in  answer  to 
the  question  whether  his  title  to  the 
property  was  absolute,  said  "his  de- 
ceased wife  held  the  deed,"  it  was  held 
that  there  was  a  breach  of  warranty, 
because  the  answer  was  not  full  and 
true;  the  fact  being  that  his  wife,  in 
whose  employ  he  had  been  prior  to 
marriage,  had  executed  in  his  favor, 
after  marriage,  an  instrument  acknowl- 
edging  an   indebtedness,   and   stating 


SURVEY,   ETC.,    WHEN   A    WARRANTY.  37Q 

So  also  it  is  highly  important  to  observe  that  a  warranty  as  to 
the  description  of  the  premises  by  reference  to  a  plan,  survey  or 
other  paper  of  a  certain  date,  expressed  or  implied,  is  not  neces- 
sarily a  warranty  that  such  description  will  be  accurate  in  all  its 
details  as  of  a  later  date;  and  particularly  where  the  policy  contains 
a  privilege  to  make  additions.^  And  if  a  map  is  referred  to  in  the 
policy  apparently  for  the  purpose  of  showing  the  relative  situation 
of  buildings,  descriptive  words  upon  it  as  to  use  or  contents  should 
not  be  held  to  prevent  a  rearrangement  of  the  contents.^ 

Sometimes  in  the  "forms"  or  description  in  the  policies  as  em- 
ployed from  year  to  year  in  renewing  insurance  on  a  certain  prop- 
erty, the  phrase  "as  per  plan  on  file,"  or  "as  per  survey  on  file"  is 
used,  whereas  in  fact  such  a  plan  or  survey,  though  correct  at  the 
time  when  it  was  made,  may  be  quite  incorrect  in  particulars  at 
date  of  renewal.  Where  both  parties  know  that  such  a  plan  is  out  of 
date,  the  court  implies  an  intent  to  refer  to  it  for  purposes  of  identifi- 
cation or  description  rather  than  as  a  warranty.^ 

A  written  application  means  one  signed  by  the  assured  or  by  his 
authority.  An  application  blank,  if  neither  signed  nor  authorized 
l)y  the  assured,  but  filled  out,  signed  and  turned  in  to  the  company 
by  its  agent,  does  not  bind  the  assured,  though  the  company  may 
have  relied  upon  it.^     Likewise  a  policy  though  expressly  referring 

that  it  should  be  a  lien  upon  her  prop-  Court  said:  "the  survey  is  referred  to 
erty,  Rohrbach  v.  Germania  Fire  Ins.  in  that  portion  of  the  policy  which  is 
Co.,  62  N.  Y.  47,  20  Am.  Rep.  451.  written  in  and  is  plainly  and  simply 
Where  the  insured  described  his  build-  the  means  used  to  identify  and  de- 
ing  as  "two  stories  high,"  the  main  scribe  the  property  to  be  insured, 
part  of  the  building  in  fact  being  two  This  is  the  more  apparent  since  the 
stories,  but  a  small  rear  addition  being  reference  by  its  terms  refers  to  no 
only  one  story,  the  inaccuracy  was  particular  survey,  though  three,  made 
held  to  be  no  breach  of  warranty,  at  different  times,  of  the  same  property, 
Wilkins  v.  Germania  Fire  Ins.  Co.,  .57  Avere  on  file  at  the  agent's  office,"  Vilas 
Iowa,  529.  A  warranty  that  a  room  is  v.  A^.  1'.  Central  Ins.  Co.,  9  Hun 
warmed  by  a  stove,  and  that  the  pipe  (N.  Y.),  121  ("if  the  application  was 
is  well  secured,  means  that  the  room  evidence  for  any  purpose  it  informed 
is  so  warmed,  and  the  pipe  so  secured,  the  defendant  of  the  nature  of  plain- 
when  the  stove  is  in  use;  but  not  at  tiff's  title  at  its  date"), 
other  times,  Loud  v.  Citizens'  Mut.  Ins.  •*  Blass  v.  Agricultural  Ins  Co  18 
Co.,  2  Gray  (Mass.),  221.  App.   Div.  484,  46  N.  Y.   Supp.  392, 

^Arlington    Mfg.     Co.     v.     Colonial  aff'd  162  N.   Y.  639,  57  N.  E.   1104; 

Asstir.  Co.,  180  N.  Y.  337  (plan  on  file  Benninghoff  v.  Agricultural  Ins.  Co.,  93 

with    broker    referred    to    in    policy).  N.  Y.  495;  Mowry  v.  Agricultural  Ins. 

And  see  Butterworth  v.  Western  Assur.  Co.,  64  Hun,  137,  18  N.  Y   Supp   834 

Co.,   132   Mass.   489.     A  warranty  of  aff'd  138  N.  Y.  642,  34  N.  E.  512.    A 

present  use  is  not  of  necessity  a  war-  false  description  of  the  property  may 

ranty  of  continuance,  §  112,  supra.  prevent  a  meeting  of  the  minds  and  so 

^  Fair  v.   Manhattan  Ins.    Co.,    112  defeat  the  contract,  5anc?ers  v.  Cooper, 

Mass.  320.  115  N.  Y.  279,  22  N.  E.  212.    An  ap- 

^  Clinton  v.  Hope  Ins.  Co.,  45  N.  Y.  plication  signed   by  the   president  of 

454,  aff'g  51  Barb.  647.    The  Supreme  another  insurance  company  was  held 


380 


MEANING 


AND    lAldM.    i;i'Ki;<T    OF    FIRE    POLICY 


to  an  application  "whereon  it  is  issued"  is  not  void  simply  because 
there  is  no  application.^  And  it  is  recognized  generally  that  un- 
answered questions  in  an  application  constitute  no  part  of  the 
insurance  contract." 

This  clause  is  not  in  the  Massachusetts  form  of  policy. 

§  283.  Who  are  Agents  of  the  Company.— /w  any  matter  relating 
to  this  insurance,  no  person,  unless  duly  authorized  in  writing,  shall 
be  deemed  the  agent  of  this  company. 

This  clause  has  already  been  discussed  in  a  previous  chapter, 
under  the  subject  of  waiver  and  estoppel.^  If  the  company  makes 
it  true,  they  can  have  the  benefit  of  it;  otherwise  not.-"^  The  clause 
is  tantamount  to  a  notice  in  respect  to  the  method  the  company 
adopts  to  give  authority  to  its  agents;  and  if  not  true,  or  if  in  fact 


not  to  be  bindiiifi  upon  the  insured, 
though  referred  to  in  tiie  policy,  Denny 
V.  Conwaij,  etc.,  Ins.  Co.,  13  (iray 
(Mass.),  492. 

i  Bla  e  V.  Exchange  Mid.  Ins.  Co., 
12  Gray  (Mass.),  20.5.  But  if  the 
policy  expressly  refer  to  an  applica- 
tion the  insured  (-annot  repudiate  the 
application  on  the  ground  that  the 
agent  making  it  had  no  authority  to 
act  for  hi:n,  Draper  v.  Charter  Oak  F. 
Ins.  Co.,  2  Allen  (Mass.),  569. 

2  Bro.vn  v.  Greenfield  Life  As.m.,  172 
Mass.  498,  53  N.  E.  129.  And  see 
p.  128,  note  2;  and  §  113,  snpra. 

3  Statutes  in  some  states  provide  in 
substance  that  misrepresentations  only 
if  material  shall  avoid  the  policy; 
others  provide  that  application  or  by- 
laws of  the  company  to  become  part 
of  the  policy  must  be  set  forth  therein 
or  attached  thereto.  See  Appendix, 
ch.  I.  In  Massachusetts  an  application 
to  be  treated  as  part  of  the  contract 
must  be  incorporated  into  the  policy 
accurately  and  in  full,  Wheeler  v. 
Watertown  F.  Ins.  Co.,  131  Mass.  1; 
Taiilor  v.  /Etna  Ins.  Co.,  120  Mass.  254. 
And  see  Xugent  v.  Greenfield  L.  Assii., 
172  Mass.  278,  52  N.  E.  440  (incorrect 
copy  of  application  attached  to  policy 
was  rejected);  Wainer  v.  Milford  Mid. 
F.  Ins.  Co.,  153  Mass.  335,  26  N.  E.  877, 
11  L.  R.  A.  598.  Massachusetts,  like 
other  states,  has  statutory  provision: 
"No  oral  or  written  misrepresentation 
or  warranty  made  in  the  negotiation  of 
a  contract  or  policy  of  insurance  by  the 
assured  or  in  his  behalf  shall  be  deemed 


material  or  defeat  or  avoid  the  policy 
or  prevent   its   attaching  unless   such 
misrepresentation  or  warranty  is  made 
with  actual  intent  to  deceive  or  unless 
the  matter  misrepresented  or  made  a 
warranty  increased  the  risk  of  loss," 
Rev.   L.   Ins.    (1907)    §21.     This  pro- 
vision is  held  to  refer  to  the  application 
or  preliminary  negotiation  and  not  to 
a   condition    contained    in    the   policy 
itself,  Barker  v.  Met.  Life  Ins.  Co.,  188 
Mass.  542,  74  N.  E.  945   (cases  cited 
from  other  states).     The  Iowa  stand- 
ard policy  provides:  "X.  Any  applica- 
tion,  survey,   plan,   or  description   of 
property   signed    by   the    insured   and 
referred  to  in  this  policy  shall,  when  a 
copy  is  attached  hereto,  be  a  part  of 
this"  contract,  and  shall  be  held  to  be  a 
representation   and  not   a  warranty." 
The  corresponding  clause  of  the  Michi- 
gan standard  policy  is  as  follows:  "If 
an   application,   survey,   plan,   or   de- 
scription of  property  be  referred  to  in 
this  policy  it  shall  be  a  part  of  this  con- 
tract, and  a  warranty  by  the  insured 
as    to    material    facts."      The    South 
Dakota    standard    policy    is    worded: 
"Neither    the    application    of   the    in- 
sured nor  the  by-laws  of  the  company 
shall  be  considered  as  a  warranty  or  a 
part    of    the   contract   of    insurance." 
Such    phraseology    usually,    but    not 
always,  relegates  the  issue  of  material- 
ity to  the  jury,  §§  93,  101,  109,  supra. 
*  See  ch.  VIII,  supra. 
5  Knights  of  Pythias  v.  Withers,  177 
U.   S.   260;   Bernard  v.   M.   Life  Ins. 
Assoc,  12  Misc.  (N.  Y.)  10. 


WHO  ARE  AGENTS  OF  THE  COMPANY 


381 


the  agent  has  an  authority  broad  enough  to  waive  it,  the  fact  may 
be  shown. ^ 

Agency  involves  a  relation  existing  between  the  company  and 
the  agent,  independent  of  the  policy,  which  is  res  inter  alios  acta, 
and  hence  the  relation  may  be  shown  by  evidence  outside  the  policy,^ 
Logically  speaking,  therefore,  this  stipulation  should  have  been 
omitted  from  the  conditions  of  the  New  York  policy,  as  it  is  from 
the  Massachusetts  and  other  policies.^ 

A  mere  broker  as  such  is  agent  for  the  insured  who  employs  him, 
though  he  is  paid  by  a  perctintage  out  of  the  premiums.^  His  knowl- 
edge and  acts  in  connection  with  the  procuring  of  insurance,  there- 
fore, are  to  be  imputed  to  the  insured  as  principal  and  not  to  the 
insurance  company;^  and  payment  of  the  premium  to  him  is  not 
payment  to  the  company  unless  made  so  by  statute  or  custom.* 


1  Insurance  Co.  v.  Norton,  96  U.  S. 
234;  Smaldone  v.  Ins.  Co.,  162  N.  Y. 
580,  57  N.  E.  168.      ' 

2/m.  Co.  V.  Wilkinson,  13  Wall. 
(U.  S.)  222;  Thuringia  Ins.  Co.  v. 
Goldsmith,  132  Fed.  450;  Williams  v. 
Hartford  Ins.  Co.,  54  Cal.  442,  .j5  Am. 
Rep.  77;  Commercial  Ins.  Co.  v.  Ires. 
56  111.  403;  Kausal  v.  Minn.  Mut.  Fire 
Ins.  Assoc,  31  Minn.  17,  16  N.  W.  4.30, 
47  Am.  Rep.  776;  see  §  158.  The 
editor  of  May  on  Ins.  says:  "It  makes 
no  difference  that  the  policy  declares 
the  agent  to  be  the  agent  of  the  as- 
sured, not  of  the  company.  For  whom 
a  person  is  acting  is  a  matter  of  law 
on  the  facts  of  e^•ery  case.  The  applica- 
tion precedes  the  policy;  and  to  hold 
that  a  provision  in  the  after-coming 
policy,  unknown  to  the  assured  at  the 
time  of  application,  could  turn  the 
insurance  agent  into  his  agent,  when 
he  thought  all  the  time  he  was  dealing 
with  him  and  accepting  his  advice  as 
agent  of  the  company,  would  be  an 
outrage,"  May,  Ins.  (4th  ed.),  286. 

3  Certain  states  have  legislated  upon 
this  subject  (Appendix,  ch.  I),  as,  for 
example,  Iowa,  the  statute  of  which 
provides  that  the  soliciting  agent  shall 
be  held  to  be  the  agent  of  the  insurance 
company,  "anything  in  the  applica- 
tion or  policy  to  the  contrary  notwith- 
standing." Such  statutes  are  con- 
stitutional and  controlling,  Continental 
Life  Ins.  Co.  v.  Chamberlain,  132  U.  S. 
304;  Phil.  Fire  Assoc,  v.  New  York, 
119  U.  S.  110,  7  S.  Ct.  108;  McConnell 
V.  Iowa  Mut.  Aid  Assoc,  79  Iowa,  757. 
But  they  go  to  an  opposite  extreme. 


Certain  standard  policies  differ  from 
those  of  Massachusetts  and  New  York. 
For  example,  the  South  Dakota  pro- 
vides: "Any  person  who  solicits  in- 
surance or  issues  policies  of  insurance, 
or  procures  applications  therefor,  shall 
be  held  to  be,  and  considered,  the  gen- 
eral agent  of  the  insurer  issuing  the 
policy  or  making  a  renewal  thereof, 
except  as  to  proof  of  loss  and  adjust- 
ment thereof."  The  Wisconsin  policy 
provides:  "Up  to  the  time  of  the  de- 
livery of  the  policy  to  assured,  in  all 
transactions  relating  to  this  policy  or 
to  the  property  herein  insured,  be- 
tween the  assured  and  any  agent  of  the 
company,  knowledge  of  the  agent  shall 
be  knowledge  of  the  company;  and  in 
all  transactions  relating  to  the  subject 
of  insurance,  between  the  insured  and 
any  agent  of  the  company  after  loss, 
knowledge  of  the  agent  shall  be  knowl- 
edge of  the  company." 
*  See  §  75,  p.  94,  note  1. 

5  Northrup  v.  Piza,  43  App.  Div. 
284,  aff'd  167  N.  Y.  578;  Westchester 
Fire  Ins.  Co.  v.  Gurian,  115  App.  Div. 
610;  Wisotzkey  v.  Hartford  Fire  Ins. 
Co.,  112  App.  Div.  596;  McGrath  v. 
Home  Ins.  Co.,  88  App.  Div.  153.  But 
a  solicitor  in  the  employ  of  one  in- 
surance office  alone  is  not  a  broker, 
Girardeau  v.  City  of  Atlanta  Ins.  Co. 
(Ga.  App.,  1907),  .58  S.  E.  314.  And 
under  statutes  a  broker  may  also  be- 
come agent  for  the  insurance  com- 
pany, Wicks  Bros.  v.  Scottish  U.  & 
N.  Ins.  Co.,  107  Wis.  606,  83  N.  W. 
781. 

6  See  §  75.  p.  94,  note  1. 


382  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

§  284.  Renewals.— T/iis  folicy  may  by  a  renewal  be  continued  under 
the  original  stipulations,  etc.,  provided  that  any  increase  of  hazard 
must  be  made  known,  etc. 

A  policy  is  sometimes  renewed  by  the  execution  of  a  short  form 
of  instrument  known  as  a  renewal  receipt  which  refers  to  the  old 
policy  and  obviates  the  necessity  of  issuing  a  new  policy  with  de- 
scription and  conditions.^ 

The  company  may  make  a  valid  renewal  by  parol,^  even  though 
the  policy  should  stipulate  that  a  renewal  must  be  in  writing/'' 

Any  increase  of  hazard  at  time  of  renewal,  if  not  disclosed,  avoids 
the  insurance.* 

The  renewal  constitutes  in  effect  a  new  contract  for  a  further 
term,  but  otherwise  based  upon  the  same  terms  and  conditions  as 
the  old,''  unless  some  modification  is  agreed  upon  or  mentioned.^ 
As  colloquially  used  and  as  sometimes  employed  by  the  courts  the 
word  "renewal"  does  not  necessarily  mean  that  all  the  provisions 
of  the  expiring  policy  are  to  continue.'^ 

If  an  express  promise  is  made  by  the  company  to  grant  a  re- 
newal upon  the  same  terms  as  before,  on  failure  to  comply,  the 
company  will  be  compelled  to  reform  in  equity  though  the  assured 
has  omitted  to  read  the  new  policy.**    But  if  no  such  express  promise 

1  Renewal  receipts  are  now  rarely  Fire  Ins.  Co.,  77  N.  Y.  235,  33  Am. 
employed,  new  policies  being  used  for  Rep.  607;  Peacock  v.  New  York  Life 
renewals  instead.  Ins.  Co.,  20  N.  Y.  293.     The  Illinois 

2  King  v.  Cox,  63  Ark.  204,  37  S;  W.  court  says  of  a  renewal  w-hich  was  evi- 
877;  Squier  v.  Hanover  /r?.s-.  Co.,  162  denced  by  a  new  policy:  "A  renewal  of 
N.  Y.  552,  57  N.  E.  93;  Abel  v.  Phoenix  a  policy  is  in  effect  a  new  contract  of 
7ns.  Co.,  47  App.  Div.  81,  62  N.  Y.  assurance,  and,  unless  otherwise  ex- 
Supp.    218.  pressed,  on  the  same  terms  and  condi- 

3  Cohen  v.  Continental  Fire  Ins.  Co.,  tions  as  were  contained  in  the  original 
67  Tex.  325,  60  Am.  Rep.  24.  Other-  policy,"  Hartford  Fire  Ins.  Co.  v. 
wise  under  Georgia  statute,  Roberts  v.  Walsh,  54  111.  164,  167. 

Germania  F.  Ins.  Co.,  71  Ga.  478.  7  Thus  the  new  contract  is  subject 

4  Peoria  Sugar  Ref.  Co.  v.  Peoples'  to  local  laws  in  force  at  the  time  of 
/ns.  Co. ,  52  Conn.  581 ;  CoZe  V.  Germamo  renewal,  Brady  v.  N orthivestern  In.''. 
Fire  Ins'.  Co.,  99  N.  Y.  36,  1  N.  E.  38.  Co.,  11  Mich.  425.  It  may  be  issued  lo 
The  disclosure  may  be  made  orally,  the  assignee  of  the  policy,  Peoria  Ins. 
Liddle  v.  Market  Ins.  Co.,  29  N.  Y.  Co.  v.  Hervey,  34  111.  46;  or  to  the 
184.  executor    of    the    assured,    Phelps    v. 

5  If  nothing  is  said  about  premium,  Gebhard  Ins.  Co.,  9  Bosw.  (N.  Y.)  40-1; 
the  presumption  is  that  the  old  rate  or  to  only  one  of  several  insured, 
continues.  Train  v.  Holland  Purchase  Lockwood  v.  Middlesex  Ins.  Co.,  47 
Ins.  Co.,  62  N.  Y.  598;  Po.st  v.  Mna  Conn.  553. 

7ns.  Co.,  43  Barb.  (N.  Y.)  351;  Boicev.  «  Palmer   v.    Hartford   Ins.    Co.,    54 

7ns.  Co.,  38  Hun  (N.  Y.),  247;  Baldwin  Conn.  488,  9  Atl.  248,  77a7/  v.  Star  Ins. 

V.  Phxnix  Ins.   Co.,  107  Kv.  356,  54  Co.,  77  N.  Y.   235;   Bnrson  v.   Phila. 

S.  W.  13,  92  Am.  St.  R.  362.    Likewise  Fire  A.-^soc,  136  Pa.  St.  267,  20  Atl. 

as  to  length  of  term,  Scott  v.  Home  Ins.  401.     So  a  statement  that  policy  has 

Co.,  53  Wis.  238,  10  N.  W.  238.  been  renewed  together  with  receipt  of 

6  De  Jernette  v.  7^.  &  C.  Co.,  17  Ky.  premium  works  estoppel  against  the 
L.  R.  1088,  33  S.  W.  828;  Hay  v.  Star  company,   International    Trust    Co.  v 


CANCELLATION  383 

has  been  made,  the  assured,  in  the  absence  of  fraud  by  the  company, 
is  bound  by  the  terms  of  the  renewal  poHcy  as  written,  including 
all  modifications.^ 

By  mutual  consent  the  new  contract  may  be  modified  in  respect 
to  any  of  its  provisions,  as  where,  for  example,  the  company  con- 
sents to  a  change  of  location.^ 

It  is  held  that  waivers  and  estoppels  oased  upon  knowledge  of 
existing  facts  and  operative  on  the  original  policy,  will  by  implica- 
tion be  carried  over  to  sustain  renewals.^ 

This  provision  is  omitted  from  the  Massachusetts  policy. 

§  285.  Cancellation. — This  policy  shall  be  canceled  at  any  time  at 
the  request  of  the  insured;  or  by  the  company  by  giving  five  days'  notice 
of  such  cancellation.  If  this  policy  shall  be  canceled  as  hereinbefore 
provided,  or  become  void,  or  cease,  the  premium  having  been  actually 
paid,  the  unearned  portion  shall  be  returjied  on  surrender  of  this  policy 
or  last  renewal,  this  company  retaining  the  customary  short-rate; 
except  that  when  this  policy  is  canceled  by  this  company  by  giving 
notice  it  shall  retain  only  the  pro  rata  premium. 

A  contract  of  insurance  presupposes  mutual  confidence  and  satis- 
faction. Therefore  it  is  a  wise  provision  which  empowers  either 
party  to  terminate  it  at  his  option,  at  any  time,  on  just  terms,  with- 

Norwich  Union  Ins.  Soc,  71  Fed.  81,  379,  8  Am.  Rep.  556.    But  if  the  terms 

36U.  S.  App.  277,  17C.  C.  A.  608.  of    the    renewal    contract    are    under 

1  Thomson    v.    Southern    Mut.    Ins.  negotiation   and   have   not   been   defi- 

Co.,  90  Ga.  78,  15  S.  E.  652  (vacancy  nitely  settled,  the  promise  to  give  a 

clause    changed    from    twenty    to    ten  renewal  is  not  yet  binding  upon  the 

days).     In  like  manner  it  is  held  that  company,  Johnson  v.  Conn.  Fire  Ins. 

a  renewal  receipt  issued  in  the  name  of  Co.,  8-1  Ky.  470;  O'Reilly  v.  Corpora- 

a  firm  covers  the  firm  as  constituted  at  tion  of  London  Assurance,  101   N.  Y. 

the  time  of  issuance,  without  disclosure  575,  since  there  must  be  a  meeting  of 

of  the  changes,  Firemen's  Ins.  Co.  v.  the  minds  of  the  parties.  Royal  Ins. 

Floss,  67  Md.  403,  10  Atl.  139.     The  Co.  v.  Beatty,  119  Pa.  St.  0,  12  Atl.  607; 

beginning  of  the  term  of  renewal  as  King  v.  IleLla  Ins.  Co.,  58  Wis.  508; 

defined  in  the  renewal  receipt  will  con-  Johnson    v.    Connecticut   Ins.    Co.,    84 

trol  even  though  in  fact  both  applica-  Ky.  470.    The  burden  of  proof  is  upon 

tion  and  renewal  are  of -a  later  date,  the  assured,  Giddings  v.  Phoenix  Ins. 

Fuchs  V.  Ger.  Farmers'  Mut.  Ins.  Co.,  Co.,  90  Mo.  272.    And  if  at  time  of  re- 

60  Wis.   286.      The   terms   of  the   re-  newal  the  property  is  already  destroyed 

newal    as    written    prevail,    Shopp    v.  the  renewal  will  not  attach,  Dodd  v. 

Patrons'  Mut.  Fire  Ins.  Co.,  197  Pa.  St.  Home  Ins.  Co.,  22  Oreg.  13,  29  Pac.  3, 

219.  47  Atl.  201.  28  Pac.  881. 

'■^  Rathhone  v.  City  Fire  Ins.  Co.,  31  ^  Kruger  v.  Western  his.  Co.,  72  Cal, 
Conn.  193;  Kunzze  V.  Amer.  Exch.  Fire  91,  13  Pac.  156;  Vanderhcef  v.  Agri- 
Ins.  Co.,  41  N.  Y.  412.  If  the  com-  crdtural  Ins.  Co.,  i(SYi\\n,?,2S]  People's 
pany,  knowing  of  the  change  of  loca-  Ins.  Co.  v.  Spencer,  53  Pa.  St.  353. 
tion,  without  express  consent  issues  The  full  description  of  the  property 
the  renewal  receipt  and  receives  the  contained  in  the  original  is  likewise 
premium,  this  amounts  to  an  implied  carried  over  by  inference,  Garrison  v. 
consent  to  a  change  of  location,  Lud-  Farmers'  Mut.  F.  Ins.  Co.,  56  N.  J.  L. 
loig  V.  Jersey  City  Ins.  Co.,  48  N.  Y.  235,  28  Atl.  8. 


384 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


out  the  consent  of  the  other.^  Despite  this  clause,  however,  it  has 
been  held  that  the  parties  may,  by  mutual  consent,  properly  evi- 
rlenced,  call  off  the  contract  instantaneously,  or  on  any  terms  agreed 
to  between  them.' 

Under  the  clause  the  right  of  either  party  is  absolute.    Motive  or 
absence  of  good  reason  is  therefore  immaterial.^ 

§  286.  Notice   must   be    Peremptory,    Explicit,    Unconditional.— 

A  strict  fulfillment  of  the  requirements  of  the  cancellation  clause 
must  be  observed  by  the  party  thus  seeking  to  terminate  his  con- 
tract prematurely.''  Thus  while  the  form  of  the  request  or  notice, 
not  being  prescribed  by  the  policy,  may  be  by  parol,  or  by  tele- 
graph, or  over  the  telephone,^  nevertheless,  it  must  be  couched  in 
terms  positive,  distinct,  unequivocal  and  unconditional.  Nor  will 
•an  expression  of  wish,  or  purpose,  or  intention  to  cancel  in  future, 
be  sufficient.^     So  also  the  request  or  notice  must  contemplate  an 


1  Without  this  clause  neither  could 
terminate  his  contract  during  its  term 
without  consent  of  the  other,  Roth- 
schild V.  A?n.  Ceni.  Ins.  Co.,  74  Mo.  41, 
41  Am.  Rep.  303. 

2  Sea  Ins.  Co.  v.  Johnston,  105  Fed. 
286,  44  C.  C.  A.  477;  Boland  v.  Whit- 
man, 33  Ind.  G4  (mutual  agreement); 
Kirby  v.  Phoenix  Ins.  Co.,  13  Lea 
(Tenn.),  340  (mutual  agreement); 
TT'icA-s  Bros.  v.  Scottish  Union  &  Nat. 
Ins.  Co.,  107  Wis.  606,  83  N.  W.  781; 
Kooistra  v.  Roc  ford  Ins.  Co.,  122 
Mich.  626,  81  N.  W.  568.  Such  a  rule 
is  doubtless  sound  if  mutual  considera- 
tion for  the  new  arrangement  can  be 
sho-rtTi,  Supple  V.  Cann,  9  Ir.  C.  L.  R.  1 
(mutual  promises  will  modify);  Miller 
V.  Firemen's  Ins.  Co.,  54  W.  Va.  344, 
46  S.  E.  181  (surrender  of  policy  on 
request);  Mutual  consent  to  cancel 
furnishes  sufficient  consideration.  Na- 
tional L.  Ins.  Co.  V.  Met.  L.  Ins.  Co.. 
226  111.  102,  80  N.  E.  747.  The  United 
States  Supreme  Court  says,  "a  con- 
tract to  cancel  it  is  as  solemn  an  act 
as  a  contract  to  make  it,"  Head  v. 
Prov.  Ins.  Co.,  2  Cranch,  127,  168.  So 
the  terms  of  the  clause,  it  is  said,  may 
be  modified  or  waived.  Southern  Ins. 
Co.  V.  Williams,  62  Ark.  382,  35  S.  W. 
1101;  Binghamv.  North  Am.  Ins.  Co., 
74  Wis.  498,  43  N.  W.  494  (by  sur- 
render of  policy);  JUtna  Ins.  Co.  v. 
Weissenger,  91  Ind.  297  (waiver  as  to 
amount  of  return  premium).  Can- 
cellation after  loss  is  not  valid  though 
both  parties  be  ignorant  of  loss,  Cass- 


ville  Roller  Mill  Co.  v.  /Etna  Ins.  Co., 
105  Mo.  App.  146,  79  S.  W.  720. 

3  International  Ins.  Co.  v.  Franklin 
Ins.  Co.,  66  N.  Y.  119;  Phoenix  Mut.  F. 
Ins.  Co.  V.  Brecheisen,  50  Ohio  St.  542, 
35  N.  E.  53;  Sun  Fire  Office  v.  Hart, 
L.  R.  14  App.  Cas.  98.  The  object 
being  to  put  an  end  to  a  subsisting 
contract,  the  party  alleging  that  re- 
sult holds  the  burden  of  proof.  Phoenix 
Assur.  Co.  V.  McArthiir,  116  Ala.  659, 
22  So.  903. 

*  Davison  v.  London  &  Lan.  Ins.  Co., 
189  Pa.  St.  132,  42  Atl.  2;  Baldwin  v. 
Penn.  Ins.  Co.,  206  Pa.  St.  248,  55  Atl. 
970;  Bradshaw  v.  Fire  his.  Co.  of 
Phila.,  89  Minn.  334,  94  N.  W.  866; 
Seamans  v.  Ins.  Co.,  90  Wis.  490,  63 
N.  W.  1059.  A  notice  is  essential, 
.'■Etna  Ins.  Co.  v.  Rosenburg,  62  Ark. 
507,  36  S.  W.  908;  Taylor  v.  Glens  Falls 
Ins.  Co.,  44  Fla.  273,  32  So.  887. 

^  Schwa rz.schild  v.  Phoenix  Ins.  Co., 
124  Fed.  52,  59  C.  C.  A.  572;  Colonial 
Assur.  Co.  V.  National  F.  Ins.  Co.,  110 
111.  App.  471;  Manchester  Ins.  Co.  v. 
7ns.  Co.  of  III,  91  111.  App.  609;  David- 
son V.  German  Ins.  Co.  (N.  J.  L.  1907), 
65  Atl.  996;  but  see  Healy  v.  Ins.  Co., 
50  App.  Div.  327,  63  N.  Y.  Supp.  1055; 
Springfield  F.  &  M.  Ins.  Co.  v.  Mc- 
Kinnon,  59  Tex.  507. 

6  Van  Tassel  v.  Greemcich  Ins.  Co., 
151  N.  Y.  130,  45  N.  E.  365;  Griffey 
v.  N.  Y.  Cent.  Ins.  Co.,  100  N.  Y.  417, 
3  N.  E.  309,  53  Am.  Rep.  202;  Van 
Valkenburgh  v.  Lenox  Fire  Ins.  Co.,  51 
N.  Y.  465;  Partridge  v.  Mil.  Mech.  Ins. 


NOTICE   MUST   BE    PEREMPTORY,    EXPLICIT,    UNCONDITIONAL    385 

absolute  termination  of  the  entire  contract,  not  a  reduction  of  its 
amount,  inasmuch  as  the  terms  of  the  clause  offer  no  option  to  either 
party  to  cancel  in  part.  Any  such  modification  can  only  be  accom- 
plished by  mutual  agreement. 

The  rule  is  exemplified  by  the  famous  Van  Tassel  litigation. 
Van  Tassel  was  the  owner  of  a  grain  warehouse  in  New  York  City, 
on  which  he  was  carrying  $30,000  insurance  in  several  policies 
shortly  expiring.  He  was  induced  by  one  of  their  solicitors  to  turn 
over  the  account  to  the  brokerage  house  of  Beecher  &  Benedict, 
who  undertook  to  renew  or  replace  the  same  amount  upon  expira- 
tion of  the  old  policies.  As  part  of  such  renewals  a  clerk  from  the 
placing  department  of  Beecher  &  Benedict  procured  from  the  Green- 
wich Insurance  Company  a  regular  binder  for  $10,000  in  favor  of 
Mr.  Van  Tassel  on  his  building  for  the  term  of  twelve  months  from 
January  1st  at  noon.  About  a  week  thereafter,  January  7th,  the 
company,  having  meanwhile  surveyed  the  risk,^  sent  this  notice  to 
the  brokers:  "Your  application  for  renewal  of  insurance  is  declined 
for  $10,000;  would  renew  for  $5,000  if  wanted.  You  will,  therefore, 
consider  that  the  risk  is  not  held  binding  by  this  company  for  more 
than  $5,000."  Six  days  thereafter  and  before  any  reply  had  been 
sent  to  the  company  the  building  was  destroyed  by  fire.  The  court 
held  that  the  binding  slip  was  equivalent  to  a  policy  and  could  only 
be  canceled  ex  parte  by  a  five-day  peremptory  notice  of  termina- 
tion, not  by  a  proposal  in  effect  to  continue  on  the  risk  at  a  reduced 
amount.  After  many  trials  and  arguments  on  appeal,-  the  insured, 
who  had  sued  on  the  binder,  recovered  judgment  for  its  full  amount 
with  interest.^ 

When  the  terms  of  the  clause  have  been  complied  with,  the  return 

Co.,  13  App.  Div.  519,  43  N.  Y.  Supp.  because  the  broker  formerly  in  charge, 
632,  aff'd  162  N.  Y.  597,  57  N.  E.  1119;  displeased  at  losing  the  account,  made 
Gardner  v.  Standard  Ins.  Co.,  58  Mo.  some  disparaging  remarks  to  the  com- 
App.  611;  Am.  Ins.  Co.  v.  Brool  s,  83  panv  regarding  the  risk. 
Md.  22,  34  Atl.  373;  Savage  v.  Phoenix  2  See  p.  97,  note  1,  supra, 
his.  Co.,  12  Mont.  458,  31  Pac.  66;  3  Van  Tassel  v.  Greenxiich  Ins.  Co., 
State  Ins.  Co.  v.  Hale  (Neb.),  95  N.  W.  151  N.  Y.  130, 45  N.  E.  365, id.,  28  App. 
473  (an  illegible  notice  ineffective);  Div.  163,  51  N.  Y.  Supp.  79;  McLean 
Southern  Ins.  Co.  v.  Williams,  62  Ark.  v.  Am.  Ins.  Co.,  122  Iowa,  355,  98 
382,  35  S.  W.  1101;  Davis  Lumber  Co.  N.  W.  146;  Western  Assur.  Co.  v. 
v.  Hartford  Ins.  Co.,  95  Wis.  226,  70  Stoddard,  88  Ala.  612.  All  these  rules 
N.  W.  84,  37  L.  R.  A.  131;  Petersburg  apply  equally  to  the  contract  of  fire 
Ins.  Co.  V.  Manhattan  Ins.  Co.,  66  Ga.  insurance,  whether  evidenced  by  a 
446;  Ncivark  Ins.  Co.  v.  Sammons,  110  policy,  a  rene^^'al  receipt,  or  a  bind- 
Ill.  166.  A  proper  notice  is  essential  ing  slip.  Van  Tassel  v.  Greenicich  Ins 
even  though  motive  for  cancellation  is  Co.,  151  N.  Y.  130,  45  N.  E.  365; 
because  of  some  default  of  the  in-  Karelsen  v.  Sun  Fire  Office,  122  N.  Y. 
sured,  Dove  v.  Ro^al  Ins.  Co.,  98  545,  25  N.  E.  921.  In  the  large  cities 
Mich.  122,  57  N.  W.  30.  a  renewal  is  usually  closed  by  a  binder 
'  This   action    was   probably   taken  for  convenience. 

25 


8S6  MEANING    AND    LEGAL    EFFECT    UF    FIRE    POLICY 

of  the  policy  and  its  physical  cancellation  or  defacement  are  not 
essential  to  the  cancellation;  but  the  request  or  notice  does  not 
become  operative  nor  the  period  begin  to  run  until  such  demand 
by  the  one  party  for  cancellation  is  actually  received  by  the  other.^ 

§  287.  Cancellation  by  the  Insure^.— The  insured  can  cancel 
forthwith  at  any  time  by  request.  No  written  notice  is  required, 
and  by  the  better  reason  the  surrender  of  the  policy  is  not  a  pre- 
requisite.2  Cancellation  is  immediate  and  does  not  await  return 
of  unearned  premium.^ 

But  the  New  York  Court  of  Appeals  takes  the  exceptional  view 
that  to  accomplish  a  cancellation  the  insured  must  both  give  notice 
and  surrender  the  policy.  As  to  whether  the  insured  would  be  de- 
barred from  cancelling,  if  he  had  mislaid  or  lost  the  policy,  no  opin- 
ion is  expressed.'*  One  of  the  learned  justices  of  that  court  has  gone 
even  further  than  this  and  says,  "whether  the  insurer  or  the  insured 
is  the  actor  in  the  attempt  to  cancel,  cancellation  is  not  complete 
until  the  unearned  premium  is  returned."  ^  We  may  safely  pre- 
sume, however,  that  this  phraseology  was  not  intended  to  indicate, 
that  the  insurer,  by  withholding  the  unearned  premium,  may  post- 
pone a  cancellation  upon  notice  of  the  insured  otherwise  regular. 

§  288.  Cancellation  by  the  Company.— By  other  forms  of  policies 
either  party  could  cancel    instanter.     But  the  assured  m.ay  more 

1  Farnumv.  Phcenix  his.  Co.,  83  C'dl.  company  then  retains  short  rates 
246,  23  Pac.  869;  Bankers'  Mut.  Cas.  (short  rates  are  a  little  more  than  the 
Co.  V.  People's  Bank,  127  Ga.  326,  56  regular  rates)  and  pays  back  to  the 
S.  E.  429;  Newark  Ins.  Co.  v.  Sammons,  assured  the  balance  of  the  premium 
110  111  166;  Crown  Point  Iron  Co.  received  by  it,  Home  Ins.  Co.  v.  Bur- 
V  Mtna  Ins.  Co.,  127  N.  Y.  608,  28  nett,  26  Mo.  App.  175;  State  Ins.  Co.  v. 
N.  E.  653,  14  L.  R.  A.  147  (not  enough  Horner,  14  Colo.  391,  23  Pac.  788.  If 
that  it  is  in  the  mail).  But  see  the  no  premium  has  been  paid  to  it,  but 
extraordinary  rule  adopted  by  the  credit  given,  the  company  has  its  right 
Kentucky  court,  Continental  Ins.  Co.  of  action  for  the  proportion  of  premium 
V.  Daniel,  25  Ky.  Law  Rep.  1.501,  78  due,  Manhattan  Ins.  Co.  v.  Harlem  R. 
S.  W.  866  (holding  that  first  there  Lumber  Co.,  26  Misc.  394,  56  N.  Y. 
must  be  an  act  of  cancellation  and  Supp.  186;  St.  Paul  F.  &  M.  Ins.  Co. 
after  that  the  notice).  v.  Neidecken,  6  Dak.  494,  43  N.  W.  696. 

2  Insurance  Commissioners  v.  Peo-  As  to  authority  of  agent  of  assured  to 
pies'  Fire  Ins.  Co.,  68  N.  H.  51,  44  cancel,  see  Northern  Assur.  Co.  v. 
Atl.  82.  If  he  is  dissatisfied  with  the  Hamilton,  50  Neb.  248,  69  N.  W.  781; 
policy  the  proper  thing  to  do  is  to  re-  and  see  §  288.  Agent  of  company  can- 
turn  it  and  not  rely  upon  a  notice  only,  not  rescind  the  contract  without  con- 
Farmers'  Ins.  Co.  v.  Phcenix  Ins.  Co.,  sent  of  the  parties,  Massasoit,  etc.,  Co. 
65  Neb.  14,  90  N.  W.  1000,  95  N.  W.  3;  v.  Assur.  Co.,  125  Mass.  110. 

Clem  V.  German  Ins.  Co.,  29  Mo.  App.  •*  Bud  ley  v.   Citizens'  Ins.  Co.,  188 

666.  N.  Y.  399,  405. 

^Parsons    v.    Northwestern    N.    Ins.  ^Buckley  v.   Citizens'  Ins.   Co.,  188 

Co.    (Iowa,     1907),    110    N.    W.    907.  N.Y.  399,405  (Vance,  J,  in  dissenting 

To  get  his  return  premium,  however,  opinion), 
he   must   surrender   the   policy.     The 


CANCELLATION    BY    THE    COMPANY  387 

reasonably  be  afforded  at  least  a  short  period  within  wh.ch  to  re- 
place his  insurance  whenever  notice  of  cancellation  comes  from  his 
insurer.*  The  standard  policy  accordingly  gives  him  five  days  for 
this  purpose;  and  during  the  five  days  he  is  still  covered. ^ 

Prior  to  the  adoption  of  the  standard  form,  it  was  held  in  many 
decisions  under  an  earlier  clause,  that  in  order  to  effect  a  cancella- 
tion, the  company,  if  in  receipt  of  the  premium,  must  accompany 
its  notice  with  a  payment  or  tender  of  the  unearned  portion  of  the 
premium.^  This  rule  was  onerous  to  the  companies.  A  company 
has  a  fixed  habitation  and  is  solvent,  else  the  insurance  department 
would  not  allow  it  to  transact  business.  Ui3on  cancellation  of  a 
policy  the  insurer  is  as  much  entitled  to  a  surrender  of  the  policy 
as  the  assured  is  to  a  return  of  the  unearned  premium."*  The  in- 
sured are  scattered  all  over  the  country.  Sometimes  several  notices 
must  be  sent  before  the  right  party  can  be  found.  Legal  tender  can 
be  made  only  in  cash.^  Rates  of  premium  are  so  low  that  no  com- 
pany can  afford,  in  general,  to  make  personal  tender.  It  is  not  safe 
to  send  cash  by  mail,  and  though  the  assured  receive  the  remit- 
tance, if  unscrupulous,  he  may  deny  it,  and,  though  honest,  after 
getting  his  cash  he  will  seldom  take  the  trouble  to  return  the  policy 
until  it  is  demanded.^  The  framers  of  the  standard  policy,  therefore, 
inserted  the  seemingly  unambiguous  statement  that  the  notice  by 
itself  shall  cancel,  but  that  "the  unearned  premium  shall  be  re- 
turned on  surrender  of  this  policy  or  last  renewal."  In  the  opinion 
of  some  of  the  courts,  the  provision  must  be  enforced  as  it  reads.''' 

i  Emmott  v.  Slater  Mut.  F.  Ins.  Co.,  *  Senor  v.    Ins.    Co.,    181    Mo.    104, 

7  R.  I.  562.     In  some  states  statutes  114,  79  S.  W.  687. 

have    provided    for    this.      Appendix,  5  Quong   Tue  Sing  v.  Assur.   Corp., 

ch.  I.  86   Cal.    566,   25   Pac.    58    (other   in- 

^  Healei/  v.  7ns.   Co.,  50  App.   Div.  surance  instead  is  no  tender). 

327,  63  N.  Y.  Supp.  1058;  Wicks  Bros.  e  Until    policy    is    actually    surren- 

V.  Scottish  U.  <&  N'.  Ins.  Co.,  107  Wis.  dered   the   company  is  solicitous  lest 

606,  83  N.  W.  781.     But  when  broker  some  claim  be  based  upon  it  by  the 

has  replaced  he  is  apt  to  telephone  the  insured  or  some  assignee. 

prior  insurer  that  it  is  off   the  risk,  ^  Schwarzckild  v.   Phoenix  Ins.    Co., 

which  is  then  a  termination  by  mutual  124  Fed.  52,  59  C.  C.  A.  572;  El  Paso 

consent  though  the  five  days  have  not  Reduction  Co.  v.  Hartford  Ins.  Co.,  121 

run,  Arnfeld  v.  Guardian  Assur.  Co.,  Fed.  937;  Davidson  v.  German  Ins.  Co. 

172  Pa.  St.  605,  34  Atl.  580.  (N.  J.  L.,  1907),  65  Atl.  996;  Parsons 

^  Van  Valkenburghv.  Lenox  Ins.  Co.,  v.  Northwestern  Xat.  Ins.  Co.   (Iowa), 

51    N.    Y.    465;    German   Ins.    Co.    v.  110  N.  W.  907;  Backus  v.  Exchange 

Rounds,  35  Neb.  752;  Manlove  v.  Com-  Ins.  Co.,  26  App.  Div.  91,  49  N.  Y. 

mercial  Ins.  Co.,  47  Kan.  309,  27  Pac.  Supp.  677;  Wdlthear  v.  Penn.  Ins.  Co., 

979.     The  company  must  return  the  2  App.  Div.  328,  37  N.  Y.  Supp.  857; 

whole    unearned    premium    and    not  and  see  Buchanan  v.  West.  Co.  Mut. 

deduct  any  part  of  the  broker's  com-  Ins.  Co.,  61  N.  Y.  611,  612;  Ins.  Co.  v. 

mission,  Scottish  U.  &  N.  Ins.  Co.  v.  Brecheisen,  50  Ohio  St.  542,  35  N.  E. 

Dangaix,  103  Ala.  38S;  McKennav.  Ins.  53;   Straker  v.   Phoenix  Ins.   Co.,   101 

Co.,  30  Mi.sc.  727,  63  N.  Y.  Supp.  164.  Wis.  413,  421,  77  N.  W.  752. 


388 


MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 


But,  by  the  current  of  authority  up  to  this  date,  the  duty  is  laid 
upon  the  company,  when  seeking  cancellation  under  the  standard 
policy,  to  accompany  its  notice  of  cancellation  with  payment  or 
actual  tender  of  the  return  premium  in  order  to  make  the  notice 
operative.  Such  courts  apparently  consider  it  unconscionable  to 
allow  the  company  to  get  off  the  risk  without  simultaneously  rem- 
stating  the  assured,  and  putting  him  in  funds  with  which  to  procure 
his  substitute  insurance.^  It  is  indeed  difficult,  however,  to  escape 
the  conclusion  of  the  dissenting  judges  in  the  New  York  Court  of 
Appeals,  voiced  by  the  chief  justice,  that  this  is  by  interpretation 
to  substitute  a  new  contract  in  place  of  unambiguous  terms  adopted 
by  the  legislature.^ 

In  computing  the  required  time  of  five  days  the  day  of  service  is 
excluded  and  the  cancellation  is  not  complete  until  midnight  of  the 
fifth  day  thereafter  though  the  policy  itself  runs  from  noon.^ 

The  notice  must  be  given  to  the  assured  himself,^  or  to  someone 
duly  authorized  to  receive  it  on  his  behalf."     A  broker  or  agent  em- 


1  Tisdell  V.  New  Hampshire  Ins.  Co., 
155  N.  Y.  163,  49  N.  E.  664,  40  L.  R.  A. 
765;  Nitsch  v.  Am.  Cent.  Ins.  Co.,  152 
N.  Y.  635,  46  N.  E.  1149;  Buclley  v. 
Citizens'  Im.  Co.,  188  N.  Y.  399;  Peter- 
son V.  Hartford  Ins.  Co.,  87  111.  App. 
567,  111  111.  App.  466;  Hartford  Ins.  Co. 
V.  McKenzie,  70  111.  App.  615;  Chris- 
man,  etc.,  Ban'iing  Co.  v.  Hartford  Ins. 
Co.,  75  Mo.  App.  310  (the  reasoning 
does  not  lead  to  the  result);  Phila. 
Linen  Co.  v.  Manhattan  Fire  Ins.  Co.,  8 
Pa.  Dist.  R.  261;  Phoenix  Assur.  Co.  v. 
Munger  Mfg.  Co.,  92  Tex.  297,  49 
S.  W.  222;  Hartford  Ins.  Co.  v.  Cameron 
18  Tex.  Civ.  App.  237,  45  S.  W.  158. 
And  see  Hamburg-Bremen  Ins.  Co.  v. 
Browning,^  102  Va.  890,  893.  The 
Mississippi  court  seems  to  have  gone 
to  yet  greater  extremes  in  favor  of  the 
insured,  Miss.  Fire  Assoc,  v.  Dobbins. 
81  Miss.  630.  But  it  is  sufficient,  if 
the  company's  agent,  under  instruc- 
tions from  the  insured,  use  the  money 
to  procure  other  insurance,  Hillock  v. 
Traders'  Ins.  Co.,  54  Mich.  531,  20 
N.  W.  571;  Miller  v.  Home  Ins.  Co.,  71 
N.  J.  L.  175,  58  Atl.  98.  Or  the  in- 
sured may  accept  in  satisfaction  less 
than  the  full  amount  of  unearned 
premium,  ^Etna  Ins.  Co.  v.  Weissinger, 
91  Ind.  297. 

2  Tisdell  V.  New  Hampshire  F.  Ins. 
Co..  155  N.  Y.  163.  170,  supra. 

3  Penn.  Plate  Glass  Co.  v.  Spring 
Garden  Ins.  Co.,   189   Pa.    St.    2.55,  42 


Atl.  138.  But  the  notice  will  run  from 
its  receipt  though  the  \\Tong  date  be 
given  in  it,  Phila.  Linen  Co.  v.  Man- 
hattan F.  Ins.  Co.,  8  Pa.  Dist.  Ct.  261. 

i  Taylor  v.  Glens  Falls  Ins.  Co.,  44 
Fla.  273,  32  So.  887.  It  is  usually  sent 
by  registered  mail  to  secure  some 
proof  of  service. 

5  Farnum  v.  Phanix  Ins.  Co.,  83 
Cal.  246,  23  Pac.  869;  Edwards  v.  Ins 
Co.,  101  Mo.  App.  45,  73  S.  W.  886 
(bookkeeper);  Von  Wien  v.  Ins.  Co., 
54  N.  Y.  Super.  Ct.  276;  Trundle  v. 
Prov.  Wash.  Ins.  Co.,  54  Mo.  App. 
188  (insured's  husband);  Dickert  v. 
his.  Co.,  52  S.  C.  412,  29  S.  E.  786. 
The  person  liable  to  pay  the  premium 
is  said  to  be,  in  general,  the  person  to 
serve,  Peterson  v.  Hartford  F.  Ins.  Co., 
87  111.  App.  567.  But  the  assured  may 
ratify  an  unavithorized  cancellation  if 
he  accepts  as  a  substitute  a  new  policy 
in  place  of  that  attempted  to  be  can- 
celed, Larsen  v.  Ins.  Co..  208  111.  166, 
70  N.  E.  31;  Hopkins  v.  Phoenix  Ins. 
Co.,  78  Iowa,  344,  43  N.  W.  197; 
Arnfeld  v.  Assur.  Co.,  172  Pa.  St.  605, 
34  Atl.  580.  So  also  policy  is  can- 
celed after  five  days  without  a  return 
of  premium  if  insured  instructs  agent 
to  use  amount  in  procuring  other  in- 
surance, Citizens'  Ins.  Co.  v.  Hender- 
son El.  Co.  (Ky.,  Oct.,  1906),  96  S.  W. 
601.  An  instruction  to  the  agent  to 
replace  ratifies  the  cancellation,  Hillock 
V.    Traders'    Ins.    Co..    54    Mich.    531. 


CANCELLATION    BY   THE   COMPANY  389 

ployed  merely  for  the  purpose  of  procuring  insurance  has  no  implied 
authority  to  cancel,  or  to  accept  an  operative  notice  of  cancella- 
tion. On  receiving  the  policies  and  transmitting  them  to  the  princi- 
pal his  authority  terminates.*  His  duty  is  to  get  insurance  for  his 
customer,  not  to  destroy  it.  Hence  it  follows  reasonably,  that 
notice  of  cancellation  by  the  company  served  upon  such  an  agent 
of  the  insured  is  unavailing.-  But,  on  the  other  hand,  until  the  policy 
is  delivered  or  so  long  as  the  contract  rests  upon  a  binding  slip  in 
charge  of  the  broker,  the  broker  may  be  served  and  he  can  also  agree 
to  cancellation  instanter  in  his  discretion.^  So  also  notice  given  to 
an  agent  of  the  assured  in  general  and  continuous  charge  of  his 
insurance  matters  is  sufficient.'* 

In  connection  with  the  cancellation  or  attempted  cancellation  of 
a  policy,  and  the  substitution  or  attempted  substitution  of  a  policy 
from  another  company  in  its  place,  the  practical  question  not  in- 
frequently arises  as  to  whether  both  policies  are  in  force  at  the  time 
of  the  fire,  or,  if  only  one  of  them,  which  one.  Where  the  aggregate 
insurance  available  exceeds  the  loss,  a  controversy  over  such  an 
issue  is  sometimes  managed,  though  in  the  name  of  the  insured,  yet 
in  reality  by  one  of  the  insurers,  who  claims  to  be  exempt,  and  who 
aims  in  the  action  first  tried  to  so  determine  the  principle  at  stake 
as  to  fasten  the  entire  responsibility  upon  the  other  insurers. 

And  see  Hamburg- Brem.  F.  Ins.  Co.  v.  Merchants'  Ins.  Co.  v.  Shults,  8  Kan. 

Browning,  102  Va.  890,  48  S.  E.  2.    A  App.    798,   57   Pac.    306;   Kooistra  v. 

surrender  of  policy  without  exacting  Rock  ford  Ins.  Co.,  122  Mich.  626,  81 

payment   of   return    premium    ratifies  N.  W.  568;  Hermann  v.  Niagara  Fire 

cancellation,  Bingham  v.  Ins.  Co.,  74  Ins.  Co.,  100  N.  Y.  411;  Heah/  v.  Ins. 

Wis.  498,  43  N.  W.  494;   Buckley  v.  Co.,  50  App.  Div.  327,  63  N.  Y.  Supp. 

Citizens'  Ins.  Co.,  188  N.  Y.  399,  81  1055;  Martin  v.  Palatine  Ins.  Co.,  106 

N.   E.    165;   Miller  v.   Firemen's  Ins.  Tenn.  523,  61  S.  W.  1024;  Davis  Lum- 

Co.,  54  W.  Va.  344,  46  S.  E.  181.     If  ber  Co.  v.  Ins.   Co.,  95  Wis.  226,  70 

the     new     company     knows    nothing  N.  W.  84. 

about  the  proposed  substitution  and  likelier  v.   Ins.   Co.,  24  Misc.   136, 

issues  a  policy  unconditionally,  then  53  N.  Y.  Supp.  323;  Karelsen  v.  Sun 

the  assured  may  claim  on  both  policies.  Fire  Office,  122  N.  Y.  545,  25  N.  E. 

See  Beirmeister  v.  City  of  London  his.  921;  Li-pman  v.  Niagara  Ins.  Co.,  121 

Co.,  61  Hun,  620,  15  N.  Y.  Supp.  433,  N.  Y.  454,  24  N.  E.  699.     And  if  on 

39  N.  Y.  St.  R.  741.  aff'd  133  N.  Y.  receiving  the  notice  the  assured  sends 

564,  30  N.  E.  1149.  the  policy  to  his  broker,  that  act  im- 

1  Niagara  F.  Ins.  Co.  v.  Raden,  87  pliedly    puts    the    broker    in    charge, 

Ala.    311,    13    Am.  St.    R.  36;    Brit.-  Parker,   etc.,   Mfg.    Co.    v.    Exch.   Ins. 

Am.   Assur.    Co.   v.    Cooper,   26  Colo.  Co.,  166  Mass.  484,  44  N.  E.  614. 

452,  58  Pac.  592;  Broaduater  v.  Lion  *  Snyder  v.  Commercial  Ins.  Co.,  67 

F.  Ins.  Co.,  34  Minn.  465,  26  N.  W.  N.  J.  L.  7,  50  Atl.  509;  Faulkner  v. 

455;  Mut.  Assur.  Soc.  v.  Ins.  Co.,  84  Manchester  F.  Assur.   Co.,  171   Mass. 

Va.  116,  4  S.  E.  178;  Wisconsin  Cent.  349,  50  N.  E.  529;  Dibble  v.  Northern 

Ry.  Co.  V.  Phoenix  Ins.  Co.,  123  Wis.  Assur.  Co.,  70  Mich.  1,  37  N.  \Y.  704; 

313,  101  N.  W.  703.  Stone  v.  Franklin  Fire  Ins.   Co.,  105 

i  Grace  v.  Am.  Cent.  Ins.  Co.,  109  N.  Y.  543,  12  N.  E.  45.     A  broker  is 

V.  S.  278,  3  S.  Ct.  207,  27  L.  Ed.  932;  agent  for  the  assured  and  whether  he 


390  MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 

A  litigation  of  this  character  grew  out  of  the  destruction  of  Sny- 
der's department  store  in  Newark,  in  the  loss  of  which  many  in- 
sunuifo  companies  were  interested.  The  new  or  substituted  com- 
pany was  in  that  case  held  liable;  and  the  first  company  was  relieved. 
The  conclusion  of  the  court  rested  upon  the  finding  of  fact  that  the 
broker,  who  had  continuous  charge  of  Snyder's  insurance,  was  a 
general  agent  for  him,  and  authorizied  as  such  to  be  served  with 
notice  of  cancellation  from  the  first  company,  and  to  replace  the 
amount  with  the  second  company,  the  defendant.  Counsel  for  the 
first  company  took  charge  of  the  litigation,  in  the  name  of  Mr. 
Snyder.' 

In  a  Pennsylvania  case  there  was  no  proof  that  the  broker  was  a 
general  agent  for  the  assured  to  receive  cancellation  notices,  and 
moreover  the  fire  occurred  three  da3's,  and  not  five,  after  the  de- 
fendant had  given  notice  of  cancellation  to  the  broker,  which  was 
only  an  oral  notice  at  that;  nevertheless,  the  defendant  was  ex- 
onerated, and  another  company  which  had  replaced  the  amount 
prior  to  the  fire  was  held  responsible.  But  here,  irrespective  of  the 
broker's  authority,  the  insured  ratified  the  substitution  by  collect- 
ing from  the  second  compan}-  a  share  of  the  loss,  and  all  three  prin- 
cipals, to  wit,  the  insured  and  both  companies,  were  aware  of  the 
facts  and  intended  that  the  second  policy  should  be  a  mere  sub- 
stitute for  the  first. - 

In  a  New  York  case  the  policy  for  $2,000  issued  by  the  defend- 
ant, never  having  been  effectively  canceled,  remained  liable,  while 
the  later  insurance,  procured  without  authority  of  the  plaintiff  and 
never  accepted  by  her,  was  not  liable.  November  24th  the  defendant 
sent  to  its  own  local  agent,  Jacobj^,  a  notice  of  cancellation  ad- 
dressed to  the  plaintiff.  Instead  of  forwarding  the  notice  to  the 
plaintiff  and  tendering  her  the  unearned  premium,  Jacoby  procured 

has    authority    to    cancel    or    receive  In  like  case  return  premium  cannot  be 

notice  is  generally  a  question  of  fact,  paid    to    mortgagee,    Lattan   v.    Royal 

Snyder    v.    Commercial    Ins.    Co..    67  Ins.   Co.,  45  L.   J.   L.  453.     But  see 

N.  J.  L.  7,  50  Atl.  509;  Ikeller  v.  Hart-  Burris   v.    Phoenix   Ins.    Co.,   65    Mo. 

ford  Ins.  Co..  24  Misc.  136,  53  N.  Y.  App.    157;    Mueller    v.    Ins.    Co.,    87 

Supp.   323;   Buidc  v.   Mechanics'  Ins.  Pa.  St.  399. 

Co.,    103    Mich.    75,    61    N.    W.    337;  ^  Snyder  v.  Commercial  Union  Assur. 

Schauer   v.    Queen  Ins.    Co.,   88  Wis.  Co.,  67  N.  J.  L.  7,  50  Atl.  507.     And 

561,  60  N.  W.  994;  Standard  Oil  Co.  v.  see  White  v.  German  Alliance  his.  Co., 

Triumph  his.  Co.,  64:  1<I.Y.  85.    Notice  103    Fed.    260,   93    Fed.    161;    Hamm 

to   a  mortgagee    will   not   cancel   the  Realty    Co.    v.    New   Hampshire    Fire 

mortgagor's  policy,   Hartford  F.   Ins.  Ins.  Co.,  80  Minn.  139,  83  N.  W.  41 

Co.  V.  Peterson,  209  111.  112,  70  N.  E.  (substituted    and    not    first    company 

757,  and  notice  to  mortgagor  will  not  held  liable). 

cancel  as  to  mortgagee,  5tate //Ks.  Co.  ^  Arnfeld    v.    Guardian   Assur.    Co. 

V.  Hale   (Neb.,   1901),  95  N.  W.   473.  172  Pa.  St.  605,  34  Atl.  680. 


CANCELLATION-    in'    THK    COMPANY  391 

two  policies  for  SI, 000  eacli  from  two  other  companies,  and  mailed 
the  new  policies  to  the  plaintiff  November  29th,  together  with  a 
letter  informing  her  that  the}^  were  in  place  of  the  defendant's 
polic}'  which  she  was  asked  to  return.  This  letter  with  enclosures 
was  received  by  the  plaintiff  on  a  Saturday  afternoon,  but  not 
examined  until  after  the  fire  which  occurred  Saturday  night.' 

The  situation  is  often  complicated  by  the  fact  that  the  same  per- 
son is  at  once  local  agent  for  the  companies  and  agent  for  the  in- 
sured to  procure  fresh  insurance  in  place  of  that  canceled  or  at- 
tempted to  be  canceled.  Thus  in  one  case  it  was  held  that  the 
agent  for  the  insurance  companies  was,  at  the  same  tim.e,  in  so  far  a 
general  agent  for  the  plaintiff  that,  without  the  special  knowledge 
or  consent  of  the  plaintiff,  the  agent  could  accept  cancellation  on 
plaintiff's  behalf  from  one  of  the  companies  which  the  agent  repre- 
sented and  replace  the  amount  in  another  company  which  he  repre- 
sented.^ 

But  where  the  company's  agent  had  no  such  general  authority 
to  act  for  the  insured,  it  was  held  that  the  cancellation  of  the  first 
policy  was  not  effectual,  inasmuch  as  the  substituted  insurance, 
though  written,  was  never  delivered  to  the  plaintiff  until  after  the 
fire,  nor  accepted  by  him  at  any  time.^ 

On  the  other  hand,  where  even  after  loss  the  local  agent  of  in- 
surance companies  informs  the  insured  that  a  policy  in  one  com- 
pany has  been  canceled,  and  the  amount  replaced  in  another  com- 
pany, the  insured  may  ratify  the  unauthorized  acts  and  is  concluded 
by  his  election  to  ratify  them,  thus  relieving  the  first  company.'' 

A  somewhat  different  state  of  facts  is  presented  in  a  Kentucky 
case.  In  pursuance  of  instructions  from  the  home  office,  a  local 
agent  of  the  defendant  told  the  insured  that  the  company  had  or- 
dered the  policy  canceled  and  wanted  the  policy.  In  response  the 
insured  promised  to  get  the  policy.  The  agent  also  told  the  insured 
that  the  policy  would  hold  good  until  another  policy  in  another 
company  for  like  amount  was  sent  him.  The  old  policy  was  returned 
to  the  local  agent  and  by  him  marked  canceled.  The  agent  en- 
deavored to  procure  fresh  insurance  but  failed.  More  than  five  days 
after  notice  of  cancellation  was  thus  given  the  fire  occurred.  The 
court  held  that  except  for  the  special  promise  of  the  agent  postpon- 
ing its  operation  the  cancellation  would  have  been  complete,  but 

^Partridge  v.  Mil.  Mech.  Ins.  Co.,  ^  Stebbins  v.  Lancashire  Ins.  Co.,  60 

13  App.  Div.  519,  43  N.  Y.  Supp.  632,  N.  H.  65. 

aff'd,  162  N.  Y.  597.  *  Larsen  v.  Thuringia  Am.  Ins.  Co., 

2  Dibble  v.  Northern  Assur.  Co.,  70  208  111.  166,  70  N.  E.  31. 
Mich.  1,37  N.  W.  704, 14  Am.  St.  R.  470. 


392  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

the  insured  had  a  right  to  rely  upon  the  extension  for  a  reasonable 
tiine.^ 

But  if,  however,  the  insured  knows  that  the  agent's  orders  from 
the  company  are  to  cancel  forthwith,  or  as  soon  as  possible,  the  in- 
sured would  have  no  right  to  rely  upon  an  inconsistent  promise  by 
the  agent  to  postpone  the  cancellation  or  to  extend  the  term  of  the 
subsisting  policy.' 

The  company  cannot  cancel  after  loss,^  or  when  a  fire  is  approach- 
ing or  imminent.'' 

The  Massachusetts  and  certain  other  standard  policies  are  worded 
differently.  The  Massachusetts  form  is  as  follows:  This  'policy  may 
be  canceled  at  any  time  at  the  request  of  the  insured,  who  shall  thereupon 
he  entitled  to  a  return  of  the  portion  of  the  above  premium  remaining, 
after  deducting  the  customary  monthly  short-rates  for  the  time  this  policy 
shall  have  been  in  force.  The  company  also  reserves  the  right,  after  giv- 
ing written  notice  to  the  insured,  and  to  any  mortgagee  to  whom  this  policy 
is  made  payable,  and  tendering  to  the  insured  a  ratable  proportion  of 
the  premium,  to  cancel  this  policy  as  to  all  risks  subsequent  to  the  ex- 
piration of  ten  days  from  such  notice,  and  no  mortgagee  shall  then 
have  the  right  to  recover  as  to  such  risks.^ 

Where,  as  in  the  Massachusetts  standard  policy,  it  is  provided 
that  the  insurance  is  terminable  by  the  company  on  giving  a  ten-day 
notice  and  refunding  a  I'atable  proportion  of  the  premium,  giving 
the  notice  of  cancellation  is  not  of  itself  sufficient,  but  the  policy 
continues  in  force  until  after  payment  or  tender  of  the  return  pre- 
mium.^ 


^Citizens'    Ins.    Co.    v.    Henderson  their  methods  of  business. "    The  Iowa 

Elevator  Co.  (Ky.,  1906),  96  S.  W.  601.  policy  is  Hke  the  New  York,  but  states: 

^Miller   v.    Firemen's   Ins.    Co.,   54  "or   by   the   company   by  giving  five 

W.  Va.  344,  46  S.  E.  181.  days'  notice  of  such  cancellation  either 

3  Ritchie  V.  Home  Ins.  Co.,  104  Mo.  by    registered    letter   directed    to    the 

App.  146,  78  S.  W.  341.  insured  at  his  last  known  address,  or 

•»  Home  Ins.  Co.  v.  Heck,  65  111.  Ill;  by  personal  written  notice."    The  Wis- 

Duncan  v.   .V.    Y.   Mut.   Ins.    Co.,  61-  consin    policy    varies    from    the    New 

N.  Y.  Super.  Ct.  13,  18  N.  Y.  Supp.  York  in  the  following  phrase:  "or  by 

863,  46  N.  Y.  St.  R.  241  (both  parties  the    company    by    giving    five    days' 

being  ignorant  of  loss,  cancellation  was  notice  of  such  cancellation,  unless  dur- 

rescinded     in     equity).       Relief     was  ing  a  time  in  which  the  hazard  shall  be 

granted  where  the  wrong  policy  was  increased  solely  by  the  act  of  God,  and 

surrendered  and    canceled.  Von  Wien  in  such  case  and  during  such  time  of 

V.  Scottish  Union  &  Nat.  Ins.  Co.,  118  such  increase  of  hazard  the  company 

N.   Y.   94,  23  N.   E.    123.     Compare  shall    not   cancel    this    policy,    except 

Birnstein  v.    Stuvvesant    Ins.   Co.,  83  upon  sixty  days'  notice  of  such  can- 

App.  Div.  (N.  Y.)  436,  82  N.  Y.  Supp.  cellation  without  the  consent  of  the 

140.  assured." 

5  The  New  Hampshire  policy  adds  »  White  v.  Connecticut  Ins.  Co.,  120 

to  the  Massachusetts  clause:  "Mutual  Mass.  330;  L'^nnan  v.  State  Mid.  Fire 

companies  may  vary  this  clause  to  suit  7ns.  Co.,  14  Allen  (Mass.),  329. 


MORTGAGEE    CLAUSE 


393 


§  289.  Return  Premium  when  Policy  becomes  Void. — In  addition 
to  the  provisions  regarding  cancellation,  it  should  be  observed  that 
by  the  terms  of  the  New  York  standard  clause,  where  the  policy 
subsequent  to  its  inception  becomes  void  or  ceases  from  any  cause, 
the  assured,  on  surrender  of  the  policy,^  becomes  entitled  to  a  return 
of  the  unearned  portion  of  the  premium,  if  the  premium  has  been 
paid.^ 


§  290.  Mortgagee  Clause. — //  with  the  consent  of  this  company  an 
interest  under  this  -policy  shall  exist  in  favor  of  a  mortgagee  or  of  any 
person  or  corporation  having  an  interest  in  the  subject  of  insurance 
other  than  the  interest  of  the  insured  as  described  herein,  the  conditions 
hereinbefore  contained  shall  apply  in  the  manner  expressed  in  such 
provisions  and  conditions  of  insurance  relating  to  such  interest  as  shall 
be  written  upon,  attached  or  appended  hereto. 

A  mortgagee  may  employ  various  methods  for  protecting  his 
interest  by  insurance. ■"*  He  can  take  out  insurance  upon  the  prop- 
erty for  his  own  benefit  exclusively,  paying  the  premiums  himself. 
He  is  then  the  sole  insured.^  His  interest  and  right  of  recovery  are 
limited  to  the  amount  of  the  indebtedness;  but  the  debtor  cannot 
claim  the  benefit  of  the  insurance.^     If  the  debt  is  paid  the  insur- 


1  Senor  v.  Ins.  Co.,  181  Mo.  104,  114, 
79  S.  W.  687. 

2  Nor  in  any  case  can  the  company- 
deduct  anything  on  account  of  the 
amount  which  has  been  allowed  to  the 
broker  of  the  assured  for  his  commis- 
.sions,  although  these  commissions  have 
come  out  of  the  premium  paid.  See 
§  75,  note  1. 

3  In  Palmer  Savings  Bank  v.  Ins. 
Co.,  106  Mass.  189,  the  court  says: 
"A  mortgagor  and  a  mortgagee  have 
each  an  insurable  interest  in  the  prop- 
erty; each  can  insure  for  his  own  bene- 
fit, the  mortgagor  for  the  full  value  of 
the  property,  and  the  mortgagee  for 
the  full  value  of  his  interest  in  the 
property  and  neither  can  avail  himself 
in  any  waj''  of  the  money  recovered 
from  insurance  by  the  other  unless 
there  is  some  contract  making  it  so 
available.  ...  At  first  the  policy 
usually  was  issued  to  the  mortgagor 
in  the  common  form,  and  was  then 
assigned  by  him  to  the  mortgagee  to 
the  extent  of  his  interest,  and  the  in- 
surance company  assented  to  the  as- 
signment. Afterwards  the  provisions 
for  the  benefit  of  the  mortgagee  were 
inserted   in   the   body  of  the   policy. 


But  such  policies,  unless  there  were 
stipulations  to  the  contrary,  were 
avoided  as  to  the  mortgagee  by  anj 
act  of  the  mortgagor  which  avoided 
the  policy  as  to  him." 

4  Boyd  V.  Thuringia  Ins.  Co. ,  25 
Wash.  447,  65  Pac.  785  (the  effect  of 
mortgagor's  acts  upon  mortgagee's 
policy  considered). 

5  Carpenter  v.  Ins.  Co.,  16  Pet.  495, 
10  L.  Ed.  1044;  Dunhrack  v.  Neall,  55 
W.  Va.  565,  47  S.  E.  303;  Burlingame 
V.  Goodspecd,  153  Mass.  24;  Inter- 
national Trust  Co.  V.  Boardman,  149 
Mass.  158,  21  N.  E.  239;  Mclntire  v. 
Plaisted,  08  Me.  363;  Foster  v.  Van 
Reed,  10  N.  Y.  19,  26  Am.  Rep.  544. 
But  if  the  insurance  has  been  pro- 
cured by  the  mortgagee  on  account  of 
the  mortgagor,  or  at  his  cost,  the  pay- 
ment of  insurance  must  be  applied  to 
reduce  the  debt.  Waring  v.  Lodcr,  53 
N.  Y.  581.  The  Vermont  court  has 
held  that  the  mortgagee  must  apply 
the  proceeds  of  the  insurance  to  the 
indebtedness  as  it  becomes  dre  and 
hence  may  lose  for  the  time  a  right  to 
foreclose  to  which  otherwise  he  would 
be  entitled,  Thor-p  v.  Croto  (Vt.,  1907), 
65  Atl.  562. 


394  MEANIN(;    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

ance  falls,  since  the  mortgagee  then  loses  his  insurable  interest.' 
This  method,  however,  is  seldom  satisfactory  to  the  mortgagee, 
who  prefers  to  take  the  interest  accruing  from  the  mortgage  free  and 
clear  of  any  expense  of  insurance.  If  the  mortgagor  has  contracted 
to  give  the  mortgagee  the  benefit  of  insurance,  the  mortgagee  will 
have  an  equitable  lien  upon  the  proceeds;  ^  but  in  the  absence  of 
some  contract  with  the  mortgagor  he  has  no  interest  whatsoever  in 
the  mortgagor's  policies. '"^  Likewise  as  before  stated,  unless  there  is 
some  agreement  between  mortgagor  and  mortgagee  to  that  effect, 
the  mortgagor  cannot  avail  himself  in  any  way  of  the  proceeds  of 
insurance  which  the  mortgagee  has  taken  out  independently  and 
exclusively  for  his  own  security.'* 

This  doctrine,  however,  does  not  mean  that  a  mortgagee  with 
his  own  independent  insurance  is  to  retain  for  his  own  benefit  a 
double  payment  for  his  debt,  one  from  the  insurer  and  a  second  from 
the  mortgagor.  In  most  jurisdictions  the  principle  of  subrogation 
is  applied  to  prevent  this  result,  even  though  the  policy  contain  no 
express  provision  on  the  subject.^ 

Though  he  contract  with  the  mortgagor  so  to  do,  the  mortgagee 
may  not,  for  the  benefit  of  himself  and  the  mortgagor,  take  out 
insurance  in  his  own  name  exclusively,  since  he  would  thereby  violate 
the  condition  of  sole  and  unconditional  ownership  contained  in  the 
policy.  Accordingly  the  usual  method  of  securing  to  a  mortgagee 
the  benefit  of  insurance  is  by  the  addition  of  a  special  provision  in  his 
favor^  inscribed  upon  the  face  of  the  mortgagor's  policy,  and  ac- 
companied by  the  delivery  of  the  original  policy  or  a  duplicate  to 
the  mortgagee.  A  special  clause,  for  this  purpose,  in  former  years 
usually  consisted  simply  of  an  indorsement  on  the  face  of  the  policy 
of  the  w^ords  "Loss,  if  any,  payable  to  A.  B.,  mortgagee,"  or  to 
"A.  B.,  mortgagee,  as  his  interest  may  appear,"  or  some  similar 
phrase,  and  such  phrases  are  still  in  common  use.  A  mortgagee, 
however,  should  not  be  content  with  a  mere  payee  clause  in  New 

1  Reijnolds  v.  London  &  Lan.  Fire  also  held  that  a  covenant  by  mort- 

Ins.   Co.,   128  Cal.    16,   60   Pac.   467;  gagor  to  insure  for  benefit  of  mort- 

Uhf elder  v.  Palatine  Ins.  Co.,  44  Misc.  gagee  would  not  run  with  the  title  to 

153,  89  N.  Y.  Supp.  792.  a  purchaser);  Gmll's  Admr.  v.  Corinth 

^Wheeler  v.  Ins.  Co.,  101  U.  S.  439,  Bank    (Ky.),   68   S.   W.   870.      And   a 

25    L.    Ed.    1055;    /Etna   Ins.    Co.    v.  mere  authority  to  insure  for  another 

Thompson,  68  N.  H.  20,  40  Atl.  396;  does  not  create  an  obligation  to  do  so, 

Swearingen   y.    Hartford   Ins.    Co.,   52  Willard  v.  Welch,  94  App.  Div.  179 

S.  C.  309,  29  S.  E.  722,  56  S.  C.  355,  ^  Palmer  Savings   Bk.    v.    Ins.    Co., 

34  S.  E.  449.  166  Mass.  189. 

3  Farmers'  Loan  &  Tr.  Co.  v.  Penn.  5  See  §  53,  supra.  Gillespie  v.  Scot- 
Plate  Glass  Co.,  18QV.  8.  434,22  S.  Ct.  tish  Union  &  N.  Ins.  Co.  (W.  Va., 
842,  46  L.   Ed.  1234  (in  which  it  was  1906),  56  S.  E.  213. 


MORTGAGEE    CLAUSE 


395 


York  and  in  most  of  the  states,  since  such  a  form  of  indorsement 
leaves  him  too  largely  at  the  mercy  of  his  debtor.^  In  most  juris- 
dictions, in  such  a  case,  he  is  held  to  be  entitled  to  recover  only  sub- 
ject to  any  defenses  available  to  the  company  against  the  insured 
mortgagor.  Hence  if  the  mortgagor  has  violated  any  condition  of 
the  contract,  the  mortgagee,  a  mere  payee,  will  take  nothing.^ 
Thus  an  award  is  binding  on  the  mortgagee  as  payee,  though  he 
was  not  a  party  to  it.^  And  so  is  an  election  on  the  part  of  the  com- 
pany to  rebuild  or  reinstate,  although  the  payee  may  not  even 
have  knowledge  that  the  company  has  chosen  this  method  of  ful- 
filling its  contract.^ 
There  is  a  conflict  of  opinion  as  to  whether  the  mortgagee  thus 

100  III.  App.  454  (cancellation  clause); 
Queen  Ins.  Co.  v.  Dearborn  Sav.  Loan 
Assoc,  175  111.  115,  51  N.  E.  717  (one 
year  limitation  to  begin  suit);  Christen- 
son  V.  Fidelity  Ins.  Co.,  117  Iowa,  77, 
90  N.  W.  495  (foreclosure  proceedings); 
East  V.  Neiv  Orleans  his.  Assoc,  76 
Miss.  697,  26  So.  691  (conveyance  of 
title);  Senor  v.  Western  Millers'  Ins. 
Co.,  181  Mo.  104,  79  S.  W.  687  (addi- 
tional insurance  does  not  forfeit  as  to 
mortgagee);  Henton  v.  Farmers'  Ins. 
Co.  (Neb.),  95  N.  W.  670  (foreclosure 
proceedings);  Bovd  v.  Tlivringia  Ins. 
Co.,  25  Wash.  447,  65  Pac.  785  (aliena- 
tion and  subsequent  insurance).  These 
cases  last  cited  exhibit  a  strained  con- 
struction in  favor  of  the  appointee  and 
would  seem  to  make  the  standard 
policy  with  such  an  indorsement  a 
well  nigh  unconditional  agreement  to 
indemnify  him.  The  real  purpose  of 
the  framers  of  the  policy  is  illustrated 
by  the  similar  clause  relating  to  mutual 
companies. 

3  Collinsville  Sav.  So.  v.  Boston  Ins. 
Co.,  77  Conn.  676,  60  Atl.  647;  Chandos 
V.  Am.  Fire  Ins.  Co.,  84  Wis.  184,  54 
N.  W.  390;  but  see  Brown  v.  Roger 
Williams  Ins.  Co.,  5  R.  I.  394;  Bergman 
V.  Commercial  Union  Assur.  Co.,  92 
Ky.  494,  18  S.  W.  122,  15  L.  R.  A.  270; 
Georgia  Home  Ins.  Co.  v.  Stein,  72 
Miss.  943,  18  So.  414. 

■1  Hcilmann  v.  Westchester  F.  Ins. 
Co.,75N.  Y.  7.  The  company  and  the 
mortgagor  cannot  ignore  the  mort- 
gagee, though  merely  a  payee,  to  the 
extent  of  closing  a  settlement  or  efrect- 
ing  an  accord  and  satisfaction  without 
his  assent,  Hathaway  v.  Orient  Ins.  Co., 
134  N.  Y.  409,  32  N.  E.  40,  17  L.  R.  A. 
514. 


1  Syndicate  Ins.  Co.  v.  Bohn,  65  Fed. 
165,  173,  12  C.  C.  A.  531. 

2  See  §  237,  supra;  Bates  v.  Equita- 
ble Ins.  Co.,  10  Wall.  (U.  S.)  33; 
Holbrook  v.  Baloise  F.  Ins.  Co.,  117 
Cal.  561,  49  Pac.  555;  Scania  Ins.  Co. 
V.  Johnson,  22  Colo.  476,  45  Pac. 
431  (mortgagee  held  bound  by  award, 
though  he  was  not  a  party  to  it); 
Staats  V.  Georgia  Home  Ins.  Co.,  57 
W.  Va.  571,  50  S.  E.  815;  Moore  v. 
Hanover  Fire  Ins.  Co.,  141  N.  Y.  219, 
36  N.  E.  191,  56  N.  Y.  St.  R.  801; 
Rosenstein  v.  Traders'  Ins.  Co.,  79 
App.  Div.  481,  79  N.  Y.  Supp.  736; 
Farmers'  Bank  v.  Manchester  A.ssur. 
Co.,  106  Mo.  App.  114,  80  S.  W.  299, 
301  (1904);  Franklin  Ins.  Co.  v.  Wolff, 
23  Ind.  App.  .556,  54  N.  E.  772  (purely 
a  contract  between  mortgagor  and 
companjO;  Monroe  B.  &  L.  As.^oc  v. 
L.  &  L.  &  G.  Ins.  Co.,  50  La.  Ann. 
1243,  24  So.  238;  Milliken  v.  Wood- 
ivard,  64  N.  J.  L.  444,  450,  45  Atl.  796; 
Sun  Ins.  Co.  v.  Bldg.  &  L.  Assoc,  58 
N.  J.  L.  367,  33  Atl.  962;  Jaskulski  v. 
Ins.  Co.,  131  Mich.  603,  92  N.  W.  98; 
Cronin  v.  Fire  Assoc  of  Phila.,  112 
Mich.  106,  70  N.  W.  448;  Antes  v. 
State  Ins.  Co.,  61  Neb.  55,  84  N.  W. 
412;  Hocking  v.  Va.  F.  &  M.  Ins.  Co., 
99  Tenn.  729,  42  S.  W.  541;  Hamburg- 
Bremen  F.  Ins.  Co.  v.  Ruddell  (Tex. 
Civ.  App.),  82  S.  W.  826;  Keith  v. 
Ro^al  Ins.  Co.,  117  Wis.  531,  94  N.  W. 
295.  In  several  jurisdictions,  how- 
ever, a  mere  payee  clause,  construed 
in  conjunction  with  the  clause  at  the 
head  of  this  section  is  held  to  create 
an  independent  contract  with  the 
mortgagee,  or  other  interested  payee, 
and  to  relieve  the  mortgagee  of  the 
effect  of  forfeitures  by  mortgagor, 
Crawford  v.   Aachen  &  M.  Ins.  Co., 


390  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

named  as  payee  will  forfeit  his  interest  by  commencing  foreclosure 
proceedings  without  written  consent.^  Not  being  the  insured,  how- 
ever, a  mere  payee  by  assigning  his  interest  in  the  insurance  does 
not  violate  the  clause  prohibiting  an  assignment  of  the  policy. ^ 

Where  the  loss  is  made  payable  to  the  mortgagee  as  sole  payee, 
and  he  collects  it,  he  must  hold  any  balance  beyond  his  interest,  in 
the  capacity  of  trustee  for  the  mortgagor,  the  insured;  ^  but  where 
the  loss  IS  made  payable  to  mortgagee  as  his  interest  may  appear, 
he  is  entitled  to  collect  only  the  amount  of  his  interest."*  By  the 
terms  of  the  policy  the  insured,  and  not  a  mere  payee,  should  make 
the  proof  of  loss.'"' 

§  291.  The  Same— Standard  Mortgagee  Clause.— To  the  mort- 
gagee class  belong  saving  banks,  trust  companies,  and  many  other 
institutions,  as  well  as  individual  creditors.  In  general,  mortgagees 
offer  a  moral  risk  exceptionally  desirable.  For  the  misconduct  of 
their  debtors,  of  which  they  are  innocent,  they  should  not  be  made 
to  suffer.  Accordingly  the  regular  and  approved  method  of  secur- 
ing to  a  mortgagee  the  benefit  of  insurance  is  by  attaching  to  the 
mortgagor's  policy  a  rider  known  as  the  standard  mortgagee  clause,* 
and  delivering  to  him  the  original  policy  or  a  duplicate.  The  policy 
as  thus  modified  is  held  to  include  two  separate  contracts  largely 

1  Delaware  Ins.  Co.  v.  Greer,  120  Co.,  168  Mass.  147,  46  N.  E.  390  (the 
Fed.  916,  57  C.  C.  A.  18S,  61  L.  R.  A.  amount  of  subsequent  mortgages  is 
137  (held  avoided);  Henton  v.  Far.  not  to  be  added  to  his  original  interest). 
&  Merchants'  Ins.  Co.  (Neb.),  95  The  burden  is  on  the  payee  to  show 
N.  W.  670  (held  not  avoided).  what  his  interest  is,  Wilcox  v.   Mut. 

2  Whiting  v.  Burkhardt,  178  Mass.  Fire  Ins.  Co.,  81  Minn.  478,  84  N.  W. 
535,  60  N.  E.  1,  52  L.  R.  A.  788.  334.    And  the  insured  should  be  joined 

^  Ermentrout    v.    Am.    Ins.    Co.,    60  as  a  party  either  as  plaintiff,  or,  if  he 

Minn.  418,  62  N.  W.  543;  Burlington  declines,  then  as  defendant,  Lewis  v. 

7ns.   Co.   V.  Lowery,  61   Ark.   108,  32  Guardian  Ins.  Co.,  181  N.  Y.  392,  74 

S.  W.  383;  Cone  v.  Niagara  Ins.  Co.,  N.  E.  224;  Kent  v.  ^tna  Ins.  Co.,  84 

60   N.   Y.   619;    Waring   v.   Loder,   53  App.  Div.  428,  82  N.  Y.  817;  Franklin 

N.  Y.  581.     According  to  the  practice  Ins.  Co.  v.  Wolff,  23  Ind.  App.  549,  54 

in  most  jurisdictions  a  payee  of  the  N.  E.  772.     But  in  some  jurisdictions 

entire  fund  may  maintain   action  on  it  is  held  that,  if  the  interest  of  mort- 

the  policy  alone  or  jointly  with  the  gagee  exceeds  the  insurance,  he  may 

insured,  but  the  insured  must  make  the  sue  alone,  Lowry  v.  Ins.  Co.,  75  Miss, 

payee  a  party  plaintiff  or  defendant,  43,  21  So.  664;  Capital  City.  Ins.  Co.  v. 

if    the   insured   institutes   the   action,  Jones,  128  Ala.  361,  30  So.  674.    It  is 

Le^vis  v.  Guardian  Ins.  Co.,  181  N.  Y.  immaterial  whether  the  mortgage  debt 

392,  74  N.  E.  224;  Winne  v.  Niagara  is  due.    Planters'    Ins.    Assoc,    v.    So. 

Ins.  Co.,  91  N.Y.  185;  Cone  V.  Niaqara  Savings    Co.,    68   Ark.    8,    56    S.    W. 

Ins.  Co.,  60  N.  Y.  619;  Farmers'  Bank  443. 

V.  Manchester  Assur.  Co.,  106  Mo.  App.  5  Armstrong  v.  Agricultural  Ins.  Co., 

114,  80  S.  W.  299  (1904).  130  N.  Y.  560,  567;  State  Ins.  Co.  v. 

*  Palmer  Sav.   Bank  v.  Ins.   Co.   of  Maac'' ens,  38  N.  J.  L.  564;  Ayres  v 

N.  A.,  166  Mass.   189,  44  N.  E.  211;  Hartford  Ins.  Co.,  17  Iowa,  176. 
Attleborough  Sav.  Bank  v.  Security  Ins.  6  Given  in  Appendix,  ch.  II. 


MORTGAGEE  CLAUSE — STANDARD  MORTGAGEE  CLAUSE    397 


independent  of  each  other,  one  in  favor  of  the  mortgagor,  and  the 
other  in  favor  of  the  mortgagee.  By  the  terms  of  the  rider,  "the 
insurance,  as  to  the  interest  of  the  mortgagee,  shall  not  be  invalidated 
by  any  act  or  neglect  of  the  mortgagor  or  owner,"  and,  therefore,  a 
forfeiture  as  against  the  mortgagor  does  not  defeat  the  interest  of 
the  mortgagee.'  A  concrete  illustration  will  greatly  clarify  the 
situation  existing  where  there  are  two  or  more  mortgages. 

Brown  owns  a  house  worth  $15,000.  He  borrows  $5,000  from  the 
Bowery  Savings  Bank,  for  which  he  gives  to  the  bank  a  first  mort- 
gage on  his  house.  Another  loan  of  like  amount  he  procures  from 
his  bankers,  J.  P.  Morgan  &  Co.,  to  whom  he  gives  a  second  mort- 
gage on  the  same  property.  In  pursuance  of  his  mortgage  covenants, 
he  takes  out  a  policy  from  the  Home  Insurance  Co.  for  $5,000,  with 
full  mortgagee  clause  in  favor  of  the  savings  bank;  and  another 
policy  from  the  Royal  Insurance  Co.  of  like  amount  with  similar 
clause  in  favor  of  Morgan  &  Co.  The  house,  thereafter,  is  damaged 
by  fire  to  the  extent  of  $4,000.  The  savings  bank  promptly  collects 
$4,000  as  soon  as  due  from  the  Home  Insurance  Co..  and  credits  the 


1  Syndicate  his.  Co.  v.  Bohn,  65  Fed. 
165,  12  C.  C.  A.  531;  Mutual  F.  his. 
Co.  V.  Alvord,  61  Fed.  752,  9  C.  C.  A. 
623;  Planters'  Mut.  Ins.  Assoc,  v. 
Southern  Sav.  Fund,  etc.,  Co.,  68  Ark. 
8,  56  S.  W.  443  (default  by  insured  in 
paying  note);  Glens  Falls  Ins.  Co.  v. 
Porter,  44  Fla.  568,  33  So.  473  (failure 
of  insured  owner  to  serve  proofs); 
Hanover  Ins.  Co.  v.  Bohn,  48  Neb.  743, 
67  N.  W.  774  (failure  of  owner  to  dis- 
close title);  State  Ins.  Co.  v.  Trust  Co., 
47  Neb.  62,  66  N.  W.  9  (prior  mis- 
statements as  to  incumbrance?);  Phoenix- 
Ins.  Co.  V.  Trust  Co.,  41  Neb.  834, 
60  N.  W.  133,  25  L.  R.  A.  679  (con- 
veyance of  property  by  insured); 
Whiting  v.  Burlhardt,  178  Mass.  535, 
60  N.  E.  1  (assignee  of  mortgagee); 
Eddy  V.  London  Assur.  Co.,  143  N.  Y. 
311,' 62  N.  Y.  St.  R.  316  (other  insur- 
ance by  owTier  does  not  avoid  nor 
foreclosure  begun  by  mortgagee  him- 
self); Breevear  v.  Rockingham  Farm- 
er.'^' M.  F.  I.  Co.,  71  N.  H.  445,  52  Atl. 
860  (conveyance  of  property  and  ad- 
ditional insurance).  Who  is  to  sue, 
Meriden  Sav.  Bank  v.  Home  Mut. 
Ins.  Co.,  50  Conn.  396;  Pioneer  Sav.  & 
L.  Co.  V.  Prov.  Wa.-^h.  Ins.  Co.,  17 
Wash.  175,  49  Pac.  231  (change  of 
ownership  after  application  and  before 
policy  issued);  Lancashire  Ins.  Co.  v. 
Boardman,  58  Kan.  339,  49  Pac.  92 
(commencement  of  foreclosure);  Smith 


V.  Union  Ins.  Co.,  25  R.  I.  260,  55 
Atl.  715  (conveyance  of  title);  Francis 
v.  Butler  Mut.  F.  Ins.  Co.,  7  R.  I. 
159  (failure  by  insured  to  pay  assess- 
ments). Under  this  clause  the  mort- 
gagee is,  doubtless,  entitled  to  notice 
by  the  insurer  of  an  election  to  repair 
or  rebuild,  Heilmann  v.  Westchester. 
F.  Ins.  Co.,  75  N.  Y.  7;  Glens  Falls  Ins. 
Co.  v.  Porter,  44  Fla.  568,  33  So.  473. 
The  company  probably  can  insist  upon 
this  right  as  against  the  mortgagee, 
Westminster  Fire  Ojjice  v.  Glasgow,  etc., 
Soc.  (1888),  13  App.  Cas.  699.  The 
rights  of  each  mortgagee  separately 
insured  are  separate,  Dunlop  v.  Avery, 
89  N.  Y.  592.  Each  mortgagee  has  a 
separate  right  of  recovery  under  his 
own  contract,  though  the  aggregate 
recovery  greatly  exceed  the  value  of 
the  property,  Scottish,  etc.,  Assn.  v. 
Northern  Assur.  Co.,  21  Scot.  L.  R. 
189;  Westminster  F.  Office  v.  Glasgoiv 
Prov.  I.  Soc.  (1888),  13  App.  Cas.  699. 
But  theoretically,  under  the  doctrine 
of  subrogation  the  aggregate  ultimate 
recovery  irom  the  whole  body  of  in- 
surers is  supposed  to  be  limited  by  the 
insurable  value  of  the  property,  De 
Hart  &  Simey,  Ins.  (1907),  18.  The 
following  case  goes  so  far  as  to  hold 
that  the  one-year  limitation  for  be- 
ginning suit  is  not  binding  upon  mort- 
gagee, Queen  Ins.  Co.  v.  Assoc,  175 
111.  115,  51  N.  E.  717. 


398  MEANING    AND    LEGAL    EFFECT    OF    FIUE    POLICY 

payment  on  the  first  mortgage.  Morgan  &  Co.  simultaneously  col- 
lect $4,000  from  the  Royal  Insurance  Co.,  and  credit  the  payment 
on  the' second  mortgage.^  At  this  stage  of  the  transaction,  it  is 
manifest,  the  owner  of  the  house,  having  lost  $4,000  and  gained 
$8,000,  has  made  a  profit  of  $4,000  out  of  his  insurance.  But  in 
leo-al  theory  the  extreme  limit  of  a  fire  insurance  contract  is  to  in- 
demnify.- Hence  the  two  insurance  companies  having  paid  the  fire 
loss  twice  over,  must  become  subrogated  to  claims  of  $4,000  against 
Brown,  $2,000  in  favor  of  each  company,  representing  in  their  rela- 
tions to  Brown,  though  not  to  the  mortgagees,  excess  payments. 
Accordingly,  after  collection  of  these  claims,  the  net  aggregate  loss  of 
the  insurers  is  reduced  to  $4,000,  the  precise  amount  of  the  fire  dam- 
age, for  which  amount  also  in  the  aggregate  they  would  have  been 
liable  to  the  mortgagor  under  the  same  policies  if  there  had  been  no 
mortgagee  clauses  attached  to  them.''  Brown  has  thus  in  fine  sus- 
tained a  fire  loss  to  his  property  of  $4,000  for  which  his  insurers,  by 
diminishing  his  net  indebtedness  to  that  extent,  have  exactly  indem- 
nified him.  But  if  Brown  is  insolvent  at  the  time  of  the  fire,  and 
his  house  has  depreciated  in  value  to  less  than  $10,000,  obviously  the 
insurers,  upon  failing  to  collect  their  claims  against  him  under  sub- 
rogation, may,  after  meeting  their  several  obligations  to  the  mort- 
gagees, be  out  of  pocket  considerably  more  than  $4,000. 

The  words  "act  or  neglect"  as  used  in  this  clause,  it  has  been 
held,  refer  to  any  act  or  omission  on  the  part  of  the  mortgagor 
whether  before  or  after  the  issuance  of  the  rider  or  policy.^  By  the 
terms  of  the  clause,  however,  the  mortgagee,  on  learning  of  any 

^Eddy  V.   London  Assur.    Co.,   143  Co.  v.  Porter,  44  Fla.  .568,  33  So.  473; 

N.  Y.  311,  38  N.  E.  307,  25  L.  R.  A.  Genesee,   etc..   Loan   Assoc,    v.    United 

68G;   Westminster  Fire  Office  v.   Glas-  States    Fire    Ins.    Co.,    16    App.    Div. 

gow  Prov.  Invest.  Soc.  (1888),  13  App.  (N.  Y.)  587,  44  N.  Y.  Supp.  979  (er- 

Cas.  699.  roneous  statement  of  interest  by  mort- 

2  §  24,  supra.  gagor  avoids  as  to  mortp;agee).     And 

^  See  Scottish,  etc.,  Assn.  v.  Northern  see  Baldwin  v.  German  Ins.   Co.,  105 

Assur.  Co. ,21  Scot.  L.  R.  189;  Chi.,  etc.,  Iowa,  379,  75  N.  W.  .326  (prior  incum- 

R.  Co.  V.  Pullman  Car  Co.,  139  IT.  S.  brances);    Hanover    Fire    Ins.    Co.    v. 

79,  88,   11   S.  Ct.   490   (citing  cases).  Bank  (Tex.  Civ.  App.),  34  S.  W.  333. 

Also  §§  53,  292.  So  also  /leZd,  that  misrepresentations  of 

*  Sundicate  Ins.  Co.  v.  Bohn,  65  Fed.  which   mortgagee   has   knowledge  will 

165,  12  C.  C.  A.  ,531;  Scottish  Union  &  be  attributed  to  him,  Am.  Cent.  Ins. 

Nat.  Ins.  Co.  v.  Field,  18  Colo.  App.  68,  Co.    v.    Co^mn    (Tex.    Civ.    App.),    34 

70  Pac.  149;  North  Brit.  &  M.  Ins.  Co.  S.  W.  461.     So  nlso  as  to  his  own  mis- 

v.  Bohn,  49  Neb.  572,  68  N.  W.  942;  statements,  Graham  v.  Firemen's  Ins. 

Majoun  v.   Firemen's  Fund  Ins.   Co.,  Co.,  87  N.  Y.  69,  41   Am.  Rep.  348; 

86  Minn.  485,  91  N.  W.  5;  Smith  v.  Cole  v.  Germania  F.  Ins.  Co.,  99  N.  Y. 

Union  Ins.  Co.,  25  R.  I.  260,  55  Atl.  36,  1  N.  E.  38.    The  mortgagee  clause 

715.      Contra,   holding   that   the  relief  is  valid  though  the  mortgagor  knows 

extends    only    to  subsequent    forfeit-  nothing   about   its   issuance,   Hare   v. 

ures  by  mortgagor,  Glens  Falls  Ins.  Headley,  54  N.  J.  Eq.  545,  35  Atl.  445. 


SUBROGATION  BY  CONTRACT  399 

change  of  ownership  or  of  occupancy,  or  increase  of  hazard,  must 
inform  the  company;  or  else  he  will  imperil  the  validity  of  his  in- 
surance.^ This,  however,  does  not  refer  to  the  commencement  of 
foreclosure  proceedings  instituted  by  himself,  but  only  to  those 
instituted  by  third  parties.^  So  also  the  mortgagee,  being  now  one 
of  the  parties  insured,  must  not,  it  is  said,  assign  his  interest  in  the 
policy  v/ithout  the  company's  consent.^ 

In  the  Massachusetts  standard  the  provision  for  mortgagee  is 
inserted  in  the  body  of  the  contract:  //  this  policy  shall  be  made 
payable  to  a  mortgagee  of  the  insured  real  estate,  no  act  or  defaidt  of 
any  person  other  than  such  mortgagee  or  his  agents,  or  those  claiming 
under  him,  shall  affect  such  mortgagee's  right  to  recover  in  case  of  loss 
on  such  real  estate;  provided  that  the  mortgagee  shall,  on  demand,  pay 
according  to  the  established  scale  of  rates  for  any  increase  of  risks  not 
paid  for  by  the  insured;  and  whenever  this  company  shall  be  liable  to 
a  mortgagee  for  any  sum  for  loss  under  this  policy,  for  which  no  lia- 
bility exists  as  to  the  mortgagor,  or  owner,  and  this  company  shall 
elect  by  itself,  or  with  others,  to  pay  the  mortgagee  the  full  amount 
secured  by  such  mortgage,  then  the  mortgagee  shall  assign  and  transfer 
to  the  companies  interested,  upon  such  paymerit,  the  said  mortgage, 
together  with  the  note  and  debt  thereby  secured.^ 

§  292.  Subrogation  by  Contract. — The  standard  mortgagee  clause 
expressly  ^  gives  to  the  insurer,  upon  making  payment,  a  right  of 
subrogation,  pro  tanto,  where  the  company  claims  that  the  policy 
is  avoided  as  to  the  mortgagor  or  owner,  but  this  right,  it  is  ex- 
pressly stipulated,  is  not  to  impair  full  recovery  by  the  mortgagee 
of  his  claim  against  the  mortgagor.^    By  the  terms  of  the  clause  the 

1  Continental  Ins.  Co.  v.  Anderson,  Breeyear  v.  RocKinghnm  F.  Mut.  Fire 
107  Ga.  541,  33  S.  E.  887  (1899);  Cole  Ins.  Co.,  71  N.  H.  445,  52  Atl.  860. 
V.  Germania  F.  Ins.  Co.,  99  N.  Y.  36,  Going  to  support  the  last  case  is  the 
1  N.  E.  38.  Contra,  dictum  in  Whitney  circumstance  that  the  care  and  custody 
V.  Aw.  7ns.  Co.,  127  Cal.  464,  56  Pac.  50  of  the  property  are  not  changed  by 
(the  words  are  merely  directory).  such  acts  of  the  mortgagee  as  the 
Omission  snsnends  and  does  not  avoid,  owner's  alienation.  Where  the  in- 
Orm.^hv  v.  Phoenix  Ins.  Co.,  5  So.  Dak.  sured  owner  and  the  mortgagee  make 
72,  58  N.  W.  301.  And  see  Pha:ni.r  inconsistent  claims,  the  company  may 
7ns.  Co.  V.  Trust  Co.,  41  Neb.  834,  60  interplead.  Sexton  v.  Home  Ins.  Co., 
N.  W.  133.  35  Arp.  Div.  170,  54  N.  Y.  Supp.  862. 

2  A'at.  Bk.  V.  Union  Ins.  Co.,  88  *  Attleborough  Sav.  Bk.  v.  Security 
Cal.  497,  26  Pac.  509;  Pioneer  Sav.  <&  Ins.  Co.,  168  Mass.  147,  46  N.  E.  390, 
L.  Co.  V.  St.  Paul  F.  &  M.  Ins.  Co..  68  60  Am.  St.  R.  373;  Gordon  v.  Ware  Sav. 
Minn.  170,  70  N.  W.  979;  Lancashire  Bk.,  115  Mass.  588. 

7ns.   Co.  V.   Boardman,  58  Kan.  339,  ^  There  is  conflict  in  the  decisions  as 

49  Pac.  92;  Edd^i  v.  Lond.  A.  Corp.,  143  to  common  law  right,  §  53,  supra. 

N.  Y.  311,  38  N.  E.  307.  e  Appendix  of  Forms  and  Eddy  v. 

3  Rase  V.  Hartford  Ins.  Co.,  58  London  Assur.  Co.,  143  N.  Y.  311,  38 
N.    J.   L.    34,   .30  Atl.    1057,      Contra,  N.  E,  307. 


400 


MEANING    AND    LEGAL    EFFECT    OF   FIRE    POLICY 


company,  on  paying  to  the  mortgagee  the  amount  of  the  mortgage 
debt,  is  entitled  to  an  assignment  of  the  mortgage  securities,  and 
to  foreclose  for  its  own  benefit.  The  mortgagor  cannot  set  up  the 
claim  in  defense  that  the  debt  had  been  paid  by  the  insurance  com- 
pany.' Despite  the  phraseology  of  this  clause,  however,  the  com- 
j)any's  right  to  realize  under  subrogation  depends,  not  upon  its 
claim  that  the  policy  is  avoided  as  to  the  mortgagor,  but  upon  proof 
that  it  is  so.^ 

§  293.  Mortgagee  Party  to  Appraisal. — Under  the  standard 
mortgagee  clause  the  mortgagee  is  entitled  to  notice  of  appraisal. 
If  he  receives  none,  he  is  not  bound  by  the  award.* 


§  294.  Proofs  of  Loss — Form  of  Action. — Under  the  standard 
mortgagee  clause  the  mortgagee,  being  one  of  the  assured,  may 
make  and  verify  the  proofs.  At  all  events  his  right  to  do  so  can- 
not be  questioned,  after  a  refusal  to  act  by  the  mortgagor.'*  But 
the  mortgagee,  being  entitled  to  receive  only  as  his  interest  may 
appear,  and  not  of  necessity  the  whole  amount  of  insurance,  should, 
by  the  better  reason  and  authority  make  the  insured  also  a  party  in 
an  action  upon  the  policy.^ 


i  Ins.  Co.  of  N.  A.  V.  Martin,  151 
Ind.  209,  51  N.  E.  361  (taking  an 
assignment  shows  company's  denial  of 
liability  to  mortgagor);  Allen  v.  Ins. 
Co.,  132  Mass.  480;  Badger  v.  Platts, 
68  N.  H.  222,  44  Atl.  296;  Ordiiay  v. 
Chace,  57  N.  J.  Eq.  478,  42  Atl.  i49; 
Springfield  F.  &  M.  Ins.  Co.  v.  Allen, 
43  N.  Y.  389. 

2  Traders'  Ins.  Co.  v.  Race,  142  111. 
338,  31  N.  E.  392,  23  L.  R.  A.  101, 
25  L.  R.  A.  681,  note,  31  111.  App.  625; 
Wisconsin  Nat.  L.  &  B.  Assoc,  v. 
Webster,  119  Wis.  476,  97  N.  W.  171. 
An  insurance  company  must  avail  it- 
self of  its  right  to  an  assignment 
within  a  reasonable  time,  Eliot,  etc., 
S.  Bank  V.  Commercial  Union  Assur. 
Co.,  142  Mass.  142,  7  N.  E.  550.  The 
company  must  not  by  delay  interfere 
with  settlements  bv  the  assured  with 
other  companies,  New  Hampshire  Ins. 
Co.  V.  Nat.  L.  his.  Co.,  112  Fed.  199, 
50  C.  C.  A.  188. 

3  Bergman  v.  7ns.  Co.,  92  Ky.  494, 


18  S.  W.  122;  Georgia  Home  Ins.  Co.  v. 
Stein,  72  Miss.  943,  18  So.  414;  Hall  v. 
Fire  Assn.,  64  N.  H.  405,  13  Atl.  648. 
And  see  Scania  his.  Co.  v.  Johnson,  22 
Colo.  476,  45  Pac.  431. 

*  Southern,  etc.,  Assn.  v.  Howe  Ins. 
Co.,  94  Ga.  167,  21  S.  E.  375,  id.,  99 
Ga.  65,  24  S.  E.  396;  State  Ins.  Co.  v. 
Ketcham,  9  Kan.  App.  £52,  58  Pac. 
229;  Lombard  Invest.  Co.  v.  Duelling 
House  Ins.  Co.,  62  Mo.  App.  315; 
Graham  v.  Firemen's  Ins.  Co.,  8  Daly 
(N.  Y.),  421.  A  Connecticut  statute 
gives  relief  to  the  mortgagee.  Gen. 
Stat.  §  2839.  And  .see  Appendix,  ch.  I, 
as  to  other  states. 

5  Lewis  V.  Guardian  Ins.  Co.,  181 
N.  Y.  392,  74  N.  E.  224;  Farmers'  Bank 
V.  Manchester  Assur.  Co.,  106  Mo.  App. 
114,  80  S.  W.  299;  Minnock  v.  Eureka 
F.  &  M.  Ins.  Co.,  90  Mich.  236,  51 
N.  W.  367;  Williamson  v.  Mich.  F.  & 
M.  Ins.  Co.,  86  Wis.  393,  57  N.  W.  46; 
but  see  last  section. 


CHAPTER  XV 

Standard  Fire  Policy-^Concluded 

§  295.  Removal  of  Property  for  Safety. — If  'property  covered  by 
this  policy  is  so  endangered  by  fire  as  to  require  removal  to  a  place  of 
safety,  and  is  so  removed,  etc. 

A  wise  provision,  making  more  definite  an  obligation  of  consider- 
able uncertainty;  for  the  general  principle  obtains,  that  where  a 
removal  is  reasonably  necessary  under  the  circumstances  of  the 
case  on  account  of  impending  danger  by  fire,  damages  resulting  from 
removal  are  recoverable  against  the  insurer  as  proximate  loss.^ 
The  principle  finds  analogy  in  the  doctrine  of  marine  insurance  by 
virtue  of  which  a  cargo  is  still  covered  by  the  policy  after  unavoid- 
able transshipment  in  consequence  of  the  disability  of  the  vessel 
named  in  the  policy.- 

This  provision  is  not  inserted  in  the  Massachusetts  form. 

§  296.  Notice  and  Proofs  of  Loss. — //  fire  occurs,  the  insured  shall 
give  immediate  notice  of  any  loss  thereby,  in  writing,  to  this  company, 
protect  the  property  from  further  damage,  forthtuith  separate,  etc. 

This  and  the  clauses  ^  immediately  following  are  the  result  of  a 
careful  revision  of  provisions  previously  existing  in  other  forms 
of  policies  relating  to  proceedings  after  loss,  by  means  of  which  the 
underwriter  is  to  be  afforded  a  prompt  opportunity,  first  of  pre- 
venting aggravation  of  damage,  and  second  of  ascertaining  whether 
he  is  liable  under  the  terms  of  his  contract,  and,  if  so,  to  what  amount. 

This  revision  has  been  in  the  line  of  liberality  towards  the  in- 
sured. Instead  of  being  compelled  to  furnish  a  detailed  statement 
of  proofs  "forthwith,"  or  within  ten,  twenty,  or  thirty  days  as  for- 
merly, he  is  given  sixty  days;  but  this  latter  period  is  rigidly  limited 
by  the  New  York  standard  policy,  except  as  it  may  be  extended  in 
writing.    Instead  of  being  required  to  go  to  the  trouble  of  obtaining 

^  Balestracci  v.  Firemen's  Ins.  Co.,  ley  v.  Western  Ins.  Co.,  L.  R.  3  Ex. 

34  La.  Ann.  844;  White  v.  Republic  71. 

Fire  Ins.  Co.,  57  Me.  91,  2  Am.  Rep.  2  See  §  193,  supra. 

22;  Whitehurst  v.  Fayetteville  Mut.  Ins.  ^  For  clause  in  full  see  Appendix, 

Co.,  6  Jones's  (N.  C.)  Law,  352;  Stan-  ch.  II. 

26  [401] 


402  MEANING   AND    LEGAL    EFFECT   OF   FIRE    POLICY 

certain  additional  proofs  as  matter  of  course,  he  is  to  procure  these 
only  in  the  exceptional  instances  where  a  special  request  is  made 
by  the  company;  but  these  provisions,  in  the  mam  reasonable, 
covering  the  subject  of  proofs  of  loss,  are  probably  of  greater  im- 
portance and  value  to  the  insurer  than  all  the  other  express  war- 
ranties of  the  policy  combined;  ^  and,  by  the  current  of  authority  in 
England  ^  and  in  this  country,  a  substantial  performance  of  the 
same,  or  similar  requirements  no  more  exacting,  is  enforced  as  an 
obligatory  condition  precedent  to  any  right  of  recovery  under  the 
policy.^ 

When,  however,  it  comes  to  matters  of  mere  detail,  for  instance, 
the  minute  but  useful  particulars  called  for  in  the  inventory  and 
verified  statement  of  loss,  among  other  things  the  itemized  lists  of 
articles  showing  as  to  each  item  cost,  cash  value,  and  damage,  two 
considerations  should  be  given  weight  in  determining  the  proper 
rule  of  construction;  first,  that  the  fire  having  probably  carried  off 
with  it  much  of  the  evidence  wanted,  a  reasonable  or  practicable 
compliance  is  all  that  the  parties  could  have  intended  to  provide 
for;  ■*  and,  second,  that  the  risk  having  been  terminated  by  the 
capital  event  of  fire,  mere  matters  of  form  relating  to  an  estimate 
of  the  amount  of  loss  already  sustained  should  not  be  too  punctil- 
iously insisted  upon  by  the  courts.^ 

1  At  common  law,  without  express  (proof  of  loss  a  condition) ;  Hicks  v. 
warranty,  the  insured  is  obliged  to  Brit.-Am.  Assur.  Co.,  162  N.  Y.  284, 
make  full  and  truthful  disclosure  as  to  56  N.  E.  743  (proof  of  loss  a  condition 
the  risk,  to  exercise  the  highest  good  even  under  a  binder);  Graham  v. 
faith  and  to  refrain  from  increasing  German-Am.  Ins.  Co.,  75  Ohio  St.  374, 
the  hazard.  These  common-law  doc-  79  N.  E.  930  (proofs  and  award);  St. 
trines,  coupled  with  the  modern  meth-  Paul  F.  &  M.  Ins.  Co.  v.  Hodge,  30 
ods  of  surveying  and  mapping  risks  by  Tex.  Civ.  App.  257,  70  S.  W.  574 
underwriters,  furnish  them  with  a  large  (detailed  schedule  a  condition  prec- 
measure    of    protection    without    ex-  edent). 

press  warranties  until  the  fire  occurs.  ^  Norton  v.  R.  &  S.  Ins.  Co.,  7  Cow. 

After  that  they  must  depend  upon  the  (N.  Y.)  645. 

express  provisions  of  the  contract  for  ^Solomon   v.    Continental   Ins.    Co., 

testing  the  character  and  estimating  160  N.  Y.  595,  55  N.  E.  279  (immedi- 

the   amount  of  the  loss.     As  to  the  ate    notice    of    loss,    means    what?); 

effect  of  false  swearing  in  the  proofs  of  Matthews  v.  Ins.  Co.,  154  N.  Y.  449, 

loss,  see  §  250,  supra;    and  Meyer  v.  48  N.  E.  751   (proofs  irregularly  veri- 

Home  Ins.  Co.,  127  Wis.  293.  fied);  McNalbi  v.  Phcenix  Ins.  Co.,  137 

2  Bunyon,  Ins.  (5th  ed.),  10;  Roper  N.  Y.  389,  398,  33  N.  E.  475  (tardy 
v.  Lendon,  1  Ell.  &  Ell.  826,  829.  service  of  proofs);  Paltrovitch  v.  Ins. 

3  Columbia  Ins.  Co.  v.  Lawrence,  10  Co.,  143  N.  Y.  73,  37  N.  E.  639  (magis- 
Pet.  (U.  S.)  507,  7  L.  Ed.  335  (insured  trate's  certificate);  Porter  v.  Trader.^' 
must  plead  and  prove  service  of  the  Ins.  Co.,  164  N.  Y.  504,  509,  58  N.  E. 
ordinary  proofs);  Hamilton  v.  Home  641  (examination  of  insured  under 
Ins.  Co.,  137  U.  S.  370,  11  S.  Ct.  133  oath);  Evans  v.  Crawjord  Co.,  etc.,  Ins. 
(award  when  required  is  a  condition);  Co.  (Wis.,  1906),  109  N.  W.  952  (wife 
Boruszweski  v.  Middlesex,  etc.,  Ass.  of  insured  may  verify  proofs  ex  neces- 
Co.,    186    Mass.    589,    72    N.    E.    250  sitate).     And  see  Simmons  v.  Western 


NOTICE   AND   PROOFS  OF  LOSS  403 

An  inspection  of  the  New  York  standard  fire  policy,  as  given  in 
full  in  the  Appendix,  Chapter  II,  discloses  that  in  the  event  of  the 
happening  of  a  fire  loss  under  the  policy  a  duty  is  laid  upon  the  in- 
sured to  perform  numerous  acts.  These  acts  fall  into  two  classes: 
(1)  those  which  must  be  done  by  the  insured  at  his  own  instance, 
although  the  insurer  keep  silence  and  make  no  demand  for  their 
performance;  (2)  those  which  are  to  be  done  by  the  insured  only  in 
case  the  insurer  by  affirmative  notice  specially  requires  performance. 
The  first  class  includes  the  following  acts:  a.  giving  the  imme- 
diate written  notice;  b.  protecting  the  property;  c.  forthwith  separat- 
ing damaged  and  undamaged  personal  property;  d.  inventorying; 
e.  within  sixty  days  serving  formal  proofs  sworn  to  and  containing 
many  specified  particulars.  The  second  class  embraces:  a.  furnishing 
verified  plans;  b.  furnishing  a  magistrate's  certificate;  c.  exhibiting 
remains  of  property;  d.  submitting  to  personal  examination  under 
oath;  e.  producing  books,  bills,  and  papers  or  certified  copies;  /.  sub- 
mitting differences  to  appraisal. 

The  corresponding  clause  of  the  Massachusetts  policy  and  those 
patterned  after  it  is  simpler:  In  case  of  any  loss  or  damage  under  this 
policy,  a  statement  in  writing,  signed  and  sworn  to  by  the  insured,  shall 
be  forthwith  rendered  to  the  company,  setting  forth  the  value  of  the  prop- 
erty insured,  the  interest  of  the  insured  therein,  all  other  insurance 
thereon,  in  detail,  the  purposes  for  which  and  the  persons  by  whom  the 
building  insured,  or  containing  the  property  insured,  was  used,  and 
the  time  at  which  and  manner  in  which  the  fire  originated,  so  far  as 
known  to  the  insured.  The  company  may  also  examine  the  books  of 
account  and  vouchers  of  the  insured,  and  make  extracts  from  the  same. 
Further  on  comes  a  provision  for  a  reference  in  case  of  differences.^ 

The  insured  mortgagor,  and  not  a  mortgagee  protected  by  the 
usual  full  mortgagee  clause,  is  the  proper  party  to  make  the  proofs. 
If  the  mortgagor  neglects  to  do  this,  the  Massachusetts  court  con- 
cludes that  the  mortgagee  may  perform  the  duty,  furnishing  "to 
the  company  in  writing,  within  a  reasonable  time,  proper  informa- 


Trav.    Ace.    Assn.    (Neb.,    1907),    112  Glazer  v.  Home  Ins.  Co.  (N.  Y.,  1907), 

N.  W.  365  (need  not  fulfill  literally);  82  N.   E.   727.     When  proofs  of  loss 

Manufacturers'    &    Merchants'    M.    I.  have  been  waived,  interest  is  held  to 

Co.  V.  Zeitinger,  168  111.  286,  48  N.  E.  run  from  date  of  fire,  Jensen  v.  Pala- 

179,  61  Am.  St.  R.  105  (must  construe  tine  Ins.  Co.  (Neb.,  1908),  116  N.  W. 

strictly   against   insurer).      As   to   the  286. 

more  liberal  rule  of  construction  said  i  Other  standard  policies  have  pro- 
to  apply  to  the  formal  requisites  of  visions  differing  both  from  the  New 
the  policy  to  be  complied  with  after  York  and  j\Iassachusetts  forms,  for 
loss,  see  §  144,  supra.  The  courts  example,  those  of  Iowa  and  South  Da- 
are    often     astute    to    infer    waivers,  kotaseeAppendixch.il. 


404  MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 

tion  in  regard  to  the  loss,  as  to  such  matters  as  a  mortgagee  reason- 
ably may  be  expected  to  know."  ^ 

§  297.  The  Same — Immediate  Written  Notice  of  Loss. — This 
provision,  altogether  appropriate  in  all  cases,  is,  however,  in  most 
instances,  largely  a  formality  in  the  cities  and  larger  towns.  There 
the  underwriters  are  not  so  dependent  upon  the  action  of  the  as- 
sured, as  in  a  sparsely  settled  region,  for  means  of  gaining  prompt 
knowledge  of  fires,  especially  of  fires  extensive  enough  to  demand 
the  services  of  the  fire  department;  and  it  often  happens  that  the 
insurance  companies  will  have  their  adjusters  at  the  scene  of  the 
loss  before  the  assured  has  given  a  thought  to  a  perusal  of  his  policies 
or  to  the  preparation  of  any  notice  thereunder.  Nevertheless,  this 
condition  must  be  complied  with,  unless  waived.^  But  if  the  com- 
pany has  prompt  actual  notice  of  the  event  from  any  source,  the 
court  will  be  eager  to  infer  a  waiver  of  a  provision  which  has  thus 
become  a  mere  technicality;  and  if  the  company  act  upon  any  in- 
formation, as,  for  example,  by  negotiating  with  the  assured,  or  by 
proceeding  to  an  adjustment,  or  by  accepting  proofs  of  loss,  the 
formal  written  notice  will  be  considered  as  dispensed  with  or  waived.^ 
Indeed,  it  has  been  held,  that,  if  the  company  has  actual  informa- 
tion, no  further  notice  will  be  deemed  essential.^ 

The  phrase  "immediate  notice"  means  with  due  diligence  under 
the  circumstances  of  the  case,^  of  which  the  jury  will  ordinarily  be 
the  judge,^  unless  the  delay  seem  to  the  court  so  great  as  to  be  clearly 
inexcusable  as  matter  of  law.'^ 

1  Union  Inst,  for  Savings  v.  Phoenix  L.  R.  A.  682,  73  Am.  St.  R.  707  (in 
Ins.  Co.  (Mass.,  1907),  81  N.  E.  994  which  a  general  assignee  not  knowing 
(citing  cases  from  other  states).  of  policy  found  it  fifty  days  after  fire 

2  Niagara  Ins.  Co.  v.  Scammon,  100  and  gave  notice  three  days  thereafter. 
111.  644;  Patrick  v.  Farmers'  Ins.  Co.,  Held,  no  forfeiture);  Fletcher  v.  Ins. 
43  N.  H.  621.  Co.,  79  Minn.  337,  82  N.  W.  647;  Ins. 

^Partridge  v.  Milwaukee  Mechanics'  Co.  of  N.  A.  v.  Brim,  111   Ind.  281, 

Ins.  Co.,  13  App.  Div.  519,  43  N.  Y.  12  N.  E.  315.    The  terms  "forthwith" 

Supp.  632,  aff'd  162  N.  Y.  597,  57  N.  E.  and  "as  soon  as  possible"  are  similarly 

1119;   Thompson  v.   Traders'  his.  Co.,  construed.  Mason  v. /ns.  Co.,  82  Minn. 

169  Mo.  12,  68  S.  W.  889;    McClellan  336,  85  N.  W.  13,  83  Am.  St.  R.  433; 

V.  Greenwich  Ins.  Co.,  107  La.  124,  30  Central  Cilv  Ins.  Co.  v.  Oates,  86  Ala. 

So.  691;  Welsh  v.  Land.  A^sur.  Corp.,  558,  6  So.  83,  11  Am.  St.  R.  67;  Harn- 

151  Pa.  St.  607,  25  Atl.   142  (sending  den  v.  Ins.  Co.,  164  Mass.  382,  41  N.  E. 

an  adjuster  is  conclusive  evidence  of  658,  49  Am.  St.  R.  467. 

receipt  of  notice  of  loss).  «  Solomon  v.  Ins.  Co.,  160  N.  Y.  595, 

^Savage    v.    Phoenix    Ins.    Co.,    12  b5  '^.  ¥,.  21%;  O'Brien  y.  Phoenix  Ins. 

Mont.    458,    31    Pac.    66.      And    see  Co.,  76  N.  Y.  459. 

P/iosma; /ns.  Co.  V.  Pemj,  131  Ind.  572,  t  Ermentrovt  v.   Ins.   Co.,  63  Minn. 

30  N.  E.  637.  305,  65  N.  W.  635,  30  L.  R.  A.  346,  56 

^Solomon   v.    Continental   Fire   Ins.  Am.  St.  R.  481;  Pokes  v.  Amazon  Ins. 

Co.,  160  N.  Y.  595,  55  N.  E.  279,  46  Co.,  55  Md.   512,  34   Am.   Rep.   323; 


IMMEDIATE   WRITTEN   NOTICE    OF   LOSS 


405 


The  notice  should  be  sent  in  the  name  of  the  assured;'  and  to 
some  agent  having  authority  to  receive  it  on  behalf  of  the  insurer, 
preferably  to  the  head  office  of  the  company,  or  to  some  general 
agency. 2  Moreover,  the  notice  must  be  actually  received  to  be 
operative;'  but  mailing  in  due  course  raises  a  presumption  of  re- 
ceipt until  rebutted.'* 

The  immediate  notice  preliminary  to  the  statement  or  proofs  of 
loss  is  not  required  by  the  Massachusetts  policy;  which,  however,  re- 
quires the  sworn  statement  of  loss  to  be  furnished  "forthwith." 
This  means  within  a  reasonable  time.^     The  Iowa  standard  policy 


Weed  V.  Hamburg-Bremen  Ins.  Co., 
133  N.  Y.  394,  31  N.  E.  231;  Bennett  v. 
Lycoming  Co.  Mut.  his.  Co.,  67  N.  Y. 
274.  In  the  following  cases  the  delay 
was  held  to  be  fatal,  Railway  Ins.  Co. 
V.  Burwell,  44  Ind.  460  "(6  days); 
Trask  v.  State  F.  &  M.  Ins.  Co.,  29 
Pa.  St.  198,  72  Am.  Dec.  622  (11  davs); 
Cook  V.  North  Brit.  &  M.  Ins.  Co., "l 81 
Mass.  101,  62  N.  E.  1049;  Burnham  v. 
Royal  Ins.  Co.,  75  Mo.  App.  394  (16 
days);  Roumage  v.  Ins.  Co.,  13  N.  J.  L. 
110  (5  days);  Edwards  v.  Ins.  Co.,  75 
Pa.  St.  378  (18  days);  Weed  v.  Ham- 
burg-Bremen Ins.  Co.,  133  N.  Y.  394, 
31  N.  E.  231  (19  days);  Inman  v.  Ins. 
Co.,  12  Wend.  (N.  Y.)  452  (38  days); 
Broum  v.  London  Assur.  Co.,  40  Hun 
(N.  Y.),  101  (48  days);  Ermentrout  v. 
Girard  Ins.  Co.,  63  Minn.  305,  65  N.  W. 
635  (60  days);  McEvers  v.  Lawrence, 
1  Hoff.  Ch.  171  (4  months);  Sherwood 
V.  Agricultural  Ins.  Co.,  10  Him,  593. 
On  the  other  hand,  a  delay  of  8  days, 
where  the  insured  did  not  know  of  the 
fire  for  3  days  was  thought  to  be  in 
time,  N.  Y.  Cent.  Ins.  Co.  v.  ^V.  P. 
Ins.  Co.,  20  Barb.  468.  In  another 
case,  where  policy  required  immediate 
proof  and  notice  of  loss,  delay  of  35 
days  in  sending  inventory  was  con- 
sidered excusable,  Kniclerbocher  Ins. 
Co.  V.  McGinnis,  87  111.  70;  Taber  v. 
Roval  Ins.  Co.,  124  Ala.  681,  26  So. 
252  (2  days);  St.  Louis  Ins.  Co.  v. 
Kyle,  11  Mo.  278,  49  Am.  Dec.  74 
(4  days);  West  Branch  Ins.  Co.  v. 
Holfelstein,  40  Pa.  St.  289,  80  Am. 
Dec.  573  (5  days);  Donahue  v.  Wind- 
sor, etc.,  Ins.  Co.,  56  Vt.  374  (22  days; 
question  for  jury).  The  great  fire  at 
Chicago  was  deemed  good  excuse  for 
delay  of  over  30  days,  Knickerbocker 
Ins.  Co.  V.  McGinnis,  87  111.  70.  Sick- 
ness may  affect  the  question,  Niagara 
F.  Ins.  Co.  V.  Scammon,  100  111.  644; 


Partridge  v.  Ins.  Co.,  13  App.  Div. 
519,  43  N.  Y.  Supp.  632;  Parker  v. 
Ins.  Co.,  179  Mass.  528,  61  N.  E.  215. 
As  to  etfect  of  incapacity  of  insured, 
see  Comstock  v.  Asso.,  116  Wis.  382, 
93  N.  W.  22.  It  has  been  held  by  one 
court  that  a  clause  requiring  immedi- 
ate notice  does  not  apply  to  a  loss 
under  lightning  and  tornado  rider 
unless  fire  ensues,  Epiphany  Roman 
Cath.  Church  v.  German  Ins.  Co.,  16 
S.  D.  17,91  N.  W.  332. 

^O'Brien  v.  Phcenix  Ins.  Co.,  76 
N.  Y.  459.  His  death  does  not  dis- 
pense with  the  requirement,  Matthews 
V.  Am.  Central  Ins.  Co.,  9  App.  Div. 
339,  aff'd  154  N.  Y.  449,  48  N.  E.  751. 

^Ermentrout  v.  Girard  Ins.  Co.,  63 
Minn.  305,  65  N.  W.  635;  Bush  v. 
Westchester  Ins.  Co.,  63  N.  Y.  531; 
Snyder  v.  Dwelling  House  Ins.  Co.,  59 
N.  J.  L.  .544,  37  Atl.  1022;  Lohnes  v. 
Lis.  Co.,  121  Mass.  439.  A  company 
acting  upon  a  notice,  is  bound  by  it, 
Welsh  V.  London  Assur.  Co.,  151  Pa. 
St.  607,  25  Atl.  142;  Davis  v.  Grand 
Rapids  Ins.  Co.,  15  Misc.  263,  aff'd  157 
N.  Y.  685,  51  N.  E.  1090;  Burlington 
Ins.  Co.  V.  Lowery,  61  Ark.  108,  32 
S.  W.  383. 

3  Central  City  Ins.  Co.  v.  Oates,  86 
Ala.  558. 

^  Munson  v.  German-Am.  Ins.  Co., 
55  W.  Va.  423,  47  S.  E.  160;  Penny- 
packer  V.  Capital  Ins.  Co.,  80  Iowa, 
56,  45  N.  W.  408,  8  L.  R.  A.  236,  20 
Am.  St.  R.  395;  Dade  v.  Mtna  Ins.  Co., 
54  Minn.  336,  56  N.  W.  48;  Susque- 
hanna Mid.  Fire  Ins.  Co.  v.  Tunk- 
hannock  Tori  Co.,  97  Pa.  St.  424,  39 
Am.  Rep.  816. 

5  Cook  v.  North  Brit.  &  Mer.  Ins. 
Co.,  181  Mass.  101,  62  N.  E.  1049,  183 
Mass.  50,  66  N.  E.  597  (two  months  too 
late  without  proof  of  reasonable  cause 
for  delay);  Parker  v.  Farmers'  Fire  Ins. 


•106  MllANlNC;    AND    LIXJAL    EFFECT    OF    FIRE    POLICY 

provides  tliat  the  written  notice  of  loss  shall  be  given  "as  soon  as 
practicable  after  he  ascertains  the  fact."  Under  the  South  Dakota 
policy,  "tiie  insured  shall  promptly  give  notice  of  such  loss."  By 
the  body  of  the  New  Hampshire  policy  the  verified  statement  or 
proof  of  loss  is  to  be  rendered  "forthwith;"  but  a  later  enactment, 
chapter  170  of  the  Public  Statutes,  is  printed  on  the  back  of  the  policy 
and  made  a  part  thereof,  and  this  governs  the  contract  in  many 
particulars.  In  other  states,  also,  statutory  provisions  control  the 
terms  of  the  policy.'  It  is  obvious,  therefore,  that  the  body  of  statu- 
tory law  applicable  to  each  case  must  be  carefully  scrutinized. 

§  298.  The   Same— Duty   to    Protect  from    Further    Damage.— 

The  insurer  is  cx])ressly  relieved  from  loss  occasioned  by  the  neg- 
lect of  the  insured  to  protect  the  property  from  further  damage.^ 
The  Massachusetts  policy  provides:  //  the  insured  property  shall  be 
exposed  to  loss  or  damage  by  fire,  the  insured  shall  make  all  reasonable 
exertions  to  save  and  protect  the  same. 

Under  both  wordings  of  this  clause  it  is  manifest  that  ordinarily 
any  question  of  neglect  on  the  part  of  the  insured  in  this  regard  must 
go  to  the  jury.'"* 

§  299.  Forthwith  Separate  Damaged  and  Undamaged — Put  in 
Best  Possible  Order— Make  Complete  Inventory,  Stating  Quantity 
and  Cost  of  Each  Article  and  Amount  Claimed  Thereon — Exhibit 
Remains. — These  provisions  must  be  complied  with  by  the  as- 
sured;^ and,  it  is  said,  the  work  must  be  done  at  his  own  ex- 
Co.,  179  Mass.  528.  61  N.  E.  215  (delay  Super.  Ct.  87;  Hoffman  v.  Mna  Ins. 
from  Oct.  3d  to  Dec.  Sth  lield  fatal,  Co.,  1  Robt.  .501,  aff'd  32  N.  Y.  405 
though  death  of  grandchild  and  other  (no  duty  to  restore,  but  only  to  pre- 
illness  in  the  family  intervened);  vent  further  deterioration);  Hebner  v. 
Fletcher  v.  German-Am.  Ins.  Co.,  79  Po/o/me /n.s.  Co.,  157  111.  144,  41  N.  E. 
Minn.  337,  82  N.  W.  647  (question  is  627  (expense  for  raising  vessel  was 
for  jury);  Rines  v.  German  Ins.  Co.,  laid  upon  insured.  Compare  sue  and 
78  Minn.  46,  80  N.  W.  839  (18  days,  labor  clause  of  marine  policy);  Sisk  v. 
held  in  time).  In  some  jurisdictions  Citizens'  Ins.  Co.,  16  Ind.  App.  565, 
delay  does  not  forfeit  but  is  held  sim-  45  N.  E.  804  (assured  neglected  to  dry 
ply  to  postpone  payment  of  the  insur-  the  property  after  water  had  been 
ance  money,  Mason  v.  St.  Paul  F.  &  played  upon  it  from  fire  engines) 
M.  Ins.  Co.,  82  Minn.  336,  85  N.  W.  Obligation  of  good  faith  exists  with- 
13;  Rottier  v.  German  Ins.  Co.,  84  Minn,  out  special  clause,  Devlin  v.  Qveen  Ins 
116,  86  N.  W.  888.  Co.,  46  Up.  Can.  Q.  B.  611.    The  duty 

1  For  example,  Missouri  and  Wash-  applies  to  walls  in  danger  of  falling  in 
ington,  in  which  must  be  added  to  consequence  of  the  fire,  Alter  v.  Home 
every  fire  policy  a  clause  indicating  Ins.  Co.,  50  La.  Ann.  1316,  24  So  180 
that  the  policy  is  subject  to  the  laws  3  Boak  Fish  Co.  v.  Manchester  F. 
of  the  state.  This  clau.se  obviates  the  Assur.  Co.,  84  Minn  419  87  N  W 
necessity  of  adopting  a  new  form  of     932.  ' 

^°l^7-     ,;•     r       ^  ^  .,    ^  ^.  *  Thornton  v.  Security  Ins.  Co.,  117 

3  Frankhn  Ins.  Co.  v.  Cobb,  2  Cine.      Fed.  773. 


STATEMENT  OR  PROOF  OF  LOSS  407 

pense.^  The  principal  object  of  these  provisions  is  to  enable  the 
company  to  estimate  the  loss;  ^  and  a  reasonable  and  substantial 
comphance  with  them  is  sufficient.^ 

But  under  the  Massachusetts  standard  policy  and  the  similar 
policies  of  other  states,  the  insured  is  not  called  upon  to  separate  the 
damaged  and  undamaged  goods,  or  to  make  out  a  detailed  statement 
of  the  amount  of  damage  claimed  upon  each  item.^ 

§  300.  Same  Subject — Statement  or  Proof  of  Loss. — Within  sixty 
days  after  the  fire  unless  such  time  is  extended  in  writing  .  .  .  shall 
render  a  statement  to  this  company  signed  and  sworn  to  by  the  insured 
stating  the  knowledge  and  belief,  etc. 

This  document,  to  which  the  inventory  already  mentioned  is 
usually  attached,  furnishes  the  first  authoritative  notice  of  the 
character  of  the  claim  of  the  assured,  and  gives  the  information 
necessary  to  enable  the  insurer  in  a  general  way  to  proceed  to  an 
investigation  of  its  validity  and  accuracy.  The  company  can  seldom 
if  ever  afford  to  do  without  this  statement,  unless  the  assured  is 
ready  to  abandon  all  claim  and  surrender  his  policy  for  cancellation.^ 
Its  service,  and  within  the  period  specified,  is  of  moment  to  the 
company;  and,  by  the  weight  of  authority  and  of  reason,  the  ren- 
dering of  the  verified  statement  of  particulars  ^  within  the  specified 
period  is  by  the  terms  of  the  New  York  standard  policy  and  those 
resembling  it  made  a  condition  precedent  to  any  right  of  recovery.'^ 

i  Hebner  v.   Palatine  Ins.   Co.,   157  remove  damaged  property,  see  As<nc/t 

111.  144,  41  N.  E.  627.  v.  German-Am.  Ins.  Co.,  131  Fed.  13; 

2  Oshkosh  Match  Works  v.  Man-  Chainless  Cycle  Co.  v.  Security  Ins.  Co. , 
Chester  Assur.  Co.,  92  Wis.  510,  66  52  App,  Div.  104,  64  N.  Y.  Supp.  1060, 
N.  W.  525.  aff'd  169  N.  Y.  304,  62  N.  E.  392. 

3  Boyle  V.  Hamburg- Bremen  Ins.  Co.,  *  Clement  v.  Brit.-Am  Assur.  Co., 
169  Pa.  St.  349,  32  Atl.  553;  Peoples'  141  Mass.  298,  5  N.  E.  847. 

Fire  Ins.  Co.  v.  Pulver,  127  111.  246,  ^  Until  it  receives  the  particulars  the 
20  N.  E.  18  (the  inventory  need  not  insurer  need  make  no  examination  of 
necessarily  give  the  cost  of  every  item).  the  loss  unless  it  choose,  Boruszireski 
The  insured  need  only  do  what  is  v.  Middlesex  M.  Ins.  Co.,  186  Mass. 
feasible  as  to  property  totally  de-  589,  72  N.  E.  250.  Statements  by  the 
stroyed,  or  greatly  damaged,  see  insured  in  his  proofs  may  be  used  as 
Johnston  v.  Farmers'  Ins.  Co.,  106  admissions  against  him  but  cannot  be 
Mich.  96,  64  N.  W.  5;  Power  Dry  used  as  evidence  in  his  favor  except  to 
Goods  Co.  V.  Imperial  Ins.  Co.,  48  show  that  the  clause  of  the  policy  re- 
Minn.  380,  51  N.  W.  123;  Davis  v.  quiring  proofs  has  been  complied  with. 
Grand  Rapid!<  Ins.  Co.,  15  Misc.  263,  Lundvick  v.  Westchester  F.  Ins.  Co.,  12S 
36  N.  Y.  Supp.  792,  aff'd  157  N.  Y.  Iowa,  376,  104  N.  W.  429,  and  §  152, 
685,  51  N.  E.  1090.    The  insured  is  not  supra. 

obliged  to  use  the  company's  blanks  «  But  a  sworn  notice  without  particu- 

for    proofs,    Citshivg    v.    Ins.    Co.,    4  lars  was  held  sufficient  in  case  of  total 

Wash.  538,  30  Pac.  736.     Nor  address  loss  on  a  building,  Pearce  Mfg.  Co.  v. 

the  proofs  to  the  company,  Wicking  v.  Lebanon  Mid.  Ins.  Co.,  216  Pa.  St.  265, 

7ns.  Co.,  118  Mich.  640,  77  N.  W.  275.  65  Atl.  663  (substantial  compliance). 

As  to  right  of  assured  to  dispose  of  and  ^  National  Wall  Paper  Co.  v.  A.  M. 


•108 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


A  considerable  minority  of  tribunals,  however,  have  announced 
the  opposite  rule,  and  by  an  unsatisfactory  and  strained  construction 
have  allowed  to  the  assured,  under  the  New  York  standard  policy, 
twelve  months  less  sixty  days  within  which  to  serve  his  first  state- 
ment or  proofs  of  claim,  basing  this  conclusion  on  the  ground  that, 
while  service  of  proofs  sixty  days  before  action  is  unmistakably 
made  a  condition  precedent,  the  policy  nowhere  expressly  states 
that  forfeiture  will  be  incurred  as  a  result  of  a  failure  to  render  the 
proof  within  the  period  named. ^     It  should  also  be  observed  that 


M.  Fire  his.  Co.,  175  N.  V.  226,  67 
N  E  440;  Peabodi/  v.  Sattciice,  166 
N.  Y.  174.  59  N.  Iv  81S,  52  L.  K.  A. 
956;  Quinlan  v.  Prov.  Wash.  his.  Co., 
133  N.  Y.  356,  362.  31  N.  E.  31,  28 
Am.  St.  R.  645,  45  N.  Y.  St.  R.  200; 
Blossom  V.  Liir.omi7i/j  Ins.  Co.,  64  N.  \ . 
162;  Pern/  v.  Caledonia  Ins.  Co.,  103 
App.  Div.  113.  93  N.  Y.  Supp.  50; 
Lol.c  Genera  Ice  Co.  v.  Selvage,  36 
Misc.  212,  73  N.  Y.  Supp.  193.  And 
mimcrous  other  cases  in  New  York 
where  the  clause  was  framed.  Teutonia 
Ins.  Co.  V.  Johnson.  72  Ark.  484.  82 
S.  W.  840  (deliberately  ilisapproving 
the  cases  which  have  reached  the  op- 
posite conclusion);  White  v.  Home  Ins. 
Co.,  128  Cal.  131,  60  Pac.  666  ("the 
great  weight  of  authority"  sustains 
this  rule);  Phosnix  Ins.  Co.  v.  Mech., 
etc.,  S.  L.  &  Bldg.  Assoc,  51  111.  App. 
479;  Hanover  Ins.  Co.  v.  Johnson,  26 
Ind.  App.  122,  125,  57  N.  E.  277; 
Westchester  Ins.  Co.  v.  Coverdale,  9 
Kan.  App.  651,  58  Pac.  1029;  Eastern 
R.  R.  Co.  V.  Relief  Fire  Ins.  Co.,  98 
Mass.  420;  Lejtwich  v.  Roual  Ins.  Co., 
91  Md.  597,  612,  46  Atl.  1010;  Goidd 
V.  Dwelling  House  Ins.  Co.,  90  Mich. 
302,  51  N.  W.  455,  52  N.  W.  754  (but 
see,  injra,  the  untenable  distinction 
made  by  Michigan  court  in  later  case, 
93  Mich.  81,  between  the  words  "un- 
less" and  "until");  Shapiro  v.  West- 
ern Home  Ins.  Co.,  51  Minn.  239,  53 
N.  W.  463;  Bowlinv.  Heckla  Fire  Ins. 
Co.,  36  Minn.  433,  434;  Maddox  v. 
Drelling  House  Ins.  Co.,  56  Mo.  App. 
343;  Farmers'  Ins.  Co.  v.  Frick,  29 
Ohio  St.  466;  Continental  Ins.  Co.  v. 
Chase,  89  Tex.  212,  34  S.  W.  93  (de- 
fendant must  plead  the  breach);  Davis 
V.  Pioneer  Mut.  Ins.  Assn.  (Wash., 
1906),  87  Pac.  829;  Cornell  v.  Mil.  Mut. 
Fire  Ins.  Co.,  18  Wis.  387,  391  (notice 
not  given  within  the  specified  period 
of  20  days  held,  insufficient).  The  rule 
is    the    same    in    England,    Roper    v. 


Lendon,  1  Ell.  &  Ell.  826,  829  (Lord 
Campbell,  Chief  Justice,  says:  "Where, 
therefore,  it  is  conceded  that  a  de- 
livery of  such  particulars  before  action 
is  essential,  it  follows  from  the  word- 
ing of  the  condition  that  the  delivery 
must  be  within  fifteen  days  after  the 
loss.  And  the  condition  so  construed 
is  a  very  reasonable  one;  it  being  ob- 
viously of  great  importance  to  the  de- 
fendants' company  to  know,  as  soon 
as  possible  after  a  loss,  the  amount 
claimed  by  the  assured").  Similarly 
where  a  policy  required  service  of  the 
paper  "forthwith"  a  dissenting  judge 
contended  that  time  was  not  of  the 
essence  of  the  contract,  inasmuch  as 
there  was  no  express  provision  that 
failure  would  defeat  the  policy,  but 
the  court  held  compliance  within  the 
time  to  be  a  condition  precedent, 
Scammon  v.  Germania  Ins.  Co.,  101 
111.  621.  So  also  the  Massachusetts 
court,  in  referring  to  the  sworn  state- 
ment of  loss  as  required  in  that  com- 
monwealth without  express  provision 
for  forfeiture,  says,  "a  failure  to  give 
the  notice  within  the  time  required 
stands  upon  different  ground  from  a 
failure  to  give  the  notice  in  due  form. 
The  latter  defect  may  be  remedied,  but 
t'i(^  former,  if  insisted  upon,  is  fatal  to 
the  assured,"  tJook  v.  North  Brit.  <fe 
Mer.  Ins.  Co.,  181  Mass.  101,  104,  62 
N.  E.  1049,  183  Mass.  50,  66  N.  E.  597. 
1  Hartford  Ins.  Co.  v.  Redding  (Fla. , 
1904),  37  So.  62;  Indfa  River  State 
Bank  v.  Hartford  In.';.  Co.  (Fla.,  1903), 
35  So.  228;  Southern  Ins.  Co.  v. 
Knight,  111  Ga.  622,  624,  36  S.  E.  821, 
78  Am.  St.  R.  216,  52  L.  R.  A.  70; 
St.  Paul  F.  &  M.  Ins.  Co.  v.  Owens, 
69  Ran.  602,  77  Pac.  544;  Orient  Ins. 
Co.  V.  Clark,  22  Kv.  L.  Rep.  1066,  59 
S.  W.  863;  Allen  v.  Mil.  Mech.  Ins. 
Co.,  106  Mich.  204,  64  N.  W.  15;  Steele 
v.  German  Ins.  Co.,  93  Mich.  81,  53 
N.  W.  514,  18  L.  R.  A.  85  (making 


STATEMENT  OR  PHOOF  OF  LOSS  409 

from  an  early  date  the  Massachusetts  and  New  York  courts  have 
stood  for  the  proposition  that  a  Hmited  period  specified  for  service 
of  proofs  is  of  the  very  essence  of  the  contract,  and  the  standard 
pohcies  of  both  classes,  now  in  general  though  not  universal  use 
throughout  this  country,  were  originally  framed  in  those  states, 
and  were  worded  in  the  light  of  the  decisions  of  their  courts. 

The  New  York  policy  provides  for  numerous  acts  which  must  be 
done  after  loss;  some  without  and  some  with  affirmative  request 
by  the  company,  but  in  no  instance  is  there  necessarily  a  precise 
time  limit  which  could  be  known  in  advance  for  the  orderly  per- 
formance of  the  act;  since 'even  with  reference  to  the  period  specified 
for  service  of  the  verified  statement,  it  is  provided  that  the  time 
may  be  extended  by  writing.  The  law  was  well  settled  in  England 
and  in  this  country  that  a  compliance  with  these  various  provisions, 
including  even  the  furnishing  of  a  magistrate's  or  notary's  certificate 
when  required,  was  a  condition  precedent,  although  the  provisions 
were  not  connected  with  any  specific  declaration  of  forfeiture;  ^ 
but  it  seemed  hardly  appropriate  to  sum  up  this  long  list  of  require- 
ments, some  absolute  and  some  conditional,  with  the  statement  that 
the  policy  would  be  avoided  upon  their  nonfulfillment  at  various 
indefinable  times.  Instead  of  adopting  phraseology  so  awkward 
the  committee  followed  up  all  these  clauses  with  the  seemingly 
unambiguous  provision  "no  suit  or  action  on  this  policy  .  .  .  shall 
be  sustainable  in  any  court  .  .  .  until  after  full  compliance  by  the 
insured  with  all  the  foregoing  requirements."  The  question  of  law 
involved,  therefore,  is  this,  whether  the  insured  has  fully  complied 
with  the  foregoing  requirement  relating  to  service  of  verified  proofs 
within  sixty  days  or  within  the  time  extended  by  writing  when, 

untenable   distinction   between  words  states  are  in  harmony  with  the  pre- 

" until  and  "unless");  Northern  Assur.  vailing  rule,  cases  supra.     The  South 

Co.  V.  Hanna,  60  Neb.  29,  82  N.  W.  Dakota     standard     policy     provides, 

97;  Gerringer  v.  North  Car.  Home  Ins.  "should  proof  of  loss  not  be  furnished 

Co.,    133    N.    C.    407,   45    S.    E.    773;  within   six   months   from  the  date  of 

Continental  Ins.  Co.  v.  Whittaker,  112  loss  this   policy  shall   be  void,  unless 

Tenn.  151,  79  S.  W.  119,  64  L.  R.  A.  such   proof  of    loss    shall    have    been 

451;  Munson  v.  German-Am.  Ins.  Co.,  waived." 

55  W.  Va.  423,  47  S.  E.  160.    And  see  i  Worsley  v.  Ward,  6  T.  R.  710,  722; 

Coventry  Ins.  Assoc,  v.  Evans,  102  Pa.  Johnson  v.  Phoenix  Ins.  Co.,  112  Mass. 

St.  281-  Snn  Ins.  Co.  v.  Mattingly,  77  49;  Mna  Ins.  Co.  v.  Tyler,  16  Wend. 

Tex.  162,13  8.  W.  1016.    The  authority  385.      At   common    law    the   doctrine 

of  some  of  these  cases  is  considerably  originally  was  that  any  statement  of 

weakened  by  the    circumstance    that  fact   or   promise   of   performance   ap- 

they  are  based  in  part  upon  decisions  pearing  on  the  face  of  the  policy  was 

in  Wisconsin,  Minnesota,  or  New  York  a    warranty    or    condition    precedent, 

construing  policies  essentially  different  Jefferson  Ins.  Co.  v.  Cotheal,  7  Wend, 

from    the    New    York    standard.      As  (N.  Y.)  72,  80,  and  English  cases  cited, 

matter  of  fact  the  courts  of  those  three  And  see  §  104,  supra. 


\U)  MEANING    AND    LEGAL    EFFECT    OF    FIRE   POLICY 

williout  any  extension  of  time  at  all  in  writing  or  otherwise,  he 
neglects  to  render  any  statement  of  his  claims  until  the  expiration 
of  nearly  ten  montiis  succeeding  the  fire.  The  company  need  make 
no  investigation  until  it  receives  these  statements  of  the  claim.^ 
After  ten  months  there  would  probably  be  no  visible  evidences  of 
rhc  lire  loss  left  on  the  premises  to  investigate. 

Where  as  in  the  ease  of  some  of  the  standard  forms  the  policy 
eoiitains  no  such  clause  making  compliance  a  condition  precedent 
there  is  possibly  better  excuse  for  postponing  by  implication  the 
time  for  serving  the  proofs,  at  least  so  it  has  seemed  to  .several 
courts.^ 

The  period  within  which  proofs  must  be  served  begins  to  run  from 
the  time  when  the  fire  has  so  far  abated  that  the  damaged  property 
may  be  inspected.^  As  to  whether  the  proofs  must  be  received 
within  the  sixty  days,  or  whether  mailing  within  that  period  is  a 
suHieient  "rendering,"  under  the  terms  of  the  requirement,  is  mat- 
tor  of  conflict  in  the  decisions."* 

§  301.  Excusable  Failure  in  Strict  Compliance. — So  also  there  is 
difference  of  opinion  as  to  what  will  avail  to  excuse  delay  in  the 
service  of  a  notice  or  statement  of  loss.  In  such  matters  the  parties 
cannot  be  presumed  to  have  expected  impossibilities.^ 

1  Boriiazweski  v.  Middlesex,  etc.,  Ass.  86  N.  Y.  Supp.  24;  Lake  Geneva  Ice  Co. 

Co.,  186  Mass.  589,  72  N.  E.  250.  v.  Selvage,  36  Misc.  R.  212,  73  N.  Y. 

'  Kahnweiler  v.  Phoenix  Ins.  Co.,  57  Supp.  193.    See  Penny  packer  \.  Capital 

Fed.  562;  Taber  v.  Rami  Ins.  Co.,  124  Ins.  Co.,  80  Iowa,  56,  45  N.  W.  408, 

Ala.  681,  20  So.  252;  Mo.sonv.  AS^.Pa?/^  8  L.   R.   A.   236,  2  Am.   St.   R.   395. 

F.   &  M.  Ins.  Co.,  82  Minn.   336,  85  Contra,   Manvfacturers'   &   Merchants' 

N.  W.  13,  83  Am.  St.  R.  433;  Burling-  M.  I.  Co.  v.  Zeitinger,  168  111.  286,  48 

ton  Ins.  Co.  v.Tohy,  10  Tex.  Civ.  App.  N.  E.  179,  01  Am.  St.  R.  105,  and  see 

425,   30   S.    W.    lill;    Welch   v.    Fire  cases   supra.      Mailing   creates   a   pre- 

Assoc,  120  Wis.  456,  98  N.  W.  227.  sumption  of  delivery,  Dade  v.  Mtym 

3  National  Wall  Paper  Co.  v.  Asso-  Ins.  Co.,  54  Minn.  336,  .56  N.  W.  48. 

dated  Mfrs.  M.  F.  I.  Co.,  175  N.  Y.  Receipt  in  time  by  Post  Office  where 

226,  67  N.  E.  440.    Though  the  insur-  company  is  located  is  said  to  be  suffi- 

ance  rests  simply  in  a  binder,  the  terms  cient,  Caldwell  v.  Dwelling  House  Ins. 

of  the  usual  policy  are   implied   and  Co.,  61  Mo.  App.  4.     If  time  expires 

proof  must   be  served   in   compliance  Sunday,    Monday    will    answer,    Mc- 

therewith,  Hicks  v.  Brit.  Am.  Ins.  Co.,  Kibban  v.   Des  Moines  Ins.   Co.,   114 

162  N.  Y.  284,  56  N.  E.  743.     Unless  Iowa,  41,  86  N.   W.   38.     As  to  the 

proofs  are  waived  by  a  denial  of  lia-  method   of   computing   the   period   of 

bility  or  otherwise.  Farmers'  Ins.  Co.  sixty  days  under  the  New  York  Con- 

V.   Baker,  94   Md.   545,  51   Atl.    184;  struction  Act  see  Benoit  v.  R.  R.  Co., 

Baile  v.  St.  Jo.  Ins.  Co.,  73  Mo.  371.  94  App.   Div.   24;   Ryer  v.   Prudential 

<  Some  courts  hold  that  proofs  must  Ins.  Co.,  185  N.  Y.  6. 
he  received  within  the  period,  Peafcody  s  insanity    held    a    good    excuse    in 

V.  Satterlee,  1G6  N.  Y.   174,  59  N.  E.  Insurance    Cos.    v.    Boykin,    12    Wall. 

S18,  52  L.  R.  A.  956;  Perry  v.  Cale-  (U.  S.)  433,  20  L.  Ed.  442;  McGraw 

dmna  Ins.  Co.,  103  App.  Div.  113,  93  v.   Germania  Ins.    Co..  54   Mich.    145, 

N.  Y.  Supp.  50;  Huse  &  Loomis  Ice  &  19  N.  W.  927;  Wheeler  v.  Conn.  Mut. 

T.  Co.  V.  Wielar  (N.  Y.  App.  Term),  Life  Ins.  Co.,  82  N.  Y.  543,  37  Am. 


EXCUSABLE  FAILURE  IN   STRICT   COMPLIANCE 


Hi 


Whenever  it  is  possible  the  insured  himself  must  sign  and  verify 
the  statement  of  loss.  The  company  has  a  right,  not  only  to  the 
information,  but  also  to  the  personal  oath  of  a  party  to  the  con- 
tract, whose  swearing,  if  false,  will  vitiate  it,  and  who  is  presumed 
to  be  best  acquainted  with  the  facts;  ^  but  if  there  are  several  in- 
sured any  one  may  act.  It  is  not  necessary  to  join  all.^  And  if 
there  is  one  assured  with  more  than  one  policy  in  the  same  com- 
pany covering  the  same  property,  one  proof  will  be  sufficient.^ 

As  to  the  many  particulars  called  for,  in  the  statement,  a  rea- 
sonable compliance,  according  to  the  circumstances  of  each  case, 
is  all  that  is  required;  but  the  itemized  statement  of  cash  or  sound 
value  and  damage  should  be  given,  if  practicable."* 


Rep.  594.  But  see  Conn.  Gen.  Stat. 
§  2839.  So  sickness  or  physical  dis- 
ability has  been  thought  to  avail  when 
no  definite  period  is  prescribed,  Parker 
V.  Middlesex  Assur.  Co.,  179  Mass.  528, 
61  N.  E.  215;  American  Ins.  Co.  v. 
Hazen,  110  Pa.  St.  530.  And  under 
the  New  York  standard  form,  where 
the  assured  has  died  and  his  estate  is 
for  a  time  without  representation, 
delay  reasonably  necessary  may  be 
allowed,  Matthews  v.  Am.  Central.  Ins. 
Co.,  154  N.  Y.  449,  48  N.  E.  751.  But 
the  only  safe  practice  for  the  assured 
to  follow  is,  in  spite  of  accident  or 
sickness,  to  comply,  if  possible,  with 
the  condition,  Sherwood  v.  Agricvltural 
Ins.  Co.,  10  Hun,  595,  aff'd  73  N.  Y'. 
447;  Scammon  v.  Germania  Ins.  Co., 
101  111.  621.  Furnishing  proofs  being 
a  condition  precedent,  loss  of  policy 
or  ignorance  of  its  requirements  is  no 
excuse  for  not  performing,  Munson  v. 
German- Am.  F.  Ins.  Co.,  55  W.  Va. 
423,  47  S.  E.  160;  Blaheley  v.  Phcenix 
Ins.  Co.,  20  Wis.  205,  91  Am.  Dec.  388. 
See  Thornton  v.  Seciirity  Ins.  Co.,  117 
Fed.  773,  aff'd  123  Fed.  664;  QuHlan 
V.  Providence  Wash.  I.  Co.,  133  N.  Y. 
356,  31  N.  E.  31,  45  N.  Y.  St.  R.  200. 
1  Execution  by  a  substitute  held 
good  in  the  following  cases:  Lumber- 
men's Mut.  Ins.  Co.  V.  Bell,  166  111. 
400,  45  N.  E.  130  (agent,  when  it  was 
impossible  for  assured  to  do  it);  Ger- 
man Ins.  Co.  V.  Grnnert,  112  ill.  68, 
1  N.  E.  113  (agent  in  absence  of  as- 
sured); Burns  v.  Mich.  Manuf.  Ins. 
Co.,  130  Mich.  561,  90  N.  W.  411 
(agent  when  the  assured  was  critically 
ill);  Swan  v.  L.  &  L.  &  G.  Ins.  Co.,  52 
Miss.  704  (agent  in  sole  charge  of 
property  and  insurance,  best  ac- 
quainted  ytdh.  the    facts);    Burge    v. 


Greenwich  Ins.  Co.,  106  Mo.  App.  244, 
80  S.  W.  342  (employee  in  absence  of 
partners);  Siins  v.  State  Ins.  Co.,  47 
Mo.  54  (agent  who  alone  knew  the 
facts);  Pearlstine  v.  West.  Ins.  Co.,  70 
S.  C.  75,  49  S.  E.  4  (agent  who  knew 
the  facts,  in  the  absence  of  the  as- 
sured); Findeisen  v.  Metropole  Ins. 
Co.,  57  Vt.  520  (husband  who  was  in 
full  charge  of  the  insurance);  Evans  v. 
Craivjord,  etc.,  Ins.  Co.  (Wis.,  1906), 
109  N.  W.  952  (wife  ex  necessitate); 
O'Connor  v.  Hartford  Ins.  Co.,  31  Wis. 
160  (wife,  the  assured  being  absent 
for  three  years);  Roberts  v.  Northwest- 
ern Nat.  Ins.  Co.,  90  Wis.  210,  62  N.  W. 
1048  (husband,  the  assured  having 
disappeared).  If  the  assured  is  dead 
any  one  of  his  legal  representatives 
executors,  administrators,  heirs,  next 
of  kin,  legatees,  or  devisees,  may  make 
the  proofs,  Matthews  v.  American  Cent. 
I.  Co.,  154  N.  Y.  449,  48  N.  E.  751,  39 
L.  R.  A.  433,  61  Am.  St.  R.  627.  But 
a  mere  payee  or  appointee  is  not  the 
insured,  State  Ins.  Co.  v.  Maackens,  38 
N.  J.  L.  565.  As  to  attaching  creditor 
see  Northwestern  Ins.  Co.  v.  Atkins,  66 
Ky.  328;  receiver,  Sims  v.  Union 
Assur.  Soc,  129  Fed.  804.  As  to  mort- 
gagee, see  §  294,  supra. 

2  Myers  v.  Council  Bluffs  Ins.  Co., 
72  Iowa,  176,  33  N.  W.  453  (one  of  a 
partnership);  Walsh  v.  Washington 
Ins.  Co.,32N.  Y.  427. 

3  Dakin  v.  L.  &  L.  &  G.  Ins.  Co.,  13 
Hun,  122,  aff'd  77  N.  Y.  600.  State- 
ments in  the  proofs  refer  to  the  date 
of  the  fire,  WicHng  v.  Citizens'  Mut. 
Ins.  Co.,  118  Mich.  640,  77  N.  W.  275; 
Jones  V.  Howard  Ins.  Co.,  117  N.  Y. 
103,  22  N.  E.  578. 

4  Gauche  v.  L.  &  L.  Ins.  Co.,  10  Fed. 
347;  Brock  v.  Des  Moines  Ins.  Co.,  96 


412  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

The  policy  is,  by  another  clause,  made  payable  sixty  days  after 
due  notice,  ascertainment,  estimate,  and  satisfactory  proof  of  the 
loss  have  been  received.  "Satisfactory  proof"  means  proof  which 
ought  to  be  considered  satisfactory.^ 

Whether  the  written  proofs  constitute  a  compliance  with  the 
warranty  of  the  policy,  is  properly  a  question  for  the  court.^ 

§  302.  Where  Served.— The  proofs  should  be  served  at  the  home 
office  of  the  company,  or  at  a  general  agency,  or  upon  a  local  agent 
designated  by  statute  to  receive  papers.^    And  where  a  local  counter- 


Iowa,  39,  64  N.  W.  685  (cash  values); 
Scottish  Un.  &  N.  Ins.  Co.  v.  Keene, 
85  Md.  263,  37  Atl.  33  (allowing  method 
of  starting  with  past  inventory  of 
stock  and  giving  subse(|uent  pur- 
chases and  sales  less  profits — often  the 
onlv  method  of  estimating  loss);  Davin 
V.  Grand  Rapids  Ins.  Co.,  15  Misc.  263, 
36  N.  Y.  Supp.  792,  aff'd  157  N.  Y. 
685,  51  N.  E.  1090  (holding  the  as- 
sured onlv  to  what  is  practicable); 
Riker  v.  Ins.  Co.,  90  App.  Div.  391, 
85  N.  Y.  Supp.  546;  Gottlieb  v.  Dutchess 
Co.  Ins.  Co.,  89  Hun,  36,  35  N.  Y. 
Supp.  71;  ^fJtna  Ins.  Co.  v.  Peoples' 
Bank,  62  Fed.  222,  106  C.  C.  A.  342. 
As  to  interest  of  the  insured,  Wicking  v. 
Ins.  Co.,  118  Mich.  640,  77  N.  W.  275. 
Need  not  disclose  an  interest  acquired 
after  loss,  Mauck  v.  Ins.  Co.,  4  Pennev- 
will  (Del.),  325,  54  Atl.  952.  As  to 
disclosing  cause  of  fire  see  White  v. 
Royal  Ins.  Co.,  149  N.  Y.  485,  44  N.  E. 
77;  McNally  v.  Ins.  Co.,  137  N.  Y. 
389,  33  N.  E.  475;  Howard  Ins.  Co.  v. 
Hocking,  115  Pa.  St.  415,  8  Atl.  592; 
Warshawky  v.  Anchor  Ins.  Co.,  98 
Iowa,  221.  But  the  cost  prices  need 
not  be  given  in  the  statement  of  loss, 
only  sound  values  and  damage,  Mc- 
Manus  v.  West.  Assur.  Co.,  22  Misc. 
(IT.  Y.)  269.  As  to  stating  other 
insurance  and  various  particulars,  see 
Jones  V.  Howard  Ins.  Co.,  117  N.  Y. 
103,  22  N.  E.  578;  Fidler  v.  Detroit 
Ins.  Co.,  36  Fed.  469  (it  is  not  neces- 
sary for  the  assured  to  apportion  the 
loss  among  the  companies);  Partridge 
V.  Milwaukee  Mechanics'  Ins.  Co.,  13 
App.  Div.  519,  43  N.  Y.  Supp.  632, 
aff'd  162  N.  Y.  597,  57  N.  E.  1119. 
Where  goods  are  totally  destroyed  the 
insured  may  do  the  best  he  can  for  a 
schedule,  Schilansky  v.  Ins.  Co.,  4 
Penneywill  (Del.),  293,  55  Atl.  1014. 
As  to  carrier's  insurance  on  property, 


his  own  or  belonging  to  others.  Force  v. 
St.  Paul  Fire  &  M.  I.  Co.,  81  App. 
Div.  633,  80  N.  Y.  Supp.  708.  If 
company  claims  defect  in  proofs  it 
must  allege  it  with  definiteness, 
Phcenix  Ins.  Co.  v.  Hedrick,  178  III. 
212,  52  N.  E.  1034. 

1  Walsh  V.  Washington  M.  Ins.  Co., 
32  N.  Y.  427;  London  Guarantee  & 
Ace.  Co.  V.  Fearnley,  43  L.  T.  N.  S.  390; 
see  §  243,  supra.  The  assured  need 
give  no  particulars  except  those  speci- 
fied in  the  policy,  De  Raiche  v.  L.  &  L. 
&  G.  Ins.  Co.,  83  Minn.  398,  86  N.  W. 
425;  McManus  v.  Western  A.sswr.  Co., 
43  App.  Div.  .550,  60  N.  Y.  Supp.  1143, 
aff'd  167  N.  Y.  602,  60  N.  E.  1115. 

2  Travellers'  Ins.  Co.  v.  Sheppard,  85 
Ga.  802.  A  carpenter's  statement  of 
the  cost  of  rebuilding  is  no  com- 
pliance with  the  clause,  Heusinkveld 
v.  St.  Paul  F.  &  M.  Ins.  Co.,  96  Iowa, 
224.  64  N.  W.  769;  Citizens'  Ins.  Co. 
V.  Doll,  35  Md.  89.  As  to  rule  in  Penn- 
sylvania when  building  is  a  total  loss, 
see  German-Am..  Ins.  Co.  v.  Hocking, 
115  Pa.  St.  398;  McGonigle  v.  Ins.  Co., 
168  Pa.  St.  1,  31  Atl.  868.  As  to 
waiver  of  formal  defects,  see  Sidton  v. 
Am.  Ins.  Co.,  188  Pa.  St.  380,  41  Atl. 
537;  Schmurr  v.  State  Ins.  Co.,  30 
Oreg.  29,  46  Pac.  .363;  and  §  144,  supra. 

^  Edgerly  v.  Farmers'  Ins.  Co.,  48 
Iowa,  644  (office  of  company);  Min- 
nock  v.  Ins.  Co.,  90  Mich.  236,  51  N.  W. 
367  (president);  Minn.,  etc.,  R.  Co.  v. 
Home  his.  Co.,  64  Minn.  61,  66  N.  W. 
132  (adjuster);  Greenlee  v.  Hanover 
Ins.  Co.,  104  Iowa,  481,  73  N.  W.  1050 
Gocal  agent) ;  Trustees  v.  Brooklyn  Ins. 
Co.,  18  Barb.  69;  Ins.  Co.  of  N.  A.  v. 
McLimans,  28  Neb.  653,  44  N.  W.  991 
(general  agent);  Walker  v.  Beecher,  15 
Misc.  149,  36  N.  Y.  Supp.  470  (attor- 
neys in  fact  for  Lloyds);  Harnden  v. 
Mil.  Mech.  Ins.  Co.,  164  Mass.  382,  41 


WHERE   SERVED — PLANS — MAGISTRATE  S   CERTIFICATE 


il3 


signing  agent,  by  custom  or  otherwise,  has  apparent  authority  to 
receive  proofs  of  loss,  service  upon  him  is  effective.^ 


§  303.  Same  Subject — Plans — Magistrate's  Certificate. — Verified 
plans  and  specifications  of  any  building,  fixtures,  or  machinery, 
destroyed  or  damaged,  must  be  furnished;  but  only  if  affirmatively 
required.^  This  may  be  either  for  the  purpose  of  aiding  the  com- 
pany in  estimating  damage,  or  in  determining  whether  it  will  exer- 
cise its  option  to  rebuild.^ 

There  is  no  such  clause  in  the  Massachusetts  policy. 

So  also,  but  only  if  affirmatively  required,^  the  assured  must 
furnish  a  certificate  of  the  magistrate  or  notary  public  (not  inter- 
ested in  the  claim  as  a  creditor  or  otherwise,  nor  related  to  the  in- 
sured) living  nearest  the  place  of  fire,  stating  that  he  has  examined 
the  circumstances  and  believes  the  insured  has  honestly  sustained 
loss  to  an  amount  certified.'^ 

The  sixty-day  limit  after  the  fire  does  not  apply  to  the  extra  or 
additional  proofs  provided  for  by  the  policy.  These  must  be  called 
for  and  furnished  within  reasonable  time;  ^  and  the  demand  by  the 
company  must  be  explicit  and  unequivocal.     It  is  not  enough  to 


N.  E.  658;  Welsh  v.  London  Assur.  Co., 
151  Pa.  St.  607,  25  Atl.  142  (local 
countersigning  agent).  May  serve  on 
a  company  which  is  absorbing  the 
original  company,  Whitney  v.  Am. 
Ins.  Co.,  127  Cal.  464,  59  Pac.  897.  As 
to  authority  of  countersigning  agent 
and  adjusters  to  waive  proofs  alto- 
gether see  §§  178,  180,  supra. 

1  Wall er  v.  Lancashire  Ins.  Co.,  188 
Mass.  560,  75  N.  E.  66;  Harnden  v. 
Mil.  Mech.  Ins.  Co.,  164  Mass.  382,  41 
N.  E.  658,  49  Am.  St.  R.  467. 

2  Fauxett  v.  Liverpool,  London  & 
Globe  Ins.  Co.,  27  U.  C.  Q.  B.  225. 

3  Lancashire  Ins.  Co.  v.  Barnard,  111 
Fed.  702,  49  C.  C.  A.  559  (holding  also 
that  assured  had  waived  right  to  de- 
mand plans  after  an  award).  As  to 
waiver  of  right  to  plans,  see  Ligon  v. 
Equitable  Ins.  Co.,  87  Tenn.  341,  10 
S.  W.  768.  Objections  to  papers  fur- 
nished under  the  demand  must  be 
promptly  made,  Breckinridge  v.  Am. 
Cent.  Ins.  Co.,  87  Mo.  62.  Demand  for 
plans  and  specifications  held,  no  waiver 
of  other  defenses,  Bond  v.  Vanderbilt 
Ins.  Co.,  90  Tenn.  212,  16  S.  W.  470, 
approved  in  Armstrong  v.  Agricultural 
Ins.  Co.,  130  N.  Y.  560.  Such  should 
be  the  rule  under  the  New  York  stand- 
ard form,  §  148,  supra.     It  has  been 


held  that  under  valued  policy  laws, 
making  the  amount  written  the  meas- 
ure of  damage  in  case  of  total  loss,  plans 
cannot  be  demanded.  Mil.  Mech.  Ins. 
Co.  V.  Russell,  65  Ohio  St.  230,  62 
N.  E,  338,  56  L.  R.  A.  159;  West. 
Assur.  Co.  V.  Broun  (Tex.  Civ.  App., 
1895),  33  S.  W.  994.  And  see  German- 
Am.  Ins.  Co.  V.  Hocking,  115  Pa.  St. 
398,  8  Atl.  586;  Roe  v.  Duelling  House 
Ins.  Co.,  149  Pa.  St.  94,  23  Atl.  718. 

*  Jones  v.  Houard  Ins.  Co.,  117  N.  Y. 
103,  22  N.  E.  578. 

^  McNally  v.  Phoenix  Ins.  Co.,  137 
N.  Y.  389,  33  N.  E.  475;  Sullivan  v 
Germania  Ins.  Co.,  89  Mo.  App.  106 
Lane  v.  St.  Paid  Ins.  Co.,  50  Minn 
227,  52  N.  W.  649,  17  L.  R.  A.  197 
Kelly  V.  Sun  Fire  Office,  141  Pa.  St 
10,  21  Atl.  447,  23  Am.  St.  R.  254 
But  see,  contra,  Home  Ins.  Co.  v 
Hammang,  44  Neb.  567,  62  N.  W.  883 
German-Am.  Ins.  Co.  v.  Norris,  100 
Ky.  29,  37  S.  W.  267. 

^McNally  v.  Phoenix  Ins.  Co.,  137 
N.  Y.  389,  33  N.  E.  475;  Gottlieb  v. 
Didchess  Co.  Mut.  Ins.  Co.,  89  Hun, 
36,  35  N.  Y.  Supp.  71;  Merchants'  Ins. 
Co.  V.  Gibbs,  56  N.  J.  L.  679,  29  Atl. 
485,  44  Am.  St.  R.  413;  Badger  v. 
Glens  Falls  Ins.  Co.,  49  Wis.  389,  5 
N.  W.  845. 


414 


MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 


inform  the  insured  generally  that  he  will  be  required  to  conform 
strictly  to  the  conditions  in  the  policy.^ 

As  to  the  residence  of  the  notary  or  magistrate  the  court  will 
not  go  into  a  very  nice  calculation  to  determine  whether  one  magis- 
trate is  a  little  nearer  to  the  place  of  the  fire  than  another.^  If  the 
assured  has  acted  in  good  faith,  it  seems  that  he  may  procure  the 
certificate  from  the  nearest  magistrate  who  will  consent  to  act.^ 

A  notary  who  had  married  a  first  cousin  of  the  assured  was  held 
to  be  so  "related"  as  to  be  disqualified.^  A  creditor  of  the  insured, 
it  is  said,  will  not  be  debarred  from  acting  as  notary  unless  he  has 
some  interest  in  the  property  insured,  or  in  the  proceeds  of  the 
insurance.'' 

If  after  the  exercise  of  reasonable  diligence  the  assured,  through 
no  fault  of  his  own,  is  unable  to  get  a  certificate,  he  should  be  ex- 
cused for  the  failure,  since  the  certificate  is  a  mere  matter  of  evi- 
dence to  be  obtained,  if  practicable,  from  a  third  party;  but  on 
this  point  there  is  conflict.^ 


1  Moyer  v.  Sun  Ins.  Co.,  176  Pa.  St. 
579,  35  Atl.  221;  Swearingen  v.  Pacific 
Ins.  Co.,  66  Mo.  App.  90;  ^tna  Im. 
Co.  V.  Shac'dctt  (Tex.  Civ.  App.),  57 
S.  W.  583.  But  if  the  insured  volun- 
tarily furnishes  a  certificate,  the  valid- 
ity of  objections  made  to  it  will  be 
determined  as  though  due  demand  had 
been  made,  .€tna  Ins.  Co.  v.  People.^' 
Bank,  62  Fed.  222,  10  C.  C.  A.  342; 
Williams  v.  Queen  Ins.  Co.,  39  Fed. 
167. 

2  Daniels  v.  Equitable  Fire  Ins.  Co. , 
50  Conn.  551;  Amer.  Cent.  Ins.  Co.  v. 
Rothchild,  82  111.  166;  Williams  v. 
Niagara  Fire  Ins.  Co.,  50  Iowa,  561; 
Dolliver  v.  St.  Joseph  Fire  &  Marine 
Ins.  Co.,  128  Mass.  315,  35  Am.  Rep. 
378;  Oswalt  v.  Hartford  Ins.  Co.,  175 
Pa.  St.  427,  34  Atl.  735;  Turleii  v. 
North  Am.  Fire  Ins.  Co.,  25  Wend. 
(N.  Y.)  374;  Snith  v.  Ho'ne  Ins.  Co., 
47  Hun  (N.  Y.),  30.  If  the  company 
objects  on  the  ground  that  there  is  a 
nearer  notary,  it  should  give  his  name 
and  address,  Paltrovitch  v.  Phcenix  Ins. 
Co.,  143  N.  Y.  73,  37  N.  E.  639;  Agri- 
cultural Ins.  Co.  V.  Bemiller,  70  Md. 
400,  17  Atl.  380.  If  the  company  ob- 
jects, and  calls  attention  to  a  nearer 
notary,  the  iisured  may  forfeit  his 
policy  by  ignoring  the  requirement, 
Gillijan  v.  Commercial  Ins.  Co.,  20 
Hun,93,aff'd87N.  Y.  626. 

^Noone  v.  Ins.  Co.,  88  Cal.  152,  26 
Pac.  103;  Walker  v.  Phoenix  Ins.  Co., 


62  Mo.  App.  209;  Lang  v.  Eagle  Fire 
Ins.  Co.,  12  App.  Div.  39,  42  N.  Y. 
Supp.  539.  If  the  company  employs 
the  nearest  magistrate  to  prevent  the 
assured  from  doing  so,  it  cannot  en- 
force the  clause,  DeLand  v.  ^tna  Ins. 
Co.,  68  Mo.  App.  277. 

4  Peoples'  Bank  v.  .^tna  Ins.  Co.,  74 
Fed.  507,  20  C.  C.  A.  630,  42  U.  S.  App. 
81.  The  insured  cannot  qualify  him- 
self to  act  as  notary  by  assigning  all 
his  interest  in  the  claim,  Stevens  v. 
Phoenix  Ins.  Co.,  32  N.  B.  394. 

^Dolliver  v.  St.  Joseph  Ins.  Co.,  131 
Mass.  39.  .  As  to  magistrate,  and  when 
disqualified,  see  Margeson  v.  Commer- 
cial Union  Assur.  Co.,  31  N.  S.  337; 
.fEtna  his.  Co.  v.  Miers,  5  Sneed 
(Tenn.),  139;  Wright  v.  Hartford  Ins. 
Co.,  36  Wis.  522  (holding  that  an  im- 
partial arbiter  is  arrived  at  not  merely 
one  having  no  pecuniary  interest  in  the 
insurance,  but  not  under  standard 
form  of  policy). 

^  McNally  v.  Phoenix  Ins.  Co.,  137 
N.  Y.  389,  33  N.  E.  475;  German-Am. 
Ins.  Co.  V.  Norris,  100  Ky.  29,  37  S.  W. 
267,  66  Am.  St.  R.  324;  Agricultural 
Ins.  Co.  V.  Bemiller,  70  Md.  400,  17 
Atl.  380;  DeLand  v.  ^tna  Ins.  Co.,  68 
Mo.  App.  277.  Contra,  Leadbetter  v. 
Mna  Ins.  Co.,  13  Me.  265,  29  Am.  Dec. 
505;  Johnson  v.  Phoenix  Ins.  Co.,  112 
Mass.  49,  17  Am.  Rep.  65;  Lane  v.  St. 
Paul  F.  &  M.  Ins.  Co.,  50  Minn.  227, 
52  N.  W.  649, 17  L.  R.  A.  197;  Roumage 


EXHIBIT  REMAINS — SUBMIT  TO  EXAMINATION  415 

As  to  the  contents  of  the  certificate  a  substantial  compHance  with 
the  requirements  of  the  pohcy  will  suffice.^  Nor  is  the  insured  con- 
cluded by  the  estimate  of  loss  or  other  statements  contained  in  the 
certificate.^ 

This  requirement  is  omitted  from  the  Massachusetts  policy. 

§  304.  Exhibit  Remains — Submit  to  Examination. — The  insured, 
as  ojten  as  required,  shall  exhibit  to  any  person  designated  by  this 
company  all  that  remains  of  any  property  herein  described,  and  submit 
to  examinations  under  oath  by  any  person  named  by  this  company 
and  subscribe  the  same. 

These  provisions,  and  the  next  following,  connected  with  it,  relat- 
ing to  the  production  of  books  and  bills  on  demand,  confer  great 
privileges  upon  the  insurers,  and  ought  to  be  enforced  b}^  the  latter 
only  within  bounds  of  reason  and  propriety.  They  are,  however, 
binding  upon  the  insured  so  far  as  it  lies  within  his  power  to  comply 
with  them,^  and  a  fulfillment,  at  least  to  that  extent,  is  a  condition 
precedent  to  a  right  of  recovery  under  the  standard  policy.^  There- 
fore, before  opportunity  for  an  examination  of  the  property  by  the 
adjuster,^  or  with  knowledge  that  a  further  examination  is  re- 
quired,^ the  assured  must  not  remove  or  dispose  of  the  property 
so  as  to  deprive  the  company  of  its  rights. 

The  demand  for  a  personal  examination  of  the  insured  under  oath 
must  be  clear  and  distinct,  and  not  ambiguous  or  inferential.^  The 
notice  also  must  designate  a  reasonable  time,  a  reasonable  place,  and 
the  person  b}^  w^hom  it  is  to  be  conducted ;  *  and  the  notice  must 

V.  Mech.  Fire  Ins.  Co.,  13  N.  J.  L.  110;  Fund  I.  Co.  v.  Sims,  115  Ga.  939,  42 

Kelli/  V.  Sun  Fire  Office,  141  Pa.  St.  S.  E.  269;  O'Brien  v.  Commercial  Fire 

10,  21  Atl.  447.  Ins.  Co.,  63  N.  Y.  108;  Titus  v.  Glens 

ijEtna  Fire  Ins.   Co.   v.    Trier,   16  /^oWs //is.  Co.,  81  N.  Y.  410. 

Wend.  385,  30  Am.  Dec.  90;  National  *  Harris    v.    Phoenix    Ins.    Co.,    35 

Ins.  Co.  V.  Strong,  25  Ohio  C.  C.  101;  Conn.  310;  Firemen's  Fund  I.  Co.  v. 

Brown  v.  Hartford  Fire  Ins.   Co.,  52  Sims,    115    Ga.    939,    42    S.    E.    269. 

Hun,  260,  5  N.  Y.  Supp.  230,  aff'd  132  Contra,  Scottish  Union  &  Nat.  Ins.  Co. 

N.  Y,  539,  30  N.  E.  68.     Objections  v.  Strain,  24  Ky.  L.  R.  958,  70  S.  W. 

will  be  held  waived  unless  promptly  274. 

pointed  out,  iSc/imwrr  V.  5ta/e /ns.  Co.,  ^  Oshkosh    Match    Works    v.    Man- 

30  Oreg.   29,  46  Pac.   363;   Bailei/  v.  c/iesto- F.  A.  Co.,  92  Wis.  510,  66  N.  W. 

Hope  Ins.  Co.,  56  Me.  474;  DeWitt  v.  525. 

Assn.,  157  N.  Y.  353,  51  N.  E.  977.  ^  Astrich   v.    German-Am.    Ins.    Co., 

But   see   Gilligan   v.    Commercial  Ins.  131  Fed.  13,  65  C.  C.  A.  251. 

Co.,  20  Hun,  93.  aff'd  87  N.  Y.  626.  7  Dougherty  v.  German-Am.  Ins.  Co., 

2  Birmingham^  Ins.  Co.  v.  Pulver,  126  67   Mo.    App.    526;    State   Ins.    Co.    v. 

111.  329,  18  N.  E.  804,  9  Am.  St.  R.  598.  Maac^ens,  38  N.  J.  L.  565. 

As  to  statutes  governing  requirements  »  JEtna  Ins.  Co.  v.  Simmons,  49  Neb. 

after  loss,  see  Appendix,  ch.  I.  811,  69  N.  W.  125  (place  out  of  county 

^  Claflin  V.  Commonwealth  Ins.  Co.,  where  assured  resides  may  not  be  rea- 

110  U.  S.  81,  3  S.  Ct.  507;  Firemen's  .sonable);   American  Cent.   Ins.   Co.   v. 


416 


MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 


itself  be  made  within  a  reasonable  time.^  Hence  the  company  may 
not  postpone  the  exercise  of  its  option  until  an  action  has  been 
brought  against  it  under  the  policy .^ 

The  company  is  entitled  to  the  personal  oath  of  the  assured,  unless 
he  is  incompetent  or  absent,  through  no  fault  of  his  own.  He  can- 
not substitute  an  agent,^  or  his  receiver  in  bankruptcy ,•»  in  his  stead. 
Therefore  if  the  assured  voluntarily  absents  himself,  so  that  he 
cannot  with  due  diligence  be  found,  this  amounts  to  a  refusal  to  be 
examined  on  oath;^  and  after  an  examination  clearly  incomplete, 
a  refusal  to  continue  will  have  the  same  effect.^  But  if  the  com- 
pany concludes  its  examination  it  cannot  give  a  fresh  notice,  and 
open  up  a  new  hearing^ 

It  is  held  that  before  entering  upon  the  examination  the  insured 
may  insist  upon  the  presence  of  his  attorney/  but,  since  the  policy 
expressly  provides  that  the  examination  shall  be  made  by  the 
representative  of  the  company,  the  attorney  for  the  assured  would 


Simpson,  43  III.  App.  98  (foreign  com- 
pany cannot  compel  assured  to  leave 
state  where  he  resides  and  where  prop- 
erty is  located);  Fleisch  v.  Ins.  Co.  of 
N.  A.,  58  Mo.  App.  593  (the  place  of 
contract  and  of  fire  held,  the  proper 
place  for  examination  of  the  assured 
and  his  books  of  account,  though  he 
resided  out  of  the  state). 

1  Fleisch  v.  Ins.  Co.  of  .V.  A.,  58  Mo. 
App.  596. 

2  Aurora  Fire  Ins.  Co.  v.  Johnson, 
46  Ind.  315. 

3  Pearlstine  v.  Westchester  Ins.  Co., 
70  S.  C.  75,  49  S.  E.  4  (where  assured 
had  fled  the  country  to  avoid  arrest 
and  could  not  be  notified  at  all). 

*  Sims  V.  Union  Assur.  Soc,  129 
Fed.  804.  Mortgae^ee  is  no  substitute. 
Fire  Ins.  Co.  v.  Felrath,  77  Ala.  194, 
54  Am.  Rep.  58. 

5  Fire>nen's  Fund  Ins.  Co.  v.  Sims, 
115  Ga.  939,  42  S.  E.  269;  Harris  v. 
Phoenix  Ins.  Co.,  35  Conn.  310. 

^Bonner  v.  Home  Ins.  Co.,  13  Wis. 
677. 

T  Moore  v.  Protection  Ins.  Co.,  29 
Maine,  97,  48  Am.  Dec.  514.  The 
company,  because  of  the  trouble  and 
expense  to  itself,  seldom  requires  the  in- 
sured to  submit  to  a  personal  examina- 
tion, except  in  those  cases  where  fraud 
is  suspected.  'The  purpose  is  to  af- 
ford a  method  of  detecting  imposition 
and  fraud,"  Pearlstein  v.  Westchester 
Ins.  Co.,  70  S.  C.  75,  49  S.  E.  4,  6. 
But  in  such  cases  this  provision  of  the 


policy  sometimes  proves  of  great  value 
to  it.  If  the  insured  gives  false  testi- 
mony in  detail  upon  his  examination 
had  under  the  terms  of  the  policy,  it  is 
generally  a  source  of  embarrassment 
to  him  upon  the  subsequent  trial  of 
his  lawsuit.  Upon  this  preliminary 
examination  the  representative  of  the 
company  finds  it  particularly  desirable 
to  interrogate  him  in  regard  to  the 
precise  location  of  the  various  items  of 
property  said  to  be  in  the  building  at 
the  time  of  the  fire,  and  also  to  compel 
him  to  state  in  detail  when  and  where 
he  purchased  them.  These  innuiries 
are  material  and  proper,  Claflin  v. 
Commonwealth  Ins.  Co.,  110  U.  S.  81,  3 
S.  Ct.  507.  If  the  property  is  fictitious, 
it  is  difficult  for  the  witness  to  tell  a 
plausible  story,  and  he  soon  finds  him- 
self obliged  to  have  recourse  to  the 
suspicious  response,  that  he  cannot 
remember.  If  he  attempts  to  locate 
the  fictitious  property  in  detail,  and 
does  not  have  a  copy  of  his  testimony 
at  the  subsequent  trial  months  or 
perhaps  years  afterAvards,  he  will  be 
ant  before  the  jury  to  tell  an  entirely 
different  story.  If  he  states  the  times 
and  places  of  purchases  from  mer- 
chants, the  books  of  the  latter  will 
furnish  a  valuable  check  upon  his 
accuracy  and  good  faith. 

8  American  Cent.  Ins.  Co.  v.  Simp- 
son, 43  111.  App.  98;  Thomas  v.  Burling- 
ton Ins.  Co.,  47  Mo.  App.  169. 


WHEN  REQUIRED,   PRODUCTION   OF  BOOKS  OF  ACCOUNTS        417 

seem  to  have  no  right  to  share  in  its  active  conduct.  As  to  the 
proper  scope  of  the  inquiry,  the  insured  is  only  bound  to  answer 
such  questions  as  have  a  material  bearing  upon  the  origin  of  the 
fire,  the  insurance,  and  the. loss;  ^  and  after  he  has  finished  the  ex- 
amination, he  must  receive  a  specific  notice  to  sign  it,  before  he  can 
be  adjudged  in  default  for  not  so  doing.^ 
The  Massachusetts  policy  has  no  such  clause. 


§  305.  When  Required,  Production  of  Books  of  Accounts,  Vouch- 
ers, etc. — Books  of  account,  vouchers  or,  if  lost,  certified  copies,  are 
almost  invariably  called  for  as  an  incident  to  any  personal  examina- 
tion of  the  insured,  and,  often,  when  no  personal  examination  is 
demanded.  The  notice  must  be  made  within  a  reasonable  time, 
and  appoint  a  reasonable  time  and  place.^  On  his  part,  the  insured 
must  make  a  reasonable  effort  to  comply  with  the  demand,  called 


1  7ns.  Co.  V.  Weides,  14  Wall.  (U.  S.) 
375  (cannot  be  compelled  to  state  on 
what  terms  he  settled  with  other  com- 
panies); Titus  V.  Glens  Falls  Ins.  Co., 
81  N.  Y.  410;  Enos  v.  St.  Paul  Ins.  Co., 
4  S.  D.  639,  57  N.  W.  919.  Whether 
the  conduct  of  the  insured,  upon  the 
examination,  amounts  to  a  disobedi- 
ence of  the  injunction  of  this  clause, 
may  be  a  question  of  fact  for  a  jury, 
Phillips  V.  Protection  his.  Co.,  14  Mo. 
220;  for,  while  logically,  the  sufficiency 
of  the  examination,  and  the  relevancy 
of  the  auestions  asked,  would  seem  to 
present  issues  of  law  for  the  court  to 
determine,  Fleischner  v.  Beaver,  21 
Wash.  6,  56  Pac.  840;  and  see  North 
Am.  Life  &  Ace.  Ins.  Co.  v.  Borroughs, 
69  Pa.  St.  43,  8  Am.  Rep.  212,  yet,  in 
practice,  courts  are  very  reluctant  to 
dismiss  the  complaint  on  surh  grounds, 
and  generally  leave  the  ai'estion  of  rea- 
sonable compliance  to  the  jury,  pro- 
vided the  insured  has  in  good  faith 
submitted  to  any  sort  of  an  examina- 
tion, which  he  believes  to  be  a  fulfill- 
ment of  his  dutv,  Porter  v.  Traders' 
Ins.  Co.,  164  N.  Y.  504,  58  N.  E.  641 
(holding  that  clause  must  be  con- 
strued liberally  in  favor  of  the  as- 
sured, and  that  the  relevancy  of  the 
interrogatories  theie  put  raised  a 
mixed  auestion  of  law  and  fact). 

2  Scottish  Union  &  Nat.  Ins.  Co.  v. 
Keene,  85  Md.  263,  37  Atl.  33;  O'Brien 
y.  Ohio  Ins.  Co.,  52  Mich.  131.  The 
insured  is  not  concluded  by  misstate- 

27 


ments  innocently  made  in  his  examina- 
tion, Huston  V.  State  Ins.  Co.,  100  Iowa, 
402,  69  N.  W.  674;  Knop  v.  National 
Ins.  Co.,  107  Mich.  323,  65  N.  W.  228. 
But  if  the  jury  finds  that  a  willfully 
false  statement  of  fact  was  made 
though  with  reference  to  only  one 
item  the  entire  policy  is  vitiated, 
DoUojf  V.  Phoenix  Ins.  Co.,  82  Me.  266 
(fraud  as  to  part  vitiates  the  whole); 
Hamberg  v.  St.  Paul  F.  &  M.  Ins.  Co., 
68  Minn.  335,  71  N.  W.  388;  Worachek 
V.  New  Denmark  Home  F.  Ins.  Co.,  102 
Wis.  88  (false  swearing  as  to  part 
forfeits  the  whole).  After  demanding 
an  examination  of  the  insured  the 
company  may  waive  it,  Wicking  v. 
Citizens'  Mui.  Ins.  Co.,  118  Mich.  640, 
77  N.  W.  275;  or  by  examining  his 
representative  instead  of  the  assured 
himself,  Western  Assur.  Co.  v.  Mc- 
Glatherv,  115  Ala.  213,  22  So.  104. 
By  the  better  authority,  requiring 
examination  and  production  of  books 
and  bills  does  not  waive  forfeitures, 
§  148,  supra. 

^  Jones  v.  Hovard  Ins.  Co.,  117 
N.  Y.  103,  22  N.  E.  578  (place  of  fire, 
a  proper  place  when  books  are  kept 
there);  Fleisch  v.  Ins.  Co.  of  N.  A., 
58  Mo.  App.  596;  Murphy  v.  North 
Brit.  &  M.  Ins.  Co..  61  Mo.  App.  323; 
Tucker  v.  Colonial  Ins.  Co.,  58  W.  Va. 
30,  51  S.  E.  86.  It  is  too  late  to  make 
demand  after  action  is  begun.  Wells 
Whip  Co.  V.  Farmers'  Mut.  Fire  Ins. 
Co.,  209  Pa.  St.  488,  58  Atl.  894.    De- 


118  MEANING   AND    LEGAL    EFFECT   OF    FIRE    POLICY 

for  under  this  clause  of  the  policy;  ^  and,  if  he  cannot  comply  in  full, 
he  must  do  so  as  far  as  circumstances  render  a  compliance  practica- 
ble.2  Under  this  clause  the  courts  do  not  require  the  production 
of  proofs  which  cannot  be  produced  by  reason  of  their  destruction 
by  the  fire,  or  because  for  any  reason  they  are  beyond  the  control 
of  the  insured.""'  And  so  also  if,  by  diligent  effort,  duplicate  bills, 
invoices,  or  vouchers  cannot  be  obtained,  their  production  will  be 
excused."    But,  otherwise,  they  must  be  produced.^ 

A  call  for  certified  copies  of  bills  or  vouchers  must  be  specific.  A 
call  for  bills  is  not  enough,  though  the  originals  are  in  fact  lost.^ 

The  Massachusetts  form  provides,  "the  company  may  also  ex- 
amine the  books  of  account  and  vouchers  of  the  insured  and  make 
extracts  from  the  same." 

§  306.  Appraisal. — In  the  event  of  disagreement  as  to  the  amount 
of  loss,  the  same  shall,  as  above  provided,  be  ascertained  by  two  com- 
petent and  disinterested  appraisers,  the  insured  and  this  company  each 
selecting  one,  and  the  two  so  chosen  shall  first  select  a  competent  and 
disinterested  umpire;  the  appraisers  together  shall  then  estimate  and 
appraise  the  loss,  stating  separately  sound  value  and  damage,  and, 
failing  to  agree,  shall  submit  their  differences  to  the  umpire;  and  the 
award  in  loriting  of  any  two  shall  determine  the  amount  of  such  loss; 
the  parties  thereto  shall  pay  the  appraisers  respectively  selected  by  them, 
and  shall  bear  equally  the  expenses  of  the  appraisal  and  umpire. 

This  is  called  the  appraisal  or  arbitration  clause.  It  offers  a 
prompt  and  inexpensive  method  ^  of  adjusting  the  most  prolific 
cause  of  dispute  between  the   parties,  namely,  divergent  opinions 

mand    is    ineffectual    if    no    place    is  7ns.    Co.,   73   Miss.   279,    18   So.   928; 

named,  Seibel  v.   Firemen's  Ins.    Co.,  Brookshier  v.  Ins.  Co.,  91  Mo.  App.  599. 

212  Pa.  St.  604,  62  Atl.  101.  "  Miller  v.  Hartford  Fire  Ins.  Co.,  70 

iSeibelv.  Lebanon  Ins.  Co.,  197  Fa..  Iowa,    704,    29    N.    W.    411;  Jones   v. 

St.  106,  46  Atl.  851;  Langan  v.  Ro^;al  Mechanics'  F.  Ins.  Co.,  36  N.  J.  L.  29, 

Ins.  Co.,  162  Pa.  St.  357,  29  Atl.  710;  13  Am.  Rep.  405;  Ward  v.  Nat.  F.  Ins. 

American  Cent.  Ins.  Co.  v.  Ware,  65  Co.,  10  Wash.  361,  38  Pac.  1127. 

Ark.  336,  46  S.  W.  129.  ^  Mispelhorn  v.   Farmers'  Ins.    Co., 

2  Farmers'   Ins.    Co.    v.   Mispelhorn,  53  Md.  473;  O'Brien  v.  Commercial  Fire 

50  Md.  180,  53  Atl.  473;  Stephens  v.  Ins.  Co.,  63  N.  Y.  108;  Langan  v.  Roval 

Union  Assur.   Soc,   16  Utah,  22,  50  7ns.  Co.,  162  Pa.  St.  357,  29  Atl.  7i0. 

Pac.  626;  Ward  v.  Nat.  Ins.  Co.,  10  Where  without  explanation  or  excuse 

Wash.  361,  38  Pac.   1127.     Inventory  it  was  shown  that  insured  had  altered 

called  for,  Manchester  F.  Ins.   Co.  v.  his   invoices,  held,   that   he   could   not 

Simmons,  12  Tex.  Civ.  App.   607,  35  recover,  Virginia  F.  &  M.  Ins.  Co.  v. 

S.  W.  722;  Fire  Assn.  v.  Masterson,  25  Saunders  (June,  1890),  86  Va  969 

Tex.  Civ.  App.  518,  61  S.  W.  962.  6  Whip  Co.  v.  Farmers'  Ins.  Co.,  209 

3L.  &  L.  &  G.  Ins.  Co.  v.  Kearney,  Pa.  St.  488,  58  Atl.  894;  Johnson  v. 

180  U.  S.  132,  45  L.  Ed.  460.  21  S.  Ct.  Phoenix  Ins.  Co.,  69  Mo.  App.  226. 

326;  Eggleston  v.   Council  Bluffs  Ins.  7  Fleming  v.  Phoenix  Assur.  Co.,  75 

Co.,  65  Iowa,  308;  Sneed  v.  Brit.-Am.  Hun  (N.  Y.),  530. 


APPRAISAL 


419 


regarding  values  and  extent  of  damage,  and  is  very  important  to 
the  companies  in  many  instances  to  relieve  them  from  extravagant 
or  fraudulent  claims.  The  option  to  take  advantage  of  this  proced- 
ure to  fix  the  amount  of  loss  is  extended  to  both  parties  alike,  but 
must  be  exercised  by  affirmative  demand  made  within  a  reason- 
able time,  otherwise  the  clause  becomes  inoperative.^  Another 
essential  factor  is  a  preexisting  disagreement  between  the  parties 
as  to  the  amount  of  loss,  without  which  any  stipulation  to  ap- 
praise would  not  fall  under  the  terms  of  the  policy,  but  would  be 
revocable  as  at  common  law.^ 


^Hamilton  v.  Phoenix  Ins.  Co.,  61 
Fed.  379,  9  C.  C.  A.  530  (reasonable 
time).  Thus  after  disagreement  if  the 
company  wants  to  avail  itself  of  this 
clause  it  must  take  the  initiative. 
Nerger  v.  Eq.  F.  Assn.  (So.  Dak.,  April, 
1906),  107  N.  W.  531.  It  is  not  a 
condition  precedent  unless  demand  is 
made,  Lesure,  etc.,  Co.  v.  Mut.  F.  Ins. 
Co.,  101  Iowa,  514,  70  N.  W.  761; 
Baillie  v.  Western  Assur.  Co.,  49  La. 
Ann.  658,  21  So.  736;  Davis  v.  Atlas 
Ins.  Co.,  16  Wash.  232,  47  Pac.  436; 
National,  etc.,  Assn.  v.  Ins.  Co.,  106 
Mich.  236,  64  N.  W.  21;  Grand  Rapids 
F.  Ins.  Co.  V.  Finn,  60  Ohio  St.  513, 
54  N.  E.  545  (reasonable  time);  Ran- 
dall V.  Ins.  Co.,  10  Mont.  362,  25  Pac. 
960;  Chainless  Cycle  Mfg.  Co.  v. 
Security  Ins.  Co.,  169  N.  Y.  304,  62 
N.  E.  392  (reasonable  time);  Davis  v. 
Am.  Cent.  Ins.  Co.,  7  App.  Div.  488, 
40  N.  Y.  Supp.  248,  aff'd  158  N.  Y. 
688;  Garretson  v.  Mer.  &  Bankers' 
Fire  Ins.  Co.,  114  Iowa,  17,  86  N.  W. 
32;  Capitol  Ins.  Co.  v.  Wallace,  48 
Kan.  400,  29  Pac.  755.  But  see  contra, 
that  compliance  is  a  condition  prece- 
dent without  demand  if  there  is  a  dis- 
agreement, Adams  v.  Ins.  Co.,  70  Cal. 
198,  11  Pac.  627;  Phcenix  Ins.  Co.  v. 
Lorton,  109  111.  App.  63;  Hutchinson  v. 
Ins.  Co.,  153  Mass.  143,  26  N.  E.  439; 
Mosness  v.  German-Am.  Ins.  Co.,  50 
Minn.  341;  Murphy  v.  7ns.  Co.,  61  Mo. 
App.  323;  Graham,  v.  Ins.  Co.,  75  Ohio 
St.  374,  79  N.  E.  930.  A  demand  by 
registered  letter  which  assured  refuses 
to  receive  is  operative,  American  Cent. 
Ins.  Co.  v.  Simpson,  43  111.  App.  98. 
And  the  demand  must  be  for  the  ap- 
praisal described  in  the  policy.  Walker 
V.  German  Ins.  Co.,  51  Kan.  725,  33 
Pac.  597;  Swearinger  v.  7ns.  Co.,  66 
Mo.  App.  90.  A  joint  demand  by 
eeveral   companies   for   one   appraisal 


will  not  be  effective,  Conn.  F.  Ins.  Co. 
V.  Hamilton,  59  Fed.  258,  8  C.  C.  A. 
114;  Palatine  Ins.  Co.  v.  Morton,  etc., 
Co.,  106  Tenn.  558,  61  S.  W.  787; 
Hartford  F.  Ins.  Co.  v.  Asher  (Ky., 
1907),  100  S.  W.  233.  The  party  that 
more  frequently  calls  for  appraisal  is 
the  insurance  company.  If  company 
elects  to  replace  or  rebuild  it  cannot 
demand  appraisal ,  Wtjnkoop  v.  Niagara 
Ins.  Co.,  91  N.  Y.  478. 

2  British- Am.  Assur.  Co.  v.  Darragh, 
128  Fed.  890;  Continental  Ins.  Co.  v. 
Vallandingham,  25  Ky.  Law  Rep.  468, 
76  S.  W.  22;  Hogadone  v.  Grayige  Mut. 
his.  Co.,  133  Mich.  339,  94  N.  W.  1045; 
Kelly  V.  L.  &  L.  &  G.  Ins.  Co.,  94:  Minn. 
141,  102  N.  W.  380.  But  it  has  been 
held  that  the  disagreement  may  be 
assumed  when  both  parties  have  signed 
the  appraisal  agreement,  Kersey  v. 
Phoenix  Ins.  Co.,  135  Mich.  10,  97 
N.  W.  57;  Fouble  v.  Pha-nix  Ins.  Co., 
106  Mo.  App.  527,  530,  81  S.  W.  485. 
In  case  of  total  loss  of  a  building  a 
valued  policy  law  prevails  over  an 
appraisal  clause,  Hartford  F.  Ins.  Co. 
V.  Bourbon  Co.  Ct.,  115  Ky.  109,  72 
S.  W.  739;  Caledonia  Ins.  Co.  v.  Cooke, 
101  Ky.  412,  41  S.  W.  279;  O'Keefe  v. 
7ns.  Co.,  140  Mo.  558,  41  S.  W.  922. 
The  award  determines  simply  the 
amount  of  loss,  therefore  the  action 
of  the  assured  is  not  on  the  award  but 
on  the  policy.  Smith  v.  Herd,  110  Ky. 
56,  65,  60  S.  W.  841;  Soars  v.  Home 
Ins.  Co.,  140  Mass.  345,  5  N.  E.  149. 
By  the  prevailing  rule  to  take  ad- 
vantage of  the  appraisal  clause  is  no 
waiver  of  known  forfeitures  under  the 
New  York  standard  policy,  Western 
Assur.  Co.  V.  Hall,  120  Ala.  547,  24 
So.  936;  Willoughby  v.  St.  Paul  Ger- 
man Ins.  Co.,  68  Minn.  373;  London 
&  L.  Ins.  Co.  V.  Honey,  2  Vict.  L.  R. 
(Law)   7.    Standard   policy  expressly 


420  MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 

The  Massachusetts  standard  poUcy  provides:  In  case  of  loss  under 
tliis  policy,  and  a  failure  of  the  parties  to  agree  as  to  the  amount  of  loss, 
it  is  mutually  agreed  that  the  amount  of  such  loss  shall  he  referred  to 
three  disinterested  men,  the  company  and  the  insured  each  choosing  one 
out  of  three  persons  to  be  named  by  the  other,  and  the  third  being  selected 
by  the  two  so  chosen;  the  award  in  writing  by  a  majority  of  the  referees 
shall  be  conclusive  and  final  upon  the  parties  as  to  the  amount  of  loss 
or  damage,  and  such  reference  unless  waived  by  the  parties  shall  be  a 
condition  precedent  to  any  right  of  action  in  law  or  equity  to  recover 
for  such  loss;  but  no  person  shall  be  chosen  or  act  as  referee,  against  the 
objection  of  either  party,  who  has  acted  in  a  like  capacity  within  four 
months. 

Under  the  Michigan  standard  policy  the  award  is  only  "prima 
facie  evidence  of  the  amount  of  such  loss."  By  the  terms  of  the  New 
Hampshire  policy,  if  the  parties  fail  to  agree  upon  referees  within 
fifteen  days  after  notice  of  loss,  either  party,  upon  giving  written 
notice,  "may  apply  to  a  justice  of  the  Supreme  Court,  who  shall 
appoint  three  referees,  one  of  whom  shall  be  thoroughly  acquainted 
with  the  kind  of  property  to  be  considered."  ^  The  Iowa  standard 
policy  contains  no  provision  for  appraisal.  Certain  of  the  standard 
policies  except  from  the  scope  of  the  appraisal  a  total  loss  on  build- 
ings.^ 

Under  the  Massachusetts  general  insurance  law,  detailing  the 
procedure  upon  arbitration,^  if  the  insurer  fail  to  apply  for  arbitra- 
tion within  the  time  specified  in  the  law,  he  waives  his  right  to  an 
arbitration.^  So  also  if  he  ignore  the  request  of  the  insured  for 
arbitration.^ 

§  307.  Standard  Clause  a  Valid  Condition. — Courts  are  the  legally 
appointed  tribunals  for  determining  controversies,  and  are  jealous 
of  interference  with  their  prerogatives.  Any  agreement,  therefore, 
to  refer  to  arbitration  the  general  question  of  the  liability  of  the 
insurers  under  the  policy,  or  all  matters  of  dispute  under  the  policy, 
would  be  void;  since  it  is  held  to  be  against  public  policy  to  oust 

provides  that  waiver  shall  not  result,  Hampshire,    and   South   Dakota.      In 

5  314.  Minnesota  if  total  insurance  on  build- 

1  Similarly  by  the  N.  J.  General  In-  ing,  exclusive  of  foundation,  is  less 
surance  Act,  §  79,  application  may  be  than  insurable  value  srecified  in  policy, 
made  to  court  for  the  appointment  of  insured  need  not  submit  to  arbitration, 
appraisers.  In  like  manner  by  Massa-  Ohage  v.  Union  Ins.  Co.,  82  Minn.  426, 
chusetts  General  Ins.  Act  (1907),  §  60,  85  N.  W.  212. 

on  failure,  to  appoint  the  third  referee,  3  Gen.  Ins.  Act  (1907),  §  60. 

application  may  be  made  to  the  insur-  *  Hayes  v.  Milford  Mut.  F.  Ina.  Co., 

ance  commissioner  to  appoint  him.  170  Mass.  492,  49  N.  E.  754. 

2  For     example,     Minnesota,     New  &  McDowell  v.   Mtna  Ins.   Co.,   164 


APPRAISERS   COMPETENT,   DISINTERESTED 


421 


the  courts  altogether  of  their  jurisdiction.^  But  the  provision  of 
the  New  York  standard  poUcy,  which  simply  refers  to  appraisal 
the  question  of  the  amount  of  loss,  leaving  any  dispute  in  regard 
to  the  company's  liability  to  be  determined  by  the  courts,  is  valid, 
and  an  award  thereunder  whenever  the  appraisal  has  been  de- 
manded by  the  company  is  expressly  made  a  prerequisite  to  any 
right  of  recovery  upon  the  policy. ^  Nor  are  the  provisions  of  this 
clause  unconstitutional.^ 

§  308.  Appraisers  Competent,  Disinterested. — The  appraisers  and 


Mass.  444,  41  N.  E.  665.  A  question 
of  waiver  is  often  for  the  jury,  Lamson 
Cons.  S.  S.  Co.  V.  Prudential  F.  Ins. 
Co.,  171  Mass.  433. 

1  Sanjord  v.  Conn.  Trav.  Mut.  Ace. 
Assoc,  147  N.  Y.  326,  41  N.  E.  694; 
Delaware  &  H.  Canal  Co.  v.  Penn 
Coal  Co.,  50  N.  Y.  250;  Reed  v.  Wash- 
ington Ins.  Co.,  138  Mass.  575;  Clement 
V.  British- Am.  Assur.  Co.,  141  Mass. 
298,  5  N.  E.  847;  Scott  v.  Avery,  20 
English  Law  &  Eq.  327,  5  H.  L.  Cases, 
811.  And  see  Chadwick  v.  Phoenix, 
etc.,  Assn.,  143  Mich.  481,  106  N.  W. 
1122. 

2  Hamilton  v.  Liverpool,  L.  &  G.  his. 
Co.,  136  U.  S.  242,  10  S.  Ct.  945,  34 
L.  Ed.  419;  Chainless  Cycle  Co.  v. 
Security  Ins.  Co.,  169  N.  Y.  304,  62 
N.  E.  392  (which  also  holds  that  de- 
fault by  assured  is  matter  of  defense 
to  be  alleged  and  proved  by  the  com- 
pany); Phoenix  Ins.  Co.  v.  Lorton, 
109  III.  App.  63;  Zalesky  v.  Home  Ins. 
Co.,  102  Iowa,  613,  71  N.  W.  566; 
Continental  Ins.  Co.  v.  Vallandingham, 
116  Ky.  287,  76  S.  W.  22;  Kersey  v. 
Phosnix  Ins.  Co.,  135  Mich.  10,  97 
N.  W.  57;  Fisher  v.  Mer.  Ins.  Co.,  95 
Me.  486,  50  Atl.  282,  85  Am.  St.  R. 
428;  Grand  Lodge  v.  Gaddis,  65  N.  J. 
Eq.  1,  55  Atl.  465;  Phoenix  Ins.  Co.  v. 
Carnahan,  63  Ohio  St.  258,  58  N.  E. 
805  (the  right  being  absolute,  motive 
or  good  faith  in  making  the  demand  is 
immaterial);  Palatine  Ins.  Co.  v.  Mor- 
ton, etc.,  Co.,  106  Tenn.  558,  61  S.  W. 
787;  Chapman  v.  Rockjord  Ins.  Co.,  89 
Wis.  572.  62  N.  W.  422;  Spurrier  v. 
La  Cloche  (1902),  A.  C.  446,  450; 
Caledonian  Ins.  Co.  v.  Gilmour  (1893), 
A.  C.  85;  London  &  L.  Ins.  Co.  v. 
Honey,  2  Vict.  L.  R.  (Law)  7  (nor  is  it 
any  waiver  of  known  defenses).  But 
in  certain  states  appraisal  prior  to 
award  even  under  the  standard  forni 


of  policy  is  held  to  be  revocable  by 
either  party  on  the  ground  that  on  so 
important  an  issue  a  party  must  not 
be  deprived  of  the  protection  of  the 
courts,  Hartford  Ins.  Co.  v.  Ho7i,  66 
Neb.  555,  92  N.  W.  746,  60  L.  R.  A. 
436;  Franklin  v.  A'eiv  Hampshire  his. 
Co.,  70  N.  H.  251,  47  Atl.  91;  Needy  v. 
German-Am.  Ins.  Co.,  197  Pa.  St.  460, 
47  Atl.  739;  Yost  v.  Dwelling  House 
Ins.  Co.,  179  Pa.  St.  381,  35  Atl.  517; 
Mentz  v.  Armenia  Ins.  Co.,  79  Pa.  St. 
478,  21  Am.  Rep.  80.  Appraisal  and 
award  are  not  a  condition  precedent 
where  a  policy  does  not  expressly  make 
them  so,  Hamilton  v.  Ins.  Co.,  137 
U.  S.  370,  11  S.  Ct.  133,  34  L.  Ed.  708; 
Birmingham  Fire  Ins.  Co.  v.  Pulver, 
126  111.  329,  18  N.  E.  804,  9  Am.  St.  R. 
598;  Seward  v.  Citv  of  Rochester.  109 
N.  Y.  164,  16  N.  E.  348;  Collins  v. 
Locke,  4  App.  Cas.  674.  Where  an  ap- 
praisal has  been  demanded  under  the 
Massachusetts  policy  and  those  like  it, 
an  award,  unless  waived,  is  a  condition 
precedent,  Lamson  Cons.  S.  S.  Co.  v. 
Prudential  Ins.  Co.,  Ill  Mass.  433; 
Schrepfer  v.  Rockford  Ins.  Co.,  77 
Minn.  291,  79  N.  W.  1005. 

^  Re  Opinion  Justices  (Me.),  55  Atl. 
828.  The  assured  must  be  careful  not 
to  remove  or  dispose  of  the  property 
before  the  company  has  had  a  reason- 
able opportunity  of  making  its  elec- 
tion, and  the  appraisers  an  opportunity 
of  investigation,  Hamilton  v.  Ins.  Co., 
136  U.  S.  242;  Astrich  v.  German-Am. 
Ins.  Co.,  131  Fed.  13,  16;  Reading  Ins. 
Co.  v.  Egelhoff,  115  Fed.  393;  Schrepfer 
V.  Rockford  Ins.  Co.,  77  Minn.  291,  79 
N.  W.  1005;  Prov.  Wash.  Ins.  Co.  v. 
Wolf  (Ind.  App.),  72  N.  E.  606;  Davis 
V.  Am.  Cent.  Ins.  Co.,  7  App.  Div.  488, 
40  N.  Y.  Supp.  248,  aff'd  158  N.  Y, 
688  (perishable  goods  need  not  be  kept 
long). 


422 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


umpire  must  be  competent  and  disinterested.  "Disinterested"  does 
not  refer  simply  to  an  absence  of  pecuniary  interest.  A  disinter- 
ested appraiser  is  one  who  is  free  from  bias  or  prejudice  towards 
cither  party.'  While  theoretically  the  appraisers,  it  is  said,  are 
supposed  to  act  in  a  quasi-judicial  capacity  and  wholly  without 
partisanship,  both  in  their  selection  of  umpire  and  in  the  conduct 
of  the  appraisal,-  nevertiieless,  in  practice  each  appraiser  is  apt  to 
be  a  zealous  advocate  before  the  umpire,  to  the  end  that  the  in- 
terests of  the  party  appointing  him  may  be  advanced,  and  not  over- 
looked; and  within  limits  such  an  attitude  seems  to  be  recognized 
by  the  courts  as  legitimate  and  indeed  unavoidable.' 

He  is,  however,  a  judicial  officer  rather  than  an  agent  and  is  under 
obligations  to  be  fair  and  disinterested.  The  appointment  of  a 
biased  or  unsuitable  appraiser,  coupled  with  concealment  of  his 
character,  is  ground  for  vacating  the  award.'*  But  if,  with  knowl- 
edge of  his  objectionable  disposition  or  lack  of  competency,  a  party 
proceeds  with  the  appraisal,  such  conduct  amounts  to  a  waiver,  and 
the  award  will  be  binding  upon  both  parties.^ 

§  309.  Scope  of  Appraisal,  Entire  Loss. — By  the  better  reason 
and  authority  the  appraisers  are  not  simply  to  pass  upon  property 
partially  damaged,  some  remains  of  which  are  left  in  sight,  but  as 


1  Bradshaw  v.  Aqricultuml  Ins.  Co., 
137  N.  Y.  137,  32  x\.  E.  1055;  Produce 
Refrig.  Co.  v.  Xorivich  Union  Fire  Ins. 
Co..  91  Minn.  210,  97  N.  W.  875  ("the 
arbitration  bein<j  cotnpulsory,  it  is 
highly  important  that  the  men  selected 
should  in  every  sense  be  disinterested," 
a  judicial  proceeding);  Foicble  v. 
Phasnix  Ins.  Co.,  lOG  Mo.  App.  527, 
81  S.  W.  485  (what  is  a  proper  selec- 
tion of  appraisers);  Ilickerson  v.  Ger- 
man Ins.  Co.,  98  Tenn.  193,  33  S.  W. 
1041;  Ro>ial  his.  Co.  v.  Parlin  Co.,  12 
Tex.  Civ.  App.  572,  34  S.  W.  401. 
Whether  appraisers  are  competent  and 
disinterested  generally  presents  a  ques- 
tion of  fact  for  the  jury,  and  this  rule 
brings  much  advantage  to  the  as- 
sured, Bradshaw  v.  Agricultural  Ins. 
Co.,  137  N.  Y.  137,  32  X.  E.  1055; 
National  Ins.  Co.  v.  O'Brvan,  75  Ark 
211,  87  S.  W.  129;  Meyerson  \:  HaH- 
ford  Ins.  Co..  17  Misc.  121,  39  N.  Y. 
Supp.  329. 

^  Hall  V.  We.'itern  Assur.  Co.,  133 
Ala.  637,  32  So.  257;  Goodwin  v. 
Merchants'  Ins.  Co.,  118  Iowa,  601, 
92  N.  W.  894;  Christianson  v.  Norm'ch 


Union  F.  Ins.  Co.,  84  Minn.  526,  88 
N.  W.  16. 

3  Am.  Cent.  Ins.  Co.  v.  Landau,  62 
N.  J.  Eq.  73,  49  Atl.  738;  Schmidt  v. 
Boston  Ins.  Co.,  82  App.  Div.  234,  81 
N.  Y.  Supp.  767. 

*  Hall  V.  Western  Assur.  Co.,  133 
Ala.  637,  32  So.  257;  Ins.  Co.  v.  Hege- 
uald,  161  Ind.  631,  66  N.  E.  902; 
Kiernan  v.  Dutchess  Co.  Ins.  Co.,  150 
N.  Y.  190,  44  N.  E.  698;  X.  Y.  Mut.  S. 
&  L.  .Assoc.  V.  Manchester  Assur.  Co., 
94  App.  Div.  104,  87  N.  Y.  Supp.  1075; 
Kaiser  v.  Hambxirg-Brem.  Ins.  Co.,  59 
App.  Div.  525,  69  N.  Y.  Supp.  344, 
aff'd  172  N.  Y.  663,  65  N.  E.  1118  (in 
which  award  was  $3,031,  and  true 
damage  83,830.28). 

5  Indiana  Ins.  Co.  v.  Brehm,  88  Ind. 
578;  Produce  Refria.  Co.  v.  Nnnoirh 
M.  Ins.  Assoc,  91  Minn.  210,  97  N.  W. 
875.  The  circumstance  that  the  ap- 
praiser had  frequently  before  acted  for 
the  company  does  not  necessarilv  dis- 
qualify him.  Remington  Paper  Co.  v. 
London  Assur.  Co.,  12  App.  Div.  218, 
43  N.  Y.  Supp.  431;  Stemmer  v.  Scot- 
tish Ins.  Co.,  33  Oreg.  65,  53  Pac.  498; 


SCOPE  OF    APFHAISAL,    ENTIRE    LOSS  423 

well  upon  property  totally  destroyed.'  The  policy  provides  that 
they  are  to  estimate  not  only  the  "damage"  but  also  "the  loss," 
meaning  apparently  the  entire  loss,  and  that,  if  an  appraisal  is  de- 
manded, the  loss  is  payable  only  when  so  estimated.^ 

The  opposite  rule  is  hopelessly  indefinite  as  applied  to  personal 
property,  and  the  cases  standing  for  it  ^  cannot  be  approved.  They 
rely  for  support  upon  a  case  in  a  lower  court,  which  construed  a 
somewhat  different  form  of  arbitration  clause;  "*  and  they  proceed 
upon  the  mistaken  theory,  announced  in  another  case  in  a  lower 
court,  that  appraisers,  appointed  as  experts,  are  limited  to  a  per- 
sonal inspection  of  the  remains  of  the  propert}^  to  enable  them  to 
estimate  sound  values  and  damages.^  But  it  would  be  almost 
impossible,  by  means  of  inspection  only,  in  most  instances  of  dam- 
age to  personal  property,  to  arrive  at  any  satisfactory  solution  of 
the  preliminary  inquiry,  namely,  what  articles  are  so  far  intact  that 
an  intelligible  estimate  may  be  made  of  their  sound  value  and 
damage.  No  expert,  however  wise  and  experienced,  can  by  eye- 
sight alone  fairly  arrive  at  the  sound  value  of  a  bedstead  and  the 
amount  of  money  damage  occasioned  by  its  combustion,  if  nothing 
of  it  is  left  but  its  casters  and  springs.  Moreover,  the  principal 
purpose  of  creating  the  appraisal  clause  would  be  defeated  if  the 
way  were  alwa3^s  open  to  a  dishonest  claimant  to  evade  its  practical 
effect  by  swearing  that  the  bulk  of  his  property  is  burned  out  of 
sight,  and  is  therefore  not  included  in  the  award. ^ 

Van  Winkle  v.  Continental  F.  Ins.  Co.,  And  see  Kaiser  v.  Hamburg-Brem.  Ins, 

55  W.  Va.  286,  47  S.  E.  82.     But  such  Co.,  59  App.  Div.  525,  69  N.  Y.  Supp. 

relationship  siiould  not  be  concealed  344,  aff'd  172  N.  Y.  663,  65  N.  E.  1118; 

by  the  company,  Cheney  v.  Martin,  127  Rutter  v.  Ins.  Co.,  138  Ala.  202,  35  So. 

Mass.  304.     An  indorser  on  a  note  of  33. 

the    insured    is    not    necessarily    dis-  2  Williamson  v.  L.  &  L.  &  G.  Ins. 

qualified,  Bullman  v.  North  Brit.  &  M.  Co.,  122  Fed.  59,  58  C.  C.  A.  241. 

Ins.  Co.,  159  Mass.  118,  34  N.  E.  169.  ^  Lang  v.   Eagle  Fire  Co.,  12  App. 

^  Stout    V.    Phoenix    Assur.    Co.,    65  Div.  39,  42  N.  Y.  Supp.  539;  Fe/K/ei  v. 

N.  J.  Eq.  566,  56  Atl.  691;  Rutter  v.  Western  Assur.  Co.,  21  Misc.  348,  47 

Hanover  Fire  Ins.  Co.,  138  Ala.  202,  N.  Y.  Supp.  141;  L.  &  L.  &  G.  Ins.  Co. 

35   So.    33    (1903);   Adams   v.   N.    Y.  v.   Colgin   (1896,  Tex.  Civ.  App.),  34 

Boirerii  Ins.  Co.,  85  Iowa,  6,  51  N.  W.  S.  W.  291. 

1149;  Chippeira  L.  Co.  v.  Phoenix  Ins.  *  Rosemvald  v.  Phoenix  Ins.  Co..  50 

Co.,   80  Mich.    116,   44   N.   W.    1055;  Hun,  172,  5  N.  Y.  Supp.  215. 

Schrepfer  v.  Rockford  Ins.  Co. ,  77  Minn.  5  Fleming   v.    Phoenix   Ins.    Co. ,    75 

291,  79  N.  W.  1005;  Mossne.ss  v.  Ger-  Him    (N.    Y.),   530.      See   later   case, 

wan-Am.    Ins.    Co.,    50    Minn.     347;  Kaiser  v.   Hamhurg-Bremen  Ins.    Co., 

Hervdnn  v.  Imverial  Fire  Ins.  Co.,  110  59  Apn.  Div.  525,  69  N.  Y.  Supp.  344. 

N.  C.  279,  14  S.  E.  742:  Conn.  F.  Ins.  aff'd  172  N.  Y.  663,  65  N.  E.  1118. 

Co.  V.  Carvnhnn,  63   Ohio   St.  258,  58  «  In  like  manner  the  appraisers  and 

N.  E.  805;  Palatine  Ins.  Co.  v.  Morton-  umpire     may     determine     the     issue 

Scott-Rnhertson  Co.,  106  Tenn.  558,  61  whether  there  has  been   a   total  loss, 

S.  W.  787;  Hong  Sling  v.  Scottish  U.  &  Williamson  v.  L.  &  L.  &  G.  Ins.  Co., 

Nat.  Ins.  Co.,  7  Utah,  941,  29  Pac.  170.  122  Fed.  59;  Yendel  v.  Western  Assur. 


124 


MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 


§  310.  Conduct  of  Appraisal.— No  very  definite  code  of  regula- 
tions for  the  guidance  of  umpire  and  appraisers  can  be  deduced 
from  the  many  decisions  upon  the  subject.  The  rigid  common-law 
rules  of  evidence  and  court  procedure  do  not  apply. ^  Nor  is  the 
appraisal  precisely  the  same  as  an  ordinary  common-law  arbitra- 
tion; '  but  it  is  rather  intended  to  afford  a  simple,  informal,  and 
speedy  remedy  ^  to  be  applied  prior  to  the  removal  of  the  remains. 
Nevertheless  the  umpire  and  appraisers  occupy  very  much  the 
same  position,  and  owe  substantially  the  same  duty,  as  common-law 
arbitrators;  therefore,  above  all  things,  they  must  act  fairly,  with- 
out bias,  and  in  good  faith. ^ 

The  policy  does  not  dictate  as  to  the  character  of  evidence  that 
may  be  received.^  Consequently  in  proper  cases  the  arbitrators, 
if  left  to  pursue  their  own  methods,  may  content  themselves  with  a 
personal  inspection  of  the  damaged  property  without  further  evi- 
dence,^ or  they  may  call  in  an  expert  on  their  own  account  to  aid 


Co.,  21  Misc.  348,  47  N.  Y.  Supp.  141. 
The  written  appraisal  agreement  usu- 
ally exchanged  after  the  fire  covers  the 
entire  loss  and  the  award  under  it  is 
conclusive  as  to  the  amount  of  loss, 
and  must  correspond  with  the  scope 
of  the  submission,  Rutter  v.  Hanover 
Ins.  Co.,  138  Ala.  202,  35  So.  33; 
Georgia  Home  Ins.  Co.  v.  Kline,  114 
Ala.  366,  21  So.  958.  But  the  policy 
provides  for  no  such  written  agree- 
ment, and  the  assured  is  not  bound  to 
exeoite  one,  Walker  v.  German  Ins. 
Co.,  51  Kan.  725.  If  the  parties  exe- 
cute an  agree  iient  which  is  not  in  ac- 
cord with  the  terns  of  the  policy,  svich 
agreement  may  nevertheless  be  bind- 
ing after  award,  as  a  common-law 
arbitration,  or  as  an  agreed  modifica- 
tion of  the  policy  provisioi,  Broadivay 
Ins.  Co.  V.  Djiinj,  55  N.  J.  L.  569,  27 
Atl.  927;  Mont  JO  ner'i  v.  Am.  Cent.  Ins. 
Co.,  108  Wis.  146,  84  N.  W.  175  (forms 
of  agreement  and  award  are  given  in 
full).  Bat  before  award,  a  common- 
law  arbitratioi  is  revocable,  Harrison 
v.  Hartford  Fire  Ins.  Co.,  112  Iowa,  77, 
83  N.  W.  823.  The  execution  of  an 
agreement  differing  from  the  terms  of 
the_  policy  amounts  to  a  waiver  of  the 
policy  clause,  Davis  v.  Atlas  A.^sjtr. 
Co.,  16  Wash.  232,  47  Pac.  436,  16 
Wash.  2.i3,  47  Pac.  485.  If  a  written 
agreement  of  appraisal  is  executed, 
its  terms  cannot  be  varied  by  ante- 
cedent or  contemporaneous  conversa- 


tions, Riitter  V.  7ns.  Co.,  138  Ala.  202, 
33  So.  33.  If  there  have  been  two  fire 
losses  unadjusted,  any  appraisal  must 
cover  both.  Mechanics'  Ins.  Co.  v. 
Hodqe,  149  111.  298,  37  N.  E.  51. 

1  Vincent  v.  German  Ins.  Co.,  120 
Iowa,  272,  94  N.  W.  458. 

2  Stout  V.  Phccnix  Ins.  Co.,  65  N.  J. 
Eq.  566,  570. 

^  Farrell  v.  German  Ins.  Co.,  175 
Mass.  340,  347,  56  N.  E.  572. 

•*  Kaiser  v.  Hamhurg-Brem.  Fire  Ins. 
Co.,  59  App.  Div.  525,  69  N.  Y.  Supp. 
344,  aff'd  172  N.  Y.  663,  65  N.  E.  1118. 
Parties  themselves  must  also  act  in 
good  faith,  Silver  v.  Western  Asstir. 
Co.,  164  N.  Y.  381,  58  N.  E.  284; 
Uhrig  v.  Williamsburgh  City  Fire  Ins. 
Co.,  101  N.  Y.  362,  4  N.  E.  745  (hold- 
ing it  to  be  a  question  of  fact  for  the 
jury  whether  they  do  so  act).  If  the 
company  is  in  fault,  lack  of  award  is  no 
defense.  Hall  v.  Western  Assur.  Co., 
133  Ala.  637,  32  So.  257. 

^  Stromc  V.  London  Assur.  Corp.,  20 
App.  Div.  571,  47  N.  Y.  Supp.  481. 

^  Hall  V.  Norwalk  Fire  Ins.  Co.,  57 
Conn.  105,  17  Atl.  3.56;  Vincent  v. 
German  Ins.  Co.,  120  Iowa,  272,  94 
N.  W.  458;  Ins.  Co.  v.  Pm/ne,  57  Kan. 
291,  46  Pac.  315.  The  umpire  need 
not  examine  except  on  points  of  dif- 
ference between  the  appraisers,  Hart- 
ford Fire  Ins.  Co.  v.  Bonner  Mfg.  Co., 
56  Fed.  378,  15  U.  S.  App.  134,  5 
C.  C.  A.  524. 


CONDUCT   OF   APPRAISAL  425 

them;  ^  but  if  either  party  to  the  poHcy  affirmatively  offers  testi- 
mony he  should  have  reasonable  opportunity  to  appear  before  the 
appraisers  and  present  it.^  And  the  umpire,  in  arriving  at  his  con- 
clusions, must  not  ignore  either  appraiser  or  his  estimates,  or  the 
facts  and  considerations  which  he  is  prepared  to  present  for  the 
umpire's  edification.^ 

In  a  Kentucky  case  in  which  the  appraisers  made  a  hasty  and 
incomplete  schedule  of  the  personal  property,  the  assured  was  not 
allowed  to  be  present  with  his  books  of  account  at  their  meeting, 
and  the  award  was  set  aside.'' 

So  also  it  is  clear  that,  where  the  property  to  be  appraised  has 
been  totally  destroyed  by  the  fire,  the  insured  must  receive  notice 
of  the  meeting  of  the  appraisers,  and  be  allowed  an  opportunity  to 
put  before  them  such  pertinent  evidence  as  he  may  possess.^ 

In  a  Massachusetts  case  it  was  held  that,  without  fatal  irregularity, 
an  arbitrator  might  converse  with  a  third  party  about  the  fire,  might 
privately  examine  the  books  of  another  arbitrator  to  get  at  the  prices 
of  goods  similar  to  those  destroyed,  might  privately  experiment  as 
to  the  effect  of  intense  heat  on  certain  goods,  where  the  results  of 
his  investigations  were  communicated  to  the  other  arbitrators.^ 

It  must  be  observed,  however,  that  certain  directions  as  to  the 
conduct  of  the  appraisal  may  be  gathered  from  the  express  terms 
of  the  policy.  Thus  sound  value,  as  well  as  damage,  must  be  ascer- 
tained and  separately  stated,  or  else  the  award  is  void.''  So  also 
proper  deduction  must  be  made  for  depreciation  in  values,  caused 
by  age  and  use;  ^  and  in  no  event  may  the  damage  allowed  exceed 

1  Bangor  Bank  v.  Niagara  Ins.  Co.,  481,  aff'd  162  N.  Y.  627,  57  N.  E.  1125; 

85  Me.  68,  26  Atl.  991.  New  York  Mut.  &  L.  A.  v.  Manchester 

^  Redner  v.  A-.  Y.  Fire  his.  Co.,  92  Fire  Assnr.  Co.,  94  App.  Div.  104,  87 

Minn.  306,  99  N.  W.  886;  Phoenix  Ins.  N.  Y.  Supp.   1075;  Schmitt  v.  Boston 

Co.    V.    Moore    (Tex.    Civ.    App.),    46  7ns.  Co.,  82  App.  Div.  234,  81  N.  Y. 

S.  W.  1131;  Van  Wirilde  v.  Continental  Supp.  767.     As  to  what  acts  will  in- 

F.  Ins.  Co.,  55  W.  Va.  286,  47  S.  E.  validate  an  award,  and  as  to  practice 

82  (testimony  not  offered  is  not  "re-  where  one  party  refuses   to  alaide  by 

jected").      Formal   notice   to   the   as-  award,    see    Christiansen    v.    Norwich 

sured  of  meetings  may  not  be  neces-  Union  F.  Ins.  Co.,  84  Minn.  526,  88 

sary  in  all  cases,  Schmitt  v.  Boston  Ins.  N.  W.  16. 

Co.,  82  App.  Div.  234,  81  N.  Y.  Supp.  *  Harth   Bros.    Grain   Co.   v.    Conti- 

767;    Reminaton   Co.    v.    Ins.    Co.,    12  nental  Ins.  Co.  (Ky.),  102  S.  W.  242. 

App.  Div.  218.  43  N.  Y.  Supp.  431.  ^  Carlston  v.  St.   Paul  F.   &    Mar. 

But  each  party  should  have  full  op-  Ins.  Co.   (Mont.,    1908),  94  Pac.  756; 

portiir>ity  to  present  his  facts,  Conti-  Continental   Ins.    Co.    v.    Garrett,    125 

vevtnl  Ins.  Co.  v.  Garrett,  125  Fed.  589;  Fed.  589,  60  C.  C.  A.  395. 

Stovt  V.  Ph'erix  Assur.  Co.,  65  N.  J.  ^  Farrell   v.    Germ  an- American   Ins. 

En.  566,  f6  Atl.  691 :  Coovs  v.  Coons,  Co.,  175  ^'nss.  340,  56  N.  E.  572. 

95  Va.  434,  28  S.  E.  885,  64  Am.  St.  R.  7  Contivental  Ins.  Co.  v.  Garritt,  125 

804.  Fed.  589,  60  C.  C.  A.  395. 

^  Strome  v.  London  Assur.  Corp.,  20  ^  Michels   v.    Western    Undernriters' 

App.  Div.  (N  Y.)  571,  47  N.  Y.  Supp.  Assoc,  129  Mich.  417,  89  N.  W.  56 


•126  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

what  it  would  cost  to  replace  at  the  time  of  the  fire.^  The  scope  of 
the  appraisal  also  is  expressly  limited  to  two  points,  sound  value 
and  loss.  Beyond  these  two  matters  the  appraisers  must  not  go. 
Therefore  they  have  nothing  to  do  with  the  question  as  to  whether 
the  company  is  liable  to  the  insured;  -  nor  with  any  issue  of  fraud 
or  breach  of  warranty  on  the  part  of  the  assured;  •"'  and  if,  as  is 
customary,  a  schedule  of  articles  is  given  to  them  as  part  of  the 
submission,  they  must  follow  its  items,  and  not  add  or  subtract 
because  of  their  construction  of  what  the  scope  and  meaning  of  the 
policy  ought  to  be.'*  The  policy  also  expressly  provides  that,  after 
first  selecting  an  umpire,  "the  appraisers  together  shall  then  esti- 
mate and  appraise  the  loss."  This  phraseology  gives  special  point 
to  the  important  proposition  that  neither  appraiser  ought  to  act 
secretly  or  independently  of  the  other  in  taking  testimony,  or  in 
examining  the  premises  with  outside  experts,  or  in  submitting  their 
results  to  the  umpire.  The  two  judges,  or,  if  the  umpire  is  called 
upon  to  act,  all  three,  should,  in  company  and  cooperation,  enjoy 
the  full  benefit  of  all  legitimate  information  and  influences  and 
should  be  afforded  the  opportunity  of  knowing  what  the  experts 
look  at,  and  of  calling  their  attention  to  pertinent  facts.^ 

Where  the  two  appraisers  are  unable  to  agree,  the  umpire  and  one 
of  them  may  make  a  valid  award  in  the  absence  of  the  other.*^ 

§311.  Unfinished    Appraisals. — If    an    appraiser    or   umpire    de- 

1  Prov.  Wash.  Ins.   Co.  v.   Board  of  49  Atl.  7.38.    In  one  case  the  court  con- 

Education,  49  W.  Va.  360,  38  S.  E.  679.  eluded  that  an  umpire  had  sufficiently 

^  Smith  V.  Herd,  110  Ky.  .56,  60  S.  performed   his   duty,   though   he  neg- 

W.   841;   Townsend  v.   Greenwich  Ins.  lected  to  visit  the  premises  and  simply 

Co.,  88  App.  Div.  323,  83  N.  Y.  Supp.  shut    himself    up    in    his    room    with 

903,  aff'd  178N.  Y.  631,  71  N.  E.  1140.  clerks,    and    split    the    difference    be- 

3  Kearne'i  v.   Washtenaw  Mid.  F.  I.  tween  the  estimates  of  the  appraisers, 

Co.,  126  Mich.  248,  85  N.  W.  733.  Hartford  Fire  Ins.  Co.  v.  Bonner  Mer. 

i  Adams  v.  ^f.   Y.  Bouery  Ins.  Co.,  Co.,  56  Fed.  378,381.     But  see  Brit.- 

85  Iowa,  6,  51  N.  W.  1149;  American  Am.  Ins.  Co.  v.  Darragh,  128  Fed.  890, 

Ins.  Co.  V.  Bell  (Tex.  Civ.  App.,  1903),  63  C.  C.  A.  426.     One  appraiser  may 

75  S.  W.  319.     And  see   Chandos  v.  obtain  information  and  lay  it  before 

Am.  Ins.  Co.,  84  Wis.  184  (holding  the  the  other,  Farrell  v.  Ins.  Co.,  175  Mass. 

presumption    to    be    that    they    have  340,  56  N.   E.   572.     If  the  two  ap- 

passed  upon  the  right  property).  praisers    agree,    they   sign    the    award 

6  Citizens'  Ins.  Co.  v.  Hamilton,  48  without     calling    upon     the     umpire, 

111.  App.  593;  Christianson  v.  Norwich  Vincent  v.  German  Ins.  Co.,  120  Iowa, 

Union   Ins.    Soc,    84    Minn.    526,    88  272,  94  N.  W.  45S;  Broadwav  Ins.  Co.  v. 

N.   W,    16;   Stro-ne   v.    London  Assur.  Dovinq,  55  N.  J.  L.  ,569,  27  Atl.  927; 

Corp.,  20  Apo.  Div.  571,47  N.  Y.  Supp.  Enright  v.  Montauk  Fire  Ins.  Co.,  61 

481,  aFf'd  162  N.  Y.  627,  .57  N.  E.  1125;  Hun,  625,  15  N.  Y    Supp.  893,  .aff'd 

Caledonia  Ins.    Co.   v.    Trauh,  83  Md.  142  N.  Y.  667,  37  N.  E.  570.     Each 

524,  35  Atl,    1.3   (holding,  also,  that  if  appraiser  is  entitled   to  a  reasonable 

one  aporaiser  withdrew  before  his  work  comt^ensation,    Alden  v.   Christianson, 

is  complete  no  valid  award  can  be  made  83  Minn.  21 ,  85  N.  W.  824. 

by  the  other).     But  see  Am.   Central  '^  German  Ins    Co.  v.  Hazard  Bank 

Ins.  Co.  V.  Landau,  62  N.  J.  Eq.  73,  (Ky.,  1907),  104  S.  W.  726. 


UNFINISHED   APPRAISALS 


427 


clines  to  act  or  to  proceed,  a  new  appointment  should  promptly  be 
made;  ^  but  if,  through  the  connivance  or  fault  of  the  company,  no 
award  is  reached,  its  absence  furnishes  no  defense  to  it,^  and  in  such 
a  case  the  assured  need  not  make  an  attempt  at  a  second  appraisal. 
The  rule  also,  in  most  jurisdictions,  seems  to  be  substantially  the 
same  as  just  stated,  where  the  award  fails  solely  because  of  the  fault 
of  the  company's  appraiser,  to  some  extent  an  appraiser  being  thus 
regarded  as  the  representative  of  the  party  appointing  him.^ 

Where  the  appraisal  drops  through  no  fault  or  misconduct  of 
either  party,  the  question  is  not  uniformly  decided  whether  the  in- 
sured must  do  anything  more,  though  it  is  not  easy  to  see  how  a 
mere  attempt  to  comply  with  an  important  condition  of  the  con- 
tract can  be  taken  as  an  equivalent  for  performance.  Some  courts 
accordingly  enforce  the  condition  more  rigorously,  holding  in  effect 
that  the  assured  must  pursue  his  efforts,  including  if  need  be  a 
fresh  appointment,  until  it  appears  that  through  no  fault  or  omis- 
sion of  his  own  it  is  impracticable  to  furnish  an  award.'*     Other 


1  Westenhaver  v.  German-Am.  Ins. 
Co.,  113  Iowa,  726,  84  N.  W.  717; 
Caledonia  Ins.  Co.  v.  Trauh,  83  Md. 
524,  35  Atl.  13,  If  before  the  with- 
drawal of  an  appraiser  a  disagreement 
has  relegated  the  task  of  deciding  to 
the  umpire  and  other  appraiser,  the 
withdrawal  will  not  prevent  an  award 
by  the  two,  Caledonia  F.  Ins.  Co.  v. 
Tra2ib,  8(5  Md.  86,  37  Atl.  782;  Broad- 
way Ins.  Co.  V.  Doying,  55  N.J.  L.  569, 
27  Atl.  927.  But  see  Franklin  v.  A'.  //. 
Fire  Ins.  Co.,  70  N.  H.  251,  47  Atl.  91. 

2  Uhriq  v.  Williamsbunjh  City  Fire 
Ins.  Co.',  101  N.  Y.  302, 4  N.  E.  745  (for 
the  jury;  Western  Assur.  Co.  v.  Hall,  120 
Ala.  547,  24  So.  936;  Michel  v.  Ameri- 
can Cent.  Ins.  Co.,  17  App.  Div.  87,  44 
N.  Y.  Supp.  832.  It  is  recently  held 
that  if  both  appraisers  are  partial,  the 
company  cannot  set  up  an  appraisal 
clause  in  defense,  Hartford  F.  Ins.  Co. 
V.  Asher  (Ky.,  1907),  100  S.  W.  233. 

3  Bishop  V.  Affricultural  Ins.  Co.,  130 
N.  Y.  488,  59  N.  E.  844;  Bradshaw  v. 
Aqricultural  Ins.  Co.,  137  N.  Y.  137, 
32  N.  E.  1055;  Austen  v.  Niagara  Ins. 
Co.,  16  App.  Div.  86,  45  N.  Y.  Supp. 
106;  Niaqarn  Ins.  Co.  v.  Bishop,  49  111. 
Anp.  388;  Fotrtde  v.  Phoenix  Ins.  Co., 
106  Mo.  Anp.  .527,  81  S.  W.  485;  Carp 
V.  Qyern  In'^.  Co.,  104  Mo.  App.  502, 
79  S.  W.  757;  Braddv  v.  A^.  Y.  Bovery 
Ins.  Co.,  115  N.  C.  354,  20  S.  E.  477; 
Chapman  v.  Rock  ford  Ins.  Co.,  89 
Wis.  572, 62  N.  W.  422,28  L.  R.  A  40? 


"*  Davenport  v.  7ns.  Co.,  10  Daly,  535; 
Vernon  Ins.  Co.  v.  Maitlen,  158  Ind. 
393,  63  N.  E.  755  (appraisers  could  not 
agree  on  umpire,  held,  no  excuse  for 
breach  of  condition);  Westenhaver  v. 
German-Am.  Ins.  Co.,  113  Icwa,  726, 
84  N.  W.  717  (failure  to  agree  on  um- 
pire no  excuse  for  lack  of  award); 
Fisher  v.  Merchants'  Ins.  Co.,  95  Me. 
480,  50  Atl.  282  (must  arbitrate  or  give 
good  legal  excuse);  Kerseij  v.  Phoenix 
Ins.  Co.,  135  Mich.  10,  97  N.  W.  57 
(difficulty  in  agreeing  on  umpire  is  no 
excuse);  Carp.  v.  Queen  Ins.  Co.,  104 
Mo.  App.  502.  But  see  Hamilton  v. 
L.  &  L.  &  G.  Ins.  Co.,  136  U.  S.  242, 
10  S.  Ct.  945,  34  L.  Ed.  419;  Carroll  v. 
Ins.  Co.,  72  Cal.  297,  13  Pac.  863; 
Silver  v.  Western  Assur.  Co.,  164  N.  Y. 
381,  58  N.  E.  284;  Williains  v.  German 
Ins.  Co.,  90  App.  Div.  413;  Spurrier  v. 
La  Cloche  (1902),  App.  Cas.  446.  But 
held,  that  the  company  should  demand 
a  fresh  appraisal  if  it  wants  one, 
Levine  v.  Lancashire  Ins.  Co.,  66  Minn. 
138,  68  N.  W.  855.  If  the  company's 
appraiser  acts  unfairly  or  refuses  to 
proceed  the  company  shouUl  not  de- 
cline to  aopomt  another,  O'Rourke  v. 
German  Ins.  Co.  (Minn.,  1905),  104 
N.  W.  900.  If  it  does  so  decline  it 
waives  its  right  to  an  aprraisnl,  Niag- 
ara Ins.  Co.  v.  Bishop,  154  111.  9,  39 
N.  E.  1102,  45  Am.  St.  R.  105:  Brock  v 
7ns.  Co.,  102  Mich.  583,  61  N.  W.  67, 
26  t   R,  A.  623,  47  Am.  St.  R.  562; 


428  MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 

courts  construe  the  condition  more  liberally  towards  the  assured. 
Regarding  the  provision  as  incidental  and  collateral  to  the  main 
contract,  they  are  more  disposed  to  consider  that,  in  once  selecting 
a  suitable  appraiser,  and  in  standing  ready  to  furnish  in  rid  of  an 
appraisal  all  pertinent  testimony  within  his  control,  the  assured  has 
performed  the  full  measure  of  his  obligation  under  this  clause  of 

the  policy.' 

The  Michigan  court  declares:  "It  is  the  established  rule  in  this 
state  that  no  right  of  action  on  the  part  of  an  insured  exists  until 
an  appraisal  provided  for  in  the  policy  has  been  made."  And  the 
court  held  that  if  an  appraiser  failed  to  act  another  should  be  chosen.^ 

If  the  appraisal  extends  beyond  the  limit  of  time  for  beginning 
action  such  period  -is  by  implication  extended  until  sixty  days  after 
award. ^ 

§  312.  Scope  of  Award. — The  scope  of  the  submission  determines 
the  valid  scope  of  the  award  .^  Thus  if  the  parties  expressly  include 
in  a  written  submission  only  property  partially  damaged,  the  in- 
sured in  his  action  on  the  policy  may  subsequently  show  in  addi- 
tion to  the  award,  the  value  of  property  totally  lost.^ 

Inasmuch  as  the  award  does  not  determine  the  liability  of  the 
insurer,  but  only  the  amount  of  the  loss,  it  is  in  the  nature  of  evi- 
dence, and  the  action  of  the  insured  to  recover  the  amount  must  be 
on  the  policy,  not  on  the  award.® 

McCullough  v.  Ins.  Co.,  113  Mo.  606.  3  Williams  v.  German  Ins.  Co.  and 

21  S.  W.  207.  Fritz  v.  Brit.-Am.  Assur.  Co.,  208  Pa. 

1  Western  Assur.   Co.   v.   Decker,  98      St.  268.  57  Atl.  573. 

Fed.  381,  39  C.  C.  A.  383,  Sanborn,  J.,  ■»  Rutter  v.  Hanover  F.  Ins.  Co.,  138 

dissenting;  Western  Assur.  Co.  v.  Hall,  Ala.   202,  35  So.  33;  Kearney  v.  Ins. 

120  Ala.  547,  24  So.  9.36;  Bernhard  v.  Co.,  126  Mich.  246,  85  N.  W.  733. 
Rochester  German  Ins.  Co.  (Conn.),  65  ^Rutter  v.   Ins.    Co.,   138  Ala.   202, 

Atl.  134;  Conn.  Fire  Ins.  Co.  v.  Cohen,  35  So.   33;  Lang  v.   Eagle  F.   Co.,  12 

97  Md.  294,  55  Atl.  675   (no  umpire  App.    Div.   39,  42  N.   Y.   Supp.   539; 

ever    selected);     Pretzf elder    v.     Mer-  Fire  Assn.  v.  Colquin  (Tex.  Civ.  App.), 

chants'  Ins.  Co.,  116  N.  C.  491,  21  S.  E.  33  S.  W.   1004.     If  ag;reement  of  the 

302,  id.,  123  N.  C.  164,  31  S.  E.  470;  parties  and  the  submission  depart  from 

Fire  Assn.    v.    Appel    (Ohio    St.),   80  terms  of  policy  the  scope  of  the  award 

N.  E.  952;   Fritz  v.   Brit.-Am.  Assur.  is  controlled  by  the  submission,  Brit.- 

Co.,    208    Pa.    St.    268,    57    Atl.    573,  Am.  Assur.  Co.  v.  Darragh,  128  Fed. 

Mitchell,  C.  J.,  and  Brown,  J.,  dissent-  890,  63  C.  C.  A.  426;  London  &  L.  Ins. 

ing.     If  the  assured  demand  an  ap-  Co.  v.  Starrs,  71  Fed.  120,  17  C.  C.  A, 

praisal   and   nominate    his    appraiser,  645;  Hall  v.  Norualk  F.  Ins.  Co.,  57 

and  the  company  refuse  to  nominate  Conn.  105,  17  Atl.  356;  S-pringfield  F. 

one,  no  binding  award  can  be  made,  &  M.  Ins.  Co.  v.  Payne,  57  Kan.  291, 

Penn.  Plate  Glass  Co.  v.  Ins.  Co.,  189  46    Pac.    315.      The    award    was    pre- 

Pa.  St.  255,  42  Atl.  138.  sumed  to  cover  also  a  question  of  ap- 

2  Baumgarth  v.  Firemen's  Fund  Ins.  portionment  in  Cassidv  v.  Ro-  al  Exch. 
Co.  (Mich.,  1908),  116  N.  W.  449;  Ver-  Assn.,  99  Me.  399,  59  Atl.  549. 

non   Trust   Co.  v.  Maitlen,    158    Ind.  ^  Soars  v.  Home  Ins.  Co.,  140  Masa 

393.  343,  5  N.  E.  149. 


SETTING    ASIDE   AWARD 


429 


Where  several  insurance  companies  interested  in  the  one  loss 
unite  in  signing  one  appraisal  agreement,  the  submission  is  not  void, 
but  will  be  regarded  as  separate  submissions,  one  for  each  insurer.^ 

§  313.  Setting  Aside  Award. — Where  the  arbitrators  are  gov- 
erned by  proper  methods  and  act  in  good  faith,  much  discretion  is 
vested  in  them.  Their  award  will  not  be  vacated  merely  because  it 
is  in  fact  either  excessive,'  or  inadequate.^  In  general,  an  award  is 
conclusive  as  to  the  amount  of  loss; ''  but,  where  the  error  is  so 
great  as  to  be  indicative  of  gross  partiality,  undue  influence,  or  cor- 
ruption, then  there  exists  ground  for  setting  aside  the  award.^  The 
same  is  true,  if  the  award  "is  obviously  and  extremely  unjust,"* 
though  there  be  no  evil  intent  or  improper  motive  on  the  part  of 
any  person  concerned.'''  Where  the  methods  of  arbitrators,  acting 
as  judicial  officers,  are  shown  to  be  unjust  or  unlawful,  the  award 
will  be  the  more  readily  annulled.  Thus  the  refusal  to  take  pertinent 
and  material  testimony;  ^  or  an  estimate  of  the  damage  on  an  im- 
proper basis;  ^  or  a  neglect  to  allow  one  of  the  appraisers  a  fair 
participation  in  the  proceedings;  ^°  or  an  omission  to  afford  proper 
opportunity  to  one  of  the  parties  to  present  his  case;  ^^  or  the  fraud- 


1  Giles  V.  Royal  Ins.  Co.,  179  Mass. 
261,  60  N.  E.  786. 

2  Hartford  Ins.  Co.  v.  Bonner  Mer. 
Co.,  56  Fed.  378,  15  U.  S.  App.  134,  5 
C.  C.  A.  524. 

^Michels  v.  Assoc,  129  Mich.  417, 
89  N.  W.  56;  Kearney  v.  Washtenaw 
Ins.  Co.,  126  Mich.  246,  85  N.  W.  733; 
Stemmcr  v.  Scottish  Ins.  Co.,  33  Oreg. 
65,  53  Pac.  498;  Strome  v.  London 
Assnr.  Corp.,  20  App.  Div.  571,  47 
N.  Y.  Supp.  481,  aff'd  162  N.  Y.  627, 
57  N.  E.  1125.  The  court  said:  "If  in 
every  case  it  might  be  shown  that  the 
arbitrators  omitted  to  consider  some 
elements  of  damage,  the  arbitration 
would  rarely  be  final,"  Remington 
Paper  Co.  v.  London  Assur.  Corp.,  12 
App.  Div.  218,  225,  43  N.  Y.  Supp.  431. 

*  Billmver  v.  Ins.  Co.,  57  W.  Va. 
42,  49  S.  E.  901. 

5  Kaiser  v.  Ins.  Co. ,  59  App.  Div. 
525,  69  N.  Y.  Supn.  344,  aff'd  172  N.  Y. 
663,  65  N.  E.  1118  Ooss  $3,930;  award 
$3,031);  Strome  v.  London  Assur.  Co., 
supra;  N.  Y.  Mvt.  S.  &  L.  A.  v. 
Manchester  Fire  Assur.  Co.,  94  Arp. 
Div.  104,  87  N.  Y.  Snpp.  1075  (Iofs 
$1,300;  award  $1,032);  Ins.  Co.  ofN.A. 
V.  Hegewald,  161  Ind.  631,  66  N.  E. 
902  (award  less  than  one-half  the  loss) ; 


Vincent  v.  German  Ins.  Co.,  120  Iowa, 
272,  94  N.  W.  458;  Produce  R.  Co.  v. 
Ins.  Soc,  91  Minn.  210,  97  N.  W.  875; 
Royal  Ins.  Co.  v.  Parlin  Co.,  12  Tex. 
Civ.  App.  572,  34  S.  W.  401;  Glover  v. 
Rochester  German  Ins.  Co.,  11  Wash. 
143,  39  Pac.  380. 

^  Perry  v.  Greenwich  Ins.  Co.,  137 
N.  C.  402,  49  S.  E.  889  (award  $73.50; 
loss  $750). 

7  Prov.  Wash.  Ins.  Co.  v.  Board  of 
Education,  49  W.  Va.  360,  38  S.  E.  679. 

^  Mosness  v.  Germa7i-Am.  Ins.  Co., 
50  Minn.  341,  52  N.  W.  932;  Stemmer  v. 
Scottish  U.  Ins.  Co.,  33  Oreg.  65,  53 
Pac.  498;  Canfield  v.  Watertown  Ins. 
Co.,  55  Wis.  419;  and  see  Hart  v. 
Kenney,  47  N.  J.  Eq.  51,  20  Atl.  29. 

9  Prov.  Wash.  Ins.  Co.  v.  Board  of 
Education,  49  W.  Va.  360,  38  S.  E. 
679;  Clover  v.  Greenuich  Ins.  Co.,  101 
N.  Y.  277,  4  N.  E.  724. 

^0  Hills  V.  Home  Ins.  Co.,  129  Mass. 
345  (in  which  two  out  of  three  pre- 
judged the  case  on  ex  parte  testimony); 
Svrinq-field  F.  &  M.  Ins.  Co.  v.  Paijne, 
57  Kan.  291,  46  Pac.  315. 

11  Rrr'vnr  v.  ,V.  Y.  Fire  Ins.  Co.,  92 
Minn.  306,  99  N.  W.  886;  Schreiber  v. 
German-Arn.  Ins.  Co.,  43  Minn.  367; 
and  see  §  310,  swpra. 


43U  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

ulcnt  concealment  of  books  and  inventory  or  ether  evidence;  ^  or 
the  failure  to  include  in  the  estimate  a  part  of  the  property  sub- 
mitted,- will  be  good  ground  for  upsetting  the  award  and  defeating 
the  plaintiff  altogether,^'  or  f  .r  relegating  the  parties  to  the  verdict 
of  a  jury  to  determine  the  actual  amount  of  loss,  as  the  case  may  be. 
But  the  legal  presumptions  are  in  favor  of  the  validity  of  the  award. 
Consequently,  in  the  absence  of  fraud,  misconduct  or  gross  mistake 
it  is  a  final  adjustment  of  the  amount  of  loss."* 

In  New  York  and  other  states  where  legal  and  equitable  relief 
may  be  obtained  in  the  same  action,  either  party  may  assail  the 
award  in  an  action  on  the  policy,  the  plaintiff,  as  part  of  his  cause 
of  action,  the  defendant,  by  way  of  defense.=^  But  in  other  juris- 
dictions a  suit  in  equity  must  be  brought  for  the  express  purpose  of 
setting  aside  the  award  with  stay  meanwhile  of  trial  of  the  action 
on  the  policy;  since,  at  common  law,  in  an  action  on  the  policy  the 
award  is  conclusive.^ 

In  an  action  brought  for  the  express  purpose  of  setting  aside  the 
award  and  recovering  on  the  policies  the  New  York  Supreme  Court 
allowed  a  joinder  of  all  the  companies  as  defendants  that  had  united 
in  the  appraisal.'^ 

§  314.  Enforcing  Contract  is  no  Waiver. — This  company  shall  not 
be  held  to  have  waived  any  provision  or  condition  of  this  policy,  or  any 
forfeiture  thereof,  by  any  requirement,  etc.,  relating  to  the  appraisal  or 
examination;  and  the  loss  shall  not  become  payable  until  sixty  days 

^Stockton,  etc.,  Works  v.  Glens  Falls  ^Sullivan  v.   Traders'  Ins.  Co.,  169 

Ins.  Co.,  98  Cal.  557,  33  Pac.  633.  N.  Y.  213,  62  N.  E.  146;  Maker  v.  Home 

2  Adams  v.  .V.  Y.  Bowery  Ins.  Co.,  Ins.  Co.,  75  App.  Div.  226,  78  N.  W. 
85  Iowa,  6,  51  N.  W.  1119:  Am.  F.  Ins.  Supp.  44;  Bellinger  v.  German  Ins.  Co., 
Co.  V.  Bell,  33  Tex.  Civ.  App.  319,  75  95  App.  Div.  262,  88  N.  Y.  Supp.  1022; 
S.  W.  319;  Phmnix  Ins.  Co.  v.  Moore  Davis  v.  Atlas  Assur.  Co.,  16  Wash. 
(Tex.  Civ.  App.),  46  S.  W.  1131;  Hong  232,  47  Pac.  436;  Canfieldv.  Watertown 
Sling  V.  Ins.  Co.,  7  Utah,  441,  27  Pac.  Ins.  Co.,  55  Wis.  419,  13  N.  W.  252. 
170.  6  Continental  Ins.  Co.  v.  Garrett,  125 

3  See  §  310.  Fed.  589,  60  C.  C.  A.  395;  Robertson  v. 
^Hanover  F.  Ins.   Co.  v.   Lewis,  28      Ins.  Co.,  68  Fed.  173;  Ga.  Home  Ins. 

Fla.  209,  10  So.  297;  Bates  v.  Brit.-Am.  Co.  v.  Kline,  114  Ala.  366,  21  So.  958; 

Ins.  Co.,  100  Ga.  249,  28  S.  E.   155;  Fire  Assoc,  v.  AUesina,  45  Orep;.  154, 

Townsend  v.    Greenwich   Ins.    Co.,   86  77    Pac.    123;    Billmyer   v.    Hamburg- 

App.  Div.  323,  83  N.  Y.   Supp.  909,  Brem.  Ins.  Co.,  57  W.  Va.  42.  49  S.  E. 

aff'd  178  N.  Y.  634,  71  N.  E.  1140;  901;  Garrebrantv.  Continental  Ins.  Co. 

Am.  Cent.  Ins.   Co.  v.  Bass,  90  Tex.  (N.  J.,  1907),    67  Atl.  90.     Minnesota 

380,    38    S.    W.     1119.      Subsequent  allows  an  equity  suit    against  all  the 

denial    of    liability    is    no    waiver    of  companies     interested    as    defendants 

award,  Montiomeni  v.  Am.  Cent.  Ins.  and  recoveries    on  the  policies  in  the 

Co.,    108   Wis.    146,    84    N.    W.    175.  same  suit,  Redner  v.  N.  Y.   Fire  Ins. 

Parties  may  set  aside  the  award  by  Co.,  92  Minn.  306,  99  N.  W.  886. 

mutual  consent,  Goodwin  v.  Ins.  Co.,  ^  Mayer    v.    Phoenix   Ins.    Co.,    124 

118  Iowa,  601,  92  N.  W.  894.  App.  Diiv.  241. 


PRO  RATA  CLAUSE — OTHER  INSURANCE  431 

after  the  notice  of  ascertainment,  estimate,  and  satisfactory  proofs  have 
been  received,  inclvding  an  award  by  appraisers  when  appraisal  has 
been  required. 

As  has  been  observed,  in  the  absence  of  this  provision  certain 
courts  have  been  disposed  to  hold  that  a  demand  by  the  company 
for  an  appraisal  or  an  examination  under  oath  amounts  to  a  waiver 
of  a  known  cause  of  forfeiture;  ^  but  this  clause  of  the  policy  allows 
the  company  to  pursue  the  contract  methods  for  ascertaining  the 
character  and  extent  of  the  loss,  before  exercising  its  option  to  de- 
cide whether  or  not  it  will  contest  the  claim  of  the  insured.^  And 
the  provision  that  the  loss  is  not  payable  until  after  the  award  by 
the  appraisers  makes  it  clear  that  a  compliance  with  the  appraisal 
clause  when  demanded  is  intended  to  be  a  condition  precedent  to 
any  right  of  action  under  the  policy.  Unless,  then,  the  requirement 
is  waived,  the  assured  must  await  the  expiration  of  the  sixty  days 
before  instituting  his  action  on  the  policy.^ 

The  Massachusetts  form  does  not  contain  this  clause,  but  makes 
the  loss  payable  within  sixty  days  after  the  submission  of  the  sworn 
statement  of  particulars.  By  the  Iowa  form  the  loss  is  payable 
forty  days  after  receipt  of  proofs  of  loss,  and  the  polic}'  provides, 
"that  this  company  shall  not  be  held  to  have  waived  any  of  the 
provisions  or  conditions  of  this  policy  or  any  forfeiture  thereof  by 
any  examination  or  investigation  herein  provided  for." 

§  315.  Pro  Rata  Clause — Other  Insurance. — Shall  not  be  liable 
for  a  greater  proportion  of  any  loss  on  the  described  property  or  for  loss 
by  and  expense  of  removal  from  premises  endangered  by  fire  than  the 
amount  hereby  insured  shall  bear  to  the  whole  insurance,  whether  valid 
or  not,  or  by  solvent  or  insolvent  insurers,  covering  such  property;  and 
the  extent  of  the  application  of  the  insurance  under  this  policy,  or  of 
the  contribution  to  be  made  by  this  company  in  case  of  loss,  may  be  pro- 
vided for  by  agreement  or  condition  written  hereon  or  attached  or  ap- 
pended hereto. 

This  is  known  as  the  pro  rata  or  contribution  clause.  To  admit 
of  its  application  there  must  be  more  than  one  policy  to  contribute, 
and  the  total  concurrent  insurance  must  exceed  the  general  loss.'* 

1  See  $  147.  days  have  expired,  Clemens  v.  Ameri- 

2  See  §  148,  supra.  can  Fire  Ins.  Co.,  70  App.  Div.  435; 
^Bellinger  v.   German  Ins.   Co.,  95      75  N.  Y.  Supp.  484.     As  to  whether 

App.  Div.  262,  88  N.  Y.  Supp.  1020;  denial  of  liability  operates  as  a  waiver, 

BoruszewsH  v.  Middlesex  Mut.  Assnr.  see  §  145,  swpra. 

Co.,   186   Mass.   589,   72   N.   E.   250.  *  Lesure  Lumber  Co.  v.  Mutual  Ins. 

Complaint    should    show    that    sixty  Co.,    101    Iowa,   514,   70   N.    W.    761 


432 


MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 


The  provision  is  calculated  to  benefit  the  insurers,  since  it  places 
upon  the  insured  the  burden  of  establishing  what  share  of  the  loss 
is  collectible  from  each  company  under  the  terms  of  its  own  policy, 
and  limits  him  in  his  recovery  against  each  to  its  ratable  proportion 
of  the  loss.*  Whereas  without  this  provision  he  was  at  liberty  to 
bring  his  proceedings  against  the  companies  of  his  selection,  leaving 
it  to  them  to  obtain  equitable  contribution  from  the  others.^ 

It  is  commonly  said  that  this  clause  was  designed  to  avoid  cir- 
cuity of  action,""*  and  this  in  a  sense  is  true.  It  must  be  observed, 
however,  that  when  the  only  dispute  relates  to  the  proper  method 
of  apportioning  an  award  or  admitted  amount  of  loss  among  the 
various  insurers,  to  compel  the  assured  to  try  out  with  each  an  issue 
in  which  all  are  interested,  not  only  tends  to  multiply  actions,  but 
may  involve  embarrassment,  since  the  results  in  later  actions  may 
prove  that  the  recovery  in  earlier  actions  is  too  small  or  too  large."* 
Injauenced  by  such  considerations  certain  courts  have  ruled  that 
where  the  main  dispute  relates  to  apportionment  of  the  loss  among 
several  companies,^  or  where  several  companies  on  the  risk  are  sub- 
stantially united  in  their  attitude  of  defense,  they  may  all  be  joined 


(where  insurance  on  the  portion  of  the 
property  lost  was  less  than  loss, 
though  the  whole  insurance  exceeded 
the  value  of  the  property);  Pencil  v. 
Home  Ins.  Co.,  3  Wash.  485,  28  Pac. 
1031  (if  loss  exceed  the  whole  insur- 
ance each  policy  paj's  in  full,  and  no 
question  of  apportionment   arises). 

1  Fireman's  Fund  Ins.  Co.  v.  Pala- 
tine (Cal.,  1907),  88  Pac.  907  (each 
policy  independent);  Hanover  F.  Ins. 
Co.  V.  Brown,  77  Md.  64,  72,  25  Atl. 
989,  27  Atl.  314;  Ca.ssil>^  v.  New  Or- 
leans Ins.  Assoc,  65  Miss.  49;  North 
Brit.  &  M.  Ins.  Co.  v.  L.  &  L.  &  G. 
Ins.  Co.  (1877),  5  Ch.  D.  569,  581; 
West  of  Eng.  F.  Ins.  Co.  v.  Isaacs 
(1896),  2  Q.  B.  377,  aff'd  66  L.  J.  N.  S. 
Q.  B.  36.  But  a  valued  policy  law  may 
override  this  clause,  Home  F.  Ins.  Co.  v. 
Weed,  55  Neb.  146,  151,  75  N.  W.  539 
(cases  cited);  West.  Assur.  Co.  v. 
Phelps,  77  Miss.  625,  27  So.  745. 

^  Godin  v.  Assurance  Co.,  1  Burr. 
489,  1  W.  Black.  103;  Thurston  v. 
Koch,  4  Dall.  (U.  S.)  348.  The  terms 
of  the  clause  bring  into  the  apportion- 
ment invalid  or  uncollectible  insur- 
ance, Bateman  v.  Lumbermen's  Ins. 
Co.,  189  Pa.  St.  465,  42  Atl.  184; 
Gaudy  v.  Orient  Ins.  Co.,  52  S.  C.  224, 
29  S.  E.  655.    This  it  has  been  claimed 


is  inequitable.  Premiums  are  not 
based  upon  the  existence  of  other  in- 
surance nor  is  a  disclosure  of  other  in- 
surance required  until  the  fire.  On  the 
other  hand,  the  underwriters  contend 
that  they  are  not  responsible  for  the 
selection  of  other  insurers,  and  ought 
not  to  be  called  upon  to  guarantee 
their  solvency. 

3  Firemen's  Fund  his.  Co.  v.  Pekor, 
106  Ga.  1,  11,31  S.  E.  779. 

4  Thus  after  judgments  were  ob- 
tained and  settlements  made  with 
various  companies  by  authority  of 
Arlington  Co.  v.  Colonial  Assur.  Co., 
180  N.  Y.  3.37,  73  N.  E.  34,  and  upon 
the  supposition  that  all  the  companies 
were  to  pro  rate  on  the  loss  at  the 
Arlington  plant  the  Appellate  Divi- 
sion subsequently  decided  that  the 
policy  of  one  company,  though  in  the 
same  terms,  did  not  cover  the  build- 
ing burned,  Arlington  Co.  v.  Empire 
Citv  Ins.  Co.,  116  App.  Div.  458,  101 
N.  Y.  Supp.  772. 

5  Schmaelzle  v.  London  &  Lan.  Ins. 
Co.,  75  Conn.  397,  53  Atl.  863;  Under- 
writers' Ins.  Co.  V.  Powell,  94  Ga.  359, 
21  S.  E.  565;  Am.  Cent.  Ins.  Co.  v. 
Landan,  56  N.  J.  Eq.  613,  39  AtL 
400. 


WHAT   IS   OTHER   CONTRIBUTING   INSURANCE 


433 


in  one  omnibus  suit  in  equity,  with  stay  of  separate  actions  at  law.^ 
Other  tribunals  have  extended  this  rule,  and,  solely  by  virtue  of  the 
pro  rata  clause,  have  sustained  such  a  joint  action  in  equity,  though 
the  companies  have  tendered  different  sets  of  defenses.^  The  cases 
last  cited  are  not  easily  harmonized  with  those  decisions  which  hold 
that  under  the  standard  apportionment  clause,  the  liability  of  each 
company  is  separate,  not  joint,  and  is  by  the  terms  of  its  own  con- 
tract limited  to  a  fixed  share  of  the  loss.^  Similarly  it  is  held  that 
it  is  no  defense  for  the  company  in  suit  under  such  a  policy  to  allege 
and  prove  that  the  entire  loss  has  been  paid  by  the  other  com- 
panies."* 

The  New  York  Supreme  Court  holds  that  the  liability  of  each 
underwriter,  under  the  Lloyd's  policy,  is  separate  and  distinct.'" 
And  the  federal  court  allowed  an  exception  to  the  joinder  of  two 
companies  under  policies  of  marine  insurance.^ 

§  316.  What  is  Other  Contributing  Insurance. — Policies  of  fire 
insurance,  to  come  into  the  apportionment  or  contribution,  must 
insure  the  same  interest,  and  be  upon  the  same  property  or  some 
part  thereof.^    They  must  also  be  subsisting,  unexpired,  or  uncan- 


*  Virginia  Chemical  Co.  v.  Ins.  Co., 
113  Fed.  1,  51  C.  C.  A.  21;  Tisdale  v. 
Ins.  Co.  of  X.  A.,  84  Miss.  709,  36  So. 
568  (1904);  and  see  Citi/  of  Albert  Lea 
V.  Nielsen,  83  Minn.  246,  86  N.  W.  83. 

2  Fegelson  v.  Niagara  Fire  Ins.  Co. , 
94  Minn.  486,  103  N.  W.  495  (six  com- 
panies, but  Minnesota  standard  clause 
does  not  contain  the  words  "valid  or 
invalid");  Pretzf elder  v.  Merchants'  Ins. 
Co.,  116  N.  C.  491,  21  S.  E.  302;  Fuller 
V.  Detroit  F.  &  M.  Ins.  Co.,  36  Fed. 
469,  1  L.  R.  A.  801  (nine  companies). 

3  Hartford  F.  Ins.  Co.  v.  Post,  25 
Tex.  Civ.  App.  428  (two  companies  im- 
properly joined);  BardueU  v.  Conicay 
Ins.  Co.,_  118  Mass.  465  ("the  liability 
of  each  is  determined  by  the  terms  of 
its  own  contract  and  is  not  modified 
by  anything  in  the  contract  of  the 
other  which  may  enable  the  insured  to 
claim  or  recover  for  a  larger  valuation 
or  amount  of  loss"). 

4  Fireman's  Fund  Ins.  Co.  v.  Palatine 
(Cal.,  1907),  88  Pac.  907;  Lucas  v. 
Jefferson  Ins.  Co.,  6  Cow.  (N.  Y.) 
635;  Goodwin  v.  Merchants'  Ins.  Co., 
118  Iowa,  601,  92  N.  W.  894  (imma- 
terial that  others  have  paid  the  whole 
loss);  Ins.  Co.  v.  Tumbull,  86  Ky.  236, 
5  S.  W.  542;  Hanover  Ins.  Co.  v.  Broicn, 

28 


77  Md.  64,  25  Atl.  989,  27  Atl.  314 
(each  contract  entirely  separate  and 
independent,  giving  the  companies  no 
right  of  contribution);  Good  v.  Buckeye 
Mut.  F.  Ins.  Co.,  43  Ohio  St.  394.  2 
N.  E.  420;  Am.  Cent.  Ins.  Co.  v.  Heath, 
29  Tex.  Civ.  App.  445,  69  S.  W.  235; 
Fitzsimmons  v.  City  Fire  Ins.  Co.,  18 
Wis.  234,  86  Am.  Dec.  761;  and  see 
Palmer  v.  Great  Western  Ins.  Co.,  10 
Misc.  167,  173,  aff'd  153  N.  Y.  660,  48 
N.  E.  1106;  Ogden  v.  East  River  Ins. 
Co.,  ,50  N.  Y.  388,  390.  It  is  the  duty 
of  the  assured  after  loss  to  disclose  all 
other  insurance,  Teidonia  Ins.  Co.  v. 
Bussell  (Tenn.),  48  S.  W.  703.  Before 
loss  there  is  no  implied  warranty  or 
agreement  that  he  will  keep  up  other 
insurance  which,  if  it  had  been  men- 
tioned, would  contribute,  Indiana  Ins. 
Co.  V.  Hoffman,  128  Ind.  250,  27  N.  E. 
561;  Lattan  v.  Royal  Ins.  Co.,  45  N.  J. 
L.  453;  Hand  v.  Williamsburg  City  Ins. 
Co.,  57  N.  Y.  41;  Quarrier  v.  Peabody 
Ins.  Co.,  10  W.  Va.  507. 

5  Straus  v.  Hoadley,  23  App.  Div. 
360.    See  §  11,  supra. 

^Rogers  v.  ^tna  Ins.  Co.,  76  Fed. 
569. 

7  See  discussion  of  other  insurance, 
§§  252,   253,   supra;  Niagara   F.   Ins. 


434  MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 

celed  at  the  time  of  the  loss.^  Thus,  if  a  mortgagor  insures  his 
interest,  and  a  mortgagee,  either  by  a  separate  pohcy  or  by  a  mort- 
gagee clause  attached  to  the  mortgagor's  pohcy,  insures  his  interest 
on  the  same  property,  there  is  no  double  or  other  insurance.^  But 
if  the  mortgagor's  policy  is  simply  made  payable  to  the  mortgagee 
without  a  mortgagee  clause,  and  the  mortgagor  should  take  out 
another  policy  upon  the  same  property  and  against  the  same  risk, 
it  would  constitute  a  case  of  double  insurance.^  If  a  common  carrier 
or  other  bailee  insure  his  own  interest  and  liability  only,  with  respect 
to  the  goods  of  the  owners  in  his  custody,  the  insurance  is  not  con- 
tributing insurance  with  the  policies  of  the  owners,  because  the  in- 
terests are  not  the  same. 

But  to  constitute  other  or  contributing  insurance  it  is  not  neces- 
sary that  the  persons  insured  under  the  different  policies  should 
be  named  by  the  same  description.  For  example,  if  a  common 
carrier,  warehouseman,  or  commission  merchant,  takes  out  insurance 
upon  goods  "his  own  or  held  by  him  in  trust,"  or  "on  account  of 
whom  it  may  concern,"  or  by  any  designation  for  the  benefit  of 
himself  and  others  interested  in  the  same  property,  provided  such 
other  persons  have  either  given  original  authority  for  the  procuring 
of  the  insurance  or  have  subsequently  ratified  it,  the  policy  covers 
their  interest  as  well  as  the  interest  of  the  party  named  as  insured;  ^ 
and  in  that  case  a  policy  by  the  owners  or  the  other  persons  in 
interest  will  constitute  other  or  double  insurance,  and  both  sets  of 
policies  will  come  into  any  apportionment.^    Nor  is  it  essential  that 

Co.  V.  Scammon,  144  111.  499,  28  N.  E.  2  Home  Ins.   Co.  v.  Koob,  113  Ky. 

919;  Lowell  Mfj.  Co.  v.  Safejuard  Ins.  360,  68  S.  W.  453;   Eddy  v.  London 

Co.,  88  N.  ^.  592,  597  (parol  evidence  Assur.  Co.,  143  N.  Y.  311,  38  N.  E. 

is  admissible  to  explain  the  intent  in  307,  62  N.  Y.  St.  R.  316,  25  L.  R.  A. 

the  case  of  general   descriptions  like  686;  Hardy  v.  Lancashire  Ins.  Co.,  166 

"their  own  or  held  in  trust").     Thus  Mass.  210,  44  N.  E.  209.     Policy  of 

an  excess  floater  cannot  be  called  upon  second  mortgagee  does  not  contribute 

to   contribute   with    the    other    insur-  with  policy  of  first  mortgagee,  Fox  v. 

ance,  Klotz  Tailoring  Co.  v.  Eastern  F.  Phoenix  Ins.  Co.,  52  Me.  333;  Scottish, 

Ins.  Co.,  116  App.  Div.  723,  102  N.  Y.  etc.,  Assn.  v.  Northern  Assur.  Co.,  11 

Supp.    82.      For   definition    of    excess  S.  S.  C.  287,  4th  series,  21  vSc.  L.  R.  189; 

floater,  see  §20,  supra.  Westminster  F.  Office  v.  Glasgow,  etc., 

1  Farmers'  Feed  Co.  v.  Scottish  U.  &  Soc.  (1888),  13  App.  Cas.  699. 

-V.  Im.  Co.,  65  App.  Div.  70,  72  N.  Y.  3  Hine  v.  Wooh'-orth,  93  N.  Y.  75; 

Supp.  732,  reversed  on  another  point,  Hastinqs  v.  Westchester  Fire  Ins.  Co., 

173  N.  Y.  241,  65  N.   E.   1105,  and  73  N.  Y.  141.    As  to  whether  a  marine 

cases  last  section,  notes.     But  insur-  policy  is  other  insurance  with  fire,  see 

ance  taken  out  without  avithority  of  Australian,  etc.,  Co.  \.  Saunders  {\S15), 

insured  is  no  insurance  at  all,  London  10  C.  P.  668. 

&  Lan.  Ins.  Co.  v.  Turnbull,  86  Ky.  *  Kellner  v.  Fire  Asso.,  128  Wis.  233 

230,  5  S.  W.  542.    Assured  cannot  take  (many  cases  cited  in  briefs  and  opin- 

insurance  on  one  item  of  the  policy  and  ion). 

apply  it  to  another  item,  J^tna  Ins.  Co.  s  California  Ins.  Co.  v.  Union  Com- 

V.  Ghxsgow,  107  Ky.  77,  52  S.  W.  975  press  Co.,  133  U.  S.  387,  10  S.  Ct.  365; 


POLICIES   WITH   NONCONCURRENT  TERMS 


435 


the  properties  described  in  the  different  pohcies  be  the  same;  it  is 
enough,  in  most  jurisdictions,  if  they  are  in  part  the  same.^  The 
other  insurance  may  cover  less,^  or  it  may  cover  more;  ^  but,  un- 
fortunately for  the  assured,  pohcies  that  have  been  avoided  for 
breach  of  warranty  must  be  included  in  the  category  of  other  in- 
surance,"* and  so  must  those  of  insolvent  companies. 

§  317.  Policies  with  Nonconcurrent  Terms. — On  the  back  of 
almost  every  policy  is  printed  the  following  warning:  "It  is  im- 
portant that  the  written  portions  of  all  policies  covering  the  same 
property  read  exactly  alike.  If  they  do  not  they  should  be  made 
uniform  at  once."  ^  Where,  in  accordance  with  this  warning,  the 
different  policies  contain  similar  terms,  and  are  identical  in  their 
descriptions  of  the  property  covered,  there  is  usually  little  em- 
barrassment in  dividing  the  loss  proportionately  among  them;  ^ 
but  when  the  policies  cover  only  in  part  the  same  property,  or  con- 


Home  Ins.  Co.  v.  Baltimore  Warehouse 
Co.,  93  U.  S.  527;  Home  Ins.  Co.  v. 
Minn.,  St.  Paul  &  M.  R.  R.  Co.,  71 
Minn.  296,  74  N.  W.  140;  Ferguson  v. 
Pekin  Plow  Co.,  141  Mo.  161,  42  S.  W. 
711.  Any  balance  above  his  own  in- 
terest the  party  named  must  hold  in 
trust  for  the  others,  see  cases  supra 
and  Hough  v.  Peoples'  Fire  Ins.  Co.,  36 
Md.  398;  Roberts  v.  Fire  Ins.  Co.,  165 
Pa.  St.  55,  30  Atl.  450;  Southern  Cold 
Storage  Co.  v.  Dechnan  (Tex.  Civ.  App.), 
73  S.  W.  545.  The  owners  or  others  in 
interest  are  entitled  to  full  and  equal 
benefit  with  the  insured  named,  in 
proportion  to  their  interests,  Johnston 
V.  Abresch  Co.,  123  Wis.  130,  101  N.  W. 
395  (1904);  Snow  v.  Carr,  61  Ala.  363; 
Liter  v.  Marrs,  13  Pa.  St.  220.  The 
modern  coinsurance  clause  is  likely  to 
drive  the  common  carrier,  warehouse- 
man, etc..  into  the  position  that  he  had 
no  intention  of  insuring  more  than  his 
own  interest  and  liability.  In  this  the 
courts  will  aid  the  insured  as  far  as  the 
language  of  the  policy  will  permit. 

1  Corlery  v.  Security  Ins.  Co.,  99 
Iowa,  382,  68  N.  W.  792.  See  many 
cases  next  section  and  §  252,  notes, 
supra.  Contra,  Pennsylvania,  which 
seems  to  stand  very  much  alone, 
Clar'e  v.  Western  Assur.  Co.,  146  Pa. 
St.  561 ,  23  Atl.  248;  W.  Branch  Lum- 
bermen's Exchange  v.  Am.  Cent.  Ins. 
Co.,  183  Pa.  St.  366,  38  Atl.  1081; 
Meigs  v.  Ins.  Co.  of  N.  A.,  205  Pa.  St. 
378,  54  Atl.  1053.     On  the  same  facts 


the  Federal  court  concluded  that  the 
Pennsylvania  court  was  clearly  wrong, 
Meigs  v.  London  Assur.  Co.,  126  Fed. 
781.  But  see  United  Underwriters' 
Ins.  Co.,  94  Ga.  359,  21  S.  E.  565. 

2  A'^.  J.  Rubber  Co.  v.  Commercial 
Union  Ins.  Co.,  64  N.  J.  L.  580,  582,  46 
Atl.  777  ("concurrent  insurance  is  that 
which  to  any  extent  insures  the  same 
interest,  against  the  same  casualty,  at 
the  same  time  as  the  primary  insur- 
ance, on  such  terms  that  the  insurance 
would  bear  proportionately  the  loss 
happening  within  the  provisions  of 
both  policies"). 

3  Washburn,  etc.,  Co.  v.  Merchants', 
etc.,  Ins.  Co.,  110  Iowa,  423,  81  N.  W. 
707. 

*  Rickerson  v.  German-Am.  Ins.  Co., 
6  App.  Div.  550,  39  N.  Y.  Supp.  547; 
Bateman  v.  Lumbermen's  Ins.  Co.,  189 
Pa.  St.  465,  42  Atl.  184;  Gandy  v. 
Orient  Ins.  Co.,  52  S.  C.  224,  29  S.  E. 
655.  Unless  a  statute  intervenes, 
Gurnett  v.  Atlas  Mut.  Ins.  Co.,  124 
Iowa,  547,  100  N.  W.  542.  For  exam- 
ple, Iowa  Code,  §  1746. 

5  A  broker  usually  employs  a  uni- 
form printed  rider  for  the  one  set  of 
policies. 

6  Thus  defendant's  policy  was  for 
$3,000,  other  insurance  $7,000,  whole 
loss  $6,250,  sound  value  $9,274.62. 
Defendant  pays  $1,875,  to  wit,  three- 
tenths  of  the  loss,  Eacrett  v.  Gore,  etc. 
Ins.  Co.,  6  Ont.  L.  R.  592. 


436 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


tain  different  and  inconsistent  provisions  applicable  to  the  one  loss, 
it  may  readily  be  seen  that  it  becomes  a  difficult  matter  to  deter- 
mine the  amount  of  liability  under  each  policy.^ 

Thus  where  the  policy  in  suit  contains  no  coinsurance  clause,  but 
the  other  policy  does  contain  such  a  clause,  the  question  arises 
which,  under  the  pro  rata  clause  of  the  policy  in  suit,  shall  be  con- 
sidered the  amount  of  the  other  policy,  the  whole  face  amount  or 
the  amount  operative  as  insurance,  to  wit,  the  amount  resulting 
after  the  application  of  the  coinsurance  clause?  Two  courts,  one  in 
the  East,  the  other  in  the  West,  deciding  the  matter  in  favor  of  the 
companies  gave  the  same  answer  on  the  same  day,  "the  whole  face 
amount  of  the  other  policy  is  the  amount  intended."  ^  Two  lower 
courts,  perhaps  more  in  harmony  with  analogous  decisions,  in  con- 
struing the  meaning  of  the  same  phrase  "whole  insurance"  as  used 
in  the  apportionment  clause,'  have  come  to  the  opposite  conclusion.'* 


1  See  discussion,  Bunyon  (5th  ed.), 
ch.  IX. 

2  Farmers'  Feed  Co.  v.  Scottish  U.  & 
N.  Ins.  Co.,  173  N.  Y.  241,  65  N.  E. 
1105  (reversing  five  judges  below. 
The  Court  of  Appeals  cites  no  cases  in 
point,  and  says  "the  question  is  new"); 
Stephenson  v.  Agricultural  Ins.  Co.,  116 
Wis.  277,  93  N.  W.  19.  That  portion  of 
the  reasoning  adopted  in  the  opinions 
of  both  these  cases  to  the  effect  that 
the  assured  had  agreed  to  become  a 
coinsurer  to  some  amount  is  not  in 
itself  convincing,  because  certainly  no 
such  agreement  had  been  made  with 
the  defendant,  but,  if  at  all,  only  with 
the  other  company,  Kansas  City  Co. 
V.  Am.  F.  Ins.  Co.,  100  Mo.  App.  691, 
75  S.  W.  186.  The  plaintiff  might  offer 
the  counter  arguments:  (1)  that  the 
main  promise  of  the  defendant  is  that 
the  plaintiff  shall  enjoy  a  full  actual 
indemnity  up  to  the  amount  of  the 
policy  in  suit  undisturbed  by  any 
doctrine  or  extraneous  agreement  re- 
garding coinsurance  not  contained  in 
the  policy  in  suit;  and  (2)  that  the 
exigencies  of  business  in  many  in- 
stances call  for  nonconcurrent  policies 
and  that  underwriters  who  have 
worded  the  policies  are  responsible  for 
the  lack  of  clearness  in  this  regard; 
(3)  that  other  insurance  is  not  taken 
into  account  in  fixing  the  rate  of 
premium,  and  that  if  the  defendant 
gains  the  benefit  of  any  after  the  loss 


it  is  a  piece  of  pure  good  luck.  Nor 
perhaps  is  it  correct  to  say  that  such 
an  agreement  to  become  coinsurer  is 
ever  made  by  virtue  of  the  standard 
coinsurance  clause  though  such  a  stipu- 
lation was  contained  in  earlier  forms, 
Chesebrough  v.  Home  Ins.  Co.,  61  Mich. 
333,  28  N.  W.  110.  The  provision  of 
the  standard  clause  "is  merely  a  mode 
of  fixing  the  proportion  to  be  paid  by 
the  defendants;"  so  stated  in  Quinn 
V.  Fire  Association,  180  Mass.  560,  562, 
62  N.  E.  980.  In  the  defendant's 
policy  there  was  no  such  clause  either 
in  the  Farmers'  Feed  Co.  case  or  in  the 
Stephenson  case. 

3  Schmaelzle  v.  London  &  Lan.  Ins. 
Co.,  75  Conn.  397,  53  Atl.  863  (must 
adopt  the  method  that  will  give  full 
indemnity);  Baltimore  F.  Ins.  Co.  v. 
Loney,  20  Md.  20;  Angelrodt  v.  Dela- 
uare  Ins.  Co.,  31  Mo.  593  (must  adopt 
the  method  that  will  make  the  loss 
good);  Deming  v.  Merchants'  Cotton 
Co.,  90  Tenn.  306,  347,  17  S.  W.  89 
("in  no  case  will  contribution  be  en- 
forced so  as  to  deny  indemnity'');  Sloat 
V.  Royal  Ins.  Co.,  49  Pa.  St.  14,  88  Am. 
Dec.  77;  Sherman  v.  Madison  Mut. 
Ins.  Co.,  39  Wis.  104  (the  other  policies 
must  make  good  the  reduction);  Bun- 
yon, Ins.  (5th  ed.),  303.  Lord  Mans- 
field said:  "In  no  case  must  the  con- 
tribution clause  be  construed  in  such  a 
manner  as  to  throw  loss  upon  the  in- 
sured, against  which  he  would  have 


*  Farmers'  Feed  Co.  v.  Scottish  U.  & 
N.  Ins.  Co.,  65  App.  Div.  70,  72  N.  Y. 


Supp.  732  (five  judges);  Armour  Pack- 
ing Co.  V.  Reading  Fire  Ins.  Co.,  67 


PARTIALLY   CONCURRENT   APPORTIONMENTS  437 

§)  318.  Partially  Concurrent  Apportionments.— A  difficult  class  of 
problems  is  frequently  presented  for  adjustment,  where  blanket  or 
general  insurance,  covering  the  larger  range  of  property,  is  called 
upon  to  contribute  with  specific  or  less  general  insurance,  covering 
a  part  or  several  parts  of  the  same  property.  These  problems  relate 
to  a  subject  known  as  "partially  concurrent  apportionments." 
Thus  suppose,  for  convenience  of  illustration,  that  a  common  carrier 
has  a  blanket  policy  on  all  the  property,  "his  own,  or  held  in  trust," 
which  happens  to  be  located  on  his  pier.  At  the  time  of  a  fire, 
stacked  up  on  dif!"erent  sections  of  the  pier,  are  shipments  of  cotton, 
jute,  coffee,  and  sugar,  just  arrived  and  belonging  to  four  consignees, 
respectively,  each  of  whom,  at  the  time  of  the  fire,  has  som.e  specific 
insurance  on  his  own  property.  The  fire  injures  all  the  shipments, 
and  the  aggregate  insurance  exceeds  the  loss.  The  owner  of  each 
shipment  brings  separate  action  upon  his  specific  policy;  and  each 
defendant  in  turn  claims  for  itself  the  benefit  of  the  full  face  of  the 
blanket  policy  as  a  contributor  towards  its  particular  loss,  hoping 
thereby  greatly  to  reduce  it.  How,  in  such  an  instance,  shall  the 
loss  be  apportioned  by  the  court  as  between  each  specific  policy  and 
the  blanket  insurance?  The  same  sort  of  question  arises  where  a 
merchant  or  manufacturer,  or  other  owner,  has  both  blanket  and 
specific  insurance  running  directly  in  his  own  favor,  and  covering 
only  in  part  the  same  property. 

been  fully  protected  had  the  policies  by  nonconcurrence  of  policies,  if  the 

been  free  from  that  clause,"  Godin  v.  aggregate  of  the  insurance  exceeds  the 

London  Assur.  Co.,  1  Burr.  489.    And  loss.      (2)   That  a  coinsurance  clause 

see  Lucas  v.  Jefferson  Ins.  Co.,  6  Cow.  serves  its  purpose  if  it  is  a  guaranty 

(N.  Y.)  635.     In  an  interesting  appor-  that  at  least  the  benefits  of  full  insur- 

tionment  by  the  arbitration  committee  ance  are  secured.     (3)  That  a  floating 

of  the  New  York  Eoard  of  Tire  Under-  policy,  with  condition  that  it  shall  not 

writers,   growing  out  of  a  fire  in  the  attach   until   all   specific   insurance   is 

Rossiter  stores  in  New  York  City,  some  exhausted,  cannot  be  held  by  reason 

years  ago,  but  not  under  the  present  of  nonconcurrence  of  specific  policies, 

form    of    coinsurance    clause,    the    ar-  save  for  the  excess  of  the  aggregate 

bitrators    laid    down    these    principles  amount    covered    by    all    such    non- 

which    they    considered    fundamental.  concurrent  policies." 
"(1)  That  the  insured  shall  not  suffer 

Mo.  App.  215  (unanimous).    As  to  the  may  make  the  apportionment  clause 

effect    of    three-fourths    value    clause,  inoperative,  Havens  v.  Germania  Ins. 

see  Haley  v.   Dorchester  Ins.   Co.,   12  '^o.,  123  Mo.  403,  27  S.  W.  718,  135  Mo. 

Gray   (Mass.),  545;  Millis  v.  Scottish  (549,  37  S.  W.  497.     Some  courts  hold 

U.  &  N.  Ins.  Co.,  95  Mo.  App.  211,  68  that  the  complaint  need  not  state  other 

S.  W.  1066.    As  to  effect  of  limit  of  loss  uiaurance,  Jitna  Ins.  Co.  v.  McLead,  57 

on  any  one  article,  see  Golde  v.  Whifh-  Kan.   95,   45   Pac.    73;    Ermentrout   v. 

-pie,  7  App.  Div.  48,  39  N.  Y.  Supp.  American  Ins.  Co.,  60  Minn.  418,  62 

964.    As  to  excess  floaters,  see  Macon  N.    W.    543.      Contra.    Coats   v.    West 

In^.   Co.   V.  Poirell,   116  Ga.   703,  43  Coast  F.  &  M.  Ins.  Co.,  4  Wash.  375, 

S.  E.  73;  Fairchild  v.  L.  &  L.  &  G.  Ins.  30  Pac.  404.    And  see  Continental  Ina. 

Co.,  51  N.  Y.  65.     Valued  policy  law  Co.  v.  Coona,  14  Ky.  L.  Rep.  136. 


438  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

The  courts  have  never  agreed  upon  any  uniform  and  clearly  de- 
fined set  of  rules  to  be  applied  to  all  the  varying  conditions  presented 
in  such  and  similar  cases.  Shall  the  blanket  be  piled  up  to  its  full 
amount,  successively,  on  the  various  classes  or  parcels  of  property 
sustaining  the  loss,  so  that  the  whole  of  it  shall  contribute  with  each 
specific  policv,  or,  before  seeking  to  apportion  the  loss,  shall  the 
more  general  insurance  be  first  distributed  in  some  way  either 
among  all  the  classes  or  parcels  of  property  which  it  covers,  or  among 
those  only  which  have  sustained  damage,  or  among  those  only  which 
need  it,  or  among  those  which  most  need  it,  and  if  so,  in  what  way 
shall  it' be  distributed?  In  other  words,  what  is  the  "whole  insur- 
ance," both  general  and  specific,  upon  the  classes  of  property  or 
items  damaged,  the  policies  nowhere  defining  the  phrase.  In  search- 
ing for  an  answer  to  these  practical  inquiries,  we  find  it  impossible 
to^harmonize  the  decisions  of  the  courts  or  the  views  of  experts. 
One  principle,  however,  the  courts  seem  to  hold  in  common,  to  wit, 
that,  unless  the  express  phraseology  of  the  policies  prohibits,^  the 
contribution  clause  ought  not  to  be  so  applied  as  to  diminish  the 
protection  of  the  insured;  since  usually  the  insurer  fixes  the  amount 
of  his  premium  regardless  of  other  insurance,  and  if,  after  the  fire, 
he  happens  to  find  other  insurance  which  relieves  him  in  part  from 
his  liability,  it  is  a  piece  of  pure  good  fortune.  His  principal  engage- 
ment is  to  pay  the  loss  in  full  up  to  the  face  of  his  policy,  and  the 
insured  has  given  no  promise  to  take  out  or  to  keep  up  other  in- 
surance.^ 

Where,  however,  the  apportionment  involves  only  what  is  called 
simple  nonconcurrence,  that  is,  where  only  one  of  the  several  classes 
of  property  covered  by  the  blanket  policy  is  also  covered  by  specific 
insurance,  two  rules  have  been  adopted  by  the  courts,  which  when 
the  facts  warrant  may  be  invoked  to  determine  the  proper  appor- 
tionment. These  rules  are  as  follows:  First,  the  full  amount  of  the 
blanket  or  general  policy  must  contribute  with  the  specific  policy 
to  pay  the  loss  on  property  covered  by  the  specific  policy  where  this 

i  As  in  Kansas  Citii ,  etc. ,  Co.  v.  Am.  863;  Niagara  Ins.  Co.  v.  Heenan,  81 

F./ns.  Co.,  100  Mo.  App.  691,75  8.  W.  III.   App.   678,   aff'd   181    III.   575,  54 

186.     The  modern  coinsurance  clause  N.  E.   1052;  Illinois  Mid.  Ins.  Co.  v. 

powerfully    affects    the    question    and  Hoffman,  132  111.  522,  24  N.  E.  413; 

renders    impracticable    some    of    the  Angelrodt  v.  Delavare  Ins.  Co..  31  Mo. 

earlier  rules  of  adjustment.      See  Mr.  593;  Deming  v.  Merchants'  Cotton  Co., 

Robb's  treatment  of  this  subject  in  a  90  Tenn.  306,  347,  17  S.  W.  89;  Sher- 

note  at  the  end  of  this  section.  man  v.  Madison  Ins.  Co.,  39  Wis.  104; 

^  Lucas  V.  Jefferson  Ins.  Co.,  6  Cow.  Godin  v.  London  Assur.  Co.,  1   Burr. 

(N.  Y.)  635;  Schmaelzle  v.  London  &  489. 
Lan.  Ins.  Co.,  75  Conn.  .397,  53  Atl. 


PARTIALLY    CONCURRENT   APPORTIONMENTS 


439 


is  the  only  loss.^  Second,  where  there  is  a  loss  both  on  the  property 
which  the  specific  policy  covers  and  on  that  which  it  does  not  cover, 
the  blanket  policy  must  first  pay  the  latter  loss,  and  then  with  its 
balance  contribute  with  the  specific  to  pay  the  loss  covered  by  both.^ 

But  where  the  nonconcurrence  is  double  or  complex,  that  is,  where 
two  or  more  of  the  classes  of  property  covered  by  the  blanket  policy 
are  the  subjects  of  specific  policies,  and  are  involved  in  loss,  there 
are  no  uniform  and  generally  accepted  rules  of  law  or  practice  by 
aid  of  which  the  apportionment  may  be  authoritatively  settled. 
The  experts  who  framed  the  standard  fire  policies  were,  of  course, 
familiar  with  the  difficulties  and  uncertainties  of  the  present  situa- 
tion, but  they  preferred  not  to  attempt  any  further  definition, 
leaving  applicable  the  decisions  of  the  courts  already  rendered,  with 
which  also  they  must  have  been  familiar. 

The  Connecticut  court  has  arbitrarily  held  in  such  a  case,  that  if 
there  are  several  such  classes  of  property  damaged,  all  under  cover 
of  a  blanket  policy,  and  each  specifically  insured  as  well,  they  will 
be  taken  up  in  the  order  of  greatest  loss,  and,  after  contribution  be- 
tween the  blanket  and  the  specific,  to  the  loss  on  the  first  class,  say 
the  cotton,  the  entire  balance  of  the  blanket  will  be  called  upon  to 
contribute  with  the  specific  insurance  on  the  second  class,  say  the 


1  Page  v.  Sun  Ins.  Co.,  74  Fed.  203, 
20  C.  C.  A.  397,  33  L.  R.  A.  249  (plain- 
tiff's lumber  worth  .$59,095.52,  of 
which  .S16,727.06  was  in  block  A  and 
$42,368.46  in  block  B.  Loss  of 
$30,982.02  confined  to  lumber  in  B. 
Plaintiffs  had  blanket  of  $40,000  on 
both  blocks  and  $10,000  of  specific 
policies  on  lumber  in  B.,  of  which  de- 
fendant's policy  for  $2,500  was  one. 
Held  that  defendant  was  liable  for 
two  thousand  five  hundred  fifty  thou- 
sandths, to  wit,  $1,549.10  of  the  loss). 

2  Cromie  v.  Kentucky,  etc.,  Ins.  Co., 
15  B.  Mon.  (Ky.)  432.  And  see 
American  Cent.  Ins.  Co.  v.  Heath,  29 
Tex.  Civ.  App.  445,  69  S.  W.  235. 
This,  known  as  the  Cromie  rule,  is 
sometimes  stated  as  follows:  "In  ap- 
portioning losses  between  policies 
which  are  only  partially  concurrent, 
the  nonconcvirrent  liability  of  the  gen- 
eral policy  shall  be  di.scharged  before 
contribution  is  mnde  to  a  loss  for  which 
all  are  liable."  The  specific  in  such  a 
case  is  entitled  to  contribution  from 
the  more  general  policy,  if  the  more 
general  is  not  otherwise  exhausted, 
Home  Ins.  Co.  v.  Baltimore  Warehouse 


Co.,  93  U.  S.  527,  23  L.  Ed.  868;  Ogden 
V.  his.  Co.,  50  N.  Y.  388,  10  Am.  Rep. 
492;  Hough  v.  7ns.  Co.,  36  Md.  398; 
Blake  v.  Ins.  Co.,  12  Gray  (Mass.),  265; 
Meigs  v.  London  Assur.  Co.,  126  Fed. 
781  (contra  on  same  facts  205  Pa.  St. 
378,  54  Atl.  1053,  the  Hill  School  case, 
in  which  there  was  blanket  insurance 
covering  main  building  and  addition, 
also  blanket  covering  their  contents. 
The  addition  was  covered  by  specific 
policies.  Its  contents  were  covered 
to  a  part  of  their  value  by  specific. 
The  Pennsylvania  court  took  the  ex- 
ceptional view  that  the  insured  could 
look  to  specific  insurance  alone  for 
recovery  for  loss  on  the  addition  and 
its  contents,  though  there  was  not 
enough  specific  on  contents  to  furnish 
full  indemnity  for  the  loss  thereon. 
By  like  reasoning,  if  there  had  been 
specific  insurance  on  the  main  building 
and  its  contents,  the  general  insurance 
would  have  escaped  altogether.  They 
argued  that  it  was  carrying  out  the 
intent  of  the  insured;  but  the  insured 
clearly  intends  to  get  the  benefit  of 
insurance  where  there  is  a  loss,  not 
where  there  is  no  loss). 


440  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

jute,  to  meet  its  loss,  and  so  on  until  all  the  loss  is  provided  for.^ 
Other  authorities,  however,  contend  with  force,  especially  where 
the  question  is  solely  between  different  sets  of  underwriters,  that 
it  is  inequitable  thus  to  pile  up  the  blanket  insurance  by  mere  in- 
terpretation, perhaps  nearly  to  its  full  amount  several  times  over, 
and  thereby  perhaps  largely  overinsuring  certain  damaged  parcels. 
They  argue  that  the  specific  insurer  never  calculated  upon,  and  has 
no  right'to  expect,  any  such  extraordinary  and  fortuitous  assistance, 
and  they  maintain  that,  before  calling  upon  the  blanket  for  con- 
tribution, it  is  fairer  to  apportion  its  amount  over  the  classes  of 
property  covered  by  it,  in  the  ratio  of  their  values,  making  it  in 
effect  for  this  purpose  separate  pohcies,  one  on  each  class  of  property.^ 
Another  rule  analogous  to  the  last  was  applied  by  the  arbitration 
committee  of  the  New  York  Board  of  Underwriters,  first  to  apportion 
the  general  insurance  among  the  different  classes  of  property  in  the 
ratios,  not  of  their  values,  but  of  their  losses  respectively.^  Other 
rules,  quite  as  valuable  and  perhaps  more  so,  together  with  an  ad- 
mirable summary  of  this  complex  subject,  follow  in  the  footnote  by 
Mr.  Willis  0.  Robb,  the  secretary  and  experienced  adjuster  of  the 
loss  committee  of  the  New  York  Board  of  Fire  Underwriters.  His 
explanation  of  the  effect  of  the  modern  coinsurance  clause  in  ren- 
dering largely  impracticable  the  Connecticut  rule,  and  other  earlier 
methods  of  apportionment,  will  receive  the  careful  attention  which 
it  deserves.^ 

1  Schmaelzle  v.  London  &  Lan.  Ins.  tions  of  the  loss,  within  the  amount  of 
Co.,  75  Conn.  397,  53  Atl.  863  (see  the  concurrent  insurance;  though  some 
Mr.  Robb's  comments  upon  this  case  of  the  policies  may  cover  other  prop- 
in  the  last  note  of  this  section).  erty  in  addition  to  that  destroyed,  or 

"i  Chandler  v.  his.  Co.  of  N.  A.,  70  protect  specific  items  not  embraced  in 

Vt    562,  41  Atl.  502.     And  see  Blake  any  of  the  others,"  Fire  Underwriters' 

V.   Exchan^je  Mut.   Ins.   Co.,   12  Gray  Text  Book  (1899),  p.  713. 

(Mass.),  265,  272;  Ogden  v.  East  River  3  Mayer  v.   Am.  Ins.   Co.,  2  N.  Y. 

Ins.  Co.,  50  N.  Y.  388,  10  Am.  Rep.  Supp.  227. 

492.  Contra,  in  case  of  simple  non-  *  The  history  and  the  present  condi- 
concurrence,  Meigs  v.  London  Assur.  tion  of  this  subject  of  nonconcurrent 
Co.,  126  Fed.  781;  Page  v.  Sun  Ins.  (or,  strictly  speaking,  partially  con- 
Co.,  74  Fed.  203,  20  C.  C.  A.  397,  33  current)  apportionments  may  be  sum- 
L.  R.  A.  249.  Mr.  Griswold  says:  marized  as  follows:  Starting  with  the 
"The  contribution  clause,  like  con-  proposition  that  the  question  of  doubt 
tribution  under  the  old  form,  is  held  in  this  whole  class  of  cases  is,  "what 
to  be  operative  only  between  the  com-  is  the  whole  insurance  upon  the  item 
panics,  in  case  of  double  insurance,  and  or  items  damaged,  the  policies  nowhere 
between  policies  containing  it;  and  defining  the  phrase?"  (but  this  propo- 
then  only  whan  the  concurrent  insur-  sition  may  be  challenged,  see  Farmers' 
ance  exceeds  the  general  loss.  .  .  .  Feed  Co.  v.  Scotti.'^h  U.  &  N.  Ins.  Co., 
The  liability  of  coinsuring  companies  173  N.  Y.  241,  65  N.  E.  1105,  in  which, 
under  this  clause  is  based  upon  the  in  another  connection,  the  court  de- 
degree  of  concurrency  of  the  policies,  fined  the  full  face  of  a  policy  to  be  its 
and  is  restricted  to  the  ratable  propor-  true  amount),  and  then  applying  the 


REINSURANCE 


441 


§  319.  Reinsurance. — Lidbility  for  reinsurance  shall  he  as  specifi- 
cally agreed  hereon. 

Reinsurance  has  already  been  described.^     It  constitutes  a  new 


general  rule  that  ambiguities  in  the 
policy  language  are  to  be  resolved  most 
favorably  to  the  insured,  the  courts 
and  the  experts  have  only  agreed  in 
deducing  these  two  specific  conclu- 
sions: tirst.  The  full  amount  of  the 
blanket  or  general  policy  must  con- 
tribute with  the  specific  policy  to  pay 
the  loss  on  property  covered  by  the 
latter,  where  this  is  the  only  loss  {Page 
V.  Sun,  supra);  and  second,  When 
there  is  a  loss  both  on  the  property  the 
specific  policy  covers  and  on  that  it 
does  not  cover,  the  blanket  policy  must 
first  pay  the  latter  loss,  then  contribute 
with  the  specific  to  pay  the  loss  they 
both  cover.  This  is  the  Cromie  rule, 
supra.  These  two  rules  comprise  the 
whole  body  of  generally  accepted  law 
on  the  subject  of  nonconcurrent  ap- 
portionments, and  it  will  be  noted  that 
they  apply  only  to  cases  of  what  is 
called  simple  nonconcurrence,  i.  e., 
cases  where  only  one  of  the  several 
classes  of  property  covered  by  the 
blanket  policy  is  also  covered  by 
specific  insurance.  When  two  or  more 
of  the  classes  comprised  in  the  cover  of 
the  blanket  policy  are  the  subjects  of 
specific  insurance,  and  involved  in  loss, 
the  apportionment  becomes  a  "free 
for  all,"  neither  courts  nor  adjusters 
having  arrived  at  anything  like  an 
agreement  as  to  method.  Perhaps  the 
commonest  rule  in  practice,  though  it 
is  certainly  losing  ground,  is  the 
(1)  "Gradual  Reduction"  rule,  lately 
adopted  by  the  Connecticut  Court  of 
Errors  in  the  Schmaehle  case.  This 
makes  the  blanket  policy  contribute 
first  on  its  full  amount  on  that  item 
where  the  loss  is  greatest  (which  some  in- 
terpret to  mean  greatest,  having  regard 
to  deficiency  in  the  specific  insurance 
applicable,  and  others  to  mean  abso- 
lutely largest),  then  with  its  remainder 
on  the  next  greatest  loss,  etc.  Of 
course  this  is  based  on  the  desire  to 
give  the  insured  the  fullest  possible 
indemnity,  and  it  is  in  fact  the  rule 
that  goes  furthest  in  that  direction  in 
the  largest  number  of  cases.  But 
when,  as  often  happens,  any  one  of 
several  rules  will  alike  indemnify  the 
insured  in  full,  so  that  the  apportion- 


ment is  a  question  among  underwriters 
only,  the  unconscionable  way  in  which 
this  rule  penalizes  the  blanket  policy 
(which  is  often  abstractly  the  most 
nearly  correct  in  form  of  all  the  policies 
on  the  risk)  makes  most  fair  minded 
experts  revolt  from  its  application. 
But  in  seeking  a  substitute  they 
scatter  in  all  directions.  Other  princi- 
pal rules  are:  (2)  The  Reading  rule, 
which  divides  the  blanket  policy 
among  the  several  items  of  property 
in  the  ratio  of  their  respective  values. 
This  was  adopted  by  the  Vermont 
Supreme  Court  in  the  Chandler  case, 
supra.  Some  adjusters  would  make 
the  division  only  among  items  in- 
volved in  loss  (harmonizing  with  the 
rule  in  Page  v.  Sun  for  simple  non- 
concurrence),  others  among  all  items 
or  classes  of  property  whether  damaged 
or  not.  (3)  The  modified  Reading 
rule,  which  so  divides  the  blanket 
policy  among  all  classes  of  property, 
whether  involved  in  damage  or  not, 
that  when  possible,  and  as  nearly  as 
possible,  the  ratio  of  available  insur- 
ance to  value  will  be  the  same  on  each 
class  as  on  all  together.  (4)  The  Finn, 
or  Griswold,  or  Kinne  rule  (they  are  in 
essentials  the  same),  which  divides  the 
blanket  policy  among  the  classes  of 
property  in  the  ratio  of  the  respective 
losses  thereon.  This  was  adopted  in 
the  New  York  Supreme  Court  case  of 
Mayer  v.  The  American  Insurance  Co., 
supra,  which  never  went  to  the  Court 
of  Appeals.  (5)  The  Rice  rule,  which, 
though  basing  the  division  of  the 
blanket  policies,  like  the  Finn  rule,  on 
losses,  not  values,  makes  that  division 
in  such  a  way  that  the  excess  of  ag- 
gregate insurance  over  aggregate  loss 
shall  be  apportioned  to  the  separate 
items  in  the  same  ratio  that  would  re- 
sult from  assigning  the  whole  blanket 
insurance  successively  to  each  item  for 
contribution.  (6)  The  simplified  Finn, 
or  Rice  rule,  which  so  divides  the 
blanket  policy  among  all  classes  of 
property  involved  in  loss  that  when 
possible,  and  as  nearly  as  possible,  the 
ratio  of  available  insurance  to  loss  will 
be  the  same  on  each  class  as  on  all 
together.      This    has    practically    the 


1  See  §  23, supra. 


142 


MEANING    AND    LEGAL    EFFECT    OF    FIKE    POLICY 


contract  and  is  governed  by  the  law  of  the  place  where  it  is  made; 
but  it  largely  rests  upon  the  provisions  of  the  original  policy.'     Its 


same  relation  to  rule  4  as  rule  3  has  to 
rulo  2,  and  aims,  in  effect,  to  cut  the 
( Jordian   knot   by   making  all   policies 
l)ay  the  same  ratio  of  loss   when   that 
is  "possible.       The.se,    then,  are    some, 
though  by  no  means  all,  of  the  various 
rules  applied  by  various  legal  and  lay 
authorities  on  apportionments,  to  what 
are  called   double   or   compound   non- 
concurrences.       Of    course    there    are 
other   cases   of   complex   or   combined 
uonconcurrence     where     the      simple 
Cromie  rule  will  be  first  ai)plied,  and 
the  work  of  apportionment  then  car- 
ried on  under  some  one  of  these  rules 
for   compound    nonconcurrence.      But 
those  cases,  as  well  as  the  frecjuently 
occurring    instances     where     reappor- 
tionments are  rendered  necessary  un- 
der many  of  these  rules,  we  may  ignore 
altogether     in     this     general     survey. 
Now,  anyone  who  merely  reads  over 
these  various  rules  will  be  prepared,  I 
think,  for  the  conclusion  which  careful 
study   of   their   respective    underlying 
principles  and  long  experience  in  their 
practical   application   to   actual   prob- 
lems has  forced  on  me,  viz.,  that  no 
one   of   them   is   either   demonstrably 
sound  in  theory,  or  universally  appli- 
cable in  practice.     And  the  subject  is 
getting  no   clearer.     Indeed,  one   fea- 
ture of  modern  underwriting  practice 
of  more  recent  development  than  most 
of    these    rules    has    powerfully    con- 
tributed   to    discredit    almost    all    of 
them  and  to  hasten  their  progress  to 
the  junk  heap.    That  is  the  coinsurance 
clause.     This  is  in  effect  a  limited  lia- 
bility clause,  and    provides    that    the 
policy,  or  any  item  or  division  of  the 
policy,  to  which  it  is  attached,  shall 
not  be  liable  for  any  greater  share  of 
the  loss  on  the  property  covered  there- 
by than  the  amount  of  such  policy  or 
item  constitutes   of,   say  80    (or   100) 
per  cent  of  the  entire   value  of  such 
property.      There    can    be    no    doubt 
(1)  that  this  clause  must  be  applied  to 
the  result  of  any  apportionment,  con- 
current  or   nonconcurrent,   after   that 
apportio  .ment    has    been    completed, 
with  the  effect  in  many  eases  of  reduc- 
ing the  loss  payment  figured  out  by 


that  apportionment;  and  (2)  that  for 
the  purpose  of  applying  the  coinsurance 
clause  the  policy  will  be  divided  only 
into  those  items  or  divisions  which  it 
originally    contained,    not    into    those 
which   may    be   arbitrarily   and    tem- 
porarily forced  on  it  in  making  a  non- 
concurrent  apportionment  of  loss  with 
other  policies.     Manifestly,  therefore, 
if     a     nonconcurrent     apportionment 
based  on  losses  instead  of  values,  or 
especially  one  that  follows  the  "grad- 
ual reduction"  rule,  has  been  worked 
out,  a  blanket  policy  company  would 
thereby  be  called  on  to  pay  a  sum  far 
in  excess  of  its  coinsurance  clause  lia- 
bility,  even    though    there   is,   in   the 
aggregate,     and     under     all     policies, 
ample  insurance,  and  this  excess  pay- 
ment it  will  promptly  and  successfully 
refuse  to  make,  relying  for  its  refusal 
upon  its  rights  under  the  coinsurance 
clause,  with  the  result  either  that  the 
insured  fails  to  recover  his  loss,  or  that 
a    different    apportionment    must    be 
arbitrarily  adopted.     In  other  words, 
the  very  rule  which,  in  the  absence  of 
a  coinsurance  clause,  will  go  furthest 
towards  indemnifying  the  insured  will, 
where  that  clause  is  present,  heap  up  a 
nominal  liability  on  the  blanket  policy 
far   above   what   can    be   enforced   in 
practice,  while  the  other  policies  will 
get  off  with  payments  far  below  their 
coinsurance    clause    limit    of   liability. 
It    is    curious    to    note    that    in    the 
Schmaelzle    case,    where    the    gradual 
reduction    rule    was    applied    by    the 
Connecticut  Court  of  Errors  and  Ap- 
peals, the  court  and  the  lawyers  alike, 
in  their  engrossment  with  the  appor- 
tionment,    forgot    that    the    blanket 
policy  had  a  coinsurance  clause  and 
that  it  was  therefore  absolutely  pro- 
tected from  paying  the  whole  amount 
apportioned  to  it  by  the  judgment;  in 
other  words,  that  the  insured  could  not 
be  made  whole,  in  that  case,  by  the 
very  rule  adonted  for  that  sole  pur- 
pose.     But  adjusters  and  brokers,  in 
practice,  are  not  allowed  to  be  so  for- 
getful, and  their  efforts  to  npplv  the 
general   rule   of   providing   the   fullest 
indemnity  for  the  insured  to  the  double 


1  Phoenix  Ins.  Co.  v.  Erie  Travfsp. 
Co.,  117  U.  S.  312,  323,  6  S.  Ct.  750, 
29  L.  Ed.  873;  Sun  Ins.  Co.  v.  Ocean 


Iv.9.  Co.,  107  U.  S.  485;  Mackenzie  v, 
Whitworth,  L.  R.  10  Exch.  142. 


REINSURANCE 


443 


immediate  subject-matter  is  not  property,  but  the  liability,  or  a 
share  of  the  liability,  of  the  original  insurer.  It  must  not  be  con- 
founded with  other  or  double  insurance,  or  with  renewals. 

The  practice  of  reinsuring,  risks,  though  formerly  prohibited  by 
statute  in  England,  has  always  been  lawful  at  common  law,  and  in 
this  country,^  and  is  of  convenience  and  benefit  to  the  public,  prima- 
rily, because  it  imposes  upon  the  original  or  straight  insurer  the  nec- 
essary burden  of  dividing  up  a  large  risk  among  many  companies, 
and,  secondaril}^,  because  it  adds,  though  indirectly,  to  the  security 
of  the  original  insured.  The  original  insurer  may  reinsure  his  entire 
liability  on  a  risk,  or  only  a  part  of  it,  or  he  may  reinsure  his  entire 


problem  presented  by  nonconcurrent 
policies,  subject  also  to  coinsurance 
clauses,  have  already  begun  to  make 
waste  paper  of  almost  all  the  rules 
given  above  for  double  nonconcurrent 
apportionments,  which  were  devised 
before  coinsurance  clauses  were  at- 
tached to  fire  policies.  Rule  3  alone 
of  the  seven  just  given  can  be  made  to 
do  duty  fairly  well  under  coinsurance 
conditions,  and  that  by  no  means 
always.  Among  the  inventions  or 
adaptations  devised  to  meet  this 
changed  situation  are  the  so-called 
Giesse  and  Morristown  rules.  The 
former  reads  thus:  "  First  find  the  limit 
of  liability  of  each  class  of  insurance, 
under  the  average  or  coinsurance 
clause,  and  find  the  total  of  those 
limits  (which  will  usually  be  somewhat 
greater  than  the  aggregate  loss)  by 
adding  them  together;  then  find  what 
each  class  would  pay  if  it  got  the  full 
benefit  of  its  contribution  clause,  i.  e., 
contribution  from  the  face  or  full 
amount  of  all  other  insurance  cover- 
ing the  whole  or  any  part  of  the  prop- 
erty which  itself  covers,  and  find  the 
total  of  these  amounts  (which  of  course 
will  be  less  than  the  aggregate  loss)  by 
adding  them  together.  We  thus  find 
the  most  each  class  can  be  made  to 
pay,  and  also  the  least  it  can  possibly 
get  off  for.  Add  the  several  differences 
between  these  pairs  of  limits,  find  what 
proportion  of  that  total  the  aggregate 
excess  of  the  unper  limits  OA'er  aggre- 
gate loss  constitutes,  and  deduct  that 
proper' ion  of  each  of  the  differences 
from  the  resnective  upper  limits,  to 
find  what  each  class  of  insurance  shall 


pay  to  make  up  the  loss."  The  Morris- 
town  rule  starts  each  policy  at  its 
lower  limit,  as  fixed  by  the  Giesse  rule, 
and  then  distributes  to  each,  pro  rata, 
the  loss  remaining  unpaid,  if  necessary 
until  each  reaches  its  coinsurance 
clause  limit.  A  curious  result  of  these 
efforts  to  make  new  apportionment 
rules  suitable  to  coinsurance  clause 
conditions  is  that,  since  there  is  no 
fixed  rule  of  the  courts  governing  non- 
concurrent  apportionments  where  two 
or  more  specifically  insured  items  are 
involved  in  loss,  it  is  possible  arbi- 
trarily to  treat  the  blanket  policy  so  as 
to  avoid  or  minimize  the  operation  of 
the  coinsurance  clause  in  these  cases: 
but  since  there  is  a  well  established 
rule  (the  Cromie  rule,  supra)  for  cases 
involving  loss  on  only  one  of  the 
specifically  insured  items,  it  is  im- 
possible to  avoid  apportioning  two 
payments  to  the  blanket  policy  in 
these  cases,  and  the  aggregate  so 
apportioned  is  often  above  the  co- 
insurance limit  of  liability,  and  the  ex- 
cess the  insured  simply  loses  outright, 
even  though  his  whole  insurance  was 
equal  to  his  whole  value.  Perhaps 
nothing  can  better  illustrate  the  ab- 
surdity of  the  present  situation  than 
this  discrepancy,  which  manifestly 
makes  it  to  the  insured's  interest,  if  he 
has  one  policy  on  each  of  two  buildings 
and  one  blanketing  both,  all  subject  to 
coinsurance  provisions,  and  a  loss  on 
only  one  building,  to  force  the  appear- 
ance of  a  loss,  however  small,  on  the 
other  also,  since  only  thus  can  he  col- 
lect his  whole  loss. 


1  Phoenix  Ins.  Co.  v.  Erie  &  W.  Tramp.  Co.,  117  U.  S.  312,  323,  6  S.  Ct.  750, 
29  L.  Ed.  873. 


1  I  I  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

liability  on  uU  his  risks.'  The  character  of  the  risk  is  supposed  to 
be  the  same  in  the  contract  of  original  insurance  and  in  the  con- 
tract of  reinsurance;  but  it  is  said  that,  though  the  contract  of 
reinsurance  may  involve  a  less  hazard,  it  must  not  involve  a  greater.^ 
While  this  is  true,  it  not  infrequently  happens,  however,  that,  for 
a  time,  the  amount  of  the  policy  of  reinsurance  will  be  greater  than 
the  amount  of  the  original  insurance,  where  the  latter  has  been  re- 
duced by  indorsement  on  account  of  a  diminution  in  the  property; 
but  the  amount  of  liability  under  the  policy  of  reinsurance  must 
always  l)o  limited  by  the  amount  of  liability  under  the  straight  in- 
surance, and  can  never  exceed  it,  since  the  contract,  in  its  nature, 
is  essentially  one  of  indemnity.^ 

The  statute  of  frauds  is  not  applicable  to  the  contract  of  re- 
insurance, inasmuch  as  it  is  not  a  collateral  agreement  of  guaranty, 
made  with  a  creditor,  to  answer  for  the  debt  of  another,"*  nor  does 
it  ordinarily  constitute  a  novation  in  favor  of  the  original  insured.^ 

It  has  been  held  in  Nebraska  that  it  is  ultra  vires  for  mutual  fire 
insurance  companies  organized  under  the  laws  of  that  state  to 
transact  a  reinsurance  business.^ 

Inasmuch  as  the  usual  contract  of  reinsurance  obligates  the  re- 
insuring company  to  await,  and  be  governed  by,  the  terms  of  ad- 
justment of  loss  as  made  between  the  original  insurer  and  the  original 
insured,  it  is  held  that  the  provisions  regarding  proofs  of  loss,^ 
appraisal,  and  the  contract  limitation  of  time  within  which  to  sue,* 

1  Ins.  Co.  of  N.  A.  V.  Hihernia  Ins.  Rep.  620.  Terms  of  the  two  policies 
Co.,  140  U.  S.  565,  11  S.  Ct.  909,  35  need  not  be  identical,  Mil.  Mech.  Ins. 
L.  Ed.  517;  Johannes  v.  Phoenix  Ins.  Co.  v.  Palatine  Ins.  Co.,  128  Cal.  71, 
Co.,  66  Wis.  50,  27  N.  W.  414.     The  60  Pac.  518. 

possible   liability    of    the    original    in-  *  Commercial  Mut.  Ins.  Co.  v.  Union 

-surer  creates  his  insurable  interest    in  Mut.  Ins.  Co.,  19  How.  (U.  S.)  318,  15 

reinsurance.    Berry    v.    Ins.    Co.,    132  L.  Ed.  636;  Bartlett  v.  Firemen's  Fund 

N.  Y.  49,  30  N.  E.  254,  28  Am.  St.  R.  Ins.  Co.,  11  Iowa,  155,  41  N.  W.  601. 

548.     Such  insurable  interest,  in  the  Contra,  Egan  v.  Ins.  Co.,  27  La.  Ann. 

absence  of  bad  faith,  need  not  exist  at  368. 

the  time  the  contract  of  reinsurance  is  s  Barnes  v.  Heckla  Ins.  Co.,  56  Minn, 

made,  if  then   contemplated   and   ac-  38,  57  N.  W.  314,  45  Am.  St.  R.  438. 

quired  thereafter,  and  before  loss,  Sun  e  Allison  v.  Fidelity  Mut.  Fire  Ins. 

Fire  Office  v.  Merz,  64  N.  J.  L.  301,  45  Co.  (Neb.,  1908),  116' N.  W.  274. 

Ail.  185;  Boston  \\  Globe  Fire  Ins.  Co.,  ''Consolidated    Real    Estate    Co.     v. 

174  Mass.  229,  54  N.  E.  543.  Cashoiv,  41    Md.  59.      Held,  sufficient 

2  London  Assur.  Corp.  v.  Thompson,  to  transmit  the  proofs  of  original  as- 
170  N.  Y.  94,  62  N.  E.  1066.  If  the  sured,  .V.  Y.  Boirerv  Ins.  Co.  v.  N.  Y. 
policy  of  reinsurance   is  lost  its  con-  Ins.  Co.,  17  Wend.  (N.  Y.)  359. 

tents  must  be  proved,  for  there  is  no  «  JacHon  v.  St.  Paul  F.  &  M.  Ins. 

presumption  that  the  risk  described  is  Co.,  99  N.  Y.  124,  1  N.  E.  539;  AVer  v. 

the  same,  Ins.  Co.  v.  Tclfmr,  45  App.  Rhoades,  73  App.  Div    158,  76  N    Y 

Div.  (N.  Y.)  564,  61  N.  i^.  Supp.  322.  Supp.  808;  Ins.  Co.  v.  Telfair,  27  Misc. 

3  Illinois  Mut.  Fire  Ins.  Co.  v.  (N.  Y.)  247:  Home  Ins.  Co.  v.  Victmia 
Andes  Ins.   Co.,  67  111.   362,   16  Am.  etc.,   Ins.    Co.    (1907),    App    Cas     59 


REINSURANCE  445 

are  not  applicable;  but  the  ordinary  rules  relating  to  material  mis- 
representation/ or  concealment,^  by  the  original  insurer  may  be 
invoked  by  the  reinsuring  company.  In  the  absence  of  affirmative 
misrepresentation  made  to  itself,  the  reinsurer  must  not  complain 
though  the  representations  of  fact  contained  in  the  original  applica- 
tion, correct  when  made,  have  ceased  to  be  true,  since  in  that  event 
he  is  insuring  a  valid  contract  as  it  stands.^ 

The  original  insured  cannot  bring  suit  against  the  reinsurer  unless 
the  contract  of  reinsurance  expressly  stipulates  that  he  may  do  so, 
or  such  be  the  intent  of  the  arrangement,  for  without  such  intent 
no  privity  of  contract  exists  between  them.''  If,  however,  the  policy 
of  reinsurance  is  made  expressly  for  the  benefit  of  the  original  in- 
sured, the  latter  may,  at  least  in  most  jurisdictions,^  pursue  his 
remedy  upon  either  policy,^  or  both,  but  can  have  only  one  satis- 
faction.'' Any  defense  which  is  available  to  the  original  insurer 
may  always  be  raised  b}^  the  reinsuring  company,  for  it  is  only  the 
liability  of  the  former  that  is  reinsured.*  But  if,  before  having  re- 
course to  the  reinsurer,  the  first  insurer  pays  or  adjusts  its  loss,  or 
compromises  it  so  as  to  fix  its  amount,  this  amount  will  control  its 
right  of  recovery  against  the  reinsurer,  for  the  contract  of  rein- 
surance is  one  of  indemnity  only,  and  furthermore  it  is  usually 


And  see  Manufact.  F.  &  M.  Ins.  Co.  v.  464,   59   Pac.   897;    Barnes  v.   Heckla 

Western  Assur.  Co.,  145  Mass.  419,  14  7ns.  Co.,  56  Minn.  38,  57  N.  W.  314, 

N.  E.  632;  Eagle  Ins.  Co.  v.  Lajayette  45  Am.  St.  R.  438.    And  see  Fischer  v. 

Ins.  Co.,  9  Ind.  446.  Hope  Mut.  Life  Itu.  Co.,  69  N.  Y.  161. 

I  Louisiana   Mid.   Ins.    Co.    v.   New  "Where  one  con  pany  ^\ith  the  assent 

Orleans  Ins.  Co.,  13  La.  Ann.  246.  of  its  policyholders  absorbs  another  by 

^  New    York    Bouerxj    Ins.    Co.    v.  reinsurance  the  latter  becomes  directly 

New  York  Ins.  Co.,  17  Wend.  (N.  Y.)  responsible    to    the    policyholders   by 

359.     And  see  Siin  Mut.  Ins.  Co.  v.  reason  of  the  nature  of  the  transaction. 

Ocean  Ins.  Co.,  107  U.  S.  485,  1  S.  Ct.  People's  Assnr.  Fund  v.  Boesse,  92  Ky.' 

582,  27  L.  Ed.  337.  290,  17  S.  W.  630;  Travelers'  Ins.  Co. 

^Cahen  v.  Ins.  Co.,  69  N.  Y.  300;  v.  California  Ins.  Co.,  1  N.  D.  151,  45 

JacHon  v.  Ins.  Co.,  99  N.  Y.  124,  1  N.  W.  703;  Johannes  v.  Phoenix  Ins. 

N.  E.  539.  Co.,  66  Wis.  50,  27  N.  W.  414.     And 

*  Strong  v.  Phoenix  Ins.  Co.,  62  Mo.  see  Whitney  v.  Am.  Ins.  Co.,  127  Cal. 

289,  21  Am.  Rep.  417;  Carrington  v.  464,  59  Pac.  897;  Shoaf  v.  Palatine  Ins. 

Commercial  Ins.  Co.,  1  Bosw.  (N.  Y.)  Co.,  127  N.  C.  308,  37  S.  E.  451;  Fire 

152;   Travelers'  Ins.  Co.  v.   California  Ins.  Asso.  v.  Canada  F.  &  M.  Ins.  Co., 

Ins.  Co.,  1  N.  D.  151,  45  N.  W.  703;  2  Ont.  481,  495. 

Goodrich's  Appeal,  109  Pa.  St.  523,  2  « N.    Y.    State   Marine   Ins.    Co.    v. 

Atl.  209;    Ruohs   v.  Traders'  Ins.  Co.,  Protection    Ins.     Co.,    1     Story,    458; 

111  Tenn.  405,  78  S.  W.  85;  Nehon  v.  Eagle  Ins.  Co.  v.  Lafayette  Ins.  Co.,  9 

Empress  Ass.  Corp.  (1905),  2  K.  B.  281.  Ind.  443.    A  reinsurer  is  not  concluded 

5  But  see  Wood  v.  Moriarty,  15  R.  I.  by  an  improper  payment  by  the  origi- 

522,  9  Atl.  427.  nal  insurer,  Chippendale  v.  Holt  (1895), 

^Glen  V.  Hove  Mut.  Life  Ins.  Co.,  65  L.  J.  Q.  B.  104.    "Other  insurance" 

56  N.  Y.  379;  Fischer  v.  Hope  Mut.  Life  in  a  policy  of  reinsurance  means  other 

/ns.  Co.,  69  N.  Y.  161.  reinsurance,  Mut.   Safeiy .  Ins.    Co.   v. 

7  Whitney  v.  Am.  Ins.  Co.,  127  Cal.  Hone,  2  Comst.  (N.  Y.)  235. 


446  MEANING    AND    LEGAL    EFFECT   OF   FIRE    POLICY 

made  expressly  subject  to  adjustments  concluded  by  the  original 
insurer.' 

The  contract  of  reinsurance,  as  has  been  observed,  .>  an  insurance 
of  liability  for  loss,  and  consequently,  as  soon  as  the  liability  of  the 
first  insurer  has  actually  accrued,  it  may  bring  suit  against  the 
reinsurer  before  an  actual  payment  of  the  loss.^  And  so  also  the 
reinsurer  may  be  obliged  to  pay  the  original  insurer  the  amount 
of  its  liability,  although  the  latter  may  have  become  insolvent,  and 
although  it  may  ultimately  be  unable  to  pay  its  indebtedness  to 
the  original  insured. '"^  The  usual  practice  is  for  the  original  insurer, 
if  sued  by  the  original  insured,  to  give  the  reinsuring  company 
opportunity  to  come  in  and  defend  the  suit  at  the  expense  of  the 
latter.  If  the  reinsuring  company  declines  to  do  this,  it  will  be  liable 
for  the  reasonable  costs  of  the  suit,  incurred  by  the  original  insurer.^ 

§  320.  The  Usual  Reinsurance  Rider. — The  most  frequent  in- 
stance of  reinsurance  occurs  where,  for  its  own  anticipated  profit, 
or  for  the  convenience  of  its  customer,  a  company  takes  a  larger 
line  on  a  risk  than  it  wishes  to  carry  unaided.  It  then  reinsures  the 
whole  or  a  part  of  its  liability  with  one  or  more  companies  at  the 
same  or  nearly  the  same  rate  of  premium.  Such  a  contract  of  re- 
insurance frequently  consists  of  the  standard  form  of  policy  with 
the  usual  reinsurance  rider  pasted  upon  it,  including  in  the  rider  a 
pro  rata  phrase  of  its  own,  and  also  unrestricted  permission  for  other 
reinsurance.''  To  the  rider  as  thus  described,  a  retainer  clause  is 
occasionally  added,  the  object  of  which  is  to  prevent  the  original 


1  Illinois  Mut.  Fire  Ins.  Co.  v.  Andes  ^  Blackstone  v.  Alemannia  F.  his. 
Ins.  Co.,  67  111.  362,  16  Am.  R.  620;  Co.,  56  N.  Y.  104;  Hunt  v.  New  Hamp- 
Insurance  Co.  V.  Insurance  Co.,  38  Ohio  shire  his.  Co.,  68  N.  H.  305,  38  Atl. 
St.  11,  43  Am.  Rep.  413.  And  see  145  (proceeds  here,  however,  were  held 
Consolidated  Real  Est.  &  Fire  Ins.  Co.,  for  sole  benefit  of  original  insured,  and 
V.  Cashoiv,  41  Md.  59.  A  judgment  in  not  as  part  of  general  assets  of  insol- 
favor  of  the  owner  of  the  property  vent  original  insurer); /lZ/ew«nma  Ffre 
against  the  original  company  binds  the  Ins.  Co.  v.  Firemen's  Ins.  Co.,  209 
reinsurer  in  any  proceeding  of  which  U.  S.  326. 

it  had  notice.  Commercial  Union  A.^sur.  *  N.  Y.  State  Mar.  Ins.  Co.  v.  Pro- 
Co.  V.  Am..  Central  Ins.  Co.,  68  Cal.  430,  tection  Ins.  Co.,  1  Story,  458;  Ha.'^tic  v. 
9  Pac.  712;  Strong  v.  Ins.  Co.,  62  Mo.  De  Peyster,  3  Caines  (N.  Y.),  190.  The 
289,  21  Am.  Rep.  417.  The  reinsurer  reinsuring  company  is  not  liable  for 
has  a  right  to  protect  its  interests  in  the  costs  of  a  suit  of  which  it  has  no 
such  litigation,  Gantt  v.  Am.  Cent.  Ins.  notice,  Faneuil  Hall  Ins.  Co.  v.  L.  & 
Co.,  68  Mo.  503;  Cass  Co.  v.  Mercantile  L.  &  G.  Ins.  Co.,  153  Mass.  63,  26  N.  E. 
Ins.  Co.,  188  Mo.  1,  86  S.  W.  237.  244,  10  L.  R.  A.  423;  Pcnn.  Ins.  Co.  v. 

2  Mutual  Safet^i  Ins.  Co.  v.  Hone,  2  Telfair,  27  Misc.  247,  57  N.  Y.  Supp. 
Comst.    (N.   Y.)  235;    Gantt  v.  Amer.  780. 

Cent.  Ins.  Co.,  68  Mo.  503;  Ex  parte  6  For  form  of  a  rider  see  Appendix 

Western  Ins.  Co.  (1892),  2  Ch.  423.  ch.  II. 


THE   USUAL    REINSURANCE   RIDER  447 

insurer  from  fully  reinsuring  its  liability,  and  to  compel  it  to  retain 
a  net  share  of  liability. 

Before  any  -pro  rata  phrase  was  introduced  into  the  reinsurance 
rider,  it  was  held  that  the  reinsuring  company  was  obliged  to  pay 
the  loss  in  full  up  to  the  face  of  the  policy  of  reinsurance  and  could 
not  call  upon  any  excess  of  original  insurance  to  relieve  it  by  con- 
tribution.^ 

This  decision  naturally  was  unsatisfactory  to  underwriters  and 
the  question  was  one  between  underwriters  only.  Therefore  a 
new  clause  was  adopted  which  with  some  variations  in  its  phrase- 
ology was  in  general  use  for  about  half  a  century,  the  purpose 
of  this  second  form  of  clause  being  to  compel  the  original  insurer 
to  contribute  to  the  loss  equitably  with  the  reinsurer  on  the  basis 
of  any  excess  of  original  insurance  over  reinsurance,  taking  the 
amount  of  both  sets  of  insurance  as  they  subsisted  at  the  time  of 
the  fire.  But  in  1905  the  highest  court  in  New  York,  overruling 
the  decision  of  Hamilton  Odell,  Esq.,  referee  in  the  earlier  trial  of  the 
same  case,  construed  this  clause  as  meaning  that  the  original  amount 
of  straight  insurance,  though  since  diminished  (or  by  parity  of  rea- 
soning increased),  and  though  the  policy  contain  no  retainer  clause, 
must  be  made  the  basis  of  the  apportionment  or  contribution  with 
the   reinsurance.^     This   construction,    never   intended   by    under- 

1  Mutual  Safety  Ins.  Co.  v.  Hone,  2  clear  by  assuming  that  in  the  Home 
Comst.  (N.  Y.)  235.  Thus  under  the  Ins.  Co.  case  the  original  policy  instead 
ancient  form  of  reinsurance  involved  of  being  diminished  in  amount  during 
in  the  Hone  case  if  the  owner  of  goods  its  term  had  been  increased,  say 
insured  them  for  $10,000  with  com-  doubled,  because  of  an  accession  of 
pany  A  and  A  reinsured  for  .S5,000  goods  in  the  warehouse.  By  the  doc- 
with  company  B,  and  a  loss  of  say  trine  seemingly  adopted  by  the  Court 
$5,000  or  less  occurred,  B  would  have  of  Appeals,  the  straight  insurer,  though 
to  pay  the  whole  loss;  though  both  then  obtaining  half  the  net  premium 
companies,  if  solvent,  were  practically  or  profits  at  the  time  of  the  fire,  would 
on  the  risk  for  the  same  net  liability,  have  borne  no  net  liability  at  all  for  any 
$5,000,  and  were  earning  the  same  loss  not  exceeding  the  amount  of  re- 
amount  of  net  premium  or  profit,  and  insurance.  Again,  suppose  the  straight 
therefore  equitably  ought  to  divide  the  insurance  at  first  to  be  $10,000  rein- 
loss  equally.  sured  with  B  for  $5,000,  witliout  a  re- 

2  Home  Ins.  Co.  and  Phoenix  Ins.  Co.  tainer  clause,  the  straight  policy  is 
V.  Continental  Ins.  Co.,  180  N.  Y.  389,  increased  to  $15,000  and  then  rein- 
73  N.  E.  65  (Judge  Edward  Bartlett  sured  with  C  for  $5,000,  without  re- 
dissenting).  In  the  last  case,  the  court  tainer  clause.  A  loss  of  $6,000  occurs, 
based  its  ruling  largely  upon  the  fact  Under  that  rider  as  construed  by  the 
that  the  rider  was  intended  to  do  away  Court  of  Appeals  B  must  pay  $3,000, 
with  the  injustice  disclosed  by  the  C,  though  on  for  the  same  amount  and 
Hone  case,  but,  it  is  submitted,  the  at  same  premium  pays  only  $2,000; 
only  way  to  accomplish  that  desirable  and  A  with  more  premium  than  either 
result  is  to  cake  for  apportionment  the  pays  only  $1,000;  but  these  results  can- 
amounts  of  insurance  and  reinsurance  not  be  reconciled  with  the  standard 
as  subsisting  at  the  time  of  the  loss,  pro  rata  clause  contained  in  the  body 
This  conclusion  is  made  convincingly  of   each    policy.      Again,  suppose   the 


148  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

writers  who  framed  the  clause,  and  at  variance  with  the  meaning 
which  they  had  universally  put  upon  it  for  many  years,*  as  was 
shown  by  undisputed  testimony  from  numerous  eminent  experts, 
made  desirable  the  adoption  of  a  revised  form  which  is  given  in  the 
Appendix.2  xhis  form  was  adopted  and  promulgated  in  May,  1906, 
by  the  National  Board  of  Fire  Underwriters  as  the  standard  form 
approved  and  recommended  by  it;  =*  but  its  use  is  not  compulsory, 
as  in  the  case  of  a  statutory  policy.  This  revised  form  in  the  absence 
of  the  retainer  clause  takes  as  the  basis  for  apportionment  the 
amounts  of  the  original  insurance  and  reinsurance  in  force  at  the  time 

of  loss."* 

Like  the  other,  this  later  rider  is  framed  upon  the  theory  that  the 
ifeinsuring  company  may  safely  trust  to  the  good  faith  of  the  original 
company  and  must  submissively  follow  where  the  convenience  of 
business  reasonably  requires.  Thus  the  later  rider  has  the  provision, 
in  substance  like  the  preceding,  "subject  to  the  same  risks,  privi- 
leges, conditions  and  indorsements  (except  changes  of  location),  as- 
signments, changes  of  interest  or  of  rate,  valuations  and  modes  of 
settlement."  ^ 

§  321.  Special  Contracts  of  Reinsurance.— A  company  sometimes 
has  all  its  risks  reinsured  by  another  company  or  other  companies 
as  a  convenient  method  of  retiring  from  business,^  or  all  risks  within 

straight  policy  to  be  $1 ,003,000  on  con-  N  J.  L.  453;  Hand  v.  Ins.  Co.,  57  N.  Y. 

tents  of  a  warehouse,  all  reinsured  in  41.  tt         r       ^ 

one  hundred  policies  of  $10,003  each,  ^Imperial  Ins.  Co.  v.  Home  Ins.  Co., 

without  retainer  clauses.     The  goods  68  Fed.  698,  30  U.   S.  App.  409,  15 

are  diminished  by  $50,003  in  value,  C.  C.  A.  609  (as  to  coinsurance  clause); 

and  the  straight  insurance  reduced  by  Ins.   Co.  v.  Associated  Manufact.  Ins. 

like  amount.     Under  the  same  rider  Co.,  70  App.  Div.  69,  74  N.  Y.  Supp. 

A    may    not    now    proceed    in    New  1038,  aff'd   174   N.  Y.  541,  66  A.  E. 

York,  in  accordance  with  the   general  1110  (bound  by  adjustment);  Manufac- 

and   convenient   custon  practiced  for  turers'  Ins.   Co.  v.  Western  Assi/r.  Co., 

fifty    years,  to  cancel  five  policies  of  145  Mass.  419,  14  N.  E.  6.32  (reinsurer 

reinsurance,  but  must  canvass  the  mar-  is  bound  by  indorsement  of  change  of 

ket  and  arrange,  if  he  can,  a  reduc-  interest);  Faneuil  Hall  Ins.  Co.  v.  L.  & 

tion  pro  rata  with  one  hundred  com-  L.  &  G.  Ins.  Co.,  153  Mass.  63,  26  N.  E. 

panies.  244.    But  the  original  company  should 

1  See  dissenting  opinion  of  Justice  not  allow  a  substantial  increase  of  risk 
Bartlett.  without  assent  of  reinsuring  company, 

2  See  Appendix,  ch.  II.  St.  Nicholas  Ins.  Co.  v.  Merchants'  Ins. 

3  It  was  prepared  by  counsel  for  the  Co.,  83  N.  Y.  604.  And  see  Lower 
plaintiffs  in  conference  with  counsel  Rhine  &  W.  his.  Assoc,  v.  Sedgewick,  1 
for  defendant  in  the  litigation  which  Q.  B.  179  (1899.) 

necessitated  it,  Ho^ne  Ins.  Co.  v.  Con-  ^  Ruohs  v.  Traders'  F.  Ins.  Co.,  Ill 

tinental  Ins.  Co.,  180  N.  Y.  389,  73  N.  Tenn.  405,  78  S.  W.  85;  Olsen  v.  Cali- 

E.  65.  fornia  Ins.  Co.,  11  Tex.  Civ.  App.  371, 

*  This    is    also   the   rule    under    the  32  S.  W.  446.     So  also  in  case  of  lifo 

legular  pro  rata  clause  of  the  standard  insurance.  Brown  v.  Mut.  R.  L.  Assn., 

policies,  Lattan  v.  Royal  Ins.  Co.,  45  224  111.  576. 


SUBROGATION 


449 


certain  dates,^  or  all  in  a  certain  locality  .^    In  such  a  case  the  special 
provisions  of  the  particular  contract  govern.^ 

In  modern  times  reinsurance  is  also  conducted  to  a  large  extent 
under  running  contracts,  terminable  perhaps  on  six  months'  notice 
in  writing  by  either  company  and  known  as  "treaties."^  The 
abrogation  of  the  regular  cancellation  clause  of  the  standard  policy 
is  in  order,  because  the  standard  policy  itself  provides,  "Liability 
for  reinsurance  shall  be  as  specifically  agreed  hereon,"  which  sanc- 
tions unlimited  right  of  variation  from  the  usual  conditions. 


§  322.  Subrogation. — Subrogation  of  rights  to  the  extent  of  pay- 
ment shall  be  assigned  to  the  company. 

The  common-law  right  of  subrogation  has  already  been  con- 
sidered. It  grows  out  of  the  doctrine  of  indemnity,  and  also  finds 
an  equitable  basis  in  the  consideration  that  the  person  who  caused 
the  loss  or  who  is  primarily  hable  ought  to  be  made  ultimately 
responsible  for  the  damage  sustained. ° 

The  insured  in  the  first  instance  has  his  option  between  two  forms 
of  remedy.  If  he  pursues  his  remedy  against  the  wrongdoer  and 
recovers  compensation,  the  insurance  company  will  escape.^     But 


1  Sun  Ins.  Co.  v.  Merz,  64  N.  J.  L. 
301,45Atl.  785. 

2  London  &  L.  F.  Ins.  Co.  v.  Lycom- 
ing F.  Ins.  Co.,  105  Pa.  St.' 424; 
Johannes  v.  Phoenix  Ins.  Co.,  66  Wis. 
50,  27  N.  W.  414. 

3  Proofs  of  loss  may  be  served  upon 
the  reinsuring  company  when  it  absorbs 
the  business  and  assumes  all  liabilities 
of  the  other  company,  Whitney  v.  Am. 
Ins.  Co.,  127  Cal.  464,  59  Pac.  897. 

*  Special  features  of  a  reinsurance 
treaty  are  often  in  substance  as  fol- 
lows, the  original  insurer  or  reinsured 
company  being  here  called  "A,"  the 
company  reinsuring  it,  "B:"  1.  B  is 
to  be  preferred  to  other  reinsurance 
companies  in  the  cessions  of  reinsur- 
ance made  from  time  to  time  by  A; 
2.  The  amount  on  any  one  risk  to  be 
ceded  by  A  to  B  is  restricted  and  also 
must  not  exceed  the  amount  retained 
for  itself  by  A;  3.  All  cessions  by  A  are 
obligatory  on  B  and  without  right  of 
cancellation     by     five     days'     notice; 

4.  Items  of  original  policy,  for  example 
building  and  contents,  are  reinsured 
pro  rata  with  the  straight  insurance; 

5.  Liability  of  B  relates  back  if  A's 
risk  has  not  been  running  more  than 
fourteen    days,    otherwise    runs    from 

29 


date  of  inscription;  6.  A  transmits  to  B 
the  particulars  of  risks  ceded  by  means 
of  a  bordereau  rendered  to  B,  say  daily 
or  weekly;  7.  Reinsurance  follows  stip- 
ulations and  rate  of  premium  of  origi- 
nal policy;  8.  Cancellation  or  reduction 
of  a  cession  ensues  only  when  there  is 
like  indorsement  on  original  policy; 
9.  B  pays  to  A  a  small  percentage  by 
way  of  compensation;  10.  A  renders  to 
B  monthly  accounts  current  showing 
premiums,  commissions,  return  premi- 
ums and  losses;  11.  A  has  sole  right  of 
settling  losses,  but  any  differences  be- 
tween A  and  B  are  settled  by  arbitra- 
tion. 

5  See   §  52,  supra. 

6  Chi.,  B.  &  Q.  R.  Co.  v.  Emmons,  42 
111.  App.  138;  Kennedy  Bros.  v.  State 
Ins.  Co.,  119  Iowa,  29,  91  N.  W.  831. 
If  he  collects  his  insurance  concealing 
the  fact  of  recovery  from  the  railroad 
company  for  the  same  loss,  it  is  a  fraud 
and  the  insurance  company  can  re- 
cover back  its  payment,  ChicLasaw  Co. 
Ins.  Co.  V.  Weller,  98  Iowa,  731,  68 
N.  W.  443;  but  a  settlement  with  the 
railroad  company  is  not  conclusive  as 
to  the  amount  of  loss.  Home  Ins.  Co.  v. 
Atch.,  etc.,  R.  Co.,  4  Kan.  App.  60,  46 
Pac.  179. 


450  MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 

if  he  chooses  first  to  enforce  his  claim  against  the  insurance  com- 
pany, the  latter  is  entitled,  by  way  of  subrogation,  to  have  recourse 
over  against  the  party  primarily  responsible.^  Inasmuch  as  the 
insurance  company,  after  making  payment,  is  entitled  to  the  right 
of  subrogation,  the  insured,  as  before  shown,  will  not  be  permitted 
after  loss  to  defeat  that  right  by  releasing  the  wrongdoer  or  com- 
promising with  him  to  the  prejudice  of  the  insurance  company 
without  the  consent  of  the  latter.^ 

The  provision  of  the  policy  requiring  the  insured  to  make  a  formal 
assignment  j)ro  tanto  of  any  rights  that  he  may  have  against  the 
person  or  corporation  causing  the  fire,  enables  the  insurance  com- 
pany without  any  question  to  institute  action  in  its  own  name 
against  the  party  primarily  liable.^  Insurance  companies,  however, 
having  regard  to  the  prejudice  which  juries  are  apt  to  exhibit  towards 
corporations,  sometimes  make  an  arrangement  with  the  insured 
whereby  it  is  agreed  that  a  suit  shall  be  brought  in  the  name  of  the 
insured  against  the  wrongdoer  for  the  whole  amount  of  damage 
sustained,  and  that  the  proceeds  of  the  suit  and  expenses  shall  be 
apportioned  between  the  insured  and  the  insurers  under  some 
stipulated  arrangement.  Sometimes  the  insurance  money  is  paid, 
or  in  large  part  advanced,  under  the  form  of  a  "loan,"  ^  before  the 
suit,  and  sometimes  payment  is  not  made  until  after  its  termina- 
tion. In  such  a  case  the  insurance  company  does  not  take  any  as- 
signment. So  also  where  the  loss  exceeds  the  insurance  the  com- 
panies and  the  assured  may  properly  make  agreement  to  sue  for 
joint  benefit.^  The  party  primarily  liable  who  is  sued  for  causing 
the  loss  cannot  make  a  defense  out  of  the  payment  of  the  insurance 
money  to  the  insured  by  the  insurance  company,  since  the  policy 
is  res  inter  alios  acta.^ 

1  The  wise  course  for  the  insured  to  v.  Atlanta  Coast  L.  R.  Co.,  132  N.  C. 

adopt  ordinarily  is  to  recover  his  in-  75,  43  S.  E.  548.     The  right  is  not  a 

surance  moneys   in   the   first   instance  mere  equity,  but  a  legal  right,  Stough- 

before    becoming    party    to    any    suit  ton  v.  Mfrs.'  Nat.  Gas  Co.,  165  Pa.  St. 

against  the  wrongdoer.  428,  30  Atl.  1001. 

^  Bloomingdale  v.  Columbia  Ins.  Co.,  *  Deming  v.   Storage  Co.,  90  Tenn. 

84  N.  Y.  Supp.  572;  Sims  v.  Mid.  Ins.  306,  17  S.  W.  89,  13  L.  R.  A.  518  (held 

Co.,  101  Wis.  586,  77  N.  W.  908,  and  to  be  a  payment), 

cases  in  §  57.  ^Chicago,   etc.,   R.    Co.    v.    Pullman 

^Kinq  V.   Victoria  Ins.   Co.,  L.  R.  Car.  Co.,  139  U.  S.  79,  11  S.  Ct.  490. 

P.  C.  (1896),  A.  C.  250.    And  see  §  58,  See  §  58,  supra. 

supra.       The     company     under     this  6  Missouri,  K.  &  T.  R.  Co.  v.  Fuller, 

clause   may   require    assignment   as   a  72  Fed.  467,  18  C.  G.  A.  641,  36  U.  S. 

condition    of    payment,    Niagara   Ins.  App.  456;  Regan  v.  R.  R.  Co.,  60  Conn. 

Co.  V.  Fidelity  Co.,  123  Pa.  St.  516,  124,  22  Atl.  503;  Weber  v.  Morris  & 

16  Atl.    790.      But  no   assignment  is  Essex  R.  R.  Co.,  35  N.  J.  Law,  409,  10 

necessary  to  perfect  the  right  of  the  Am.  Rep.  253;  Tex.  &  Pac.  R.  Co.  v. 

company,  Hamburg-Bremen  Fire  I.  Co.  Levi,  59  Tex.  676;  Harding  v.   Tovm- 


SUBROGATION — TORTIOUS   FIRES  451 

§  323.  Subrogation — Tortious  Fires.— It  not  infrequently  hap- 
pens that  the  fire  which  causes  the  loss  to  the  property  of  an  insured 
person  is  negligently  started  by  a  common  carrier,  or  other  person, 
on  premises  more  or  less  distant  from  the  property  of  the  insured. 
The  insurers,  upon  paying  the  loss,  thereupon  become  subrogated 
to  any  rights  of  the  insured  against  the  wrongdoer. 

The  prosecution  of  these  rights  often  involves  the  difficult  ques- 
tion, in  respect  to  the  spread  of  the  fire,  how  far  the  damages  caused 
thereby  are  to  be  attributed  to  the  negligence  of  the  wrongdoer  as 
a  proximate  cause.  The  proximate  cause  is  to  be  determined  not 
so  much  by  any  relationship  of  propinquity  in  time  or  space,  as  by 
the  intimacy  of  causal  connection  between  the  negligent  act  and 
the  resulting  consequences.  It  is  natural  for  fire,  especially  if  started 
amid  inflammable  material,  to  spread,  and  the  dangerous  character 
of  this  element  presents  no  excuse  for  imprudence  in  its  use.  Though 
the  number  of  sufferers  from  a  conflagration  may  be  many,  and  the 
extent  of  the  damage  great,  this  in  itself  offers  no  reason  for  shifting 
the  burden  of  loss  from  those  who  are  guilty  to  those  who  are  in- 
nocent, provided  the  results  are  naturally  to  be  expected.  The 
extent  of  proximate  loss  ought  not  to  be  bounded  by  limits  of  owner- 
ship, nor  confined  within  arbitrary  and  intangible  lines. ^ 

In  Ryan  v.  A^.  Y.  Central  R.  R.  Co.,^  however,  it  was  held  that 
where  a  house  in  a  populous  city  takes  fire  through  the  negligence 
of  the  owner  or  his  servant,  and  the  flames  destroy  a  neighboring 
building  one  hundred  and  thirty  feet  distant,  the  owner  of  the  first 
building  is  not  liable  to  the  owner  of  the  second  building  for  the 
damage  sustained. 

So  far  as  the  Ryan  case  stands  for  the  proposition  that  where  the 
facts  are  sufficiently  plain  they  present  a  question  of  law  for  the 
court,  its  doctrine  has  been  repeatedly  approved.^  But  as  an  ex- 
position of  the  law,  applicable  in  general  to  the  question  of  proximate 
loss  by  the  spread  of  fire,  it  is  opposed  by  the  current  of  judicial 
opinion  ^  and  has  been  so  far  distinguished  by  the  courts  of  the  same 

shend,  43   Vt.  536,  5  Am.  R?p.   304.  v.  Hesters,  90  Ga.  12;  East  Tenn.  R. 

And  see    Chi.,   etc.,   R.    Co.    v.    Pull-  Co.  v.  Hall,  90  Ga.  17. 

man  Car  Co.,  139  U.  S.  79,  11  S.  Ct.  235  N.  Y.  210. 

490.  3  Read  v.  Nichols,  118  N.  Y.  229,  23 

1  See  §  231,  supra.  Whether  the  ex-  N.  E.  468. 

tent  of  the  loss,  under  all  the  circum-  *  The  G.  R.  Booth,  171  U.  S.  450,  458, 

stances  of  the  case,  is  remote  or  rea-  19  S.  Ct.  9;  Ins.  Co.  v.  Boon,  95  U.  S. 

eonably  proximate  is  often  a  question  117;  Mil.  R.  R.  Co.  v.  Kellogg,  ^'i  U.  S. 

for  the  jury,  Milwaukee,  etc.,  R.  R.  Co.  469;  Goodlander  Mill  Co.  v.  Standard 

V.  Kellogg,  94  U.  S.  469.     An  extra-  Oil  Co.,  63  Fed.  400,  405,  27  L.  R.  A. 

ordinarily    violent    wind    intervening  583;  Perley  v.  Eastern  R.  R.  Co.,  98 

may  be  a  new  cause,  East  Tenn.  R.  Co.  Mass.  418, 96  Am.  Dec.  645. 


452 


MEANING    AND    LEGAL    EFFECT    OF    FIRE    POLICY 


state  as  to  have  lost  much  of  its  authority.^  Nevertheless  that 
court,  in  one  case,  has  again  declared  the  soundness  of  the  doctrine, 
and  has  gone  so  far  as  to  hold  that  while  the  spread  of  fire  to  the 
land  of  the  first  abutting  owner  is  proximate,  beyond  that  it  must 
be  regarded  as  remote.^ 

§  324.  Subrogation— Negligence  of  Water  Company.— Is  a  water 
company  liable  in  tort  to  the  insured  citizen  and  taxpayer  tor  fire 
loss  caused  by  a  negligent  insufficiency  of  water  supply,  where  the 
supply  is  expressly  contracted  for  between  the  municipality  and  the 
water  company?  On  this  subject  of  practical  importance  to  the 
underwriter,  authorities  differ.^    The  weight  of  reason  as  expressed 

29  Am.  St.  Rep.  856;  and  Judge 
Parker's  remarks  in  Olmsted  v.  Aque- 
duct, 46  N.  J.  L.  495,  501.  The  follow- 
ing cases,  constituting  a  large  ma- 
jority, hold  that  the  water  company 
is  not  responsible  at  the  suit  of  a 
citizen,  since  the  contract  is  not  made 
with  the  individual,  but  with  the  mu- 
nicipality, Town  V.  Ukiah,  etc.,  Co.,  142 
Cal.  173,  75  Pac.  773;  Fowler  v.  Athens, 
etc.,  Co.,  83  Ga.  219,  9  S.  E.  673;  Fitch 
V.  Seymour  Water  Co.,  139  Ind.  214,  37 
N.  E.  982;  Bec::er  v.  Keokuk,  etc.,  Co., 
79  Iowa,  419,  44  N.  W.  694;  Mott  v. 
Cherryvale,  etc.,  Co.,  48  Kan.  12,  28 
Pac.  989;  Allen,  etc.,  Co.  v.  Shreveport 
W.  Co.,  113  La.  1091,  37  So.  980; 
WUanson  v.  Light,  etc.,  Co.,  78  Miss. 
389,  28  So.  877;  Howsmon  v.  Water  Co., 
119  Mo.  304,  24  S.  W.  784;  Eaton  v. 
Fairburv,  etc.,  Co.,  37  Neb.  546,  56 
N.  W.  201  (on  the  ground  that  the 
municipality  itself  could  not  be  sued) ; 
Ferris  v.  Water  Co.,  16  Nev.  44,  40 
Am.  Rep.  485;  Wainwright  v.  Queens 
Co.  Wat'-r  Co.,  78  Hrni,  146,  28  N.  Y. 
Supp.  987  (approved  in  165  N.  Y.  30); 
Blunk  V.  Dennison,  etc.,  Co.  (Ohio),  73 
N.  E.  210  (on  the  ground  that  the 
municipality  would  not  be  liable,  hence 
its  contractor  is  not  liable);  House  v. 
Houston  W.  Co.,  88  Tex.  233,  31  S.  W. 
179;  Nichol  v.  Water  Co.,  53  W.  Va. 
348;  44  S.  E.  290;  Britton  v.  Green  Bay, 
etc.,  Co.,  81  Wis.  48,  51  N.  W.  84. 
There  is  said  to  be  no  privity  of  con- 
tract between  the  water  company  and 
the  citizen.  Nickerson  v.  Bridgeport 
Hyd.  Co.,  46  Conn.  24;  Bush.  v.  Arte- 
sian, etc. .Co.,^ Idaho, 618, 43 Pa.  St. 69; 
McEntee  v.  Kingston  W.  Co.,  165  N.  Y. 
27,  58  N.  E.  785;  Smith  v.  Water  Co., 
82  App.  Div.  427,  81  N.  Y.  Supp.  812. 
If  the  municipality  itself  furnishes  the 


1  Frace  v.  N.  Y.,etc.,R.  R.,  143  N.  Y. 
182.  38  N.  E.  102;  O'Neill  v.  N.  Y.,  D. 
&  W.  R.  Co.,  115  N.  Y.  579,  22  N.  E. 
217;  Tannery.  N.  Y.  Central  Co.,  108 
N.  Y.  623,  15  N.  E.  379;  Webb  v.  Rome 
W.  &  0.  R.  R.  Co.,  49  N.  Y.  420;  Hine  v. 
Gushing,  53  Hun  (N.  Y.),  519;  Martin 
V.  A^.  Y.,  O.  &  W.  R.  Co.,  62  Hun,  181. 

2  Hoffman  v.  King,  160  N.  Y.  618; 
Van  Inwegen  v.  Port  Jervis,  etc.,  R.  R. 
Co.,  165  N.  Y.  626,  58  N.  E.  878.  The 
application  of  this  rule  would  seem  to 
produce  incongruous  results,  for  ex- 
ample, where  at  one  section  the  inter- 
vening strip  is  a  foot  wide  and  at  the 
next  section  a  mile  wide.  The  common 
carrier  under  this  rule  apparently  could 
effectually  dispose  of  claims  by  induc- 
ing some  friendly  party  to  buy  the 
adjacent  foot  of  land  on  either  side  all 
along  the  road.  A  negligent  party  is 
not  chargeable  with  knowledge  of  the 
boundary  lines  of  his  neighbor's  prop- 
erty, and  often  in  fact  knows  nothing 
about  them,  but  he  is  presumed  to 
know  that  a  conflagration  is  likely  to 
burn,  so  long  as  it  finds  inflammable 
material  in  its  pathway. 

3  The  following  cases  held  the  water 
company  responsible  to  the  injured 
taxpayer,  Guardian  Tr.  Co.  v.  Fisher, 
200  U.  S.  57,  28  S.  Ct.  186,  aff'g  128 
N.  C.  375;  Guardian,  etc.,  Co.  v.  Greens- 
boro Water,  etc.,  Co.,  115  Fed.  184; 
Mugge  v.  Tampa,  etc.,  Co.  (Fla.,  1906), 
42  So.  81  (court  prefers  reasons  to 
number  of  authorities);  Graves  Co. 
Water  Co.  v.  Ligon,  112  Ky.  775,  66 
S.  W.  725  (citing  other  Kentucky 
cases);  Gorrell  v.  Greensboro,  etc.,  Co., 
124  N.  C.  328,  32  S.  E.  720.  The  fore- 
going minority  probably  have  the  best 
of  the  argument,  see  Judge  Freeman's 
note  to  Britton  v.  Green  Bay,  etc.,  Co., 


LIMITATION    OF  TIME   TO  SUB  453 

by  the  United  States  Supreme  and  other  courts  seems  to  allow  such 
an  action.  The  majority  of  the  courts,  as  shown  by  the  cases  cited 
in  the  notes,  rule  otherwise.  If  such  an  action  is  maintainable  at 
the  instance  of  the  insured  citizen,  his  insurer  on  paying  the  loss  be- 
comes subrogated  to  the  same  right. 

§  325.  Subrogation — Order  of  Civil  Authority. — Where  buildings 
are  justifiably  blown  up  by  order  of  civil  authority  to  check  a  con- 
flagration, can  the  underwriter,  on  paying  the  loss,  recover  of  the 
municipality?    Evidently  not  at  common  law.* 

§  326.  Limitation  of  Time  to  Sue. — No  suit  or  action  shall  be  sus- 
tainable until  after  full  compliance  by  the  insured  with  all  the  fore- 
going requirements,  nor  unless  commenced  within  twelve  months  next 
after  the  fire. 

A  comphance  with  all  the  provisions  of  the  contract  is  thus  ex- 
pressly made  a  condition  precedent.  Without  this  express  condi- 
tion it  has  been  held  that  the  provisions  relating  to  an  ascertain- 
ment of  the  loss,  the  appraisal  clause,  for  example,  are  independent 
and  collateral,  and  that  suit  may  be  brought  by  the  insured  upon 
the  policy  without  complying  with  their  requirements.^  But  ob- 
servance of  the  restrictive  limit  of  twelve  months  for  starting  litiga- 
tion on  the  standard  policy  is  thus  made  a  condition  precedent  to 
any  right  of  recovery  thereunder;  and  by  the  terms  of  the  contract 
the  general  statute  of  limitations  is  superseded,  unless,  as  in  all 
similar  cases,  the  insurer  has  waived  his  contract  privilege.^    This 

water,  it  has  been  held  that  it  cannot  v.  Mayor,  7  Ga.   200;   White  v.   City 

be  made  liable  to  the  citizen  for  such  Council,  2  Hill  (S.  C),  571.     This  was 

damage  by  reason  of  insufficient  water  an  important  question  after  the  San 

supply,    Springfield   Fire    Ins.    Co.    v.  Francisco  earthquake  of  1906. 
Village  of  Keeseville,  148  N.  Y.  46,  42  ^  Hamilton   v.   Home  Ins.    Co.,   137 

N.    E.    405.      Contra,   under   diiYerent  U.  S.  370,  11  S.  Ct.  133;  ieeed  v.  W-'as/i- 

form  of  contract,  Watson  v.  Needham,  ington  Ins.  Co.,  13S  Mass.  572. 
161  Mass.  404,  37  N.  E.  204.    Nor.  it  is  -^  Riddiebarger  v.  Hartford  Ins.   Co., 

said,  can  the  municipality  itself  sue  a  7  Wall.   (U.  S.)  386,  19  L.  Ed.  257; 

water  company  for  such  damage  to  Chichester  v.  I^ew  Hampshire  F.  I.  Co. , 

municipal   property,    Totrn   v.    Ukiah,  74  Conn.   510,  51   Atl.   545;   Southern 

etc.,  Co.,  142  Cal.  173,  75  Pac.  773.    On  Fire  I.  Co.  v.  Knight,  111  Ga.  622,  36 

the  question  of  privity  of  contract  see  S.  E.  821,  78  Am.  St.  R.  216, 52  L.  R.  A. 

Pond  V.  New  Rochelle  Water  Co.,  183  70;  Garretson  v.  Merchants'  Ins.   Co., 

N.  Y.  330.  114  Iowa,  17,  86  N.  W.  32;  Smith  v. 

1  Bowditch  V.  Boston,  101  U.  S.  16;  Herd,  110  Ky.  56,  60  S.  W.  841;  Barry 

Dunbar  V.  Alcalde,  I  Cal.  355;  Russell  V.  Lumber  Co.  v.  Citizens'  Ins.  Co.,  136 

Mayor,  2  Denio  (N.  Y.),  461;  Lord  v.  Mich.  42,  98  N.  W.  761;  Ward  v.  Fire 

Mayor,  3  Hill  (N.  Y.),  426;  Mayor  v.  Ins.    Co.,   82   Miss.    124,   33   So.   841; 

Lord,  18  Wend.  126;  iSione  V.  Ma?/or,  25  Sullivan   v.   Prudential  Ins.    Co.,   172 

Wend.  157.    But  compare  United  States  N.  Y.  482,  65  N.  E.  268;  Appel  v. 

v.Rmfsell,  13  Wall.  (V.  S.)  623;  Bishop  Cooper  Ins.  Co.   (Ohio  St.),  80  N.  E. 


454  MEANING    AND    LEGAL    EFFECT   OF    FIRE    POLICY 


restrictive  clause  is  binding  upon  an  infant  insured/  and  also  upon 
a  mortgagee  under  the  mortgagee  clause.^  The  contract  limitation 
of  twelve  months,  together  with  the  other  provisions  of  the  usual 
policy,  is  also,  by  legal  inference,  imported  into  the  oral  or  written 
binder  although  the  insured  has  no  knowledge  of  such  a  limitation;  ^ 
but,  it  has  been  held,  that  an  independent  promise  to  pay  the  amount 
of  an  adjusted  loss  upon  consideration  of  the  surrender  of  the  policy 
will  not  be  governed  by  the  policy  limitation.^ 

The  one-year  limit  for  beginning  action  has  been  held  inapplicable 
to  a  contract  of  reinsurance.'^ 

§  327.  When  the  Period  Begins  to  Run.— By  the  better  authority 
the  period  of  limitation  begins  to  run,  under  the  standard  policy, 
from  the  date  of  the  fire,  as  specifically  stated.^     In  older  forms  of 


955  (six  months  clause);  Morrill  v. 
A'.  E.  Fire  Ins.  Co.,  71  Vt.  281,  44  Atl 
358;  Ryer  v.  Prudential  Ins.  Co.,  185 
N.  Y.  6  (if  last  day  is  Sunday,  Monday 
is  too  late  under  New  York  Construc- 
tion Act).  Contra,  Nebraska  where  it 
is  held  that  the  one-year  limit  is  void 
as  against  public  policy,  Omaha  Ins. 
Co.  V.  Drennen,  56  Neb.'^623,  77  N.  W. 
67;  Grand  View  Bldg.  Ass.  v.  Northern 
Assur.  Co.  (Neb..  1905),  102  N.  W. 
246.  And  see,  as  to  South  Dakota, 
Vesey  v.  Commercial  Union  Assur.  Co., 
18  S.  D.  632,  101  N.  W.  1074.  Igno- 
rance of  the  insured  is  no  excuse  for 
nonfulfillment,  De  Grove  v.  Met.  Ins. 
Co.,  61  N.  Y.  594,  19  Am.  Rep.  305. 
Mistake  of  the  insured  is  no  excuse. 
Farmers'  Mut.  F.  Ins.  Co.  v.  Barr,  94 
Pa.  St.  345.  In  case  of  technical  de- 
feat in  the  first  action  certain  statutes 
allow  a  second  suit  within  twelve 
months  thereafter,  Riddlesbargcr  v. 
Hartford  Ins.  Co.,  7  Wall.  (U.  S.)  386; 
Waydell  v.  Gahrielson,  72  Fed.  648; 
Lancashire  Ins.  Co.  v.  Stanley,  70  Ark. 
1,  62  S.  W.  66;  Wooster  v.  Railroad  Co., 
71  N.  Y.  471. 

i  Mead  v.  Phoenix  Ins.  Co.,  68  Kan. 
432,  75  Pac.  475,  64  L.  R.  A.  75;  Suggs 
V.  Ins.  Co.,  71  Tex.  579,  9  S.  W.  676, 
1  L.  R.  A.  847. 

^  Am.  Bldg.  &  L.  Assoc,  v.  Farmers' 
Ins.  Co.,  11  Wash.  619,  40  Pac.  125. 
But  a  mortgagee's  default  does  not  bar 
a  timely  action  by  the  mortgagor, 
Shawnee  F.  Ins.  Co.  v.  Bayah,  8  Kan, 
App.  169,  55  Pac.  474.  A  payment  to 
a  mortgagee  does  not  waive  the  time 
limitation  as  against  the  assured,  King 
V.    Waterfo)nn    Ins.    Co.,    47    Hun,    ]. 


This  clause  does  not  apply  to  reinsur- 
ance, see  §  319,  supra.  As  to  the  effect 
of  war,  see  §  108,  supra.  As  to  the  ef- 
fect of  death  of  the  insured,  coupled  with 
delay  in  appointing  representative  of 
his  estate,  see  Matthews  v.  Am.  Cent. 
Ins.  Co.,  154  N.  Y.  449,  48  N.  E.  751, 
39  L.  R.  A.  433.  A  breach  of  the 
limitation  is  matter  of  defense.  There- 
fore the  plaintiff  need  not  plead  per- 
formance. Miller  Brewing  Co.  v.  Capital 
Ins.  Co.,  Ill  Iowa,  590,  82  N.  W.  1023, 
82  Am.  St.  R.  529.  But  if  plaintiff  re- 
lies upon  waiver,  it  is  wiser  not  to 
plead  due  performance  of  all  condi- 
tions, Allen  v.  Dutchess  Co.  Mut.  Ins. 
Co.,  95  App.  Div.  86,  88  N.  Y.Supp. 
530.  To  do  so  is  perhaps  fatal  irregu- 
larity in  some  jurisdictions,  Williams 
V.  Ins.  Co.,  119  App.  Div.  (N.  Y.)  573 
(waiver  of  one-year  limitation  must  be 
alleged).  See  §  154,.s?/pra.  The  gen- 
eral rule  is  that  waiver  cannot  be  shown 
under  an  allegation  of  full  performance, 
Reich  V.  Maryland  Cas.  Co.,  54  Misc. 
(N.  Y.)  585. 

^  De  Grove  v.  Metropolitan  Ins.  Co., 
61  N.  Y.  .594;  §  82,  supra. 

■i  Smith  V.  Glens  Falls  Ins.  Co.,  62 
N.  Y.  85;  Willoughby  v.  St.  Paul  Ger- 
man Ins.  Co.,  68  Minn.  373,  71  N.  W. 
272.  A  compromise  agreement  made 
after  loss  will  not  be  controlled  by  the 
twelve  months  clause,  Hanover  F.  Ins. 
Co.  V.  Hatton  (Ky.),  55  S.  W.  681. 

5  See  §  319,  supra. 

^  Allen  V.  Dutchess  Co.  Ins.  Co.,  95 
App.  Div.  86,  88  N.  Y.  Supp.  530; 
King  v.  Watertown  Ins.  Co.,  47  Hun,  1; 
Daly  V.  Concordia  Ins.  Co.,  16  Colo 
349;   (15   Pac.    116;    Chiche.-iter  v.    .¥-••' 


"WHEN    THE    I'KUlOl)    BEGINS   TO    RUN 


455 


policies,  however,  in  which  the  word  "loss,"  instead  of  fire,  was 
used,  it  was  held  by  many  courts  that  "loss"  in  that  connection 
meant  "liability,"  and  that  therefore  the  specified  period  ran  from 
the  time  when  the  cause  of  action  on  the  policy  accrued  to  the  in- 
sured, for  instance,  often  at  expiration  of  sixty  days  after  service 
of  the  proofs  of  loss.^  B}^  like  course  of  reasoning,  even  under  the 
wording  of  the  standard  form,  or  similar  phraseology,  some  courts 
continue  to  apply  the  old  rule,  contending  that  other  clauses  of  the 
instrument  relating  to  proofs  of  loss,  appraisal,  examination  under 
oath,  and  so  on,  a  compliance  with  which  sometimes  more  than 
exhausts  the  period  of  a  year,  indicate  an  intention  to  give  to  the 
assured  twelve  available  months  after  the  fire  within  every  part  of 
which  his  action  will  be  sustainable,  since  otherwise,  by  the  terms 
of  the  instrument  in  their  entirety,  he  may  have  no  time  at  all  left 
for  starting  action  after  his  right  of  action  matures.^  Indeed  the 
United  States  Supreme  Court,  though  expressly  declining  to  pass 
upon  the  point,  said,  in  reversing  the  court  below,  "There  are,  it  is 
said,  adjudged  cases  that  would  authorize  such  a  construction  of 
this  policy  as  would  give  the  insured  the  whole  term  of  twelve 
months  from  the  date  when  he  could  demand,  as  of  right,  that  his 
claim  for  loss  be  satisfied.^ 


Hampshire  Ins.  Co.,  74  Conn.  510,  51 
Atl.  545;  Allemania  Ins.  Co.  v.  Little, 
20  111.  App.  431;  State  Ins.  Co.  v. 
Stoffels,  48  Kan.  205,  29  Pac.  479; 
Owen  V.  Ins.  Co.,  87  Ky.  571,  10  S.  W. 
119;  Egan  v.  Oakland  Ins.  Co.,  29 
Oreg.  403,  42  Pac.  990;  Hocking  v. 
Howard  Ins.  Co.,  130  Pa.  St.  170,  18 
Atl.  614;  Hart  v.  Citizens'  Ins.  Co.,  86 
Wis.  77,  56  N.  W.  332,  21  L.  R.  A.  745, 
39  Am.  St.  R.  880;  Prevost  v.  Scottish 
U.  <&  N.  Ins.  Co.  (Rap.  Jud.,  Quebec), 
14  S.  C.  203. 

1  New  Haven  S.  Co.  v.  Prov.  Wash. 
Ins.  Co.,  159  N.  Y.  547,  54  N.  E.  1093; 
Steen  v.  Niagara  Ins.  Co.,  89  N.  Y. 
315,  42  Am.  Rep.  297;  Sun  Ins.  Co.  v. 
Jones,  54  Ark.  376,  15  S.  W.  1034; 
Miller  v.  Hartford  Ins.  Co.,  70  Iowa, 
704,  29  N.  W.  411;  Chandler  v.  St.  Paul 
Ins.  Co.,  21  Minn.  85,  18  Am.  Rep.  385; 
Murdock  v.  Franklin  Ins.  Co.,  33  W.  Va. 
407,  10  S.  E.  777,  7  L.  R.  A.  572. 

2  Steel  V.  Phoenix  Ins.  Co.,  51  Fed. 
715,  7  U.  S.  App.  325,  2  C.  C.  A.  463 
(aff'd,  but  not  necessarily  on  this 
point,  in  154  U.  S.  518);  Friezen  v. 
Allemannia  Ins.  Co.,  30  Fed.  352; 
Vette  V.  Clinton  Ins.  Co.,  30  Fed.  668 
(but   policy   limit   only   six   months); 


Reade  v.  State  Ins.  Co.,  103  Iowa,  307, 
72  N.  W.  665,  64  Am.  St.  R.  180; 
German  Ins.  Co.  v.  Davis,  40  Neb. 
700,  59  N.  W.  698  (but  limit  only  six 
months);  Leach  v.  Republic  F.  Ins.  Co., 
58  N.  H.  245;  Sample  v.  Lond.  &  Lan. 
Ins.  Co.,  46  S.  C.  491,  24  S.  E.  334,  47 
L.  R.  A.  696,  57  Am.  St.  R.  701;  Ins. 
Co.  V.  Scales,  101  Tenn.  628,  49  S.  W. 
743  (but  limit  only  six  months);  Hong 
Sling  V.  Royal  Ins.  Co.,  8  Utah,  135,  30 
Pac.  307.  And  see  Rogers  v.  Home  Ins. 
Co.,  95  Fed.  109,  35  C.  C.  A.  402.  But 
compare  Chambers  v.  Atlas  Ins.  Co., 
51  Conn.  17,  50  Am.  Rep.  1;  Brooks  v. 
Ga.  Home  Ins.  Co.,  99  Ga.  116,  24 
S.  E.  869;  Johnson  v.  Humboldt  Ins. 
Co.,  91  111.  92;  Carraway  v.  Merchants' 
Ins.  Co.,  26  La.  Ann.  298;  Fullani  v. 
N.  Y.  Ins.  Co.,  7  Gray  (Mass.),  61; 
Rattier  v.  German  Ins.  Co.,  84  Minn. 
116,  86  N.  W.  888;  Grigsby  v.  German 
Ins.  Co.,  40  Mo.  App.  276;  Travelers' 
Ins.  Co.  V.  California  Ins.  Co.,  1  N.  D. 
151,  45  N.  W.  704;  McFarland  v.  R. 
Officials  &  Employees'  Ace.  Assn.,  5 
Wyo.  126,  38  Pac.  347,  27  L.  R.  A.  48, 
63  Am.  St.  R.  29. 

3  Thompson  v.  Phoenix  Ins.  Co.,  136 
TV  S.  287  298,  10  S.  Ct.  1019  ^decider* 


456 


MEANING    AND    LKGAL  EFFECT   OF    FIRE    POLICY 


§  328.  Commencement  of  Action. — Delivery  of  a  summons  to 
the  sheriff  for  service  under  the  New  York  law  is  equivalent  to  be- 
ginning an  action.^  But  if  the  summons  is  set  aside,  the  service  of 
a  second  summons  after  the  expiration  of  the  twelve  months  will 
not  avail  the  insured. ^  If  the  action,  brought  to  trial,  was  com- 
menced after  the  expiration  of  the  period  named,  the  fact  that 
another  action  was  begun  within  the  period  will  not  aid  the  insured 
as  an  excuse  for  his  nonfulfillment.'"'  But  if  a  suit  in  equity  for 
reformation  of  the  policy  fails,  the  complaint  may  be  amended  in 
order  to  allow  continuance  of  the  suit  as  an  action  upon  the  policy."* 

§  329.  Construction  of  Limitation  Clause.— While  this  limitation 
clause  is  to  be  enforced  according  to  its  reasonable  intendment, 
nevertheless,  in  arriving  at  its  fair  meaning,  regard  must  be  had  to 
the  other  provisions  of  the  contract.  Thus  if  a  compliance  with 
the  appraisal  clause  prevents  the  claim  of  the  insured  from  matur- 
ing until  after  the  expiration  of  twelve  months,  the  time  for  bringing 
suit  must  be  considered  extended.^    So  also  where  a  Lloyd's  policy 


on  ground  of  waiver).  A  provision 
limiting  the  insured  to  a  particular 
forum  for  his  action  would  be  invalid, 
Nute  V.  Hamilton  Mut.  Ins.  Co.,  6 
Gray  (Mass.),  174. 

^Hamilton  v.  Royal  Ins.  Co.,  156 
N.  Y.  327,  50  N.  E.  863.  So  in  other 
states,  Miller  Brewing  Co.  v.  Capital 
Ins.  Co.,  in  Iowa,  590,  82  N.  W.  1023; 
Modern  Woodmen  v.  Bauersfeld,  62 
Kan.  340,  62  Pac.  1012;  German  Ins. 
Co.  V.  Wright,  6  Kan.  App.  611,  49  Pac. 
704;  Farrell  v.  German-Am.  Ins.  Co., 
175  Mass.  340,  56  N.  E.  572;  Harvey 
V.  Ins.  Co.,  120  Mich.  601,  79  N.  W. 
898;  Georgia  Home  Ins.  Co.  v.  Holmes, 
75  Miss.  390,  23  So.  183  (no  agent 
within  county).  With  an  unofficial 
process  server  the  rule  is  said  to  be 
otherwise,  Lesure  Lumber  Co.  v.  Mut- 
ual Ins.  Co.,  101  Iowa,  514,  70  N.  W. 
761.  The  filing  of  a  prcecipe  for  a 
summons /le/r/,  sufficient  service,  Schroe- 
der  V.  Mer.  &  Mech.  bis.  Co.,  104  111. 
71.  An  alias  summons,  it  is  said,  will 
relate  back  to  the  time  of  the  original, 
Everett  v.  Niagara  Ins.  Co.,  142  Pa.  St. 
322,  21  Atl.  817;  Virginia  F.  &  M.  Ins. 
Co.  V.  Vaughan,  88  Va.  832,  14  S.  E. 
754. 

2  State  Ins.  Co.  v.  Stoffels,  48  Kan. 
205.  29  Pac.  479. 

3  Sullivan  v.  Prudential  Ins.  Co.,  172 
N.  Y.  482,  65  N.  E.  268;  Melson  v. 


Phenix  Ins.  Co.,  97  Ga.  722,  25  S.  E. 
189;  McElroy  v.  Ins.  Co.,  48  Kan.  200, 
29  Pac.  478;  Ward  v.  Penn.  Ins.  Co.,  82 
Miss.  124,  33  So.  841.  And  see  Chi- 
chester V.  New  Hampshire  Ins.  Co.,  74 
Conn.  510,  51  Atl.  545;  Wilhelmi  v. 
Des  Moines  Ins.  Co.,  103  Iowa,  532,  72 
N.  W.  685.  An  injunction  does  not 
prevent  the  operation  of  the  limita- 
tion clause  of  the  policy,  Wilkinson  v. 
First  Nat.  Ins.  Co.,  72  N.  Y.  499.  But 
the  insured  may  gain  relief  by  a  sea- 
sonable cross-bill  in  the  injunction 
suit.  North  Brit.  &  M.  Ins.  Co.  v. 
Lathrop,  70  Fed.  429,  25  U.  S.  App. 
443,  17  CO.  A.  175. 

■*  New  York  Ice  Co.  v.  Northwestern 
/ns.  Co.,  23  N.Y.  357.  And  see  Jacobs 
V.  St.  Paid  Ins.  Co.,  86  Iowa,  145,  53 
N.  W.  101.  But  it  is  said  that  an  en- 
tirely new  cause  of  action  cannot  be 
allowed  by  amendment  after  the  policy 
limit  of  time  has  expired,  Grier  v.  North. 
Assur.  Co.,  183  Pa.  St.  334,  39  Atl.  10. 

5  Williams  v.  German-Am.  Ins.  Co., 
90  App.  Div.  413,  86  N.  Y.  Supp.  98 
(time  extended  until  sixty  days  after 
award);  Austen  v.  Niagara  Ins.  Co.,  16 
App.  Div.  86,  45  N.  Y.  Supp.  106;  Case 
v.  Sun  Ins.  Co.,  83  Cal.  473;  Harrison 
V.  Hartford  Ins.  Co.,  112  Iowa,  307, 
83  N.  W.  820;  Fritz  v.  Brit.-Am. 
Assur.  Co.,  208  Pa.  St.  268,  57  Atl.  573. 
And  see  Rogers  v.  ^tna  Ins.  Co.,  95 


INSURED   INCLUDES    LEGAL   REPRESENTATIVE  457 

provides  that  action  shall  be  brought  against  one  underwriter  only, 
and  that  the  other  underwriters  shall  abide  the  event  of  such  action, 
actions  against  the  other  underwriters  need  not  be  brought  within 
the  year  succeeding  the  fire.^ 

§  330.  Waiver  of  Limitation. — The  policy  provision  being  in 
derogation  of  the  general  statute  of  limitation,  the  courts  are  not 
slow  in  holding  the  company  estopped  from  insisting  upon  it,  where 
the  promise  or  conduct  of  the  company  has  induced  the  delay. ^ 

The  Massachusetts  clause  names  as  the  limit  of  time  for  bringing 
suit  two  years  from  the  time  the  loss  occurred.^ 

§  331.  Insured  Includes  Legal  Representative. — Whenever  in  this 
policy  the  word  "insured"  occurs  it  shall  be  held  to  include  the  legal 
representative  of  the  insured  and  wherever  the  word  "loss"  occurs  it 
shall  be  deemed  the  equivalent  of  "loss  or  damage." 

The  policy  is  not  so  far  a  personal  contract  as  to  terminate  on 
the  death  of  the  assured.  Such  a  result  would  be  highly  incon- 
venient, and  is  not  needful  to  the  protection  of  the  insurer.  On 
the  occurrence  of  that  event  the  executor  or  administrator  of  the 
assured  has  the  right  to  collect  the  insurance  money  in  case  of  loss, 
whether  the  policy  is  on  real  or  personal  estate.^ 


Fed.  103,  35  C.  C.  A.  396  (where  judg-  Lond.  Assur.  Co.,  93  Va.  553,  25  S.  E. 

ment  in  collision  suit  was  prerequisite  597.     As  to  effect  of  setting  aside  a 

to  claim  against  defendant);   Martin  fund    by   an   insolvent   company,   see 

V.  State  Ins.  Co.,  44  N.  J.  L.  485,  43  St.   Paul  German  Ins.   Co.,  58  Minn. 

Am.  Rep.  397.  163,  59  N.  W.  996.    But  mere  negotia- 

1  A'.  J.  Concentrating  Works  v.  tions  for  an  adjustment  are  no  waiver 
Ackerman,  6  App.  Div.  (N.  Y.)  540,  of  the  limitation,  Vincent  v.  Mut.  Res. 
39  N.  Y.  Supp.  585;  Lawrence  v.  Fund  L.  Ass.,  74  Conn.  684,  51  Atl. 
Schoefer,  19  Misc.  239,  42  N.  Y.  Supp.  1066;  Carlson  v.  Met.  L.  his.  Co.,  172 
992.  As  to  reinsurance  see  §  319,  Mass.  142,  51  N.  E.  525;  Allen  v. 
supra.  Dutchess  Co.  Mut.  Ins.   Co.,  95  App. 

2  Thompson  v.  Phoenix  Ins.  Co.,  136  Div.  86,  88  N.  Y.  Supp.  530;  Morrill 
U.  S.  287,  10  S.  Ct.  1019,  34  L.  Ed.  v.  Ins.  Co.,  71  Vt.  281,  44  Atl.  358. 
408;  De  Farconnet  v.  Western  Ins.  Co.,  3  For  statutes  see  Appendix,  ch.  I. 
110  Fed.  4:05;  Steel  V.  Phoenix  Ins.  Co.,  *  Laurence  v.  Niagara  Ins.  Co.,  2 
51  Fed.  715,  2  C.  C.  A.  463;  Magner  v.  App.  Div.  267,  37  N.  Y.  Supp.  811, 
Mut.  Life  Assoc,  17  App.  Div.  13,  aff'd  154  N.  Y.  752,  49  N.  E.  1099; 
aff'd  162  N.  Y.  657,  57  N.  E.  1116;  Wyman  v.  Wyman,  26  N.  Y.  253.  As 
Fireman's  Fund  Ins.  Co.  v.  Western  to  meaning  of  the  term  "legal  rep- 
Refrig.  Co.,  162  111.  322,  44  N.  E.  746;  resentative,"  see  Matthews  v.  Am. 
Goodwin  v.  Merchants'  Ins.  Co.,  118  Cent.  Ins.  Co.,  154  N.  Y.  449,  48  N.  E. 
Iowa,  601,  92  N.  W.  894;  Scottish  U.  751;  Alford  v.  Consol.  Ins.  Co.,  88 
&  N.  Ins.  Co.  V.  Enslie,  78  Miss.  157,  Minn.  478,  93  N.  W.  517  (receiver  of  a 
28  So.  822;  Phoenix  Ins.  Co.  v.  Rad  corporation);  Metzger  v.  Manchester  F. 
Bita  Hora,  41  Neb.  21,  59  N.  W.  752;  Assur.  Co.,  102  Mich.  334,  63  N.  W. 
Dibbrell  v.  Georgia  Home  Ins.  Co.,  110  650  ("representative"  does  not  mean 
N.  C.  193,  14  S.  E.  783;  Cochran  v.  "agent"). 


458  MEANING    AND    LEGAL    EFFECT   OF   FIRE    POLICY 

§  332.  Mutual  Companies. — //  this  policy  he  made  by  a  mutual 
or  other  company  haoiiuj  apcciuL  regulations  lawfully  applicable  to  its 
organization,  membership,  policies,  or  contracts  of  insurance,  such 
regulations  shall  apply  to  and  form  a  part  of  this  policy  as  the  same 
may  be  written  or  printed  upon,  attached  or  appended  hereto. 

The  regulations  or  by-laws  of  mutual  companies  often  affect  the 
particulars  of  the  contract.  These  regulations  are,  in  general,  bind- 
ing upon  the  policyholders,  who  in  mutual  companies  constitute 
the  riiembers  of  the  company.^  This  direction  of  the  standard  policy 
wisely  and  equitably  provides  that  such  regulations  must  be  dis- 
closed in  connection  with  the  contract  itself;  for  instance  any  special 
provision  relating  to  the  method  of  paying  premium  by  deposit 
note,  wholly  or  partly  in  place  of  a  present  cash  payment. ^ 

This  clause  does  not  appear  in  the  Massachusetts  policy,  but  the 
Massachusetts  public  statutes  and  the  statutes  of  other  states  pro- 
vide that  provisions  of  the  by-laws,  or  the  application  which  forms 
a  part  of  the  contract,  must  be  set  forth  in  the  policy,  or  that  a  copy 
must  be  attached  thereto,  and  under  such  statutes,  it  .has  been  held 
that  a  failure  to  comply  precludes  a  defense  based  on  anything  con- 
tained in  the  application.^ 

§  333.  Authority  of  Agents  to  Waive  Limited  to  Writing. — This 
policy  is  made  and  accepted  subject  to  the  foregoing  stipulations  and 
conditions,  together  with  such  other  provisions,  agreements  or  conditions 
as  may  be  indorsed  hereon  or  added  hereto  and  no  officer,  agent  or  other 
representative  of  this  company  shall  have  power  to  waive  any  provision 
or  condition  of  this  policy  except  such  as  by  the  terms  of  this  policy 
may  be  the  subject  of  agreement  indorsed  hereon  or  added  hereto,  and 
as  to  such  provisions  and  conditions  no  officer,  agent,  or  representative 
shall  have  such  power  or  be  deemed  or  held  to  have  waived  such  pro- 
visions or  conditions  unless  such  waiver,  if  any,  shall  be  written  upon 
or  attached  hereto,  nor  shall  any  privilege  or  permission  affecting  the 
insurance  under  this  policy  exist  or  be  claimed  by  the  insured  unless 
so  written  or  attached. 

The  importance  of  this  clause  to  the  insurance  companies  is 
illustrated  by  the  frivolous  and  oftentimes  false  testimony  by  which, 

1  Wilson  V.  Union  Mid.  F.  Ins.  Co.,  the  company's  defense  is  fraud,  a 
77  Vt.  28,  58  Atl.  799.  And  see  §  5,  medical  witness  may  use  the  applica- 
supra.  As  to  assessments,  see  Meley  tion,  though  not  incorporated  or  at- 
V.  Whitaker,  Receiver^  61  N.  J.  L.  602.  tached  to  the  policy,  to  aid  his  mem- 

2  See  §  228,  supra.  ory,  H olden  v  Prudential  Ins.  Co.,  191 
^  Rauen  v.  Prudential  Ins.  Co.,  129      Mass    163. 

Iowa,  725,  106  N.  W   i98.    But  where 


AUTHORITY   OF   AGENTS   TO    WAIVE    LIMITED  TO    WRITlxVG     459 

under  the  doctrine  of  waiver  and  estoppel,  the  essential  conditions 
of  the  written  policy  are  subverted.  By  the  prevailing  rule  the 
provisions  of  the  clause  are  not  invalid  upon  their  face  or  contrary 
to  pubhc  policy,  and  are  to  be  enforced,  except  as  facts  amounting 
to  a  waiver  of  the  clause  itself,  or  to  an  estoppel  against  the  com- 
pany, are  established. 

The  meaning  and  legal  effect  of  the  clause  have  been  considered 
at  length  under  the  subject  of  waiver  and  estoppel.^  Within  the 
deliberate  opinion  of  the  United  States  Supreme  Court,  as  before 
shown,  this  provision  of  the  contract  is  reasonably  calculated  to 
protect  both  parties  from  the  uncertainties  and  perils  of  oral  testi- 
mony, and  should  be  applied  by  the  courts  according  to  its  terms 
and  in  pursuance  of  its  purpose,  and  should  not  be  evaded.^  Many 
of  the  provisions  of  the  standard  fire  policies  are  needful  in  general 
to  guard  the  public  against  fires  having  their  origin  in  carelessness  or 
fraud.  All  proper  modifications,  suited  to  special  instances,  can 
be  made  by  indorsements  or  riders  attached  to  the  statutory  form 
of  policy.^    Nevertheless  a  majority  of  the  state  courts,  encroach- 


1  For  full  discussion  see  ch.  VIII, 
supra. 

2  Northern  Assur.  Co.  v.  Grand  View 
Bldg.  Assn..  18S  L  .  S.  308,  22  S.  Ct. 
133,  46  L.  Ed.  213 

3  Often  so  attached  ."^s  occasion  de- 
mands, are  such  pern'iti.  as  the  follow- 
ing: For  other  insuran-?^  (§  252);  to 
remain  unoccupied  a  portion  of  each 
year  (§§271,  272,  273).  or  to  remain 
imoccupied  a  portion  of  et^ch  year  in 
charge  of  a  competent  per.^on;  to  use 
kerosene,  oil,  or  gas  sto-^es;  to  use 
steam  and  electricity  for  heating, 
lighting  and  power;  to  use  benzine  or 
gasoline  or  other  prohibited  articles,  or 
occupations,  with  or  without  restric- 
tions (§§  269.  281);  to  make  additions, 
alterations  and  repairs  (§  233),  or  to 
make  ordinary  alterations  and  repairs 
exclusive  of  j^dditions  or  reconstruc- 
tions; or  to  cover  builder's  risk  (§  258); 
to  cover  though  on  leased  ground 
(§  260);  to  work  in  factories  over  time 
(§  255).  Besides  such  permits,  other 
clauses  are  often  added,  for  example: 
lightning,  mortgagee  (§  290),  coinsur- 
ance (§  242),  average  (§  242),  auto- 
matic sprinkler  equipmer.t  (§  109); 
watchman  (§  256);  clear  -^space;  iron 
safe;  three-fourths  value  (§  242);  three- 
fourths  loss,  etc.  The  iron-safe  clause, 
requiring  a  safe,  inventory,  al^-;:'  set  of 
books,  is  used  mainly  in  the  South; 


recent  cases  construing  it  are  ap- 
pended, Mtna  Ins.  Co.  v.  Johnson 
(Ga.,  1907),  56  S.  E.  643  (substantial 
compliance  will  suffice);  Ai^tna  Ins.  Co. 
V.  BIoujU  (Miss.,  1907),  44  So.  162 
(assured  failed  to  keep  books  in  safe. 
Policy  avoided);  Coggins  v.  .'li^tna  Ins. 
Co.  (N.  C,  1907),  56  S.  E.  506  (policy 
avoided;  no  inventory  kept  as  re- 
quired); Reynolds  v.  German-Am.  Ins. 
Co.  (Md.,  1907),  68  Atl.  262  (policy 
avoided;  inventory  not  made  within 
30  days);  McMillan  v.  7ns.  Co.  (S.  C, 
1907),  58  S.  E.  1020  (substantial  com- 
pliance sufficient);  Sccttish  U.  &  N. 
Ins.  Co.  V.  Moore,  36  Tex.  Civ.  App. 
312  (substantial  compliance  sufficient). 
Even  imder  a  liberal  statute  there 
must  be  a  reasonable  fulfillment  of  the 
iron-safe  clause  warrantv,  Arkansas 
Ins.  Co.  V.  Luther  (Ark.^  1908),  109 
S.  W.  1022;  Arka7isas  Ins.  Co  v. 
Stuckey  (Ark.,  1907),  106  S.  W.  203; 
Yates  V.  Thomason  (Ark.,  1907),  102 
S.  W.  1112  (policy  avoided);  Arkaiisas 
Ins.  Co.  V.  McManus  (Ark.,  1908),  110 
S.  W.  797.  But  the  company  has  been 
held  estopped  from  insisting  upon  for- 
feiture, where  the  agent  issuing  the 
policy  knew  that  there  was  no  safe, 
Rudd  V.  Am.  Guarantee,  etc.,  Ins.  Co. 
(Mo.  App.,  1906).  35  Ins.  L.  J.  948 
Sometimes  an  earthquake  clause  is  at- 
tached to  the  policy  (§  280).    And  see 


460  MEANING   AND    LEGAL   EFFECT   OF   FJRE    POLICY 

ing  apparently  upon  the  prerogative  of  the  legislatures,  have  largely 
nullified  this  clause  of  the  standard  policies  by  applying  to  it  the 
modern  American  doctrine  of  parol  waiver.^ 

The  Massachusetts  policy,  and  other  standard  policies  like  it, 
have  no  similar  provision.  To  the  similar  clause  in  the  Wisconsin 
policy  are  added  phrases  regarding  knowledge  by  the  company's 
agent  prior  to  the  inception  of  the  contract,  and  also  regarding  his 
knowledge  after  loss,  which  powerfully  affect  its  operation  in  favor 
of  the  assured.^  The  South  Dakota  policy  has  the  following  ex- 
traordinary provision,  which,  so  far  as  conditions  affecting  the  risk 
prior  to  the  fire  are  concerned,  places  the  insurer  practically  at  the 
mercy  of  unscrupulous  claimants:  It  shall  he  the  duty  of  the  insurer,  in 
order  to  avail  himself  of  any  provision  in  this  policy  rendering  it  void, 
to  promptly  cancel  the  policy  as  provided  herein  upon  having  or  obtain- 
ing notice  or  knowledge  of  the  existence  of  any  facts  or  circumstances 
which  would,  according  to  the  terms  of  the  policy,  render  it  void;  other- 
wise it  will  he  deemed  to  have  waived  such  provision  or  provisions  void- 
ing the  policy.  Provided,  that,  if  the  grounds  for  cancellation  under 
the  last  clause  shall  he  distinctly  specified  in  the  written  notice,  such 
cancellation  may  he  effected  upon  twenty-four  hours'  notice  to  the  in- 
sured; and  actual  notice  to,  or  the  knowledge  of,  any  agent  of  the  com- 
pany as  above  mentioned  shall  be  deemed  notice  to,  and  knowledge  of, 
the  company. 

§  334.  Policy  not  Valid  Until  Countersigned. — This  provision  is 
binding,^  but  in  no  wise  interferes  with  a  closing  of  the  contract  by 
preliminary  oral  or  written  binder.-*  The  clause  often  fixes  the  place 
where  the  contract  is  consummated  and  the  policy  delivered,  and, 
in  that  event,  may  determine  what  body  of  law  shall  govern  as  to 
its  validity,  construction  and  discharge.^ 

Richmond    Coal    Co.     v.    Commercial  ""- Welch  y.  Fire  Assn.,  \20W\s.  ^5^, 

Union  Assur.  Co.,  37   Ins.   L.  J.  97;  98  N.  W.  227. 

Board   of   Education    v.    Alliance   Ins.  ^Badger  v.  Ins.  Co.,  103  Mass.  244. 

Co.,  159  Fed.  991.  4  See  §§  80,  81. 

1  See    §§  128,    173,    174.      And    see  s  Orient    Ins.    Co.    v.    Rudolph,    69 

German-Am.  Ins.  Co.  v.  Hyman  (Colo.,  N.  J.  Eq.  570,  61  Atl  26 
1908),  94  Pac.  27;  Dulaney  v.  Fidelity 
'&  Cas.  Co.  (Md.),  66  Atl.  614. 


CHAPTER  XVI 
Life  Insurance  Policy 

§  335.  Life  Insurance  Policy — Introductory. — The  general  prin- 
ciples of  law  governing  the  fire  policy  are  applicable  also  to  the  life 
policy.  It  will  be  well  to  note,  however,  that  while  almost  every 
individual  property  owner  is  practically  under  compulsion  to  seek 
the  protection  of  fire  insurance,  life  insurance  appears  to  the  public 
to  be  more  a  matter  for  free  choice.  Life  insurance,  therefore,  must 
be  made  to  look  attractive  and  valuable,  if  it  is  to  win  popular  favor. 
The  mercantile  fire  insurance  policy  usually  runs  for  the  term  of  a 
year.  It  is  frequently  renewed.  Each  premium  is  independent  and 
is  relatively  small;  but  the  life  insurance  policy  may  run  for  a  long 
period,  indeed  for  a  lifetime.  Its  premiums  in  the  aggregate  with 
interest  may  largely  exceed  the  face  of  the  policy.  To  pay  pre- 
miums during  the  whole  span  of  a  life,  in  return  for  a  contract 
eventually  turning  out  to  be  worthless  would  bring  dismay,  if  not 
disaster,  to  those  in  interest.  An  apprehension  of  such  a  possible 
result  tends  to  neutralize  the  effect  produced  by  the  most  alluring 
advertisements  circulated  by  life  insurance  agencies.  From  such 
considerations  it  may  easily  be  inferred  that  a  litigious  reputation 
is  not  a  desirable  asset  for  any  life  insurance  company  to  possess. 
Hence  in  its  policy  we  are  not  surprised  to  find  the  modern  "incon- 
testable'' clause;  and  we  rightly  conclude  that  the  legal  practitioner 
is  likely  to  be  engaged  in  less  controversy  over  the  warranties  of  the 
usual  life  policy  than  over  those  of  the  usual  fire  policy.^  Notwith- 
standing the  soundness  of  these  premises  we  must  not,  in  our  com- 
prehensive review  of  the  law  of  life  insurance,  ignore  provisions 
which  are  pecuhar  to  the  policy  of  life  insurance. 

In  New  York  the  legislature  has  made  obligatory,  except  as  applied 
to  industrial  insurance,  four  standard  forms  of  life  insurance  con- 
tracts, comparatively  simple  in  their  terms.^    It  will  be  profitable, 

1  The  life  insurance  policies  of  assess-  other  forms,  and  has  already  modified 
ment  companies  have  given  rise  to  the  statutory  forms.  Standard  hfe  in- 
much  litigation.  surance    policies    have   been    adopted 

2  Ins.  L..  sec.  101  The  insurance  by  the  legislatures  of  several  other 
superintendent  may  allow  the  use  of  states. 

[461J 


462 


MEANING    AND    LEGAL    EFFECT    OF    LIFE    POLICY 


however,  in  treating  of  this  subject,  to  follow  clause  by  clause  one  of 
the  older  and  more  complex  forms  of  policy^  still  in  general  use, 
which  will  at  the  same  time  present  the  law  points  involved  in  the 
construction  of  the  standard  forms. 

§  336.  Designation  of  Beneficiary. — Payable  to  the  insured,  his 
executors,  administrators,  or  assigns. 

A  policy  taken  out  in  this  form  is  the  property  of  the  insured,  is 
subject  to  the  claims  of  his  creditors,  and  upon  his  death  is  collectible 
by  his  executors  or  administrators  like  any  other  personal  assets  of 
his  estate;  unless  he  has  previously  assigned  it.^ 

§  337.  Other  Beneficiaries.— Oftentimes  the  policy  is  made  payable 
to  others  than  the  insured,  who  may  be  designated  by  such  general 
terms  that  it  is  not  easy  to  determine  to  whom  the  description  is  in- 
tended to  be  applicable,  under  the  circumstances  as  they  happen  to 
exist  at  the  time  of  the  decease  of  the  insured.^     In  such  cases  the 


1  Appendix,  ch.  II.  For  definition 
of  life  insurance  and  its  nature  see 
Ritter  V.  Mrd.  L.  Ins.  Co.,  169  U.  S. 
139,  151,  18  S.  Ct.  300.  At  p.  151  the 
court  says:  "Life  insurance  imports  a 
mutual  agreement,  whereby  the  in- 
surer, in  consideration  of  the  payment 
by  the  assured  of  a  named  sum  an- 
nually or  at  certain  times,  stipulates 
to  pay  a  larger  sum  at  the  death  of  the 
assured.  The  company  takes  into  con- 
sideration, among  other  things,  the 
age  and  health  of  the  parents  and 
relatives  of  the  applicant  for  insurance, 
together  with  his  own  age,  course  of 
life,  habits  and  present  condition;  and 
the  premium  exacted  from  the  assured 
is  determined  by  the  probable  duration 
of  his  life,  calculated  upon  the  basis  of 
past  experience  in  the  business  of  in- 
surance. The  results  of  that  experi- 
ence are  disclosed  by  standard  life  and 
annuity  tables  showing  at  any  age  the 
probable  duration  of  life." 

2  §  71 ,  supra. 

3  If  no  beneficiary  is  sufficiently 
designated  the  insurance  reverts  to 
the  estate  of  the  insured,  Boy  den  v. 
Massachusetts  Masonic  L.  Assoc,  1G7 
Mass.  242,  45  N.  E.  735.  So,  also,  if 
the  beneficiary  cannot  lawfully  take, 
Mayher  v.  Manhattan  L.  Ins.  Co.,  87 
Tex.  169,  27  S.  W.  124.  But  where 
there  vv'as  no  person  in  existence  of 
any  class  specified,  who  could  take  as 
beneficiary,  the  Nebraska  court  held 
that   the   fund    would    revert    to    the 


society  and  would  not  go  to  the  ad- 
ministrator of  the  member  or  to  his 
creditors,  Warner  v.  Modern  Woodmen 
(67  Neb.  233),  93  N.  W.  397  (citing 
many  cases).  Sometimes  the  insurance 
company  protects  itself  with  the  fol- 
lowing provision:  "The  production  by 
the  company  of  this  policy  and  a  re- 
ceipt for  the  sum  assured,  signed  by 
any  person  furnishing  proof  satis- 
factory to  the  company  that  he  or  she 
is  an  executor  or  administrator,  hus- 
band or  wife,  or  relative  by  blood,  or 
lawful  beneficiary  of  the  insured,  shall 
be  conclusive  evidence  that  such  sum 
has  been  paid  to  and  received  by  the 
person  or  persons  lawfully  entitled  to 
the  same,  and  that  all  claims  and  de- 
mands upon  said  company  under  this 
policy  have  been  satisfied."  Payment 
thus  made  to  anyone  so  named  will 
furnish  the  company  with  a  complete 
defense.  Brooks  v.  Met.  Life  his.  Co. 
(N.  J.,  1903),  56  Atl.  168;  Ruojf  v. 
John  Hancock  M.  L.  Ins.  Co.,  86  App. 
Div.  447.  No  one  of  those  thus  named 
for  the  exercise  of  the  companies'  elec- 
tion has  an  exclusive  right  of  action 
on  the  policy.  Hence,  it  has  been  held, 
no  one  alone  has  an  attachable  interest 
in  the  insurance  fund,  Providence  Co. 
S.  Bk.  V.  Vadnais  (R.  I.,  1904),  58  Atl. 
454.  But  any  receipt  fraudulently  ob- 
tained by  the  company  may  not  be 
conclusive,  McNicholas  v.  Prudential 
Ins.  Co.,  191  Mass.  304. 


OTHER   BENEFICIARIES  463 

words  are  given  a  popular  rather  than  a  technical  signification,^  and 
especially  where  the  appointment  is  gratuitous,  parol  evidence  is  freely 
received  to  arrive  at  the  real  meaning  of  the  insured.^ 

A  designation  of  beneficiaries,  however,  can  be  made  only  from 
the  classes  specified  and  in  accordance  with  statutes  and  with  the 
charter  and  by-laws  of  the  company,  so  far  as  they  may  govern  the 
subject.^  Thus,  in  a  Tennessee  case,  Offill,  a  member  of  the  Knights 
of  Honor,  had  his  benefit  certificate  made  payable  to  his  niece,  the 
plaintiff.  The  constitution  and  laws  of  the  society  provided  for 
three  classes  of  beneficiaries:  (1)  members  of  the  family;  (2)  blood 
relatives;  (3)  persons  dependent  on  the  member.  Offill  surrendered 
his  certificate  and  took  out  another  in  place  of  it  payable  on  his  death 
to  Miss  Coram  whom,  though  she  lived  with  her  parents,  he  had 
promised  to  support.  But  after  his  decease  it  appeared  that  his 
assistance  in  fact  rendered  to  her  was  limited  to  some  music  lessons, 
and  the  gift  of  a  dress,  a  pair  of  shoes,  and  a  watch.  The  court  held 
that  Miss  Corum,  not  being  dependent  upon  the  insured,  was  not 
entitled  to  the  appointment,  and  that  the  proceeds  of  the  insurance 
belonged  to  the  niece,  the  prior  appointee."* 

Other  courts  approach  this  matter  from  a  different  point  of  view. 
John  M.   Irvine,   named   the  plaintiff,   who  was  his  sister-in-law, 

i  Walter  V.  Hensul,  42  Minn.  204,44  zenberg,   162  Mass.   98,   38   N.   E.    17 

N.  W.  57.  (creditors  excluded);  Marsh  v.  Amer. 

2  Griswold  v.  Sawyer,  125  N.  Y.  411,  Legion  of  Honor,  149  Mass.  515,  21  N.  E. 
35  N  Y.  St.  R.  396,  26  N.  E.  464;  Pittel  1070;  Britton  v.  Roml  Arcanum,  46  N.  J. 
V.  Fidelity  Mut.  L.  Assn.,  86  Fed.  255,  Eq.  102.  18  Atl.  675;  Sanger  v.  Roths- 
30  C.  C.  A.  21,  52  U.  S.  App.  638  c/iiM,  123  N.  Y.  577,  34  N.  Y.  St.  R.  258, 
("legal  representatives"  construed  in  26  N.  E.  3;  Grand  Lodge  v.  Iselt  (Tex. 
the  light  of  an  assignment  of  policy  by  Civ.  App.),  37  S.  W.  377.  The  policy 
the  insured  himself);  Knights  Templars  may  reserve  to  the  company  the  right 
&  Masonic  M.  A.  Assn.  v.  Greene,  79  to  appoint  the  beneficiary  from  certain 
Fed.  461  (all  the  circumstances  and  classes.  Brooks  v.  Metropolitan  Life 
context  may  be  invoked  to  determine  Ins.  Co.,  70  N.  J.  L.  36,  56  Atl.  168. 
whether  "heirs"  includes  widow).  The  subject  of  change  of  beneficiary  is 
The  rule  of  construction  is  analogous  considered  in  §§  64,  68,  69,  supra. 

to  that  applied  in  the  case  of  wills  and  *  Ofpll    v.    Supreme    Lodge    (Tenn., 

other  gifts,  Mut.  Ben.  Life  Ins.  Co.  v.  1898),  46  S.  W.  758.    Where  one  desig- 

Bank,  24  Ky.  L.  R.  580,  69  S.  W.  1;  nation  of  beneficiary  fails,  a  previous 

Duvall  V.  Goodson,  79  Ky.  224;  Rnss  v.  valid    designation    remains    in    force, 

Supreme  Council,  110  La.  588,  34  So.  Smith  v.  Boston  &  M.  R.  Relief  Assn., 

697.  168  Mass.  213,  46  N.  E.  626;  Grand 

3  Masonic  Mut.  Ben.  Assoc,  v.  Sever-  Lodge  of  Wisconsin  of  Order  of  H.  S. 
son,  71  Conn.  719,  43  Atl.  192  (by-laws  v.  Lemke,  124  Wis.  483,  102  N.  W.  911 
in  force  at  time  of  member's  decease  (survivors).  The  New  York  court  has 
may  govern);  Norwegian  Old  People's  decided  that  a  company,  by  accepting 
Home  Soc.  v.  Wilson,  176  111.  94,  52  dues,  is  estopped  from  contesting  a 
N.  E.  41;  Smith  v.  Supreme  Tent,  127  certificate  in  favor  of  a  "dependent," 
Iowa,  115,  102  N.  W.  830  ("rela-  on  the  ground  that  she  was  not  a  de- 
tives");  Carson  v.  Vicksburg  Bank,  75  pendent,  Tramblay  v.  Supreme  Coun- 
Miss.  167,  22  So.  1,  37  L.  R.  A.  559  ci7,  90  App.  Div.  39,  appeal  withdrawn, 
(creditors  excluded);  Clarke  v.  Swart-  179  N.  Y.  517. 


464  MEANING    AND    LEGAL    EFFECT   OF    LIFE    POLICY 

beneficiary  in  his  certificate  of  membership  in  the  Knights  of  Pythias. 
The  association  with  full  knowledge  of  the  relationship,  which  in- 
deed was  disclosed  upon  the  face  of  the  certificate,  issued  the  certifi- 
cate and  received  payment  of  dues  thereunder.  On  the  trial,  how- 
ever, it  contended  that  the  appointment  was  not  lawful  within  the 
meaning  of  its  by-laws.  The  New  York  court,  reversing  the  court 
below,  held  that  the  association  was  estopped  from  raising  this 

defense.^ 

But  although  the  designation  of  the  beneficiary  may  be  irregular, 
or  may  altogether  fail,  the  court  will  enforce  the  contract  if  possible 
and  not  allow  it  to  be  defeated. ^ 

As  already  shown  the  general  rule  is  that  as  soon  as  the  contract 
is  made  rights  of  third  party  beneficiaries  become  vested,  and  cannot 
be  disturbed  by  a  fresh  appointment  unless  such  a  power  is  expressly 
reserved  to  the  insured. •"* 

§  338.  Insurance  Payable  to  Heirs  or  Legal  Representatives.— 

In  the  case  of  gratuitous  arrangements,  the  probable  intent  of  the 
donor,  if  lawful,  must  be  carried  out.  As  popularly  used,  the  words 
"heirs"  and  "heirs  at  law"  and  similar  phrases  usually  refer  to  the 
distributees  or  persons  who  would  receive  personalty  in  case  of 
intestacy,  and,  in  the  absence  of  other  evidence  of  intent,  such  is  the 
signification  accepted  by  the  courts  in  construing  the  life  policy  or 
certificate.^    Thus  it  was  held  that  the  phrase  "lawful  heirs"  was 

1  Strange    v.    Supreme    Lodge,    189  gent  v.  Supreme  Lodge,  158  Mass.  557, 

N.  Y.  346,  82  N.  E.  433.     See  §  130,  33  N.  E.  650;  Addison  v.  New  Eng. 

su-pra.     In  the  same  case  it  was  also  Comml.    Traveller:^'   Assoc,   144   Mass. 

held  that  where  the  first  designation  591;    Carson   v.    Vicksburg    Bank,   75 

is  made  for  value  received  from  the  Miss.  167,  22  So.  1,  37  L.  R.  A.  559. 

beneficiary,    the    rights   of    the   bene-  It  has  been  held  in  New  York  by  a 

ficiary  are  vested,  and  the  usual  power  divided  court  that,  where  an  associa- 

of   making   a   new    appointment,    re-  tion  issues  a  certificate  in  favor  of  a 

served  to  the  insured  by  the  by-laws,  beneficiary  outside  the  permitted  class, 

no  longer  exists  without  consent  of  the  only  the   association   can   avail   itself 

beneficiary ;    citing    Conselyea    v.    Su-  of  the  act  ultra  vires.    The  beneficiaries 

preme  Council,  3  App.  Div.  464,  aff'd  contemplated  by  the  by-laws  were  not 

157  N.  Y.  719;  Webster  v.  Welch,  57  allowed  to  recover,  by  reason  of  the 

App.  Div.  558;  Smith  v.  National  Ben.  fact    that    the    association    made    no 

Soc,    123    N.    Y.    85.      Compare    the  objection     to     those     irregularly    ap- 

Nebraska  case  in  which  it  was  held  pointed,  Coulson  v.  Flynn,  181  N.  Y. 

that    though    conviction    for    felony  62,  73  N.  E.  507. 

amounted  by  the  by-laws  to  expulsion  3  See  §  64,  supra;  Perry  v.  Tweedy 

from    membership,    yet    collection    of  (Ga.,  1907),  57  S.  E.  782.    A  right  to 

assessments  with  full  knowledge  of  the  change  beneficiaries,  though  expressly 

facts  constituted  a  waiver,  Pringle  v.  reserved,   does  not  include  power  to 

Modern     Woodmen    (Neb.,  1907),  113  surrender  the  policy  for  cancellation 

N.  W.  231.  without  consent  of  the  beneficiaries, 

^  Hadlei/  v.  Odd  Fellows,  173  Mass.  Holder  v.  Prudential  Ins.  Co.   (S.  C, 

583,  54  N.  E.  345;  Clarke  v.  Su-aHzen-  1907),  57  S.  E.  853. 

hrrg,  162  Mnss    98,  .-^S  N.  E.   17;  Snr-  *  .Johnson   v.    Knights  of  Honor,  63 


INSUEANCE  PAYABLE  TO  WIFE 


465 


used  in  a  colloquial  sense  and  included  the  widow,  though  technically 
not  one  of  the  heirs  at  law.^  And  "legal  heirs,"  it  is  said,  includes 
all  the  distributees  under  the  statute  of  distributions.^ 

The  phrase  "legal  representatives"  properly  means  executors  or 
administrators,  including  also  assigns/"*  and  such  signification  will 
naturally  be  given  to  it,^  but  not  necessarily,  since  the  purpose  of 
the  donor,  if  lawful,  must  control.  Thus  where  a  policy  was  made 
payable  to  the  "legal  representatives"  of  the  insured,  the  court  re- 
fused to  allow  the  proceeds  to  fall  into  the  general  assets  of  his  estate 
for  the  benefit  of  his  creditors,  and  held  that  he  intended  in  that 
instance  to  designate  his  wife  and  children.^ 

Where  a  policy  is  payable  to  wife  and  children,  or  other  benefici- 
aries, they  all  divide  the  proceeds  equally,  and  not  in  accordance  with 
the  statute  of  distributions,  unless  statutes  or  by-laws  so  provide.* 


§  339.  Insurance  Payable  to  Wife. — An  "affianced  wife"  is  not  "a 
wife  "  within  the  meaning  of  statutes  or  of  rules  of  an  association.'' 


Ark.  255,  13  S.  W.  794,  8  L.  R.  A.  732; 
Mullen  V.  Reed,  64  Conn.  240,  29  Atl. 
478,  24  L.  R.  A.  664,  42  Am.  St.  R.  174; 
Hubbard  v.  Turner,  93  Ga.  752,  30 
I..  R.  A.  593,  20  S.  E.  640  (money  went 
to  brother);  Britton  v.  Supreme  Coun- 
cil, 46  N.  J.  Eq.  102,  18  Atl.  675,  19 
Am.  St.  R.  376  (money  went  to 
mother);  Northwestern  M.  A.  Assoc,  v. 
Jones,  154  Pa.  St.  99,  26  Atl.  253,  32 
W.  N.  C.  169  ("heirs"  does  not  mean 
executor  or  administrator  of  estate  of 
insured).  It  is  held  in  some  jurisdic- 
tions, however,  that  the  administrator 
or  executor  of  the  insured  may  collect 
by  suit  and  distribute  to  the  rightful 
beneficiaries,  Janda  v.  Union,  71  App. 
Div.  150,  75  N.  Y.  Supp.  654,  aff'd 
173  N.  Y.  617,  66  N.  E.  1110;  Bishop 
V.  Grand  Lodge,  112  N.  Y.  627,  20  N.  E. 
562;  Clarke  v.  Swartzenberg ,  162  Mass. 
98,  38  N.  E.  17;  Rose  v.  M^ortha7n,  95 
Tenn.  505,  32  S.  W.  458,  30  L.  R.  A. 
609;  but  see  Schoep  v.  Bankers'  Alliance 
Ins.  Co.,  104  Iowa,  354,73  N.  W.  825; 
Iowa  State  T.  M.  Assoc,  v.  Moore,  73 
Fed.  750,  34  U.  S.  App.  670, 19  C.  C.  A. 
662. 

1  Hannigan  v.  Ingraham,  55  Hun 
(N.  Y.),  257,  28  N.  Y.  St.  R.  530,  8 
N.  Y.  Supp.  232;  Alexander  v.  Associa- 
tion, 126  111.  558,  18  N.  E.  556,  2  L.  R. 
A.  161  (all  went  to  widow);  Lyons  v. 
Yerex,  100  Mich.  214,  58  N.  W.  1112, 
43  Am.  St.  R.  452  ("heirs  at  law" 
includes  widow);    Schnltz  v.   //?.<•■.    Co., 


59  Minn.  308,  61  N.  W.  331;  Leavitt  v. 
Dunn,  56  N.  J.  L.  309,  28  Atl.  590,  44 
Am.  St.  R.  402  ("heirs "means  "widow 
as  well  as  children");  contra,  Gauch 
V.  Ins.  Co.,  88  111.  251,  30  Am.  Rep. 
554;  Phillips  v.  Carpenter,  79  Iowa, 
600,  44  N.  W.  898. 

2  Thomas  v.  Covert,  126  Wis.  593. 
The  term  "heirs"  includes  widow 
where  the  widow  is  one  of  the  next  of 
kin.  Burns  v.  Burns,  190  N.  Y.  211. 

3iV.  Y.  Milt.  L.  Ins.  Co.  v.  Arm- 
strong, 117  U.  S.  591,  597,  6  S.  Ct.  877, 

29  L.  Ed.  997. 

^Sulz  V.  M.  R.  F.  L.  Assoc,  145 
N.  Y.  563,  40  N.  E.  242,  28  L.  R.  A. 
379;  People  v.  Phelps,  78  111.  147.  And 
see  Leonard  v.  Harney,  173  N.  Y.  352, 
66  N.  E.  2  and  Colder  v.  Chandler,  87  Me. 
63,  32  Atl.  784  (legal  representatives 
held  the  proceeds  in  trust  for  "heirs"). 

5  Murray  v.  Strang,  28  111.  App.  608; 
Schultz  V.  Citizens'  Mtd.  L.  Ins.  Co.,  59 
Minn.  308,  61  N.  W.  331;  Rose  v. 
Wortham,  95  Tenn.  505,  32  S.  W.  458, 

30  L.  R.  A.  609.  And  see  Griswold  v. 
Sawrjer,  125  N.  Y.  411,  35  N.  Y.  St.  R. 
396,  26  N.  E.  464. 

(^Bell  V.  Kinneer,  101  Ky.  271,  40 
S.  W.  686,  19  Ky.  L.  Rep.  545;  Small 
V.  Jose,  86  Me.  120,  29  Atl.  976;  Jack- 
man  v.  Nelson,  147  Mass.  300. 

1  Palmer  v.  Welch,  132  111.  141,  23 
N.  E.  412.  But  an  "affianced  wife" 
might  come  within  the  class  of  "de- 
pendents," McCnrthy  v.  Svprem.e  Lodge, 


466 


MEANING    AND    LEGAL    EFFECT   OF    LIFE    POLICY 


§340.  Insurance  Payable  to  Children.— The  term  "children" 
will  not  generally  be  extended  to  include  grandchildren,^  but  if 
needful  to  effectuate  the  apparent  intent  of  the  insured,  "child"  is 
held  to  mean  an  adopted  child;  ^  and  "orphans"  is  held  to  mean 
"children,"  rather  than  those  only  who  are  bereft  of  both  parents.^ 
Children  born  after  the  contract  are  included,  unless  the  children  are 
specificajly  named;  ^  and  children  subsequently  born  by  a  second 
wife  participate  equally  in  the  fund.^  In  case  of  a  policy  to  "my 
wife  Mary  and  children,"  a  child  by  a  former  wife  is  a  beneficiary.'^ 
To  "be  paid  to  his  wife  M.  K.  and  children,"  means  to  his  children 
by  this  wife  or  others,  not  M.  K.'s  children^ 

§  341.  Insurance  Payable  to  Family,  Dependents,  Survivors,  etc. 

—"Family"  may  include  persons  who  are  not  relatives,  if  residing 
with  the  insured. »  Here  again  the  intent  of  the  insured  must  if 
possible  be  ascertained.^  Thus  an  adult  son  though  not  dependent 
upon  or  residing  with  the  insured  may  be  included  ;^'^  also  stepchildren 
who  have  married  and  left  the  household  of  the  insured. ^^ 


153  Mass.  314,  26  N.  E.  868, 11  L.  R.  A. 
144,  25  Am.  St.  R.  637.  So  a  woman, 
believing  herself  to  be  a  lawful  wife, 
was  held  protected  within  the  same 
class,  Crosby  v.  Ball,  4  Ont.  Law  R. 
490.  It  has  been  held  that  the  in- 
surance company  is  protected  in  mak- 
ing payment  in  good  faith  to  the  al- 
leged beneficiary  named  as  wife  and 
need  not  investigate  the  validity  of 
the  marriage.  Met.  Life  Ins.  Co.  v. 
Louisville  Trust  Co.  (Ky.,  1905),  89 
S.  W.  268.  As  to  mistresses  named  as 
beneficiaries.  Independent,  etc.,  Sons  of 
Jacob  V.  Henderson,  76  Miss.  326,  71 
Am.  St.  R.  532,  24  So.  702  (appoint- 
ment sustained);  Keener  v.  Grand 
Lodge,  38  Mo.  App.  543  (appointment 
not  sustained);  Brown  v.  Mansur,  64 
N.  H.  39,  5  Atl.  768  (assignment  of 
certificate  to  mistress  for  support  of 
child  sustained).  Second  wife  held  en- 
titled to  insurance  on  death  of  first 
wife,  Speegle  v.  Sovereign  Camp  (S.  C, 
1907),  58  S.  C.  435. 

» Russell  V.  Russell,  64  Ala.  500; 
Small  V.  Jose,  86  Me.  120,  29  Atl.  976; 
U.  S.  Trust  Co.  V.  Mut.  Ben.  Life  Ins. 
Co.,  115  N.  Y.  152,  24  N.  Y.  St.  R.  1, 
21  N.  E.  1025;  Winsor  v.  Association, 
13  R.  I.  149.  But  see  Continental  Life 
Ins.  Co.  V.  Palmer,  42  Conn.  60,  19 
Am.  Rep.  530;  Re  Conrad's  Estate, 
89  Iowa,  396,  56  N.  W.  535;  Duvall  v. 
Goodson,  79  Ky.  224. 


2  Virgin  v.  Marwick,  97  Me,  578,  55 
Atl.  520;  Martin  v.  ^'Etna  Life  Ins.  Co., 
73  Me.  25,  and  see  Kemp  v.  New  York 
Produce  Exchange,  31  App.  Div.  175, 
54  N.  Y.  Supp.  678.  Illegitimate  chil- 
dren described  as  "adopted  children" 
allowed  to  recover,  Hanley  v.  Supreme 
Tent,  38  Misc.  161.  77  N.  Y.  Supp.  246. 

3  Fischer  v.  Malchow,  93  Minn.  396, 
101  N.  W.  602. 

*  Roquemore  v.  Dent;  Dent  v.  Roque- 
more,  135  Ala.  292,  33  So.  178,  93  Am. 
St.  R.  33;  Scull  v.  jEtna  L.  Ins.  Co., 
132  N.  C.  30,  43  S.  E.  504,  60  L.  R.  A. 
615,  95  Am.  St.  R.  615;  Thomas  v. 
Leake,  67  Tex.  469,  3  S.  W.  703.  But 
see  Conn.  Mut.  Life  Ins.  Co.  v.  Bald- 
win, 15  R.  I.  106,  23  Atl.  105. 

5  Helmken  v.  Meyer,  118  Ga.  657,  45 
N.  E.  450;  Ric'er  v.  Ins.  Co.,  27  Minn. 
193,  6  N.  W.  771,  38  Am.  Rep.  289. 

6  McDermott  v.  Centennial  Mut.  Life 
Asso.,  24  Mo.  App.  73.  If  the  phrase 
"our  children"  is  used  the  rule  is 
different,  Evans  v.  Opperman,  76  Tex. 
293,  13  S.  W.  312. 

7  Koehler  v.  Centennial  Mut.  Life 
Ins.  Co.,  66  Iowa,  325. 

8  Carmichael  v.  Northwestern  Mvi. 
Ben.  Assoc,  51  Mich.  494. 

8  Folmer's  Appeal,  87  Pa.  St.  133. 

10  Klotz  v.  Klotz,  15  Ky.  L.  Rep.  183, 
22  S.  W.  551. 

11  Tepper  v.  Supreme  Council,  16 
N.  J.  Eq.  638. 


BENEFICIARIES   MAY   SUE  467 

A  wife  and  child  were  held  to  be  the  "immediate  family"  in  place 
of  the  father  of  the  insured  who  had  ceased  to  be  properly  desig- 
nated.^ 

Occasional  presents  to  a  beneficiary  are  not  enough  to  make  him 
a  "dependent."  There  must  be  dependency  in  a  material  degree  for 
assistance  or  support.^  A  person  who  is  neither  a  relative  of  the 
insured,  nor  a  member  of  his  household,  nor  connected  with  him  by 
marriage  is  not  to  be  regarded  as  a  "survivor,"  as  that  term  is  used 
in  a  certificate  or  in  the  rules  of  an  association.^ 

In  a  Massachusetts  case,  the  household  consisted  of  Wilber,  the 
insured,  his  wife  and  her  two  unmarried  sisters.  One  of  the  sisters 
and  the  insured  earned  the  needed  funds  for  the  common  support 
while  the  wife  and  the  remaining  sister  cared  for  the  house.  Wilber 
took  out  a  benefit  certificate  after  the  death  of  his  wife,  to  aid  the 
sisters  in  the  event  of  his  own  death,  making  one  of  them  beneficiary 
by  the  terms  of  the  policy.  The  court  concluded  that  a  jury  might 
find  from  the  evidence  that  the  beneficiary  was  "dependent"  upon 
the  assistance  of  Wilber  to  support  herself  and  sister  in  his  lifetime 
in  the  same  degree  of  comfort  in  which  they  had  theretofore  lived, 
and  that  an  obligation  to  furnish  such  assistance,  although  perhaps 
not  enforceable  at  law,  might  have  rested  upon  moral  and  equitable 
grounds.^ 

§  342.  Beneficiaries  May  Sue. — Upon  maturity  of  the  policy,  third 
parties  appointed  therein  by  the  insured  as  beneficiaries  may  in  most 

1  Knights  of  Columbus  v.  Rowe,  70  3  Grand  Lodge  v.   Lemke,   124  Wis. 

Conn.  545,  40  Atl.  451.    As  construing  483,  102  N.  W.  911;  Koerts  v.  Grand 

"  immediate  family  "  see  also  Norwegian  Lodge,  1 19  Wis.  520,  97  N.  W.  163. 
Soc.  V.  Wilson,  176  111.  94,  99,  52  N.  E.  *  Wilber  v.  Supreme  Lodge,  192  Mass. 

41  (married  daughter  included  though  477,  78  N.  E.  445.    The  same  court  in 

residing  elsewhere);  Larkin  v.  Knights  an  earlier  case  said:  "Trivial  or  casual, 

of  Columbus,  188  Mass.  22,  73  N.  E.  or    perhaps    wholly    charitable    assist- 

850    (widow    preferred    to    designated  ance,  would  not  create  a  relation  of 

father).      What    constitutes    member-  dependency  within  the  meaning  of  the 

ship   in   a   "family,"   Grand  Lodge   v.  statute  or  by-laws.     Something  more 

McKay  (Mich.,  1907),  112  N.  W.  730;  is  undoubtedly  required.     The  bene- 

Supreme  Lodge  v.   Dewey,   142   Mich.  ficiary  must  be  dependent  upon  the 

666,  106  N.  W.  140.     "A  member  of  member  in  a  material  degree  for  sup- 

his  immediate  family  or  in  default  of  port  or  maintenance  or  assistance,  and 

such    family   one    of    his    blood    rela-  the  obligation  on  the  part  of  the  mem- 

tions,"  construed  in  Dalton  v.  Knights  her  to  furnish  it  must,  it  would  seem, 

r/ Co/wmftus,  80  Conn.  212,  67  Atl.  510.  rest    upon    some    moral,    or    legal    or 

^  Offill    V.    Supreme    Lodge    (Tenn.,  equitable  grounds,  and  not  upon  the 

1S98),    46    S.    W.    758;    Alexander    v.  purely    voluntary    or    charitable    im- 

Parler,   144   111.   355,  33   N.   E.    183;  pulses  or  disposition  of  the  member," 

McCarthy  v.  Supreme  Lodge,  153  Mass.  McCarthy  v.  New  Eng.  Order  of  Pro- 

314,  26  N.  E.  866;  Wilbur  v.  Supreme  tection,  153  Mass.  314,  318,  26  N.  E. 

Lodge,  192  Mass.  477  866. 


^       468 


MEANING    AND    LEGAL    EFFECT    OF    LIFE    POLICY 


jurisdictions  bring  action  at  law  in  their  own  name  as  the  real  parties 
in  interest  to  recover  the  fund.^ 

§  343.  Anticipatory  Breach.— By  the  weight  of  authority,  if  the 
insurer  renounces  the  continuing  contract  of  insurance,  upon  his 
part,  and  unequivocally  refuses  in  advance  of  its  maturity,^  to  per- 
form it,  the  insured  may  at  his  option  take  the  insurer  at  his  word. 
The  insured  is  then  relieved  of  the  duty  of  further  performance  on 
his  part,  and  may  maintain  an  action  at  law  for  damages,  before  the 
specified  date  of  expiration.^  For  example,  where  during  the  life  of 
the  policy  the  association  repeatedly  repudiated  liability  for  $5,000, 
the  face  of  the  policy,  and  declared  that  it  would  pay  only  $2,000  on 
maturity  of  the  policy,  the  New  Jersey  Supreme  Court  sustained  a 
present  action  at  law  for  damages.^ 

In  the  leading  case  cited  from  the  reports  of  the  United*  States 
Supreme  Court,^  the  contract  under   consideration,   it  should  be 

1  McLaughlin  v.  McLaughlin,  104 
Cal.  171,  37  Pac.  865;  Martin  v.  jEtna 
Ins  Co.,  73  Me.  25;  Fisher  v.  Donovan, 
57  Neb.  361,  365,  77  N.  W.  778  ("the 
money  became  absolutely  the  property 
of  the  beneficiaries");  Carraher  v. 
Ins.  Co.,  11  N.  Y.  St.  R.  665;  Gould  v. 
Association,  26  R.  I.  142,  58  Atl.  624. 
See  Lawrence  v.  Fox,  20  N.  Y.  268. 
The  estate  of  the  insured  has  nothing 
to  do  with  it,  Taylor  v.  Hair,  112  Fed. 
913;  Rollins  v.  McHatton,  16  Colo.  203, 
27  Pac.  254;  Pinneo  v.  Goodspeed,  120 
111.  524,  12  N.  E.  196;  McFarland  v. 
Creath,  35  Mo.  App.  112;  Hellenberg 
V.  Dist.  No.  1,  94  N.  Y.  580;  Manley 
V.  Manley,  107  Tenn.  191,  64  S.  W.  8; 
West  V.  Grand  Lod'je,  14  Tex.  Civ.  App. 
471,  479,  37  S.  W.  966.  In  Massachu- 
setts the  rule  was  otherwise,  and  no 
one  but  a  party  to  a  contract  could  sue 
upon  it;  but  by  statute  the  beneficiary 
may  now  sue  in  that  jurisdiction  also, 
Dean  v.  American  Legion,  156  Mass. 
435,31  N.  E.  1. 

■"-Roehm  v.  Horst.  178  U.  S.  1,  20 
a  Ct.  780,  44  L.  Ed.  953  (approving 
Hochster  v.  De  la  Tour.  2  El.  &  Bl.  678); 
Bla\,.ly  V.  Fidelity  Mut.  L.  Ins.  Co., 
143  Fed.  619;  Supreme  Council  v.  Dai.v, 
130  Fed.  101.  64'C.  C.  A.  4.35;  Supreme 
Council  v.  Black,  123  Fed.  650,  59 
C.  C.  A.  414;  O'Neill  v.  Supreme  Coun- 
cil, 70  N.  J.  L.  410,  57  Atl.  463;  Mutual 
Res.  Fund  L.  Assn.  v.  Tavlor,  99  Va. 
208,  37  S.  E.  854  (value  of  policy  is  the 
measure  of  damages);  Lee  v.  Mut.  Life 
A^sn.,  97  Va.  160,  33  S.  E.  556;  John- 


stone V.  Millimj,  L.  R.  16  Q.  B.  D.  460 
("when  one  party  assumes  to  renounce 
the  contract,  that  is,  by  anticipation 
refuses  to  perform  it,  he  thereby,  so  far 
as  he  is  concerned,  declares  his  inten- 
tion then  and  there  to  rescind  the  con- 
tract. Such  a  renunciation  does  not 
of  course  amount  to  a  rescission  of  the 
contract,  because  one  party  to  a  con- 
tract cannot  by  himself  rescind  it,  but 
by  wrongfully'  making  such  a  renun- 
ciation of  the  contract  he  entitles  the 
other  party,  if  he  pleases,  to  agree  to 
the  contract  being  put  an  end  to,  sub- 
ject to  the  retention  by  him  of  his 
right  to  bring  action  in  respect  of  such 
wrongful  rescission.  The  other  party 
may  adopt  such  renunciation  of  the 
contract  by  so  acting  upon  it  as  in 
effect  to  declare  that  he  too  treats  the 
contract  as  at  an  end,  except  for  the 
purpose  of  bringing  an  action  upon  it 
for  the  damages  sustained  by  him  in 
consequence  of  such  renunciation," 
Lord  Esher  at  p.  467).  See  14  Harv. 
Law  Rev.  432  et  seq.  Likewise  an 
insurance  agent  wrongfully  dismissed 
may  sue  at  once  for  damages,  ^^tna 
Life  Ins.  Co.  v.  Nexsen,  84  Ind.  347. 

3  O'Neill  V.  Supreme  Council,  70 
N.  J.  L.  410,  57  Atl.  463. 

4  Raehm  v.  Horst,  178  U.  S.  1,  supra. 
At  page  14  the  court  cites  with  ap- 
proval an  insurance  case,  where  the 
insurer  abandoned  the  contract  by  his 
act  and  a  present  action  for  damages 
was  held  appropriate. 


ANTICIPATORY   BREACH  469 

observed,  was  for  the  sale  of  hops;  but  the  opinion  and  views  of 
the  court  seem  to  extend  to  contracts  of  insurance  as  well.  In  the 
three  insurance  cases  cited  from  the  lower  federal  courts  the  action 
of  the  assured  in  each  case  was  brought  to  recover  the  amount  of 
assessments  paid  upon  a  policy  and  interest;  ^  but  these  cases  also 
seem  to  approve  the  doctrine  of  the  text,  and  to  take  the  amount 
of  premiums  paid  and  interest  as  an  appropriate  measure  of  dam- 
ages for  the  breach,  if  the  assured  so  elect,  upon  renunciation  of 
the  contract  by  the  insurer.^ 

Especially  is  the  rule  clear,  where  the  insurer  not  only  repudiates 
the  contract  by  his  declaration  that  he  will  not  pay  in  future,  but  also 
violates  a  present  obligation  under  the  contract,  by  refusing  to  accept 
a  premium  when  due.^  It  would  indeed  be  a  harsh  doctrine  that  com- 
pelled the  insured  to  struggle  on  paying  premiums  all  his  life  or  ten- 
dering premiums  to  an  unfriendly  insurance  company,  in  constant 
apprehension  of  a  lawsuit  in  place  of  an  immediate  cash  payment, 
as  his  family's  inheritance  upon  his  own  decease."*  The  insurer's 
refusal  to  perform  his  promise,  however,  must  be  distinct,  unequivo- 
cal and  absolute,  and  the  reliance  by  the  insured  upon  such  renun- 
ciation must  be  equally  clear  to  warrant  his  action  for  damages 
before  maturit}^  of  the  contract.^  And  if  with  knowledge  of  the 
facts  the  insured  elects  to  continue  with  the  contract,  he  cannot 
subsequently  exercise  a  second  and  inconsistent  election  to  treat  it 
as  abrogated.^ 

On  the  other  hand,  the  courts  of  New  York  and  Massachusetts  hold 
that  an  attempted  reduction  of  the  face  of  a  policy  by  an  unwar- 
ranted by-law,  or  a  refusal  to  accept  a  premium,  will  give  no  present 
right  of  action  for  damages  against  the  insurer.'^     The  New  York 

1  Blakely  v.  Fidelity  Mut.  L.  Ins.  Co.,  5  Wells  v.  Hartford  M.  Co.,  76  Conn. 
143    Fed.    619;    Supreme    Council    v.      27,  55  Atl.  599. 

Daix,  130  Fed.  lOl;  Supreme  Council  V.  ^Supreme     Council     v.     Lippincott, 

Black,  123  Fed.  650  (citing  many  cases).  134  Fed.  824,  67  C.  C.  A.  650,  69  L.  R. 

2  Supreme  Council  v.  Black,  123  Fed.  A.  803;  Blakeh/  v.  Fidelity  Mut.  L.  Ins. 
650,  59  C.  C.  A.  414  (citing  Roehm  v.  Co.,  143  Fed.  619. 

Horst,  178  U    S.  1,  and  other  cases);  ^  Porter    v.    Supreme    Council,    183 

Fawcett  v.  Iron  Hall,  64  Conn.  170,  192,  Mass.  326,  67  N.  E.  238    (court   does 

29  Atl.  614,  24  L.  R.  A.  815;   Union  not  decide   whether  a  present  suit  in 

Cent.  Life  Ins.  Co.  v.  Pottkor,  33  Ohio  equity   would   lie);    Kelh/   v.   Security 

St.  459,  31  Am.  Rep.   555;    American  Mut.  L.  Ins.  Co.,  186  N.  Y.  16  (strong 

Life  Ins.  Co.  v.  McAden,  109  Pa.  St.  dissenting  opinion  by  E.  T.  Bartlett, 

399,  1  Atl.  256.  J.);  Langan  v.   Supreme  Council,  174 

3  Fischer  v.  Hope  Ins.  Co.,  69  N.  Y.  N.  Y.  266,  60  N.  E.  932.  The  New 
161;  Wald's  Pollock,  Contracts  (3d  ed.),  York  and  Massachusetts  rule  is  dis- 
363.  approved  in  Wald's  Pollock,  Contracts 

*  See  dissenting  opinion  of  Judge  (3d  ed.),  363.  Notwithstanding  thc 
Bartlett  in  Kelly  v.  Security  Mut.  L.  declaration  by  the  company  that  it 
Im.  Co.,  186  N.  Y.  IS,  78  N,  E.  58^  ^'^n  pay  only  the  ajcaouut  as  reduced 


470  MEANING    AND    LEGAL    EFFECT    OF    LIFE    POLICY 

court  has  decided  that  the  proper  remedy  for  the  insured  in  such 
a  case  is  a  suit  in  equity  to  compel  the  insurer  to  hve  up  to  its 
contract  ^  and  to  recognize  its  obhgation  thereunder.  The  court 
in  adopting  this  exceptional  view  was  apparently  influenced  by 
the  apprehension  that  present  actions  for  damages  for  rescission 
or  renunciation  in  such  cases,  if  sustained,  might  throw  mutual 
benefit  life  insurance  companies  into  bankruptcy. ^  In  opposition 
it  may  be  forcibly  urged  that  under  the  Massachusetts  and  New 
York  rule,  and  especially  by  a  succession  of  illegal  acts,  a  company 
can  easily  induce  many  of  the  insured  to  abandon  their  insurance, 
rather  than  to  engage  in  a  hostile  and  unpromising  campaign  against 
the  company.  This  unfortunate  result  has  in  fact  followed  to  a 
startling  extent. 

§  344.  Anticipatory  Breach— Remedies  Available.— By  the  pre- 
vailing rule,  where  the  insurer  renounces  the  contract  prior  to  date 
of  performance,  the  policyholder  may  take  the  insurer  at  his  word 
and  presently  sue  for  damages,  or  he  may  bring  an  equitable  action 
to  preserve  the  contract,  or  he  may  tender  the  premium  and  upon 
maturity  of  the  contract  bring  action  on  the  policy.^ 

A  federal  judge  says:  "On  the  one  hand  it  is  held  that  where  the 
insurance  company  wrongfully  revokes  its  policy,  and  refuses  further 
to  be  bound  by  it,  the  holder  may  elect  whether  to  enforce  the  con- 
tract or  to  treat  it  as  rescinded.  If  he  elects  to  pursue  the  latter 
course,  his  measure  of  relief  is  the  amount  of  premiums  paid,  with 
interest,  and  this  though  he  has  had  the  benefit  of  insurance  under 
the  policy  from  its  inception  to  the  time  of  revocation,  and  even 
though  such  revocation  would  not  operate  in  law  to  avoid  the  pol- 
icy. .  .  .  On  the  other  hand,  it  is  held  by  many  authorities  that, 
if  the  assured  is  in  such  a  state  of  health  that  he  can  secure  other 
insurance  of  like  nature  and  kind,  his  measure  of  damages  is  the 

by  the  by-law,  nevertheless,  on  ma-  ^  Day  v.  Conn.  G.  Life  Ins.  Co.,  45 

turity  of  the  contract  it  must  pay  the  Conn.   480.     But  the  South  Carolina 

full  amount,  Porter  v.  Supreme  Coun-  court   holds   that   the   amount   of  the 

cil,  183  Mass.   326;  Gavt  v.  American  note  for  the  first  premium  is  the  meas- 

Legion,  107  Tenn.  603,  64  S.  W.  1070.  ure    of    damages    where    t) '^    insur^i 

Upon  abandonment  or  renunciation  of  refuses  to  deliver  a  policy  uti  agreec;, 

the  contract  before  maturity,  a  meas-  Prince  v.   State  Mut.   Ins.   Co.    (S.  C, 

ure  of  damages  is  the  amount  of  pre-  1907),  57  S.  E.  766.     If  the  contract 

miums   or   assessments   paid,   and   in-  is  vitiated  from  its  incep+ion   by  the 

terest.     See  cases  cited  in  last  section.  insurer's    fraud,  the    policyholder  can 

1  Langan  v.  Supreme  Council,  174  recover  back  all  premiums  paid  and 
N.  Y.  266,  66  N.  E.  932.  interest,  Moore  v.  Mvt.  Res.  Life  Fund 

2  Kelly   v.    Security  Mut.   Life  Ins.  iissn.,  N.  Y.  App.  Div.  (Sept.,  1907). 
Co,,  186  N.  Y.  16,  20,  78  N.  E.  584. 


APPLICATION   INCOKPORATED 


471 


difference  between  the  cost  of  carrying  the  insurance  which  he  has, 
for  the  term  stipulated  for,  and  the  cost  of  new  insurance  at  the 
rate  he  would  then  be  required  to  pay  for  a  like  term.  If,  however, 
he  is  unable  to  obtain  other  insurance,  then  his  measure  of  damages 
will  be  the  present  value  of  his  policy  as  of  the  date  of  death,  less  the 
estimated  cost  of  carrying  the  same,  from  the  date  of  cancellation, 
at  his  then  age."  ^ 

§  345.  Application  Incorporated. — In  consideration  of  the  state- 
ments and  agreements  in  the  application  which  are  hereby  made  a  part 
of  this  contract,  and  warranted  to  he  true,  etc. 

This  form  of  words  incorporates  the  statements  of  fact  and  stipu- 
lations of  the  application  into  the  contract  and  makes  them  express 
warranties.  If  the  application  is  made  a  part  of  the  policy,  it  is 
immaterial  in  which  instrument  the  words  "warranted  to  be  true" 
may  be  inserted.^'  But  in  mere  matters  of  opinion  good  faith  only  is 
required.^     If  the  warranties  of  the  application  are  not  expressly 


1  Krebs  v.  Security  Trust  &  Life  Ins. 
Co.,  156  Fed.  294  (citing  many  cases; 
the  court  also  considers  the  measure  of 
damages  in  case  of  insurance  with  an 
investment  feature  added,  or  when  the 
assured  is  entitled  to  accumulations 
and  profits,  and  concludes  that  the 
company  in  fault  must  surrender  the 
entire  profits  and  be  content  to  retain 
only  compensation  for  the  risk  run, 
citing  Abell  v.  Penn.  Mut.  Life  Ins. 
Co.,  18  W.  Va.  400).  Where  the  con- 
tract is  rescinded  for  the  insurer's 
fraud,  the  insurer  cannot  offset  against 
the  amount  of  premiums  paid  by  the 
insured  the  cost  to  the  insurer  of  carry- 
ing the  insurance  to  time  of  rescission, 
Moore  v.  Mut.  Res.  Fund  Life  Assn., 
121  App.  Div.  (N.  Y.)  335. 

2  Fell  V.  John  Hancock  Mut.  Life 
Ins.  Co.,  76  Conn.  494,  57  Atl.  175; 
Standard  Life  &  .Ace.  Ins.  Co.  v.  Mar- 
tin, 133  Ind.  376,  .35  N.  E.  105;  Clemans 
V.  Supreme  Assembh/,  131  N.  Y.  485, 
488,  30  N.  E.  496,^  16  L.  R.  A.  33; 
Cxishman  v.  U.  S.  Life  Ins.  Co.,  63 
N.  Y.  404;  Schane  v.  Metropolitan 
L.  Ins.  Co.,  76  App.  Div.  (N.  Y.)  271 
(breach  of  warranty  a:'oids  as  matter 
of  law;  materinlity  of  thing  warranted 
is  unimportant);  IlaC'ett  v.  Svpreme 
Council,  44  App.  Piv.  524,  60  N.  Y. 
Supp.  806,  aff'd  168  N.  Y.  588,  60 
N.  E.  1112  (assured  presumed  to  read 
application);    Northwestern    L.    Assur. 


Soc,  23  Ind.  App.  121,  53  N.  E.  787. 
As  to  what  reference  will  incorporate 
an  extrinsic  paper  and  make  its  state- 
ments warranties,  see  §§  85,  106.  As 
to  rule  of  construction  favorable  to 
assured  see  Provident  Life  Assvr. 
Soc.  V.  Reutlinger,  58  Ark.  528,  533, 
25  S.  W.  835;  Brignac  v.  Pacific  Mut. 
L.  Ins.  Co.,  112  La.  574,  36  So.  595  ("do 
you  use  liquors?");  Supreme  Council 
V.  Brashears,  89  Md.  624,  43  Atl.  866, 
73  Am.  St.  R.  244;  Kattenbach  v. 
Omaha  L.  Assoc,  49  Neb.  842,  69 
N.  W.  135,  70  N.  W.  392.  As  to  where 
third  party  examined  simulated  the 
insured,  see  Given  v.  Prudential  Ins. 
Co.,  44  App.  Div.  (N.  Y.)  549,  60  N.  Y. 
Supp.  959.  The  application  and  policy 
together  usually  form  the  contract, 
Paquctte  v.  Prudential  Ins.  Co.,  193 
Mass.  215.  A  statement  of  fact  on  the 
face  of  the  policj^  does  not  in  life,  as  in 
marine,  insurance  become  a  warranty 
unless  the  contract  by  stipulation  ex- 
pressly makes  it  so,  Ellinger  v.  Mut. 
Life  ins.  Co.  (1905),  1  K.  B.  31,  35; 
Thompson  v.  Weems,  9  App.  Cas.  671, 
684. 

3  §  111,  supra;  Ames  v.  Manhattan 
L.  Ins.  Co.,  40  App.  Div.  465,  58  N.  Y. 
Supp.  244,  aff'd  167  N.  Y.  584,  60 
N.  E.  1106  (statement  as  to  obscure 
disease  construed  as  opinion);  es- 
pecially as  applied  to  answers  in 
medical  examination  which  nHi.«t  often 


472  MEANING    AND    LEGAL    EFFECT   OF    LIFE    POLICY 

made  a  part  of  the  contract,  they  are  held  to  be  extrinsic  representa- 
tions only.^  So  also  there  is  no  absolute  warranty  if  the  application 
provides  that  the  statements  are  true  to  the  best  of  the  applicant's 
knowledge  and  belief;  '  but  if  by  the  undisputed  testimony  a  war- 
ranty has  been  broken,  it  matters  not  that  the  breach  in  no  wise 
contributed  to  the  loss,  or  that  the  insured  acted  in  good  faith. 
In  the  absence  of  statutory  relief  the  insurance  is  defeated.  There 
is  no  issue  left  for  the  jury.-'' 

The  study  of  numerous  modern  instances  will  bring  us  to  a  clearer 
comprehension  of  the  doctrine  of  warranty  as  applied  in  the  law  of 
life  insurance.  Thus  in  a  Wisconsin  case  the  decedent,  Loehr,  hus- 
band of  the  plaintiff,  had  warranted  the  truth  and  fullness  of  his 
answers  as  written  by  the  representatives  of  the  company,  includ- 
ing the  statement  that  the  applicant  had  "never  been  sick."  In 
fact  he  had  had  three  attacks  of  inflammatory  rheumatism  of  a 
serious  character  on  different  occasions  within  a  period  of  three 
years.  No  mention  of  any  of  these  attacks  appeared  in  the  written 
application,  but  it  was  shown  on  the  trial  that  he  had  orally  stated 
to  the  medical  examiner  and  to  the  agent  that  he  had  had  grippe 
and  rheumatism  a  year  before  the  application  for  the  policy.  He 
did  not,  however,  specify  inflammatory  rheumatism  or  say  any- 
thing about  three  attacks.  On  appeal  the  Supreme  Court,  reversing 
the  court  below,  held  that  the  policy  was  avoided  for  breach  of 
warranty,  and  that  the  doctrine  of  waiver,  upon  a  partial  disclosure 
of  the  facts  orally  to  the  agent,  would  not  apply  in  aid  of  the  plain- 
tiff.4 

Another  good  illustration  of  the  application  of  an  affirmative 

be  largely  matter  of  opinion,  Jennings  Lodge,  5.3  N.  J.  L.  17,  20  Atl.  873; 
V.  Supreme  Council,  81  App.  Div.  76,  Ain.  Popular  Life  Ins.  Co.  v.  Day,  39 
81  N.  Y.  Supp.  90;  Louis  v.  Conn.  N.  J.  L.  89,  23  Am.  Rep.  198. 
Mut.  L.  Ins.  Co.,  58  App.  Div.  137,  68  2  See  §§  110,  111,  supra. 
N.  Y.  Supp.  686,  aff'd  172  N.  Y.  659,  3  See  §  107,  supra.  Jennings  v. 
65  N.  E.  1119;  Henn  v.  Met.  Life  Ins.  Supreme  Council,  81  App.  Div.  (N.  Y.) 
Co.,  67  N.  J.  L.  310,  51  Atl.  689  (dis-  76,  81  N.  Y.  Supp.  90;  Lutz  v.  Metro- 
ease);  Finn  v.  Met.  Life  Ins.  Co.,  70  politan  Life  Ins.  Co.,  186  Pa.  St.  527, 
N.  J.  L.  255,  57  Atl.  438  (pneumonia;  40  Atl.  1104.  In  most  jurisdictions 
but  statement  as  to  other  application  the  burden  is  on  the  defendant  to  show 
for  insurance  is  matter  of  fact).  So  falsity  of  statement,  for  example, 
also  as  to  "consumption"  and  "medi-  Spencer  v.  Citizens'  Mut.  L.  Ins.  Assn., 
cal  attendance,"  Schofield  v.  Met.  L.  142  N.  Y.  .505,  37  N.  E.  617;  Supreme 
Ins.  Co  79  Vt.  161,  64  Atl  1107.  Council  v.  Brashears,  89  Md.  624,  43 
i  Accident  Ins.  Co.  v  Crandal,  120  Atl.  866,  73  Am.  St.  R.  244.  Biit  see 
U.  S  527,  7  Smp.  Ct.  685,  30  L.  Ed.  S^'-eeneu  v.  Met.  L.  Ins.  Co.,  19  R.  I. 
740;  Bankers'  Life  ins.  Co.  v.  Miller,  171,  36  Atl.  9,  .38  L.  R.  A.  297,  61  Am. 
100  Md    1,  .59  Atl.  116;  Fitzgerald  v.  St.  R.  751. 

Supreme  Council,  39  Aon.   Div.   251,  ^  Lcehr  v.  Supreme  Assembly  (Wis., 

56  N.  Y.  Supp.  1005,  aff'd  167  N.  Y.  1907),    112    N.    W.    441.      Compars 

568,  60  N.  E.  1110;  McVey  v.  Grand  §  173,  supra. 


APPLICATION    INCORPORATED  473 

warranty  is  furnish'^d  in  a  Michigan  report  of  the  same  year.  Mudge, 
the  decedent,  had  warranted  that  he  had  "never  had  the  disease 
of  insanity."  By  the  undisputed  testimony  it  appeared  that  he 
had  previously  been  insane  and  had  been  so  adjudged,  and  that  he 
had  been  confined  and  treated  as  insane  and  that,  although  aware 
of  these  facts,  he  had  made  no  allusion  to  them  in  his  interview  with 
the  examiner.  There  was  evidence,  however,  tending  to  show  that 
the  examiner  and  also  the  agent  had  knowledge  of  the  previous  in- 
sanity of  the  applicant.  The  court  decided  that  the  policy  was 
avoided,  and  that  the  claimant,  the  widow,  could  not  avail  herself 
of  the  principle  of  estoppel,  inasmuch  as  the  insured  must  have 
known  that  his  answers  were  not  correct.^ 

In  a  Pennsylvania  case,  the  insured  in  his  application  declared, 
■'I  guarantee  that  the  applicant  does  not  and  will  not  practice  any 
bad  or  vicious  habit  that  tends  to  the  shortening  of  life."  The  judge 
held  that  this  was  a  warranty  as  to  the  future,  and  charged  the 
jury  that  if  afterwards  the  insured  practiced  the  pernicious  habit 
of  intemperance  the  policy  became  void.  A  verdict  was  rendered 
for  the  defendant  and  the  judgment  entered  thereon  was  affirmed 
on  appeal.^ 

But  in  another  Pennsylvania  case,  while  recognizing  that  a  war- 
ranty must  be  fulfilled,  the  court,  in  the  course  of  its  interpretation 
of  the  meaning  of  the  instrument,  found  a  way  of  escape  for  the 
plaintiff,  by  locating  the  untrue  declaration  outside  the  reach  of 
the  warranty.  In  his  application  the  decedent  had  declared  "that 
he  does  not  now,  nor  will  he,  practice  any  pernicious  habit  which 
obviously  tends  to  the  shortening  of  life."  The  policy  provided, 
"If  any  of  the  declarations  made  in  the  application,  upon  the  faith 
of  which  this  policy  is  issued,  shall  be  found  in  any  respect  untrue, 
this  policy  shall  be  null  and  void."  At  the  time  of  the  application 
the  applicant  was  of  correct  habits;  but  some  years  afterwards  he 
became  addicted  to  the  immoderate  use  of  intoxicating  drinks, 
resulting  in  delirium  tremens  and  death.  The  court  deduced  from 
the  word  "declared"  no  covenant,  promise,  or  warranty  for  the 
future,  but  a  mere  statement  of  future  intention.  The  declaration 
as  to  present  habits  being  true,  the  court  concluded  that  there  was 
no  breach  of  warranty,  and  reversed  in  favor  of  the  plaintiff.^ 

i  Mudfje     V.     Suvreme     Court,     etc.  ^Knight   v.   Mut.   Life  Ins.   Co.,   9 

(Mich.,  1907),  112  N.  W.  1130  ("good      Weekly  Notes  Cas.  (Pa.)  501. 
faith    is    essential    to  an    estoppel").  ^  Knecht  v.  Mut.  Life  Ins.   Co.,  90 

Compare  §  173.  Pa.  St.  118,  35  Am.  Rep.  641   (Trun- 

key,  J.,  dissenting).    Compare  §  110. 


474  MEANING    AND    LEGAL    EFFECT    OF    LIFE    POLICY 


Analogous  to  the  last  is  a  case  in  Illinois.  In  response  to  the 
interrogatory,  "Have  you  other  insurance?  If  so,  name  amount 
and  companies,"  the  written  statement  appeared  in  the  applica- 
tion, "Atlas,  $5,000;  Star,  $10,000;  will  drop  Star  July  15,  '96." 
The  answers  to  the  interrogatories  were  by  the  policy  incorporated 
and  warranted  to  be  full  and  complete.  In  fact  the  answer  to  the 
interrogatory  regarding  other  insurance  was  correct  so  far  as  it 
was  responsive  to  the  question,  but  the  volunteered  statement, 
regarding  the  future,  "will  drop  Star,"  etc.,  was  not  true.  The 
court  held  that  the  answers  were  warranties  only  so  far  as  they 
were  strictly  responsive  to  the  questions,  and  that  the  additional 
statement  was  mere  surplusage,  an  error  in  which  would  not  avoid 
the  policy.^ 

The  rule  is  well  settled  that  if  upon  the  face  of  the  application  it 
appears  that  a  question  is  unanswered,  or  the  answer  is  incomplete, 
the  company,  by  accepting  the  application  as  it  is,  waives  the 
obvious  defect.  Mrs.  Beck,  the  beneficiary  named  in  her  hus- 
band's policy,  brought  action  in  a  case  of  this  character.  Mr.  Beck 
had  agreed  as  follows:  "The  truthfulness  of  each  statement  above 
made,  by  whomsoever  written,  is  material  to  the  risk,  and  is  the 
sole  basis  of  the  contract;  I  hereby  warrant  each  and  every  state- 
ment herein  made  to  be  full,  complete,  and  true."  The  defendant, 
the  life  insurance  company,  contended  for  a  breach  of  warranty 
in  that  the  questions  were  not  fully  answered.  One  of  the  answers 
was  as  follows:  "I  have  never  had,  or  been  afflicted  with,  any  sick- 
ness, disease,  ailment,  injury,  or  complaint,  except  rheumatism, 
three  years  ago."  Close  to  the  answer  was  the  printed  direction, 
"Duration,  whether  trivial  or  otherwise.  If  rheumatism,  state 
whether  muscular,  sciatic,  or  inflammatory."  This  requirement  was 
not  complied  with,  but  there  was  no  fatal  breach.  If  the  company 
wanted  a  more  particular  answer  it  should  have  insisted  upon  it.^ 

Likewise  the  rule  is  well  settled  that  if  the  phraseology  of  the 
contract  in  its  entirety  permits,  the  court  will  construe  the  erroneous 
statement  as  representation  or  matter  of  opinion  rather  than  strict 
warranty.  Connor  answered  in  the  negative  each  of  these  questions: 
"Is  the  party  subject  or  predisposed  to  dyspepsia,  dysentery,  diar- 
rhoea, or  any  other  disease  or  bodily  infirmity?"  "Has  the  party 
had,  or  been  affected,  since  childhood,  with  .  .  .  fits  or  con- 
vulsions?"    By  the  policy  he  agreed  that  if  the  declaration,  or  any 

1  Commercial  Mut.  Ace.  Co.  v.  Bates,  (Ark.,  1907),  104  S.  W,  533.  Compare 
176  111.  194,  52  N.  E.  49.  §  113,  supra. 

*  Fidelity  Mut.  Ldfe  Im.  Co.  v.  Beck 


APPLICATION   INCORPORATED  475 

part  thereof,  should  be  found  to  be  in  any  respect  untrue,  the  policy 
should  be  null  and  void.  There  was  testimony  tending  to  show 
that  from  his  eighteenth  to  his  twentieth  year  Connor  had  had  a 
disorder  described  as  "fits,"  "convulsions,"  or  "spasms."  But 
the  policy  purported  to  be  issued  "in  consideration  of  the  representa- 
tions" made  in  the  application;  and  in  the  application  the  bene- 
ficiaries declared  that  no  "material  circumstance"  had  been  with- 
held. Taking  the  contract  in  its  entirety  the  court  was  of  opinion 
that  the  answer  was  a  representation,  and  that  if  the  jury  found 
that  the  answer  was  substantially  true  and  made  in  good  faith,  the 
plaintiff  was  entitled  to  recover.^ 

Many  other  illustrations  of  the  doctrine  of  warranty  are  cited 
in  the  following  sections  of  this  and  the  next  chapters. 

It  sometimes  happens  that  the  application,  though  expressly 
made  part  of  the  contract,  does  not  correspond  in  its  terms  with 
the  policy.  The  question  then  arises,  when  the  action  is  brought 
on  the  contract  and  not  for  its  reformation,  to  which  part  of  the 
contract  shall  the  court  give  preference.  Under  such  circumstances 
it  is  usually  held  that  the  policy  expresses  the  later  and  final  in- 
tention of  the  parties. 

For  example,  in  a  Pennsylvania  case,  the  policy  itself  was  made 
payable  to  the  insured,  his  executors,  administrators,  and  assigns; 
while  in  the  application  a  different  beneficiary  was  named.  The 
insured  had  the  policy  in  his  possession  for  twelve  years  and  the 
premiums  thereon  were  all  duly  paid.    The  court  adjudged  that  the 

1  Alabama  Gold  Life  Ins.  Co.  v.  tradictory  provisions  relating  to  the 
Johnston,  80  Ala.  467,  2  So.  125,  59  subject,  or  be  otherwise  reasonably  sus- 
Am.  Rep.  816  (symptoms  of  disease  ceptible  of  such  construction.  The 
not  intended  to  "be  material,  unless  court,  in  other  words,  will  lean  against 
affecting  soundness  of  health,  or  tend-  that  construction  of  the  contract  which 
ing  to  shorten  life).  In  the  last  case  will  impose  upon  the  assured  the  bur- 
the  court  says:  "In  construing  con-  dens  of  a  warranty,  and  will  neither 
tracts  of.  insurance  there  are  some  create  nor  extend  a  warranty  by  con- 
settled  rules  of  construction,  bearing  struction.  (3)  Even  though  a  war- 
on  this  subject,  which  we  may  briefly  ranty,  in  name  or  form,  be  created  by 
formulate  as  follows:  (1)  The  courts  the  terms  of  the  contract,  its  effect 
being  strongly  inclined  against  forfeit-  may  be  modified  by  other  parts  of  the 
ures,  will  construe  all  the  conditions  of  policy,  or  of  the  application,  including 
the  contract,  and  the  obligations  im-  the  questions  and  answers,  so  that  the 
posed  lilierally  in  favor  of  the  assured,  answers  of  the  assured,  so  often  merely 
and  strictly  agninst  the  insurer.  (2)  It  categorical,  will  be  construed  not  to  be 
reoiiires  the  clearest  and  most  un-  a  warranty  of  immaterial  tacts,  stated 
eauivocal  language  to  create  a  war-  in  such  answers,  but  rather  a  warranty 
rantv,  and  everv  statement  or  engage-  of  the  assured's  honest  belief  m  their 
ment  of  the  assured  will  be  construed  truth— or,  in  other  words,  tliat  they 
to  be  a  representation  and  not  a  were  stated  in  good  faith.  1  he  strong 
warranty,  if  it  be  at  all  doubtful  in  inclination  of  the  courts  is  thus  to 
meaning,  or  the  contract  contains  con-  make   these   statements,   or   answers^ 


476 


MEANING    AND    LEGAL    EFFECT   OF    LIFE    POLICY 


proceeds  of  the  policy  belonged  to  the  executor  of  the  insured  and 
not  to  the  person  specified  as  beneficiary  in  the  application.^ 

§  346.  Statutory  Provisions. — As  already  shown,  numerous  classes 
of  statutes  affect  and  control  the  purport  and  legal  meaning  of  the 
life  insurance  policy.  Two  classes  of  these  statutory  provisions,  of 
varied  phraseology  in  different  states,  may  appropriately  be  recalled 
in  this  connection.  The  one  class  require  in  substance  that  the  in- 
sured must  be  furnished  with  the  entire  contract,  so  that  at  all  times 
he  may  have  the  opportunity  of  knowing  just  what  his  obligations 
are.^  Within  the  reach  of  such  statutes,  therefore,  if  the  application 
is  part  of  the  contract,  it  is  usually  provided  that  a  copy  of  it  must  be 
given  to  the  insured,  or  incorporated  into  the  policy  itself.  A  failure 
to  comply  with  the  statute  requirement  precludes  a  defense  based  on 
anything  contained  in  the  application.^  Nevertheless,  while  such  an 
unattached  application  is  inadmissible  in  evidence,  it  may  be  used 
by  a  witness  to  refresh  his  memory.'' 

The  other  class  of  statutes  usually  provide  in  substance  that  a 
breach  of  warranty,  unless  in  a  matter  material  to  the  risk,  or  in- 
volving bad  faith  on  the  part  of  the  insured,  shall  not  avoid  the  policy.^ 


binding  only  so  far  as  they  are  ma- 
terial to  the  risk,  where  this  can  be 
done  without  doing  violence  to  the 
clear  intention  of  the  parties  expressed 
in  unequivocal  and  unqualified  lan- 
guage to  the  contrary."  Compare 
§§  110,  111. 

1  Burt  V.  Burt  (Pa.,  1907),  67  Atl. 
210;  HutHon  v.  Jenson,  110  Wis.  26; 
Hunter  v.  Scott,  108  N.  C.  213.  The  ap- 
plication, in  the  first  instance,  is  an 
offer,  MrCuUy's  Admr.  v.  Phoenix,  etc.. 
Co.,  18  W.  Va.  782.  If  the  terms  of  the 
policy  do  not  tally  witii  the  applica- 
tion, the  policy  amounts  to  a  mere 
counter-offer,  Stevens  v.  Capital  Ins. 
Co.,  87  la.  28.3,  which  requires  accept- 
ance in  order  to  become  a  contract, 
Gore  v.  Bankers',  etc.,  A.'tsn.,  88  Cal. 
609.  But  from  long-continued  posses- 
sion of  the  policy  and  payment  of 
premiums  thereon,  such  acceptance 
may  be  implied,  Bostwick  v.  Mutual 
Life  Ins.  Co.,  116  Wis.  392. 

^Holden  v.  Prudential  Ins.  Co.,  191 
Mass.  153,  157,  77  N.  E.  309. 

3  Rauen  v.  Prudential  Ins.  Co. ,  129  la. 
725  (the  case  is  to  be  considered  as  if  no 
such  paper  existed);  Moore  v.  Provident 
Sav.  L.  Assur.  Soc,  97  la.  226,  66  N.  W. 
157,  32  L.  R.  A.  473,  59  Am.  St.  R. 


411;  Met.  L.  Ins.  Co.  v.  Moore,  25  Ky. 
L.  R.  1613,  79  S.  W.  219;  Manhattan 
L.  Ins.  Co.  v.  Albro,  127  Fed.  281,  62 
C.  C.  A.  213  (paper  attached  not  a  true 
copy  because  an  answer  was  omitted); 
Lanqdean  v.  John  Hancock  M.  L.  Ins. 
Co.  (Mass.,  1907),  80  N.  E.  452  (a  copy 
substantially  correct  satisfies  the  stat- 
ute). Though  part  of  application  is  in 
evidence  of  which  copy  was  furnished, 
the  defendant  cannot  put  the  other 
part  in  evidence  of  which  no  copy  was 
attached  to  the  policy,  Paquette  v. 
Prudential  Ins.  Co.,  193  Mass.  215. 

■1  Holden  v.  Prudential  Life  Ins.  Co., 
191  Mass.  153,  77  N.  E.  309.- 

5  N.  Y.  Ins.  L.,  §  58,  combines  both 
provisions  in  one  clause:  "Every  policy 
of  insurance  issued  or  delivered  within 
the  state  on  or  after  the  first  day  of 
Jan.,  1907,  by  any  life  insurance 
corporation  doing  business  within 
the  state  shall  contain  the  entire  con- 
tract between  the  parties  and  nothing 
shall  be  incorporated  therein  by  refer- 
ence to  any  constitution,  by-laws, 
rules,  application,  or  other  writings 
unless  the  same  are  endorsed  upon 
or  attached  to  the  policy  when  issued; 
and  all  statements  purporting  to  be 
made  by  the  insured  shall  in  the  ab- 


STATUTOHV    PROVISIONS  477 

Under  these  liberal  statutes,  however,  the  interests  of  the  parties  are 
not  of  necessity  turned  over  to  the  discretion  of  a  jury,  though  it  may 
be  difficult  in  practice  to  draw  the  line  with  precision  between  issues 
which  properly  belong  to  the  court  and  those  which  should  go  to  the 
jury. 

Thus  under  such  a  statute  the  Texas  court  decided  that  answers 
in  the  application  concerning  medical  attendance  and  treatment, 
though  false,  would  not  necessarily  avoid  the  policy,  if  relating  to 
a  trivial  and  not  a  serious  disease.^  And  likewise,  under  a  similar 
statute,  the  Kentucky  court  heid  that  whether  the  representations 
of  the  applicant  regarding  his  other  insurance  and  his  use  of  in- 
toxicants were  substantially,  though  not  literally,  true,  presented  a 
question  for  the  jury.^ 

In  a  Massachusetts  case,  Barker,  the  insured,  warranted  in  his 
application  that  he  had  no  kidney  disease.  He  died  of  that  trouble 
about  three  months  later.  By  the  statute  of  that  state  warranties, 
if  contained  in  the  application,  are  in  effect  converted  into  mere 
representations,  which,  to  avoid  the  policy,  must  be  shown  to  be 
material  to  the  risk  or  to  hove  been  made  in  bad  faith.  On  the  trial, 
evidence  was  produced  tending  to  show  that  at  the  date  of  the  ap- 
plication Barker  was  in  sound  health,  or,  if  not,  that  at  least  he  had 
not  intentionally  misrepresented,  and,  furthermore,  that  any  mis- 
statements were  not  of  matters  necessarily  increasing  the  risk  of 
loss.     The  plaintiff's  verdict  was  left  undisturbed.^ 

Where  an  applicant  has  suffered  from  a  disease  so  grave  in  its 
nature  that  generally  it  is  recognized  as  having  a  tendency  to  shorten 
life,  and  fails  to  disclose  the  fact  in  answer  to  a  question  which  calls 
for  such  information,  it  may  be  ruled  as  matter  of  law  that  as  the  risk 
is  thus  increased  the  policy  is  void.'*  So  also  a  material  misstatement 
as  to  age  may  have  the  same  effect  as  matter  of  law.^  And  if,  with 
intent  to  deceive  the  insurer,  the  applicant  falsely  states  that  he  had 

sence  of  fraud  be  deemed  representa-  itself,  Barker  v.  Met.  Life  Ins.  Co.,  188 

tions  and  not  warranties.    Any  waiver  Mass.  542,  74  N.  E.  945  (sound  health); 

of  the  provisions  of  this  section  shall  Met.  Life  Ins.  Co.  v.  Howie,  62  Ohio  St. 

be  void."    And  see  §  118,  supra.  204. 

1  Modern  Order  v.  Hallmig  (Tex.  Civ.  ^  Barker  v.  Met.  Life  Ins.  Co.  (Mass., 

App.,  1907),  103  S.  W.  474.    Otherwise  1908),  84  N.  E.  490,  citing  many  cases, 

if  incorrect  answer  refers  to  a  serious  ••  Kidder   v.    Supreme    Commanderv, 

disease,  Life  Ass.  v.  Harris,  94  Tex.  192  Mass.  326,  78  N.  E.  469:  Brown 

25,    57    S.   W.    635,    86    Am.    St.    R.  v.    Greenfield    Life    Assn.,    172    Mass. 

813.  498;  Rainger  v.  Boston  Mut.  L.  Assn., 

^Met.  Life  Ins.  Co.  v.  Ford   (Ky.,  167  Mass.  109,  44  N.  E.  1088. 

1907),  102  S.  W.  876.     But  certain  of  5  Kidder   v.    Supreme    Commandery, 

such  statutes  refer  only  to  answers  and  192  Mass.  326,  78  N.  E.  469;  Dolan  v. 

statements  contained  in  the  applica-  Mzd.  Res.  Fund  L.  Assn.,  173  Maea 

tion,  not  to  a  condition  in  the  policy  197,  200,  53  N.  E.  398. 


478  MEANING    AND    LEGAL    EFFECT   OF    LIFE    POLICY 

never  used  intoxicating  liquors  to  excess,  or  had  never  been  rejected 
by  any  other  company,  the  court  will  dismiss  his  action  on  the 
policy,^  notwithstanding  the  statutory  provision. 

But,  on  the  other  hand,  where  the  insurer  in  reply  to  a  question 
calling  for  the  fact  has  not  been  informed  of  a  disease  which,  although 
serious,  may  not  have  a  tendency  to  shorten  life,  it  is  for  the  jury  to 
say  whether  the  risk  has  been  increased,^  or  whether  the  insured 
was  guilty  of  bad  faith  in  giving  his  answer. 

And  if  the  statute  further  provides  that  no  misrepresentation  shall 
be  deemed  material  unless  the  matter  misrepresented  shall  actually 
contribute  to  the  event  insured  against,  and  whether  it  so  contributed 
shall  be  a  question  for  the  jury,  then  the  question  of  avoidance  of 
the  policy  for  false  or  fraudulent  misrepresentations  of  material  facts, 
is  taken  from  the  court  and  relegated  to  the  jury.^ 

§  347.    Statements   as   to   Health  or  Freedom   from   Disease. — 

Health  is  a  relative  term,  for  probably  no  one  is  altogether  free  from 
ailments.  No  general  definition  of  sound  health  can  be  given  which 
would  accurately  apply  to  all  cases,  therefore  the  question  of  disease 
or  unsound  health  must  often  go  to  the  jury.''  To  violate  a  warranty 
of  good  health  it  must  appear  that  the  sickness  was  one  having  a 
tendency  to  shorten  life  or  permanently  impair  the  health  or  that  it 
amounted  to  a  vice  in  the  constitution.^    The  Ohio  court  concludes 

i  Langdean   v.    John   Hancock  Mut.  lings  v.  Ins.  Co.,  70  Vt.  477,  41  Atl. 

L.  Ins.  Co.  (Mass.,  1907),  80  N.  E.  452.  516. 

2  Kidder  v.  Supreme  Commandery,  ^  Conn.  Mut.  Life  Ins.  Co.  v.  Union 
192  Mass.  326,  78  N.  E.  469  (slight  Tr7/.s<  Co.,  112  U.  S.  250,  5  Sup.  Ct.  119, 
ailments  confining  to  bed);  Hogan  v.  28  L.  Ed.  708;  Bancroft  v.  Home  Ben. 
Met.  L.  Ins.  Co.,  164  Mass.  448;  Levie  Asso.,  120  N.  Y.  14,  30  N.  Y.  St.  R. 
V.  Met.  L.  Ins.  Co.,  163  Mass.  117.  175,  23  N.  E.  997;  Grattan  v.  Metro- 
And  see  Penn  Mut.  L.  Ins.  Co.  v.  politan  Life  Ins.  Co.,  92  N.  Y.  274,  44 
Mech.  Sav.  Bk.,  72  Fed.  413,  19  C.  C.  Am.  Rep.  372,  80  N.  Y.  292,  36  Am. 
A.  286,  38  L.  R.  A.  33,  aff'd  73  Fed.  Rep.  617  (germs  of  a  lurking  hidden 
653,  19  C.  C.  A.  316.  disease  do  not  avoid);  Schmitt  v.  Mich. 

3  Keller  v.  Home  Life  Ins.  Co.,  198  Mut.  L.  Ins.  Co.,  101  App.  Div.  (N.  Y.) 
Mo.  440  (certificate  of  medical  ex-  12  (temporary  ailment  not  "a  dis- 
aminer  recommended  the  risk;  two  ease");  Maine  Ben.  Assn.  v.  Parks,  81 
attending  physicians  testified  that  Me.  79, 16  Atl.  339,  10  Am.  St.  R.  240; 
they  had  told  the  insured  prior  to  his  Packard  v.  Metropolitan  Ins.  Co.,  72  N. 
application  that  he  had  consumption);  H.  1,  54  Atl.  287  ("sound  health"  is  op- 
Williams  v.  Ins.  Co.,  189  Mo.  70;  posed  to  serious  disease  or  vice  in  the 
Jenkins  v.  Ins.  Co.,  171  Mo.  375;  constitution);  Frenc/i  v.  M?/i.  7?e.s.  F)/«ff 
Schuermann  v.  7ns.  Co.,  165  Mo.  641;  Assn.,  Ill  N.  C.  391,  16  S.  E.  427,  32 
Aloe  v.  Life  Assn.,  164  Mo.  075;  Jacobs  Am.  St.  R.  803  (slight  illness  no  breach). 
V.  Life  A.ssn.,  146  Mo.  523.  But  see  Mut.  Life  Ins.  Co.  v.  Simpson, 

*  Pacard  v.  Met.  Ins.  Co.,  72  N.  H.  88  Tex.  333,  31  S.  W.  501,  28  L.  R.  A. 

1;  54  Atl.  287;  Dorey  v.  Ins.  Co.,  172  765,  53  Am.  St.  R.  757.     Open  sores 

Mass.   234,  51    N.   E.  974;   Barnes  v.  from  wound  are  not  a  disease.  Home 

Fidelity  Mut.  L.  Assoc,   191   Pa.   St.  Mut.  Lif$  Assn.  v.  Gillespie,  110  Pa. 

618.  43  Atl.  341.  45  L.  R.  A.  264;  Bil-  St.  84,  1  Atl.  340.    As  to  sore  on  the 


STATEMENTS   AS    TO    HEALTH    OR    FREEDOM   FROM    DISEASE    479 


that  in  life  insurance  "sound  health"  means  that  state  of  health 
which  is  free  from  any  disease  or  ailment  that  seriously  affects  the 
general  healthfulness  of  the  system;  not  a  mere  indisposition.'  A 
federal  judge  reviews  many  authorities  on  this  subject,  and  has 
this  to  say:  "What  is  to  be  understood  by  'serious  illness'?  If  any 
sickness  which  may  terminate  in  death,  then  it  must  embrace  almost 
every  distemper  in  the  entire  catalogue  of  diseases.  To  give  such 
an  interpretation  to  this  expression,  would,  we  have  no  doubt, 
defeat  a  recovery  in  a  large  majority  of  the  certificates  issued  by 
the  society.  The  true  construction  of  the  language  must  be  that 
the  applicant  has  never  been  so  seriously  ill  as  to  permanently  im- 
pair his  constitution,  and  render  the  risk  unusually  hazardous."  ^ 

In  answer  to  the  question,  "Have  you  ever  had  any  difficulty 
with  your  head  or  brain?"  the  applicant  said  "No;"  and  the  court 
decided  that  the  question  called  for  a  functional  or  organic  derange- 
ment, and  that  periodic  headaches  though  severe  did  not  constitute 
a  ground  for  forfeiture.^ 

The  fact  that  the  applicant  was  afflicted  with  dyspepsia  six  months 
or  more  before  the  application  was  signed  did  not  make  untrue  his 
statement  that  he  was  not  subject  to  dyspepsia  at  the  time  of  the 
policy.^ 


tongue  developing  into  cancer,  com- 
pare Story  V.  United  L.  &  Ace.  Ins. 
Assn.,  51  Hun,  644,  4  N.  Y.  Supp.  373, 
aff'd  125  N.  Y.  761,  27  N.  E.  408,  with 
Peck  V.  Wash.  Life  Ins.  Co.,  91  App. 
Div.  597,  87  N.  Y'.  Supp.  210.  As  to 
whether  an  idiot  or  insane  person  is  in 
sound  health,  compare  Robinson  v. 
Met.  Life  Ins.  Co.,  1  App.  Div.  269,  37 
N.  Y.  Supp.  146,  aff'd  157  N.  Y.  711, 
53  N.  E.  1131,  with  McNeil  v.  Assn., 
40  App.  Div.  581,  58  N.  Y.  Supp.  119. 
There  is  said  to  be  no  presumption  that 
insanity  existing  in  the  past  continues 
till  the  date  of  application,  Mvt.  Life 
Ins.  Co.  V.  Wisu-ell,  56  Kan.  765,  44 
Pac.  996,  35  L.  R.  A.  258;  Blaclstone 
V.  Stand.  L.  &  Ace.  Ins.  Co.,  74  Mich. 
592,  42  N.  W.  156,  3  L.  R.  A.  486.  As 
to  whether  a  statement  regarding 
health  or  disease  is  to  be  construed  as 
matter  of  fact  or  of  opinion  see  Provi- 
dence Sav.  Life  Assur.  Soc.  v.  Pruett, 
141  Ala.  688,  37  So.  700  (disease  of 
liver);  Rvpert  v.  Supreme  Court,  94 
Minn.  293,  102  N.  W.  715  (when  only 
bona  fide  belief  and  judgment  wi'I  be 
required);  Finn  v.  Met.  Life  Ins.  Co., 
70  N.  J.  L.  255,  57  Atl.  438.  And  in 
determining  whether  the  statement  is 


of  fact  or  opinion  it  is  reasonable  to 
consider  whether  it  relates  to  matters 
concerning  which  the  insured  could 
have  no  certain  knowledge  and  whether 
good  faith  in  the  answer  does  not  sat- 
isfy the  requirement  of  the  contract, 
Moulor  V.  Am..  Life  Ins.  Co.,  Ill  U.  S. 
335,  4  S.  Ct.  466,  28  L.  Ed.  447;  Fergu- 
son V.  Mass.  Ben.  L.  Ins.  Co.,  32  Hun, 
306,  aff'd  102  N.  Y.  647;  Keatley  v. 
Travelers'  Ins.  Co.,  187  Pa.  St.  197,  40 
Atl.  808;  March  v.  Met.  Life  Ins.  Co., 
186  Pa.  St.  629,  40  Atl.  1100,  65  Am. 
St.  R.  887;  Schwarzbach  v.  Ohio  Vol. 
Protective  Union,  25  W.  Va.  622,  52 
Am.  Rep.  227. 

1  Met.  Life  Ins.  Co.  v.  Howie,  62 
Ohio  St.  204  (breach  of  the  warranty 
avoids  policy). 

2  Keiper  v.  Equitable  Life  Assur. 
Soc,  159  Fed.  206. 

3  Higbie  v.  Guardian  Mut.  Life  Ins. 
Co.,53N.  Y^603. 

i  World  Mut.  Life  Ins.  Co.  v.  Schidtz, 
73  111.  586  (dyspepsia  temporarily  con- 
nected with  an  abscess);  Lerie  v.  Met. 
Life  Ins.  Co.,  163  Mass.  117,  39  N.  E. 
792  (as  to  hernia,  question  was  con- 
strued as  referring  to  time  of  applica- 
tion); Murphy  v.  Mut.  Ben.  L.  &  F. 


480 


MEANING   AND    LEGAL    EFFECT   OF    LIFE    POLICY 


A  congestion  or  disorder  of  the  liver  is  not  necessarily  a  disease  of 
the  liver  within  the  meaning  of  the  policy;  and  in  these  and  similar 
cases,  if  the  testimony  leaves  it  in  doubt  whether  the  disorder  is  a 
slight  attack  or  a  permanent  or  serious  disease,  the  question  is  for 
the  jury.^  Accordingly,  in  general,  the  jury  must  determine  whether 
a  slight  attack  of  pneumonia  or  sunstroke  is  a  disease; '  but  an  attack 
may  be  so  slight  that  the  court  will  refuse  to  send  the  issue  to  the 

jury.3 

If,  however,  after  applying  to  the  language  of  the  contract  a 
liberal  rule  of  construction  in  favor  of  the  assured  the  court  per- 
ceives that  a  warranty  of  "sound  health"  has  been  broken,  the 


Ins.  Co.,  6  La.  Ann.  518  (inflammation 
of  bowels  whether  chronic  disease). 
Statements  refer  to  time  of  closing  the 
contract,  therefore  material  changes 
pending  negotiations  should  be  dis- 
closed, Thompson  v.  Travelers'  Ins.  Co., 
13  No.  Dak.  444,  101  N.  W.  900.  See 
also  §  100.  Compare  the  case  of  state- 
ments made  for  reinstatement  of  lapsed 
policy,  Mut.  Ben.  Life  Ins.  Co.  v. 
Higginhotham,  95  U.  S.  380,  24  L.  Ed. 
499;  Mulligan  v.  Prudential  Ins.  Co., 
76  Conn.  676,  58  Atl.  230;  American 
Order  v.  Stanleij  (Neb.),  97  N.  W.  467 
(non-disclosure  of  pregnancy);  Pea- 
cock V.  N.  Y.  Life  Ins.  Co.,  20  N.  Y. 
293.  Good  health  is  consistent  with 
a  touch  of  dyspepsia,  Morrison  v.  Wis. 
Odd  Fellows  Mid.  Life  Ins.  Co.,  59 
Wis.  162,  18  N.  W.  13.  With  a  slight 
billious  attack.  Mutual  Reserve  Fund 
L.  Assoc.  V.  Ogletree,  Tl  Miss.  7,  14, 
25  So.  869.  With  a  mere  cold.  Met. 
Life  Ins.  Co.  v.  McTague,  49  N.  J.  L. 
587,  9  Atl.  766,  60  Am.  Rep.  661; 
Sievcrts  v.  National  Ben.  Assoc,  95 
Iowa,  710,  64  N.  W.  671;  N orthtrestern 
Mut.  Life  Ins.  Co.  v.  Woods,  54  Kan. 
663,  39  Pac.  189.  But  a  warranty  of 
"good  health"  is  not  consistent  with 
severe  dyspepsia  continued  for  many 
years,  Jeffrey  v.  United  Order,  97  Me. 
176,  53  Atl.  1102;  .V.  Y.  Life  Ins.  Co. 
V.  Flack,  3  Md.  341,  56  Am.  Dec.  742. 
"Acute  gastritis,"  "acute  bronchitis," 
or  grip  is  not  necessarily  an  illness, 
Billings  v.  Met.  L.  Ins.  Co.,  70  Vt.  477, 
41  Atl.  516.  Tuberculosis  of  the  brain 
is  a  "local  disease,"  Scales  v.  Universal 
Life  Ins.  Co.,  42  Cal.  523. 

1  Cushman  v.  U.  S.  Life  Ins.  Co.,  70 
N.  Y.  72.  So  the  jury  may  have  to 
pass  on  the  question  of  health  or  dis- 
ease in  case  of  pharyngitis,  Mut.  Ben. 


Life  Ins.  Co.  v.  Wise,  34  Md.  582;  or 
throat  disease,  Eisner  v.  Guardian  Mut. 
L.  Ins.  Co.,  8  Fed.  Cas.  398;  gastritis, 
Price  V.  Phoenix  Mut.  Life  Ins.  Co., 
17  Minn.  497;  bronchitis,  Campbell 
V.  Neiv  England  Mid.  Life  Ins.  Co.,  98 
Mass.  381;  Mausbach  v.  Met.  L.  Ins. 
Co.,  53  How.  Pr.  (N.  Y.)  496;  kidney 
trouble  or  Bright's  disease,  Contl.  Life 
Ins.  Co.  V.  Yung,  113  Ind.  159,  15  N.  E. 
220,  3  Am.  St.  R.  630;  Hogan  v.  Met. 
Life  Ins.  Co.,  164  Mass.  448,  41  N.  E. 
663;  Brown  v.  Met.  Life  Ins.  Co.,  65 
Mich.  306,  32  N.  W.  610,  8  Am.  St.  R. 
894  (for  jury);  Weinstraub  v.  Met. 
Life  Ins.  Co.,  27  Misc.  546,  58  N.  Y. 
Supp.  295  (policy  avoided);  Archibald 
v.  Mut.  Life  Ins.  Co.,  38  Wise.  542 
(policy  avoided);  consumption.  Met. 
Life  Ins.  Co.  v.  Mitchell,  175  111.  322, 
51  N.  E.  637;  Tucker  v.  United  L.  & 
Ace.  Assn.,  133  N.  Y.  548,  30  N.  E. 
723;  Vose  v.  Eagle  Life  &  Health  Ins. 
Co.,  6  Cush.  (Mass.)  42;  Woodward  v. 
Iowa  L.  Ins.  Co.,  104  Tenn.  49,  56 
S.  W.  1020.  But  see  Murphy  v.  Pru- 
dential Ins.  Co.,  205  Pa.  St.  444,  55 
Atl.  19;  gout,  Fowkes  v.  Manchester  & 
L.  Life  Ins.  Co.,  3  Fost.  <t  F.  440.  But 
a  clear  case  of  Bright's  disease  is  not 
consistent  with  good  health,  Austin  v. 
Mut.  Res.  Fund  Life  Assn.,  132  Fed. 
555. 

2  Boos  V.  World  Mutual  Life  Ins. 
Co.,  64  N.  Y.  236;  Conn.  Mutual  Life 
Ins.  Co.  V.  Union  Trust  Co.,  112  U.  S. 
250,  5  S.  Ct.  119;  Knickerbocker  Life 
Ins.  Co.  v.  Trefz,  104  U.  S.  197;  Moulor 
V.  Ins.  Co.,  101  U.  S.  708;  Finn  v. 
Met.  L.  Ins.  Co.,  70  N.  J.  L.  255,  57 
Atl.  438. 

3  Mutual  Ben.  Life  Ins.  Co.  v. 
Daviess,  87  Ky.  541  (vertigo). 


STATEMENTS   AS   TO    HEALTH    OR   FREEDOM    FROM    DISEASE     481 

action  of  the  beneficiary  upon  the  policy  must  be  dismissed.  A 
policy  of  the  defendant  dated  February  11,  on  the  life  of  Adaline 
Morelle,  provided  that  no  obligation  was  assumed  by  the  company 
unless  at  the  time  when  the  policy  was  issued  the  insured  was  alive 
and  in  sound  health.  In  fact  the  insured  was  not  at  that  time  in 
sound  health.  But  the  plaintiff  showed  that  an  examining  phy- 
sician employed  by  the  defendant  company  examined  the  insured 
on  January  30,  and  on  February  4  returned  to  the  company  his 
certificate  that  he  found  the  insured  to  be  in  good  health.  Judg- 
ment was  rendered  in  favor  of  the  insurance  company.^ 

Where  the  testimony  is  undisputed  that  the  applicant  was  afflicted 
with  a  designated  disease  or  disorder — as,  for  example,  rupture  or 
tonsilitis — his  statement  to  the  contrary  in  the  application  is  a  breach 
of  warranty,  and,  in  the  absence  of  statutory  provision,  it  is  error 
to  submit  the  question  to  the  jury.- 

William  Simpson,  the  deceased  husband  of  the  plaintiff,  war- 
ranted in  his  application  for  life  insurance  that  he  never  was  sub- 
ject to  "headache — severe,  protracted,  or  frequent."  On  the  trial, 
testimony  was  introduced  tending  to  show  that  the  statement  was 
incorrect.  The  court  charged  the  jury  "that  temporary  illness  of 
assured  in  the  course  of  everyday  life,  brought  on  by  excessive  ex- 
ercise or  overwork,  is  not  embraced  in  said  application,  but  the 
answers  therein  have  reference  to  such  diseases  or  ailments  as  indi- 
cate a  vice  in  the  constitution,  or  are  so  serious  as  to  have  some 
bearing  on  the  general  health."  On  appeal  the  Texas  Supreme  Court 
held  that  the  charge  was  erroneous,  as  applied  to  the  specific  ques- 
tion and  answer  of  the  application;  and  the  judgment  in  favor  of 
the  plaintiff  was  reversed  and  the  cause  remanded.^ 

In  like  manner,  if  the  applicant  for  insurance  erroneously  answer 
that  she  never  had  "a  chronic  or  persistent  cough,"  and  warrant 
the  answer  to  be  true,  whether  the  fact  be  material  or  immaterial 
the  policy  is  avoided. "^ 

If  the  warranty  is  that  the  assured  has  not  had  spitting  of  blood, 
and  the  testimony  shows  that  this  statement  is  not  true,  there  is  no 
question  for  the  jury,^  but  the  inquiry  should  be  regarded  as  referring 

1  Gallant  v.  Met.  Life  Ins.  Co.,  167  ^  Mutual  Life  Ins.  Co.  v.  Simpson, 

Mass.  79.  88  Tex.  333,  31  S.  W.  501,  28  L.  R.  A. 

^Glutting  V.  Met.  Life  Ins.  Co.,  50  765,  53  Am.  St.  R.  757. 
N.  J.  L.  287;  ^tna  Life  Ins.  Co.  v.  *  Bertrand  v.  Franklin  Life  Ins.  Co., 
France,  91  U.  S.  510.  So  also  as  to  119  La.  423,  44  So.  186. 
heart  disease,  Met.  Life  Ivs.  Co.  v  ^  Smith  v.  /E'^^^a  Life  Ins.  Co.,  49 
Moravec,  214  III.  186,  73  N.  E.  415.  N.  Y.  211;  Foot  v.  .^tna  Life  Ins.  Co., 
And  consumption,  Schofield  v.  Met.  L.  4  Daly  (N.  Y.),  285;  Smith  v.  North- 
Ins.  Co.,  79  Vt.  161,  64  Atl.  1107.  western  Mut.  L.  Ins.  Co.,  196  Pa.  St. 

31 


182  MEANING   AND    LEGAL    EFFECT   OF   LIFE    POLICY 

to  some  disease  as  of  the  respiratory  organs  and  not  to  the  incidental 
spitting  of  blood  connected  with  pulUng  a  tooth  or  biting  the  tongue.^ 

The  insured  said  in  her  appHcation  that  she  was  in  sound  health. 
She  died  of  phthisis  nine  months  after  the  poUcy  was  issued,  and  was 
sick  three  years  before  her  death.  The  court  held  that  it  was  error 
to  refuse  to  instruct  the  jury  in  favor  of  the  company.^ 

The  answer  "never  sick,"  made  by  a  German  unfamiliar  with  our 
language,  was  construed  to  mean  that  he  had  never  had  any  of  the 
list  of  diseases  enumerated  in  the  application.^  But  if  in  reality  the 
warranty  is  broken,  the  intent  of  the  insured  or  his  ignorance  of  the 
facts  is  immaterial.^ 

In  determining  whether  a  breach  has  occurred  much  depends  upon 
the  phraseology  of  the  contract.  If  the  statement,  for  example,  is 
qualified  by  the  words  "to  the  best  of  my  knowledge  or  belief,"  to 
avoid  the  policy  bad  faith  must  be  shown,  or  actual  knowledge  of 
the  facts  constituting  breach.^  And  without  such  qualifying  words, 
where  the  answer  of  the  applicant  is  made  in  good  faith  and  relates 
to  an  unknown  and  obscure  disease,  or  to  a  long  list  of  diseases, 
some  of  them  obscure,  the  courts  are  disposed  to  construe  the  answer 
as  relating  to  matter  of  opinion  of  the  applicant  rather  than  to  mat- 
ter of  fact.^ 

§  348.  Statements  as  to  Medical  Attendance. — Statements  as  to 
medical  attendance  or  consultation  with  physicians  if  untrue  avoid 
the  policy;'  but  the  court  will  construe  the  language  favorably  to 

314,  46  Atl.  426.     But  see  Dreier  v.  ■*  Cooperative  Life  Assn.   v.   Leflore, 

Continental  L.  Ins.  Co.,  24  Fed.  670;  53  Miss.  1;  Breeze  v.  Met.  Life  Ins.  Co., 

Pudritzky  v.  Supreme  Lodge,  76  Mich.  24  App.  Div.  377,  48  N.  Y.  Supp.  753; 

428,  43  N.  W.  373.  Langstaff  v.  Mut.  L.  Ins.  Co.,  69  N.  J. 

1  Peterson  V.  Des  Moines  Life  Assn.,  L.  54,  54  Atl.  518;  Boyle  v.  North- 
lid  Iowa,  668,  87  N.  W.  397;  Camp-  western  Mut.  Relief  Assoc.,  95  Wis.  312, 
bell  V.  New  Eng.  Mut.  L.  Ins.  Co.,  98  70  N.  W.  351. 

Mass.  381 ;  Singleton  v.  St.  Louis  Mut.  ^  Hann  v.  National  Union,  97  Mich. 

7ns.  Co.,  66  Mo.  63,  27  Am.  Rep.  321.  513,  56  N.  W.  834,  37  Am.  St.  R.  365; 

2  Met.  Life  Ins.  Co.  v.  Dempsey,  72  Mut.  Life  his.  Co.  v.  Wager,  27  Barb. 
Md.  288.     A  severe  attack  of  typhoid  (N.  Y.)  354. 

fever  avoided  the  policy  as  matter  of  "  Minnesota  Mut.   Life  Ins.   Co.   v. 

law,  where  the  assured  warranted  "no  Link,  230  111.  273,  82  N.  W.  637;  Owen 

serious  illness,"  Meyers  v.  Woodmen  of  v.  Met.  Life  Ins.  Co.  (N.  J.,  1907),  74 

the  World,  193  Pa.  St.  470,  44  Atl.  563.  N.  J.  Law,  770,  67  Atl.  25;  Blackman 

So  also  of  "pulmonary  disease,"  aSw/K-  v.   U.  S.  Cas.  Co.   (Tenn.,  1907),  103 

van  V.  Met.  Life  Ins.  Co.  (Mont.,  1907),  S.  W.  784. 

88   Pac.   401    (good    faith   and   imma-  ^  Brady  v.    United  Life  Ins.   Assn., 

teriality  of   misstatement  no  excuse).  60  Fed.  729,  9  C.  C.  A.  252;  Mid.  Res. 

Pre<2;nancy  is  consistent  with  "sound  Fund  L.  Assn.  v.  Cotter,  72  Ark.  620, 

health,"    Merriman    v.    Grand    Lodge  83   S.   W.   321    (statement  as  to  last 

(Neb.,  1906),  110  N.  W.  302.  attendance   obvioiisly   untrue);    Clem- 

^  KnicJ erhocler    Life    Ins.     Co.     v.  ents  v.  Connecticut  Indemnity  Co.,  29 

rre/2,  104  U.  S.  197.  App.   Div.   131,  51   N.  Y.   Supp.   442 


WHAT    CONSTITUTES    MEDICAL    ATTENDANCE   OR    CONSULTATION    483 

the  insured  if  it  can  do  so,  and  will  relieve  him  if  the  questions  are  in 
anywise  ambiguous.^  Thus  if  the  applicant  names  a  doctor  as  his 
attending  physician,  this  may  not  avoid  the  policy,  although  the  phy- 
sician is  not  the  usual  medical  attendant,  for  the  statement  may  still 
be  true.^ 

In  one  case  the  question  was,  "Name  and  residence  of  family 
physician?"  and  the  answer  was,  "Refer  to  Doctor  Mills."     The 
proofs  showed  that  Doctor  Mills  was  not  the  physician  of  the  insured 
but  the  court  held  that  upon  this  ambiguous  form  of  response  it  was 
proper  to  leave  the  question  of  forfeiture  to  the  jury.^ 

The  North  Carolina  statute  provides:  "All  statements  or  descrip- 
tions in  any  application  for  a  policy  of  insurance,  or  in  the  policy 
itself,  shall  be  deemed  and  held  representations  and  not  warranties; 
nor  shall  any  representation,  unless  material  or  fraudulent,  prevent 
a  recovery  on  the  policy."  Bryant,  in  applying  for  his  policy,  in- 
correctly warranted  that  he  had  not  within  two  years  been  under 
the  care  of  a  physician.  The  Supreme  Court  on  appeal  ruled,  as 
matter  of  law,  that  the  misstatement  was  material  and  reversed  the 
judgment  recovered  by  the  plaintiff.'* 

§  349.  What  Constitutes  Medical  Attendance  or  Consultation. — 

The  decisions  are  not  altogether  in  harmon}^  in  defining  what  medical 
attendance  and  consultation  must  be  disclosed.  This  depends  in  a 
measure  upon  the  language  of  the  particular  interrogatory. 

Medical  consultation  or  treatment  means  a  resorting  to  a  physician 

(later  attendances  for  weak  heart  not  Co.,  67  N.  J.  L.  310,  51  Atl.  689  (dis- 

disclosed);  McGowan  v.  Supreme  Court,  closure  of  one  other  consultation  con- 

104  Wis.  173,  80  N.  W.  603,  107  Wis.  strued  to  be  enough);  Billuigs  v.  Met. 

463,  83  N.  W.  775  (statement  that  no  Life  Ins.  Co.,  70  Vt.  477,  41  Atl.  516 

physician   was  needed   for  five  years  (disclosure  of  one  physician  construed 

was  false).  to  be  enough). 

1  N.   Y.  Life  Ins.  Co.  v.  Baler,  83  2  Cushman  v.  U.  S.  Life  Ins.  Co.,  70 

Fed.  647,  27  C.  C.  A.  658  (construed  N.  Y.  72. 

to    refer    only    to    serious    illnesses);  ^  Higgins  v.  Phoenix  Mut.  Life  Ins. 

Stewart   v.    Equitable   Mut.    L.    Assn.,  Co.,  74  N.  Y.  6. 

110  Iowa,  528,  81  N.  W.  782  (question  *  Bryant  v.  Met.  Life  Ins.  Co.  (N.  C, 

held  ambiguous  as  to  time);  Rp-pert  v.  Mch.,  1908),  60  S.  E.  983  {Held,  that 

Supreme    Court,    94    Minn.    293,    102  a   misrepresentation   need   not   neces- 

N.  W.  715   (answers  did  not  purport  sarily  contribute  to  the  cause  of  loss 

to   be  full   and   complete;    policy  not  in  order  to  be  material ;  any  fact  which 

avoided);  Hale  v.  Life  Ind.  &  Invest.  naturally  influences  the  underwriter  in 

Co.,    65  JVIinn.    548,    68    N.    W.    182  accepting  the   risk  or  modifying  the 

(answer  incomplete  on  its  face;  if  com-  rate  should  be  so  regarded;  also  that  if 

Eany   M'anted   more  names   it  should  the  applicant  through  apprehension  as 

ave  asked  for  them).     So  also  Fitch  to   his  health  consulted  a  physician, 

V.  Am.  Popular  Life  Ins.  Co.,  59  N.  Y.  and   engaged    him    for   regular   treat- 

557,  17  Am.  Rep.  372  and  Dilleber  v.  ment,  though  not   bedridden,  he  was 

Home  Life  Ins.  Co.,  69  N.  Y.  256,  25  under  his  care  within  the  meaning  of 

Am.  Rep.  182;  Henn  v.  Mid.  Life  Ins.  the  policy). 


484 


MEANING    AND    LEGAL    EFFECT   OF    LIFE    POLICY 


for  the  purpose  of  procuring  medical  aid,  but  not  necessarily  for  a 
specific  disease;  and  giving  medicine  by  a  physician  to  relieve  suffer- 
ing is  "prescribing  medicine"  within  the  meaning  of  an  application.^ 
The  consultation  called  for  by  the  application  relates  to  the  insured 
and  not  to  the  illness  of  some  other  person,^  and  many  authorities 
lay  down  the  rule  that  a  consultation  or  attendance  for  slight  tem- 
porary ailments  need  not  be  mentioned  by  the  applicant.^  Other 
authorities,  however,  are  not  so  liberal  to  the  insured,  the  decision 
often  turning  upon  the  particular  phraseology  of  the  question  in 
the  application.'* 

The  insured  stated  in  his  appHcation  that  he  had  had  no  medical 
attendance  within  the  year.  A  physician  testified  that  he  had  at- 
tended him  and  prescribed  for  him  within  that  time  in  the  presence 
of  certain  members  of  the  family,  who  testified  that  they  had  no 
recollection  of  it.  The  court  held  that  the  question  of  breach  was 
for  the  jury.^ 


1  Cobb  V.  Covenant  Mutual  Benefit 
Assn.,  153  Mass.  176,  26  N.  E.  230,  10 
L.  R.  A.  666,  25  Am.  St.  R.  619.  But 
see  the  rulings  in  Mutual  Life  Ins.  Co. 
V.  Arheljer,  4  Ariz.  271,  36  Pac.  895; 
White  V.  Prov.  Sav.  Life  Assur.  Soc, 
163  Mass.  108,  39  N.  E.  771,  27  L.  R. 
A.  398;  Mut.  Res.  Fund  L.  Assn.  v. 
Ogletree,  77  Miss.  7,  25  So.  869  (a  guest 
at  the  doctor's  house);  Gibson  v.  Am. 
Mut.  L.  Ins.  Co.,  37  N.  Y.  580  (doctor 
present  as  friend  and  neighbor). 

^  Dilleber  v.  Home  Life  Ins.  Co.,  69 
N.  Y.  256,  25  Am.  Rep.  182;  Helwig 
V.  Mut.  Life  Ins.  Co.,  58  Hun,  366,  12 
N.  Y.  Supp.  172;  Billings  v.  Met.  L. 
Ins.  Co.,  70  Vt.  477,  482,  486,  41  Atl. 
516. 

3  Hubbard  v.  Mut.  Res.  Fund  L. 
Assn.,  100  Fed.  719,  40  C.  C.  A.  665; 
Fran'din  Life  Ins.  Co.  v.  Galligan,  71 
Ark.  295,  100  Am.  St.  R.  73;  Blurnen- 
thal  V.  Berkshire  L.  Ins.  Co.,  134  Mich. 
216,  96  N.  W.  17;  Plumbx.  Penn  Mut. 
Life  Ins.  Co.,  108  Mich.  94,  65  N.  W. 
611;  Tooker  v.  Security  Trust  Co.,  26 
App.  Div.  372,  49  N.  Y.  Supp.  814, 
affd  165  N.  Y.  608,  .58  N.  E.  1093 
(treated  for  sores  on  his  head);  Crosby 
V.  Security  Mut.  Life  Ins.  Co. ,  86  App. 
Div.  89,  83  N.  Y.  Supp.  140  (slight 
ailment);  Chinnery  v.  U.  S.  Industrial 
Ins.  Co.,  15  App.  Div.  515,  44  N.  Y. 
Supp.  581  (trivial  treatment  on  one 
occasion  in  hospital  many  years  be- 
fore); Genung  v.  Met.  Life  Ins.  Co., 
60  App.  Div.  424,  69  N.  Y.  Supp.  1041 


(date  when  last  under  physician's 
care);  Henn  v.  Met.  Life  Ins.  Co.,  67 
N.  J.  L.  310,  51  Atl.  689;  Woodward  v. 
Iowa  Life  Ins.  Co..  104  Tenn.  49,  56 
S.  W.  1020. 

4  Caruthers  v.  Kansas  Mid.  L.  Ins. 
Co.,  108  Fed.  487;  Cobb  v.  Covenant 
Mut.  Ben.  Assn.,  153  Mass.  176,  26 
N.  E.  230,  10  L.  R.  A.  666,  25  Am.  St. 
R.  619;  Conn.  Mut.  Life  Ins.  Co.  v. 
Young,  77  111.  App.  440;  Modern  Wood- 
men V.  Von  Wald,  6  Kan.  App.  231, 
238,  49  Pac.  782;  McDermott  v.  Modern 
Woodmen,  97  Mo.  App.  636,  652  (must, 
disclose  medical  attendance  though 
for  slight  ailment);  Met.  Life  Ins.  Co. 
V.  McTague,  49  N.  J.  L.  587,  9  Atl. 
766,  60  Am.  Rep.  661  (any  prescrib- 
ing by  a  physician  though  only  for  a 
cold,  if  called  for,  must  be  disclosed); 
Roche  V.  Supreme  Lodge,  21  App.  Div. 
599,  47  N.  Y.  Supp.  774  (judges  in 
reversing  stood  three  to  two  and  held 
that  any  consultation  must  be  dis- 
closed whether  for  serious,  trifling,  or 
no  disease).  Brock  v.  United  Moderns, 
36  Tex.  Civ.  App.  12,  81  S.  W.  340 
(in  care  of  physician  for  granulated 
eyelids). 

^O'Hara  v.  United  Brethren  Mutual 
Aid  Society,  134  Pa.  St.  417,  19  Atl. 
683;  Wall  v.  Royal  Society  of  G.  F., 
179  Pa.  St.  355,  36  Atl.  748  (war- 
ranted last  attendance  was  "one  year 
ago,"  i«  fact  there  were  six  occasions 
since;  policy  held  void);  Plumb  v. 
Perm  Mut.  L.  Ins.  Co.,  108  Mich.  94, 


FAMILY    PHYSICIAN    OR    USUAL   MEDICAL   ATTENDANT  485 

In  a  New  Jersey  case  the  applicant  warranted:  "The  following  is 
the  name  of  the  physician  who  last  attended  me,  the  date  of  the 
attendance,  and  the  name  of  the  complaint  for  which  he  attended 
me:  Typhoid  fever;  January,  1893;  Dr.  Braymer.  I  have  not  been 
under  the  care  of  any  physician  within  two  years,  unless  as  stated 
in  previous  line,  except."  The  word  "except"  was  printed  and 
nothing  was  written  after  it.  The  application  in  an  earlier  clause 
provided,  "wherever  nothing  is  written  in  the  following  paragraphs, 
it  is  agreed  that  the  warranty  is  true  without  exception."  The  proof 
was  that  Dr.  Jarrett  had  previously  attended  the  assured  for  illness 
on  September  25th,  26th,  28th,  and  30th,  and  October  2d,  3d,  4th, 
and  5th,  and  that  the  ailment  which  required  the  doctor's  attend- 
ance was  rheumatism  in  the  shoulder.  The  court  concluded  that 
the  facts  showed  a  breach  of  the  warranty  that  the  assured  had  not 
been  under  the  care  of  a  physician,  and  the  judgment  for  plaintiff 
was  reversed.^ 

§  350.  Family  Physician  or  Usual  Medical  Attendant. — It  is  not 

always  easy  to  say  who  is  the  family  physician  or  usual  medical 
attendant,  or  whether  there  is  one;  and  if  the  company  challenges 
the  truth  of  the  answer,  the  insured  is  entitled  to  the  benefit  of  any 
doubt. ^  And  the  question  as  to  the  truth  of  the  statement  in  regard 
to  the  medical  attendant  or  usual  medical  attendant  or  family  physi- 
cian, if  the  testimony  is  ambiguous,  must  go  to  the  jury.^  On  the 
other  hand,  if  by  the  undisputed  testimony  the  answer  is  untrue, 
the  court  must  dismiss  the  complaint,^ 

65  N.  W.  611  (a  slight  variance  in  time  v.  Union  Mut.  Life  Ins.  Co.,  6  Robt. 

held  immaterial);  Providence  Sav.   L.  (N.  Y.  Super.  Ct.)  455. 
Assur.  Soc.  V.  Reutlinger,  58  Ark.  528,  ^Scales  v.    Universal  Life  Ins.   Co., 

532,  25  S.  W.  835   (warranted  never  42  Cal.  523;  Edington  v.  Midual  Life 

called   a  physician);   Sladden  v.   New  Ins.  Co.,  67  N.  Y.  185;  Gibson  v.  Ainer. 

York  L.  Ins.  Co.,  86  Fed.  102,  29  C.  C.  Mut.  L.  Ins.  Co.,  37  N.  Y.  580;  Smith 

A.  596,  58  U.  S.  Apn.  482  (continued  v.  Met.  Life  Ins.  Co.,  183  Pa.  St.  504, 

attendance    for    (<  I  '    i^liould    be    dis-  38  Atl.    1038;  Huckman  v.  Fernie,  3 

closed).  M.  &  W.  505. 

1  Fish  V.  Met.  Life  Ins.  Co.,  73  N.  J.  *  Phillips  v.  Nexv  York  Life  Ins.  Co., 
L.  619,  64  Atl.  109;  and  see  Hanrahan  9  N.  Y.  Supp.  839,  31  N.  Y.  St.  R.  636. 
V.  Met.  Life  Ins.  Co.,  72  N.  J.  L.  504,  By  statute  in  some  states  the  attend- 
63  Atl.  280.  ing  physician  is  not  allowed  to  testify 

2  Prov.  Sav.  Life  A.sswr.  Soc.  v.  to  information  acquired  by  him  pro- 
Cannon,  201  111.  260,  66  N.  E.  388;  fessionally  on  the  occasion  of  such  at- 
Price  V.  Phoenix  Mut.  Life  Ins.  Co.,  17  tendance,  Supreme  Lodge  v.  Meyer, 
Minn.  497,  10  Am.  Rep.  166  ("family  198  U.  S.  520;  Holden  v.  Met.  Life  Ins. 
physician^'  defined);  Reid  v.  Pied-  Co.,  165  N.  Y.  13,  58  N.  E.  771.  But 
mont  &  A.  Life  Ins.  Co.,  58  Mo.  421  he  may  testify  to  the  fact  of  attend- 
(issue  for  jury);  Higgins  v.  Phcvniz  ance,  Nelson  v.  Nederland  Ins.  Co.,  110 
Mut.  Life  Infi.  Co.,  74  N.  Y.  6;  Monk  Town,  600,  81    N.   W.   807;   Rhode  v 


486 


MEANING    AND    LEGAL   EFFECT   OP    ^FE    POLICY 


§  351.  History  of  Family  and  Relatives. — It  is  hardly  to  be  ex- 
pected that  the  applicant  for  insurance  can  carry  around  on  the  tip 
of  his  tongue  full  and  accurate  statistics  regarding  the  ages  at  death, 
causes  of  death,  and  physical  and  mental  health  during  lif'i,  of  his 
ancestors  and  relatives,  and  the  courts  are  reluctant  to  defeat  a 
policy,  because  an  answer  made  in  good  faith  to  such  collateral  lines 
of  inquiry  turns  out  to  have  been  erroneous. 

While  in  some  cases  the  binding  force  of  such  a  warranty  has  been 
recognized,'  other  courts  have  evaded  a  fatal  result  in  the  absence  of 
bad  faith  and  have  sustained  the  policy  by  construing  the  statements 
as  representations,  or  as  matters  of  belief  only.^ 

§  352.  Statements  as  to  Other  Insurance. — Inquiry  is  oft^n  made 
in  the  application  both  as  to  other  subsisting  policies  of  life  insurance 
and  as  to  any  rejected  or  postponed  applications.  The  importance 
of  the  warranty  is  obvious.^ 


Met.  Life  Ins.  Co.,  129  Mich.  112,  88 
N.  W.  400.  Only  the  executor  or  ad- 
ministrator of  the  insured  can  waive 
the  privilege,  Beil  v.  Supreme  Lodge, 
80  App.  Div.  (N.  Y.)  609. 

1  McGoican  v.  Supreme  Court,  104 
Wis.  173,  80  N.  W.  603;  Johnson  v. 
Maine  &  N.  B.  Ins.  Co.,  83  Me.  183,  22 
Atl.  107  (warninty  that  brother  never 
had  insanity);  Knnsus  Mid.  Lije  Ins. 
Co.  V.  Pinson,  04  Tex.  5.53,  63  S.  W. 
531,  64  S.  W.  818  (ages  of  sisters 
slightly  erroneous);  Met.  Ins.  Co.  v. 
Rutherford,  98  Va.  195,  35  S.  E.  361, 
35  S.  E.  719  (cause  of  father's  death). 

^  Globe  Mid.  Life  A.s-.sn.  v.  Wagner, 
188  111.  133,  58  N.  E.  970,  52  L.  11.  A. 
649,  80  Am.  St.  R.  169  (none  of  broth- 
ers dead);  Fraternal  Trihunes  v.  Ilanes, 
100  111.  App.  1  (cause  of  father's  death); 
Germania  Ins.  Co.  v.  Rudwig,  80  Ky. 
223  (ages  of  father  and  mother  and 
cau.ses  of  their  death);  New  Era  A.'isn. 
V.  Mactavish,  133  Mich.  68,  94  N.  W. 
599  (cause  of  sister's  death).  The 
rule  of  construction  must  always  be 
in  favor  of  insured,  Insurance  Co.  v. 
Gridley,  100  U.  S.  614,  25  L.  Ed.  746 
("no  hereditary  taint  to  my  knowl- 
edge"); Keefe  v.  Supreme  Council,  52 
App.  Div.  616,  64  N.  Y.  Supp.  1012. 

^Clapp  V.  Mass.  Ben.  Assoc,  146 
Mass.  519;  Edinqton  v.  /Etna  Life  Ins. 
:o.,  77  N.  Y.  564,  100  N.  Y.  536,  3 
N.  E.  315;  London  Assurance  v.  Man- 
sel,  11  L.  R.,  Ch.  Div.  363;  Moore  v. 
M^d.   Res.  Fund  L.   Assn.,   ]33   Mifli 


526,  95  N.  W.  573;  Finn.  v.  Met.  L. 
Ins.  Co.,  70  N.  J.  L.  255,  57  Atl.  438; 
March  v.  Met.  L.  Ins.  Co.,  186  Pa.  St. 
629,  40  Atl.  1100,  65  Am.  St.  R.  887. 
Ignorance  on  the  part  of  the  insured 
of  the  prior  rejection  is  immaterial, 
Kelly  V.  Life  Ins.  Clearing  Co.,  113  Ala. 
453,  21  So.  361;  Hackelt  v.  Supreme 
Council,  44  App.  Div.  524,  60  N.  Y. 
Supp.  806,  affkl  168  N.  Y.  588,  60 
N.  E.  1 112;  Kemp  v.  Good  Templars,  04 
Hun,  637,  19  N.  Y.  Supp.  435,  aff'd 
135  N.  Y.  658,  32  N.  E.  648;  Am. 
Union  Life  Ins.  Co.  v.  Judge,  191  Pa. 
St.  484,  43  Atl.  374.  Intent  in  failing 
to  disclo.se  other  existing  insurance  is 
immaterial,  Leonard  v.  State  Mut.  L. 
A.ssur.  Co.,  24  R.  I.  7,  51  Atl.  1049, 
96  Am.  St.  R.  698.  Policy  may  be 
void  for  partial  and  misleading  dis- 
closure, Perm  Mid.  L.  Ins.  Co.  v. 
Mich.  Sav.  Bank;  72  Fed.  413,  19 
C.  C.  A.  280,  38  L.  R.  A.  33;  Aloe  v. 
Mut.  Res.  Fund  Life  Assn.,  147  Mo. 
561,  49  S.  W.  553;  Studwell  v.  Mut. 
Life  A.^sn.,  61  N.  Y.  Super.  Ct.  287,  19 
N.  Y.  Supp.  709,  aff'd  139  N.  Y.  615, 
35  N.  E.  204;  Nal.  Life  Ins.  Co.  v. 
Hopkins,  97  Va.  167,  33  S.  E.  539. 
But  see  Ger.  Am.  Mut.  Life  Assn.  v. 
Farley,  102  Ga.  720,  29  S.  E.  615; 
Security  Trust  Co.  v.  Tarpey,  182  111. 
52,  54  N.  E.  1041.  Policy  will  not  be 
avoided  for  omission  altogether  to 
make  answer.  Phoenix  Mut.  Life  Ins. 
Co.  V.  Raddin,  120  U.  S.  183,  7  Sup 
Ct.    .500,    30    T,.    Ed.    644;    Broii^    v. 


STATEMl-JNTS    AS   TO    AGE 


187 


Where  the  policy  in  suit  is  issued  by  a  regular  insurance  company, 
the  question  arises  whether  the  inquiries  relating  to  other  insurance 
include  appHcations  to  fraternal  societies  or  Ijeneficiary  associa- 
tions and  to  certificates  issued  by  them.  The  decisions  on  this  point 
are  not  altogether  in  harmony  and  they  sometimes  turn  upon  the 
phraseolog}'  of  statutes.' 

ilj  353.  Statements  as  to  Age. — The  rate  of  premium  being  based 
upon  the  age  of  the  insured,  it  is  quite  material  that  the  response  to 
this  question  should  be  correct. ^ 

The  policy  was  held  void  where  the  applicant  erroneously  war- 
ranted his  age  to  be  fifty-nine  instead  of  sixty-four."''    And  where  the 


Greenfield  L.  Ansoc,  172  Mass.  498, 
53  N.  E.  129;  American  Life  Ins.  Co.  v. 
Mahone,  56  Miss.  180.  And  in  case  of 
ambiguity  the  rule  of  construction  is 
favorable  to  the  insured,  Com.  Mut. 
Ace.  Co.  V.  Bates,  176  111.  194,  52  N.  E. 
49;  Robinson  v.  Supreme  Commander}!, 
77  App.  Div.  21.-),  79  N.  Y.  Supp.  13, 
aff'd  177  N.  Y.  .564,  69  N.  E.  1130. 
As  to  what  amounts  to  application 
and  rejection,  see  Secun'ti/  Mid.  Life 
Ins.  Co.  V.  IVehb,  106  Fetl.  808,  45 
C.  C.  A.  648,  55  L.  R.  A.  122,  126  Fed. 
635,  61  C.  C.  A.  383;  Ferris  v.  Life 
Assur.  Co.,  118  Mich.  485,  76  N.  W. 
1041;  Edinqlon  v.  /Etna,  Life  Ins.  Co., 
77  N.  Y.  .564,  100  N.  Y.  536,  3  N.  E. 
315;  Jennings  v.  Su])reme  Council,  81 
App.  Div.  76,  81  N.  Y.  8upp.  90; 
Koenio  v.  U.  L.  Ins.  As.Kn.,  16  Misc. 
531,  38  N.  Y.  Supp.  506;  Kan.  Mvi. 
L.  Ins.  Co.  V.  Coalson,  22  Tex.  Civ. 
App.  64,  54  S.  W  388.  The  company 
may  not  set  up  a  breach  which  was 
the  result  of  its  own  fraud,  Clemans  v. 
Supreme  Assembli/,  131  N  Y.  485,  30 
N.  E.  496.  But  knowledge  of  the  facts 
by  the  medical  examiner  may  be  no 
bar  if  his  authority  is  limited,  Des- 
mond V.  Supreme  Council,  51  App. 
Div.  91,64  N.  Y.  Supp.  406. 

1  Onlj''  other  insurance  or  applica- 
tions in  ren;ular  (companies  is  intended 
to  be  included  by  the  inteiTop;atory, 
Fidelity  Mut.  L.  Assn.  v.  Miller,  92 
Fed.  63,  34  C.  C.  A.  211;  Penn  Mut. 
Life  Ins.  Co.  v.  Mcch.  Sav.  Bank,  72 
Fed.  413,  19  C.  C.  A.  286,  38  L.  R.  A. 
33,  73  Fed.  653,  19  C.  C.  A.  316,  38 
L.  R.  A.  70;  Newton  v.  Southwestern 
Mut.L.  Assn.,  116  Iowa,  311 ,  90  N.  W. 
73;  Seidenspinner  v.  Met.  Life  Ins.  Co., 
70  App.  Div.  476,  74  N.  Y.  Supp.  1108, 


reversed  175  N.  Y.  95;  Spitz  v.  Mut. 
Ben.  Life  Assn.,  5  Misc.  245,  25  N.  Y. 
Supp.  469;  Penniston  v.  Unioii  Cent. 
Life  Ins.  Co.,  6  Ohio  Dec.  830,  8 
Am.  Law  Rec.  631,  7  Ohio  Dec.  678, 
4  Wkly.  Law.  Bui.  935;  Lithgow  v. 
Supreme  Tent,  165  Pa.  St.  292,  30  Atl. 
830;  Equit.  Life  Ins.  Co.  v.  Hazlewood, 
75  Tex.  338,  12  S.  W.  621,  7  L.  R.  A. 
217,  16  Am.  St.  R.  893.  Contra,  mem- 
bershii)  in  a  mutual  I)enefit  association 
is  other  insurance  since  such  associa- 
tions are  insurance  companies,  Mc- 
Callum  V.  N.  Y.  Mvt.  Life  Ins.  Co.,  55 
Hun,  103,  8  N.  Y.  Supp.  249,  aff'd 
124  N.  Y.  642,  27  N.  E.  412;  Kemp  v. 
Good  Templars,  19  N.  Y.  Supp.  435, 
aff'd  135  N.  Y.  658;  Alden  v.  Supreme 
Tent.  178  N.  Y.  535,  71  N.  E.  104 
(statement  was  that  he  had  been  re- 
jected by  no  other  "life  insurance 
compan3''  or  association").  And  see 
Bruce  v.  Conn.  Mut.  Life  Ins.  Co.,  74 
Minn.  310,  77  N.  W.  210;  Meiicr-Bums 
V.  Ins.  Co.,  189  Pa.  St.  579,  42  Atl.  297 
(statement  was  that  he  had  been  re- 
jected "by  no  other  company"). 

^  Preuster  v.  Supreme  Council,  135 
N.  Y.  417,  32  N.  E.  135. 

^Sweft  v.  Citizens'  Mut.  Relief  So- 
ciety, 78  Me.  541;  Dolan  v.  Mutual 
Reserve  F.  L.  Assoc.,  173  Mass.  197, 
.53  N.  E.  398  ("upon  a  policy  for  life 
we  think  it  .should  be  held  as  matter 
of  law  that  a  material  increase  of  ape 
increases  the  risk").  But  see  Couqh- 
lin  V.  Met.  L.  Ins.  Co.,  189  Mass.  .538 
(22  years  instead  of  20  as  stated;  held, 
a  question  was  presented  for  the  jury 
under  the  statute);  Colley  v.  Wilson, 
86  Mo.  App.  396.  The  general  rule 
applies  to  beneficial  societies,  Marcoux 
V.  Society  of  B.  of  St.  John  Baptist,  91 


488 


MEANING    AND    LEGAL    EFFECT    OF    LIFE   POLICY 


true  age  was  thirty-five  and  the  application  represented  it  to  be  thirty, 
it  was  held  to  be  a  fatal  variation.^ 

But  the  warranty,  like  all  others,  may  be  waived,  or  the  company 
may  be  estopped  from  taking  advantage  of  the  mistake.^ 

The  New  York  standard  policies,  as  amended  by  the  superin- 
tendent of  insurance,  now  provide,  "If  the  age  of  the  insured  has 
been  misstated,  the  amount  payable  hereunder  shall  be  such  as 
the  premium  paid  would  have  purchased  at  the  correct  age."  ^ 

§  354.  Statements  as  to  Family  Relationship. — The  untrue  state- 
ment of  the  applicant  that  he  was  a  widower  was  held  to  be  fatal  to 
a  recovery  under  a  policy.^  So  also  the  erroneous  statement  that  the 
lady  with  whom  he  had  gone  through  the  form  of  marriage  was  his 
wife.^  So  also  a  breach  of  the  warranty  that  the  insured  was  a  single 
man,  when  in  reality  a  married  man,  forfeited  the  policy,  although 
the  risk  was  not  thereby  increased.^    But  the  erroneous  statement 


Me.  250,  39  Atl.  1027;  McCarthtj  v. 
Catholic  Knights,  102  Tenn.  345,  52 
S.  W.  142;  Sieverts  v.  National  Ben. 
Assoc,  95  Iowa,  710,  64  N.  W.  671; 
Albert  v.  Muf.  L.  his.  Co.,  122  N.  C. 
92,  30  S.  E.  327,  65  Am.  St.  R.  693; 
Cerri  v.  Ancient  Order,  28  Ont.  R. 
111. 

1  ^tTia  Life  Ins.  Co.  v.  France,  91 
U.  S.  510,  23  L.  Ed.  401,  94  U.  S.  561, 
24  L.  Ed.  287.  Any  question  of  good 
faith  is  immaterial  in  the  absence  of 
statutory  modification,  Dinan  v.  Su- 
preme Council,  201  Pa.  St.  363,  50  Atl. 
999.  Or  unless  applicant  says  to  the 
best  of  his  knowledge  and  belief, 
O'Connell  v.  Supreme  Conclave,  102 
Ga.  143,  28  S.  E.  282,  66  Am.  St.  R. 
159.  The  policy,  or  statute,  often 
provides  for  adjustment  based  on  true 
age,  Singleton  v.  Prudential  Ins.  Co., 
11  N.  Y.'App.  Div.  403,  42  N.  Y.  Supp. 
446;  Supreme  Council  v.  Bo^de,  10 
Ind.  App.  301,.37N.  E.  1105. 

^O'Brien  v.  Home  Ben.  Soc,  117 
N.  Y.  310,  22  N.  E.  954;  Miller  v. 
Phmnlv  Mut.  Life  Ins.  Co.,  107  N.  Y. 
292,  14  N.  E.  271;  Gray  v.  '  -fJonal 
Ben.  Assoc,  111  Ind.  531,  11  N.  E. 
477;  Wiherg  v.  Minn.  S.  R.  Assn.,  73 
Minn.  297,  76  N.  W.  37.  Burden  of 
proof  is  on  company  to  show  false 
statement  as  to  age,  Ala.  G.  L.  Ins.  Co. 
V.  Mobile  Mut.  Ins.  Co.,  81  Ala.  329, 
1  So.  561;  Supreme  Council  v.  Con'  lin, 
60  N.  J.  L.  565,  38  Atl.  659,  41  L.  R.  A. 
449;  Valley  Mut.  L.  Assn.  v.  Teewalt, 


79  Va.  421.  Contra,  Murray  v.  aSu- 
preme  Lodge,  74  Conn.  715,  52  Atl. 
722.  As  to  method  of  proving  age  of 
decedent,  see  Murray  v.  Supreme 
Lodge,  74  Conn.  715,  52  Atl.  722  (record 
of  births,  etc.);  Meehan  v.  Supreme 
Council,  95  App.  Div.  142,  88  N.  Y. 
Supp.  821  (baptismal  record);  Murray 
v.  Supreme  Hive  Ladies,  112  Tenn. 
664,  80  S.  W.  827  (census  reports). 
Entry  in  family  Bible,  So.  Life  Ins. 
Co.  v.  Wilkinson,  53  Ga.  535;  Supreme 
Council  V.  ConJdin,  60  N.  J.  L.  565, 
38  Atl.  659,  41  L.  R.  A.  449;  U.  C. 
Life  Ins.  Co.  v.  Pollard,  94  Va.  146, 
26  S.  E.  421,  36  L.  R.  A.  271,  64  Am. 
St.  R.  715.  Member  of  family  may 
testify  as  to  apparent  age,  Grand 
Lodge  v.  Bartes,  69  Neb.  631,  636,  96 
N.  W.  186;  Hancock  v.  Supreme  Coun- 
cil, 69  N.  J.  L.  308,  55  Atl.  246.  Pri- 
vate record  book  of  soldier,  required 
to  be  kept,  held  admissible  to  prove 
age  of  child,  Hunt  v.  Supreme  Council, 
64  Mich.  671,  31  N.  W.  576,  8  Am.  St. 
R.  855. 

3  Ins.  L.,  §  101. 

4  United  Brethren  Mut.  Aid  Soc.  v. 
White,  100  Pa.  St.  12. 

^Gaines  v.  Fidelity  &  Cos.  Co.,  188 
N.  Y.  411,  81  N.  E.  169  (she  had  a 
prior  husband  living). 

^Jeffries  v.  Life  Ins.  Co.,  22  Wall. 
47,  22  L.  Ed.  833;  but  see  Eg.  Life  Ins. 
Co.  V.  Paterson,  41  Ga.  338,  5  Am. 
Rep.  535;  Storey  v.  Williamsburg  M 
Mut.  B.  Assn.,  95  N.  Y.  474.     Aa  to 


HABITS 


489 


by  the  applicant  that  the  person  named  in  the  policy  as  beneficiary 
was  a  cousin  of  the  applicant,  was  considered  too  trivial  to  vitiate 
the  contract.^ 


§  355.  Habits.— The  warranty  that  the  applicant  is  of  temperate 
habits  does  not  mean  that  he  totally  abstains  from  drinking  wines 
or  liquors.2  But  the  warranty  must  be  true,  since  a  statement  of 
habits  is  matter  of  fact,  rather  than  opinion.^  In  case  of  doubt, 
however,  the  question  of  the  correctness  of  the  answer  must  go  to 
the  jury.^ 

The  United  States  Supreme  Court  expressed  the  opinion  that  a 


untrue  statement  that  beneficiary  was 
husband  or  wife  see  Makel  v.  Hancock 
Mut.  Ins.  Co.,  95  App.  Div.  241; 
Gaines  v.  Fidelity  &  Cas.  Ins.  Co.,  93 
App.  Div.  524,  and  compare  Vivar 
V.  Supreme  Lodge,  52  N.  J.  L.  455.  As 
to  inquiries  regarding  relatives  see 
Davis  V.  Supreme  Lodge,  35  App.  Div. 
354,  54  N.  Y.  Supp.  1023,  afi'd  165 
N.  Y.  159,  58  N.  E.  891  (died  of  con- 
sumption "so  far  as  I  know");  Fitz- 
gerald V.  Supreme  Council,  39  App. 
Div.  251,  56  N.  Y.  Supp.  1005,  aff'd 
167  N.  Y.  568,  60  N.  E.  1110  (differ- 
ence between  warranties  and  repre- 
sentations   explained). 

1  Britton  v.  Roval  Arcanum,  46  N.  J. 
Eq.  102,  18  Atl.  675. 

2  Van  ValI.enburgh  v.  Amer.  Popular 
Life  Ins.  Co.,  70  N.  Y.  605.  See 
Mutual  L.  Ins.  Co.  v.  Thomson,  14 
Ky.  L.  Rep.  800,  22  S.  W.  87;  Brignac 
V.  Pacific  Mut.  L.  Ins.  Co.,  112  La.  574, 
36  So.  595;  Chambers  v.  Northwestern 
Mut.  L.  Ins.  Co.,  64  Minn.  495,  67 
N.  W.  367,  58  Am.  St.  R.  549  (burden 
of  showing  falsity  is  on  defendant). 

3  Langdeau  v.  John  Hancock  Mut. 
L.  Ins.  Co.  (Mass.,  1907),  80  N.  E.  452 
(intoxicants  to  excess);  Thomson  v. 
Weems,  9  App.  Cas.  686.  Statement 
of  habits  refeis  to  what  time,  Prov. 
Sav.  L.  Assur.  Soc.  v.  Hadley,  102  Fed. 
856,  43  C.  C.  A.  25;  Des  Moines  L. 
Assn.  V.  Owen,  16  Colo.  App.  60,  63 
Pac.  781. 

*  Meacham  v.  A''.  Y.  State  Mut.  Ben. 
Assoc,  120  N.  Y.  237,  24  N.  E.  283; 
Pelton  V.  Westchester  Fire  Ins.  Co.,  77 
N.  Y.  605;  Mut.  L.  Ins.  Co.  v.  Simpson, 
88  Tex.  333,  31  S.  W.  501,  28  L.  R.  A. 
765,  53  Am.  St.  R.  757;  Northwestern 
Life  Ins.  Co.  v.  Muskegon  Bank,  122 
U.  S.  501,  7  Sup.  Ct.  1221,  30  L.  Ed. 
1100.     But  see  Puis  v.  Grand  Lodge, 


13  N.  Dak.  559,  102  N.  W.  165.  War- 
ranted not  to  have  been  treated  for  al- 
coholism, Moore  v.  Mut.  Reserve  Fund 
L.  Assn.,  133  Mich.  526,  95  N.  W.  573. 
Warranted  not  to  have  used  liquor  to 
excess  and  if  false,  policy  shall  be 
avoided,  Franklin  Life  Ins.  Co.  v. 
American  Nat.  Bk.,  74  Ark.  1,  84 
S.  W.  789.  Examine  Rainger  v.  Bos- 
ton Mut.  L.  Assoc,  167  Mass.  109,  44 
N.  E.  1088  (material  to  the  risk); 
Malicki  v.  Chicago  Guar.  F.  L.  Soc, 
119  Mich.  151,  77  N.  W.  690.  But  see 
Sovereign  Camp  v.  Burgess  (Miss.),  31 
So.  809.  As  to  meaning  of  "excess" 
see  Moore  v.  Prudential  Ins.  Co.,  92 
App.  Div.  135,  87  N.  Y.  Supp.  368. 
Meaning  of  the  phrase  "temperate 
as  to  use  of  liquors,"  Holtum  v.  Ger- 
mania  Life  Ins.  Co.,  139  Cal.  645,  73 
Pac.  591;  Pacific  Mut.  Life  Ins.  Co.  v. 
Terry  (Tex.  Civ.  App.,  1904),  84  S.  W. 
656  ("use"  means  habit,  custom). 
See  also  as  to  words  "used,"  and  "to 
excess,"  Provident  Sav.  L.  Assur.  Soc. 
v.  Exchange  Bk.,  126  Fed.  360.  Phrase 
construed,  "so  intemperate  as  to  im- 
pair health  "  Janneck  v.  Met.  Life  Ins. 
Co.,  162  N.  Y.  574,  57  N.  E.  182;  Keefe 
V.  Supreme  Council,  52  App.  Div.  616, 
64  N.  Y.  Supp.  1012.  Use  of  intoxi- 
cants or  stimulants.  Endowment  Rank 
Sup.  L.  K.  P.  V.  Townsend,  36  Tex. 
Civ.  App.  651,83  S.  W.  220;  North- 
western L.  Ins.  Co.  v.  Bodurtha,  23 
Ind.  App.  121,  53  N.  E.  787  (1899); 
Grand  Lodge  A.  0.  U.  W.  v.  Belcham, 
145  111.  308,  33  N.  E.  886;  Supreme 
Council  of  R.  A.  v.  Brashears,  89  Md. 
624,  43  Atl.  866,  73  Am.  St.  R.  244. 
But  as  to  where  wrong  answers  are 
written  by  medical  examiner  see  O'Far- 
rell  V.  Met.  Life  Ins.  Co.,  44  App.  Div. 
554,  60  N.  Y.  Supp.  945,  aff'd  168 
N.  Y.  592,  60  N.  E.  1117. 


190  MEANING    AND    LEGAL    EFFECT    OF    LIFE    POLICY 

man  might  have  the  delirium  tremens  once,  without  necessarily 
violating  a  warranty  relating  to  temperate  habits.*  But  the  English 
court  was  unwilling  to  commit  itself  to  this  view.^ 

Foley  the  plaintiff  obtained  from  the  defendant  a  policy  on  the 
life  of  his  debtor  Badenhop,  by  which  a  warranty  was  given  that 
the  insured  had  always  been  a  man  of  temperate  habits.  On  the 
trial  the  defendant  produced  much  testimony  tending  to  show 
that  Badenhop  had  been  a  very  intemperate  man  and  had  been 
attended  by  a  physician  for  delirium  tremens.  On  the  other  hand, 
several  witnesses  testified  unqualifiedly  to  his  being  a  man  of  tem- 
perate habits.  The  trial  judge  charged  the  jury  among  other  things 
that  if  they  found  that  his  habits  in  the  usual,  ordinary,  and  every- 
day routine  of  his  life  were  temperate,  then  such  representations 
were  not  untrue  within  the  meaning  of  the  policy,  although  they 
might  find  that  he  had  an  attack  of  delirium  tremens  resulting  from 
an  exceptional  indulgence  in  drink  prior  to  the  issue  of  the  policy; 
and  that  the  burden  of  proof  was  upon  the  defendant  to  show  the 
breach  of  any  warranty  in  the  policy.  The  United  States  Supreme 
Court  held  that  the  issue  raised  was  for  the  jury,  and  that  the  charge 
was  not  erroneous.^ 

The  Maryland  statute  provides  that  untrue  statements  in  the 
application,  made  in  good  faith,  must  relate  to  some  matter  material 
to  the  risk  to  avoid  the  policy.  The  applicant  stated,  "That  his 
habit  as  to  the  use  of  intoxicants  was  one  glass  of  beer  a  day  on  an 
average,  and  that  such  had  been  his  habit  in  the  past,  and  that  he 
had  never  taken  any  special  treatment  for  alcoholism."  These 
statements  were  incorrect.  In  fact  he  drank  much  more  than  one 
glass  of  beer  a  day  on  an  average  and  had  been  treated  for  alcohol- 
ism. The  court  held  as  matter  of  law  that  the  answers  related  to 
matter  material  to  the  risk,  and  that  the  policy  was  forfeited.  The 
judgment  obtained  by  the  plaintiff  was  reversed.'* 

i  Insurance  Co.  v.  Foley,  105  U.  S.  Standard  L.    &   A.    Ace.   Ins.    Co.   v. 

350.     Compare  Mna  Life  Ins.  Co.  v.  Lauderdale,   94   Tenn.   642,  30   S.   W. 

Dat)ev,123U.S.  733,  8  Sup.  Ct.  331,31  732.      But   see   Mna   L.    Ins.    Co.    v. 

L.  Ed.  315;  Mna  Life  Ins.  Co.  v.  Ward,  Rehlaeruler,  68  Neb.  284,  94  N.  W.  129. 

140  U.  S.  76, 11  Sup.  Ct.  720,  35  L.  Ed.  They  are  material  under  the  Kentucky 

371  (for  medical  purposes).  .statute.    Provident    Sav.    Life    Assvr. 

2  Thomson  v.    Weems,  9   App.  Cas.  Snc.  v.  Dees  (Ky.  C.  A.  1905),  86  S.  W. 

686.     As  to  statements  regarding  use  523,  27  Ky.  L.  Reo.  670.     See  Union 

of  drugs  and  narcotics.  Rand  v.  Prov.  C.  L.  Ins.' Co.  x.  Lee,  20  Ky.  L.  Rep. 

Sav.  L.  Assur.  Soc,  97  Tenn.  291,  37  839,  47  S.  W.  614. 

S.  W.  7;  Hiqbee  v.  Guardian  Mvt.  L.  ^Ins.  Co.  v.  Foley,  105  U.  S.  350, 

Ins.  Co.,  66  Barb.  462,  aff'd  53  N.  Y.  26  L.  Ed.  1055. 

603.     Statements  by  the  assured  re-  *  Mutual   Life   Ins.    Co.    v.    Mullen 

specting  his  own  habits  are  generally  (Md.,  Mch.,  1908),  69  Atl.  385. 
construed    as    material    to    the    risk, 


STATEMENTS   AS   TO    OCCUPATION 


491 


§  356.  Statements  as  to  Occupation. — The  warranty  as  to  the  occu- 
pation of  the  insured  is  often  a  most  important  matter,  since  some 
occupations  are  far  more  hazardous  than  others.  The  statements 
relating  to  this  subject,  if  warranted,  must  be  true.^  Thus  a  man 
engaged  in  catching  runaway  slaves  must  not  describe  himself  as  a 
farmer;  ^  but  where  the  insured  represented  himself  as  "a  laborer" 
it  was  held  that  the  statement  was  not  untrue,  though  a  more  apt 
description  would  have  been  "inspector;"  ^  and  where  the  applicant 
warranted  that  he  was  a  soda-water  maker,  and  was  also  a  soda- 
water  seller,  it  was  held  that  there  was  no  breach  of  warranty,'*  and, 
in  general,  if  the  words  of  the  answer  are  equivocal  in  their  meaning 
the  issue  is  for  the  jury.^ 


1  Dwight  V.  Germania  L.  Ins.  Co., 
103  N.  Y.  341,  8  N.  E.  654,  57  Am. 
R.  729;  Murphey  v.  Am.  Mid.  Ace. 
Assn.,  90  Wis.  206,  62  N.  W.  1057 
("occupation  is  very  material  to  the 
risk;"  whether  applicant  was  a  "car- 
penter and  millwright,"  held,  not  for 
juiy);  Standard  L.  &  Ace.  Ins.  Co.  v. 
Ward,  65  Ark.  295,  45  S.  W.  1065 
(statement  was  "office  work  only," 
but  in  fact  the  applicant  was  engaged 
in  the  cattle  business);  Fell  v.  John 
Hancock  Mut.  Life  Ins.  Co.,  76  Conn. 
494,  57  Atl.  175  (statement  "lock- 
maker"  was  untrue,  no  question  left 
for  jury);  Ford  v.  U.  S.  Mid.  Ace.  Co., 
148  Mass.  153,  19  N.  E.  169,  1  L.  R.  A. 
700  (statement  "leather  cutter  and 
merchant,"  in  fact  applicant  was  not 
a  merchant).  But  see  Southern  L. 
Ins.  Co.  V.  Booker,  9  Heisk.  (Tenn.) 
606,  24  Am.  Rep.  344. 

^  Hartman  v.  Kevstone  Ins.  Co.,  21 
Pa.  St.  466.  If  both  the  agent  and 
the  insured  know  that  false  statements 
are  inserted  in  the  application  the 
policy  is  void,  Maltson  v.  Moderyi 
Samaritans,  91  Minn  434,  98  N.  W. 
330  ("bartender  and  painter,"  in  fact 
the   applicant   was  only  a  bartender). 

^  Smith  V.  Prudential  Ins.  Co..  10 
App.  Div.  148,  41  N.  Y.  Supp.  925 
(burden  of  proof  on  defendant);  Brink 
V.  Guaranty  Mrd.  Ace.  A.^sn.,  55  Hun, 
606,  7  N.  Y.  Supp.  847,  aff'd  130  N.  Y. 
675,  29  N.  E.  1035  ("livery  stable 
proprietor  not  working");  Neafie  v. 
Mfg.  Ace.  Ind.  Co.,  55  Hun,  111,  8 
N.  Y.  SuT^D.  202  ("iceman  proprie- 
tor"); Dailey  v.  Preferred  Masonic 
Mut.  Ace.  As.m.,  102  Mich.  289,  57 
N.  W.  184,  26  L.  R.  A.  171  ("passonger 
conductor").      The    illegality    of    an 


occupation  does  not  per  se  avoid  the 
insurance.  Lord  v.  Dall,  12  Mass.  115, 
7  Am.  Dec.  38  (earliest  reported  life 
insurance  case  in  U.  S.).  A  bank 
teller  need  not  disclose  his  embezzle- 
ments since  embezzling  is  not  to  be 
called  "an  occupation,"  Penn  Mut. 
L.  Ins.  Co.  V.  Meeh.,etc.,  Trust  Co.,  72 
Fed.  413, 19  C.  C.  A.  286,  38  L.  R.  A.  33. 
^Grattan  v.  Met.  Life  Ins.  Co.,  80 
N.  Y.  292,  36  Am.  Rep.  617.  As  to 
statements  regarding  making  or  selling 
wine,  liquors,  etc.,  see  Hadley  v.  Prov. 
Sav.  L.  Assur.  Soc,  90  Fed.  390,  102 
Fed.  857,  43  C.  C.  A.  25  (policy  not 
avoided);  McGurk  v.  Met.  L.  Ins.  Co., 

56  Conn.  528,  16  Atl.  263,  1  L.  R.  A. 
563  (policy  not  avoided);  High  Court, 
etc.,  of  Foresters  v.  Sehiieitzer,  70  111. 
App.  139,  aff'd  171  111.  325,  49  N.  E. 
506  (policy  not  avoided);  Fid.  Mut. 
L.  Ins.  Co.  V.  Fieklin,  74  Md.  172,  21 
Atl.  680, 23  Atl.  197  (policy  not  avoided 
if  answers  are  in  good  faith);  Collins 
V.  Met.  L.  Ins.  Co.,  32  Mont.  329,  80 
Pac.  609  ("connected  with  sale  of 
liquor");  Holland  v.  Supreme  Council, 
54  N.  J.  L.  490,  25  Atl.  367  ("printer," 
but  applicant  really  a  "bar  tender," 
policy  avoided);  Dwight  v.  Germait,ia 
L.  his.  Co.,  103  N.  Y.  341,  8  N.  E.  654, 

57  Am.  Rep.  729  (warranty  broken, 
hence  policy  avoided). 

5  Kenyan  v.  Knights  Templar,  122 
N.  Y.  247,  25  N.  E.  299  ("not  engaged 
in  retailing  liquors").  "Occupation" 
means  something  more  than  occa- 
sional or  casual  acts,  Standard  L.  & 
Ace.  Ins.  Co.  v.  Fraser,  76  Fed.  705, 
22  C.  C.  A.  499;  Guiltinan  v.  Met.  L. 
Ins.  Co.,  69  Vt.  469,  38  Atl.  315.  But 
see  Malicki  v.  Chicago  Guar.  F.  L.  Soc, 
119  Mich.  151,77N.  W  690. 


492  MEANING    AND    LEGAL    EFFECT    OF    LIFE    POLICY 

In  the  defendant's  policy,  issued  to  Walton  Dwight,  his  answers 
contained  in  his  application  were  warranted  to  be  true.  He  had 
answered  "no"  to  this  question:  " Is  he  now,  or  has  he  been  engaged 
in  or  connected  with  the  manufacture  or  sale  of  any  beer,  wine  or 
other  intoxicating  liquors."  On  the  trial  it  appeared  that  for  three 
years  and  up  to  about  a  year  and  a  half  prior  to  the  application, 
Dwight  had  been  engaged  in  keeping  a  hotel.  While  he  had  no  bar 
in  connection  with  the  business,  and  did  not  sell  to  outsiders,  he 
kept  a  wine  and  liquor  room  and  regularly  sold  wines  and  liquors  in 
bottles  to  guests  of  the  house.  The  trial  judge  allowed  the  jury  to 
find  a  verdict  for  the  plaintiff.  The  judgment  entered  thereon  was 
reversed  on  appeal  by  the  court  of  last  resort.  That  court,  while 
conceding  that  a  policy  of  insurance  is  subject  to  construction, 
where  upon  the  face  of  the  instrument  its  meaning  is  doubtful  or  its 
language  ambiguous  or  uncertain,  held  that  an  express  warranty, 
though  involving  an  immaterial  requirement,  having  been  plainly 
violated  by  Dwight,  his  insurance  was  at  an  end,  and  that  neither 
court  nor  jury  had  the  right  to  construct,  by  implication  or  other- 
wise, a  new  contract  in  place  of  that  made  by  the  parties.^ 

Stevens,  the  deceased,  had  been  a  member  of  the  Modern  Wood- 
men of  America.  His  certificate  provided  that  if  he  should  engage 
in  any  prohibited  employment,  including  the  occupation  of  "saloon 
bartender,"  his  certificate  would  be  forfeited.  At  first  a  chore  boy 
working  out  of  doors,  later  the  decedent  was  engaged  to  do  certain 
work  in  a  saloon,  to  attend  to  the  cleaning  of  the  spittoons,  the 
floor,  and  the  bar.  He  was  not  regularly  employed  to  wait  upon 
customers,  and  yet  occasionally  he  would  do  so  when  the  proprietor 
was  otherwise  busy  or  absent.  The  court  held  that  these  occasional 
acts  of  performing  the  duties  of  a  saloon  bartender  could  not  be 
treated  as  being  an  employment  in  the  prohibited  occupation  under 
the  defendants'  code  of  laws.^ 

§  357.  Statements  or  Requirements  as  to  Residence  and  Travel. — 

Statements  in  the  application  as  to  residence  must  be  true,  but  the 
words  must  be  construed  favorably  to  the  insured.^    Similarly,  re- 

1  Dwight  V.  Germania  Life  Ins.  Co.,  calling  to  which  an   insured   devotes 

103  N.  Y.  341,  8  N.  E.  654,  57  Am.  himself  with  some  degree   of    perma- 

R®P-  729.  nancy  for  hire  or  profit,  and  it  does  not 

^Stevens  v.  Modern  Woodmen,   127  refer  to  acts  which  are  simply  inci- 

Wis.  606   ("  engaging  in  the  employ-  dentally  connected  with  a  regular  em- 

ment  or  occupation  prohibited  by  the  ployment").     And  see  §  390,  infra. 
conditions  of  the  contract  must  be  held  3  Mobile  L.  Ins.   Co.  v.   Walker,  58 

to  have  reference  to  the  vocation  or  Ala.  290;  Forbes  v.  Am.  Mut   L   Ins. 


STATEMENTS  ABOUT   BODILY   INJURIES   OR    INFIRMITIES       493 

strictions  contained  in  the  policy  relating  to  residence  and  traveling 
must  be  complied  vvith.^ 

In  this  connection  the  phrase  "settled  limits  of  the  United  States," 
means  within  the  boundaries  of  the  Union,  and  not  the  portions  of 
the  country  that  are  thickly  settled.-  If  a  permit  is  given  to  travel 
by  a  particular  route  or  to  remain  in  a  hazardous  region  for  a  particu- 
lar time,  the  limitation  must  be  strictly  observed.^  Inability  to  re- 
turn will  be  no  excuse  for  a  breach  of  warranty.'*  But  the  company 
or  its  representative  may  waive  such  requirements  of  the  policy.^ 

The  New  York  standard  policies  as  amended  by  the  superintendent 
of  insurance  contain  the  following  clause:  "Conditions — (The  policy 
may  here  provide  for  restrictions  of  liability  by  reason  of  travel,  oc- 
cupation, change  of  residence  and  suicide.  These  restrictions  must 
be  applicable  only  to  cases  where  the  act  of  the  insured  provided 
against  occurs  within  one  year  after  the  issuance  of  the  policy.")** 

§  358.  Statements  about  Bodily  Injuries  or  Infirmities. — In  deter- 
mining what  "injuries  or  bodily  infirmities"  must  be  disclosed  in 
the  application  and  when  the  issues  are  for  the  jury,  the  rules  are 
similar  to  those  applicable  to  statements  concerning  health.'''  Thus 
a  temporary  or  trivial  injury,  of  which  no  permanent  effects  remain, 
is  not  supposed  to  be  called  for  by  the  insurer,  and  what  is  serious 

Co.,  15  Gray  (Mass.),  249,  77  Am.  Dec.  Mut.   L.  Ins.   Co.,  46   Barb.    (N.  Y.) 

360;  Hann  V.Nat.  C/mon,  97  Mich.  513,  412,  aff'd  48  N.  Y.  34,  8  Am.  Rep. 

56  N.  W.  834,  37  Am.  St.  R.  365;  Fitch  518. 

V.  Am.  Pop.  L.  Ins.  Co.,  59  N.  Y.  557,  <  Evans  v.    U.  S.  Life  Ins.   Co.,  64 

17  Am.   Rep.   372;   Bonner  v.    Conti-  N.  Y.  304. 

nental  L.  Ins.  Co.,  80  Ohio  Dec.  697;  ^  Bevin  v.  Conn.  Mut.  Life  Ins.  Co., 

Southern  Life   Ins.    Co.    v.    Booker,   9  23  Conn.  244;  Germania  Life  Ins.  Co. 

Heisk.  606,  24  Am.  Rep.  344;  Hutchin-  v.  Koehler,  168  111.  293,  48  N.  E.  297; 

son  V.  Hartford  L.  &  Ace.  Ins.  Co.  (Tex.  Mut.  Ben.  Life  Ins.  Co.  v.  Martin,  108 

Civ.  App.,  1897),  39  S.  W.  325.  Ky.  11,  55  S.  W.  694.    But  subsequent 

1  Douglas  v.  Knickerbocker  L.  Ins.  receipt  of  premium  by  the  company, 
Co.,  83  N.  Y.  493  (Wm.  M.  Tweed  without  knowledge  of  forfeiture,  will 
escaped  from  sheriff  and  went  outside  not  revive  the  policy,  Bennecke  v. 
limits  prescribed  by  his  policy);  Night-  Insurance  Co.,  105  U.  S.  355.  Where 
ingale  v.  State  Mut.  Life  Ins.  Co.,  5  an  English  policy  required  notice  to 
R.  I.  38.  the  directors,  and  written  consent  to 

2  Casler  v.  Conn.  Mut.  Life  Ins.  Co.,  visit  a  foreign  country,  it  was  held  that 
22  N.  Y.  427.  notice  under  the  policy  to  an  agent  of 

3  Hathaway  v.  Trenton  Mut.  L.  &  the  company  was  sufficient,  where  the 
i^.  7ns.  Co.,  11  Cush.  (Mass.)  448.  As  agent,  for  several  years  afterwards, 
to  the  construction  of  the  meaning  and  collected  the  premiums  and  remitted 
effect  of  permits  see  Walsh  v.  Ji:tna  them  to  the  company,  although  he 
L.  Ins.  Co.,  30  Iowa,  133,  6  Am.  Rep.  had  not  express  authority  to  waive 
664;  Germania  Ins.  Co.  v.  Rudwig,  80  the  contract  conditions,  Wing  v.  Har- 
Ky.  223;  Rainsford  v.  Roval  Ins.  Co.,  vey,  5  DeG.,  M.  &  G.  265. 

33  N.  Y.  Super.  Ct.  453,  aff'd  52  N.  Y.         '«  Ins.  L.,  §  101. 
626-  Pohalski  v.  Mut.  L.  Ins.  Co.,  36  7  §  347,  supra. 

N.  Y.  Super.  Ct.  234;  WeUs  v.  Conn. 


494 


MEANING    AND    LEGAL    EFFECT    OF    LIFE    POLICY 


enough  to  demand  disclosure  may  oftentimes  present  a  question  of 
doubt  for  the  jury.^ 

For  instance,  the  omission  to  recollect  a  temporary  injury  to  an 
eye,  caused  by  sand  which  was  thrown  into  it  and  inflamed  it,  was 
not  considered  necessarily  fatal  to  the  policy  where  the  applicant 
had  answered  in  the  negative  the  question  whether  he  had  ever  had 
any  illness,  local  disease,  or  injury  in  any  organ.- 

In  another  case,  an  applicant  warranted  that  he  had  never  had 
any  bodily  or  mental  infirmity.  As  matter  of  fact  he  had  received 
a  gunshot  wound  in  the  back  of  his  head  by  which  the  external  table 
of  the  skull  was  fractured,  and  a  piece  about  one-half  inch  square 
taken  out,  on  the  strength  of  which  also  he  had  received  a  pension 
from  the  government,  and  the  pension  had  subsequently  been  in- 
creased on  account  of  vertigo  and  impaired  vision  which  he  claimed 
were  a  result  of  the  wound.  Nevertheless,  the  court  held  that  the 
issue  of  breach  of  warranty  was  one  for  the  jury  to  determine.^ 


1  Ins.  Co.  V.  Wilkinson,  13  Wall. 
(U.  S.)  222,  20  L.  Ed.  617.  Breach  of 
the  warranty  avoids,  see  ^^tna  Life 
Ins.  Co.  V.  'France,  91  U.  S.  510,  23 
L.  Ed.  401  (hernia);  Stand.  L.  &  Ace. 
Ins.  Co.  V.  Sale,  121  Fed.  664,  .57  C.  C. 
A.  418.  Trivial  injuries  or  infirmities 
undisclosed  do  not  avoid  the  policy. 
Black  V.  Travelers'  Ins.  Co.,  121  Fed. 
732,  58  C.  C.  A.  14,  61  L.  R.  A.  ,500 
(gunshot  wound  in  head);  Mfrs.  Ace. 
Ind.  Co.  v.  Dorgan,  58  Fed.  945,  7 
C.  C.  A.  581 ,  22  L.  R.  A.  620  (anemic 
murmur  of  heart);  Bernays  v.  U.  S. 
Mut.  Ace.  Assn.,  45  Fed.  455  (erysipe- 
las); Cotton  V.  Fidelity  &  Cos.  Co.,  41 
Fed.  506  (near-sightedness);  Stand. 
L.  &  Ace.  Ins.  Co.  v.  Martin,  133  Ind. 
376,  33  N.  E.  105  (injuries  to  left  foot 
and  right  leg  causing  slight  limp); 
Wilkinson  v.  Conn.  Mxd.  L.  Ins.  Co., 
30  Iowa,  1 19,  6  Am.  Rep.  657  (fall  from 
tree);  Tyler  v.  Ideal  Ben.  Assn.,  172 
Mass.  536,  52  N.  E.  1083  (sprained 
ankle);  Maryland  Cas.  Co.  v.  Gehr- 
mann,  96  Md.  634,  54  Atl.  678  (curva- 
ture of  leg);  Bancroft  v.  Home  Ben. 
Assn.,  120  N.  Y.  14,  30  N.  Y.  St.  R. 
175,  23  N.  E.  997,  8  L.  R.  A.  68  (blow 


on  windpipe  from  fencing  causing 
blood  to  flow);  Brink  v.  Guaranty 
Mid.  Ace.  Assn.,  55  Hun,  606,  7  N.  Y. 
Supp.  847,  aff'd  130  N.  Y.  675,  29 
N.  E.  1035  (unconsciousness  from 
falls  from  buggy);  Home  Mut  L.  Assn. 
V.  Gillespie,  110  Pa.  St.  84,  1  Atl.  340 
(wound  by  shell  at  Cold  Harbor,  ques- 
tion for  jury);  But  a  stricture  is  "a 
local  infirmity,"  and  must  be  dis- 
closed, Hanna  v.  Mut.  L.  Assn.,  11 
App.  Div.  245,  42  N.  Y.  Supp.  228. 
So  also  as  to  severe  concussion  of  brain 
from  a  fall,  Snyder  v.  Mid.  Life  Ins. 
Co.,  22  Fed.  Cas.  740,  uTA  93  U.  S. 
393,  23  L.  Ed.  887.  As  to  what  is  a 
surgical  operation  see  Caruthers  v. 
Kan.  Mut.  Life  Ins.  Co.,  108  Fed.  487 
(policy  not  avoided);  Lippincott  v. 
Supreme  Council,  64  N.  .J.  L.  309,  45 
Atl.  774  (policy  avoided). 

^  Fiteh  v.  Amer.  Popular  Life  Ins. 
Co.,  59  N.  Y.  557,  17  Am.  Rep.  372. 

^  Black  V.  Travelers'  Ins.  Co.,  121 
Fed.  732,  58  C.  C.  A.  14,  61  L.  R.  A. 
500.  And  see  S7nith  v.  Met.  Life  Ins. 
Co.,  183  Pa.  St.  504;  Barnes  v.  Fidelity 
Mut.  Life  Assn.,  191  Pa.  St.  618. 


CHAPTER  XVII 

Life  Policy — Concluded 


§  359.  Payment  of  Premiums. — The  'policy  to  cease  unless  pre- 
miums paid,  when  due,  at  the  home  office,  and  upon  production  of  re- 
ceipts signed  by  president  or  treasurer,  and  policy  not  to  take  effect 
until  first  premium  actually  paid. 

The  payment  of  the  premium  is  of  the  essence  of  the  contract, 
and,  in  fact,  constitutes  all  that  the  company  receives  on  its  part, 
and  under  the  usual  phraseology  of  the  life  insurance  policy  a  failure 
to  pay  on  or  before  the  day  or  hour  ^  stipulated  will  cause  forfeiture 
of  a  subsisting  policy,^  unless  the  company  is  in  some  way  responsi- 
ble for  the  omission  ^  or  waives  it.'*  Accordingly  it  will  be  seen  that 
punctuality  in  payment  of  every  premium  as  from  time  to  time  it 


1  Tihhits  V.  Mutual  Ben.  L.  Ins.  Co. 
(Ind.),  65  N.  E.  1033;  Penn  Plate  Glass 
Co.  V.  7ns.  Co.,  189  Pa.  St.  255,  42  Atl. 
138,  69  Am.  St.  R.  810. 

2  loica  Life  Ins.  Co.  v.  Lewis,  187 
U.  S.  335,  23  S.  Ct.  126;  Klein  v.  Ins. 
Co.,  104  U.  S.  88,  26  L.  Ed.  662; 
Mutual  Res.  Fund  L.  Assn.  v.  Mine- 
hart,  72  Ark.  630,  83  S.  W.  323.  If  no 
hour  is  named  insured  has  for  payment 
until  midnight  of  day  named,  Thom- 
son V.  Ins.  Co.,  4  Pa.  Dist.  R.  382.  If 
no  day  is  clearly  specified  there  will  be 
no  forfeiture  for  nonpayment,  Perry  v. 
Ban^ ers'  Life  Ins.  Co.,  47  App.  Div. 
567,  62  N.  Y.  Supp.  553,  aff'd  167  N.  Y. 
607,  60  N.  E.  1118.  If  place  or  agent 
is  named  in  the  policy  the  insured  must 
seek  out  the  designated  place  or  agent 
when  making  payment  of  premiums, 
Ins.  Co.  V.  Davis,  95  U.  S.  425,  24 
L.  Ed.  453.  The  United  States  Su- 
preme Court  says:  "Forfeitures  are 
necessary  and  should  be  fairly  en- 
forced," Nederla.nd  L.  Ins.  Co.  v. 
Meinert,  199  U.  S.  171,  26  S.  Ct.  15. 

^Lovell  V.  Ins.  Co.,  Ill  U.  S.  264, 
4  S.  Ct.  390,  28  L.  Ed.  423;  Heinlein  v. 
Imperial  Life  Ins.  Co.,  101  Mich.  250, 
59  N.  W.  615,  25  L.  R.  A.  627,  45  Am. 
St.  R.  409;  Garner  v.  Ins.  Co.,  110 
N.  Y.  266, 18  N.  E.  130, 1  L.  R.  A.  256. 
Where  beneficiaries  had  no  knowledao 


of  existence  of  a  policy,  fraudulently 
surrendered  to  the  company  by  the 
insured  before  death,  the  court  de- 
cided that  there  was  a  valid  excuse  for 
the  nonpayment  of  premiums,  since 
the  company  was  party  to  the  sur- 
render, Whitehead  v.  A'^.  Y.  Life  Ins. 
Co.,  102  N.  Y.  152.  As  to  effect  of 
insolvency  of  company  upon  obliga- 
tion of  insured  to  pay  premiums,  see 
Burdon  v.  Association,  147  Mass.  360, 
17  N.  E.  874,  1  L.  R.  A.  146;  Jones  v. 
Life  Assn.,  83  Ky.  75;  Attorney  General 
V.  7ns.  Co.,  82  N.  Y.  336;  Taylor  v.  Ins. 
Co.,  9  Daly  (N.  Y.),  489;  Benton  v. 
7ns.  Co.,  34  Scot.  L.  R.  686. 

4  If  company  declines  to  receive 
tender  of  premium  properly  made,  the 
insured  need  not  tender  subsequent 
premiums,  Meyer  v.  7ns.  Co.,  73  N.  Y. 
516,  29  Am.  Rep.  200;  Shaw  v.  Ins. 
Co.,  69  N.  Y.  286;  Kenyan  v.  National 
Life  his.  Co.,  39  App.  Div.  292,  57 
N.  Y.  Supp.  60;  Nat.  Mid.  Ins.  Co.  v. 
Home  Ben.  Soc,  181  Pa.  St.  443,  37 
Atl.  519,  59  Am.  St.  R.  666.  Repudia- 
tion by  the  company  of  all  liability 
makes  tender  of  premiums  unneces- 
sary, Haijner  v.  Ins.  Co.,  69  N.  Y.  435; 
Denison  v.  Masons'  Fraternal  Ace. 
Assoc,  59  App.  Div.  (N.  Y.)  294,  69 
N.  Y.  Supp.  291;  Teboiv  v.  Wash.  Life 
Ins.  Co..  59  App.  Div.  310,  69  N.  Y. 


496  MEANING    AND    LEGAL    EFFECT   OF    LIFE    POLICY 

becomes  due  is  essential  to  the  continued  validity  of  the  insurance.* 
But  if  the  company  antedates  the  policy,  the  court  will,  if  possible, 
so  construe  the  contract  as  to  give  the  insured  the  benefit  of  a  full 
year  of  insurance  before  being  in  default  for  the  next  annual  pre- 
mium.^ 

As  heretofore  shown,  sickness,  paralysis,  absence,  or  other  m- 
ability  to  comply  with  the  terms  of  the  contract  furnishes  no  excuse 
for  nonpayment  of  a  premium  as  stipulated. ^  Nor  in  the  absence  of 
contract  or  statutory  provision  would  the  company  be  required  to 
give  notice  of  the  approaching  maturity  of  a  premium  or  of  its  elec- 
tion to  consider  the  insurance  void  for  nonpayment  of  a  premium;  ^ 
but  where  dividends  are  applicable  to  reduce  the  amount  due  for 
premiums  the  burden  is  upon  the  insurer,  before  claiming  forfeiture, 
to  give  notice  of  the  amount  of  the  balance  payable  by  the  insured.^ 
The  insured,  however,  cannot  claim,  as  a  set-off  to  the  premium, 
earnings  of  the  company  not  yet  declared  as  dividends.^  So,  also, 
if  the  premium  is  paid  by  a  note,  and  the  policy  provides  for  for- 
feiture upon  nonpayment  of  the  note,  no  relief  can  be  granted  in 
case  of  breach.^ 

Life  insurance'  is  forfeited  for  nonpayment  of  a  premium  because 
the  policy  so  stipulate?.  If  the  policy  fails  to  provide  that  non- 
payment of  the  premium,  or  premium  note,  shall  terminate  or  avoid 

Supp.    289;    Man.    Life    Ins.    Co.    v.  U.  S.  24,  23  L.  Ed.  789;  iV.  F.  Li/e /rw. 

Smith,  44  Ohio  St.  1.56,  5  N.  E.  417,  Co.  v.  Davis,  95  U.  S.  425,  24  L.  Ed. 

58  Am.  Rep.  806.  453;  Worthington  v.  7ns.  Co.,  41  Conn. 

1  Nedeiiand  Life  Ins.  Co.  v.  MeineH,  372,  19  Am.  Rep.  495;  Dillard  v.  Ins. 
199  U.  S.  171,  181,  23  S.  Ct.  15;  Holly  Co.,  44  Ga.  119,  9  Am.  Rep.  167;  Mut. 
v.Metrop.  Life  Ins.  Co.,  105  N.Y.  437,  Ben.  Life  Ins.  Co.  v.  Hillyard,  37 
11  N.  E.  .507.  If  a  premium  falls  due  N.  J.  L.  444,  18  Am.  Rep.  741;  Cohen 
on  Sunday  payment  within  the  next  v.  Ins.  Co.,  50  N.  Y.  610,  10  Am.  Rep. 
twenty-four  hours  is  in  time.  Ham-  522;  Mut.  Ben.  Life  Ins.  Co.  v.  Atwood, 
mond  V.  Ins.  Co.,  10  Gray  (Mass.),  306,  24  Grat.  (Va.)  497,  18  Am.  Rep.  652. 
Leigh  v.  his.  Co.,  26  La.  Ann.  436.  *  Thompson  v.  Ins.  Co.,  104  U.  S. 
As  to  holidays  see  National  Mut.  Ben.  252,  26  L.  Ed.  765;  Attorney  General  v. 
Assn.  V.  Miller,  85  Ky.  88,  2  S.  W.  /ns.  Co.,  93  N.  Y.  70.  Unless  by  virtue 
900.  of  a  settled    custom    in  past   dealing 

2  McMaster  v.  N.  Y.  Life  Ins.  Co.,  with  insured,  iV.  Y.  Life  Ins.  Co.  v. 
183  U.  S.  25,  22  S.  Ct.  10,  46  L.  Ed.  64.  Eggleston,  96  U.  S.  572,  24  L.  Ed. 
Compare  Tibbitts  v.  Ins.  Co.,  159  Ind.  841. 

671 ,  65  N.  E.  1033.  ^  Phoenix  Mut.  L.  Ins.  Co.  v.  Dosier, 

3  School  District  v.  Dauchy,  25  Conn.  106  U.  S.  30,  27  L.  Ed.  65;  Union 
530;  Carpenter  v.  Association,  68  Iowa,  Cent.  Life  Ins.  Co.  v.  Caldtvell,  68  Ark. 
453,  27  N.  W.  456,  56  Am.  Rep.  855  505,  58  S.  W.  355;  Meyer  v.  Ins.  Co., 
(sickness  and  delirium);  Thompson  v.  73  N.  Y.  516,  29  Am.  Rep.  200. 

Ins.  Co.,  104  U.  S.  252,  26  L.  Ed.  765;  «  Mut.  Life  Ins.  Co.  v.  Girard  L.  & 
Webb  V.  Ins.  Co.,  63  Md.  217  (absence);  Trust  Co.,  100  Pa.  St.  172. 
Wheeler  v.  Ins.  Co.,  82  N.  Y.  543,  37  7  KnicI.erbocker  Life  Ins.  Co.  v.  Pen- 
Am.  Rep.  594.  As  to  the  effect  of  dleton,  112  U.  S.  696,  5  S.  Ct.  314; 
war  as  excuse  for  postponing  payment,  Mclnti/re  v.  Ins.  Co.,  52  Mich.  188,  17 
see  .V.  r.  Life  hi.-^.  Co.  v,  Sfathnm.  9P>  N.  W,'7S1. 


PAYMENT  OF  PREMIUMS  497 

the  insurance,  nq  such  result  follows.^  And  if  a  promissory  note  is 
accepted  by  the  company  in  lieu  of  a  cash  payment  called  for  by 
the  terms  of  the  policy,  nonpayment  of  the  note  at  maturity  will 
not  cause  forfeiture  in  the  absence  of  express  provision,  although 
the  nonpayment  of  the  cash  premium  would  have  had  that  effect.^ 
But  a  note,  itself  containing  a  forfeiture  provision,  if  executed  con- 
temporaneously with  the  policy,  may  be  construed  as  constituting 
part  of  the  contract,  and  nonpayment  of  the  note  will  then  cause 
avoidance  of  the  policy.^  The  rule,  however,  is  otherwise  where 
such  a  note  forms  no  part  of  the  contract  or  where  such  forfeiture 
clause  in  the  note  is  inconsistent  with  other  clauses  in  the  policy.'' 
It  has  been  held  that  the  ostensible  scope  of  authority  of  a  solicit- 
ing agent  is  limited  to  the  receipt  of  the  first  premium,  and  that,  if 
intrusted  with  the  delivery  of  the  poUcy,  he  is  apparently  authorized 
to  receive  payment  of  the  first  premium  without  any  rpecial  or 
separate  receipt,  no  matter  what  the  policy  says,  but  not  of  subse- 
quent premiums.^  So  also,  unless  the  application  contains  a  limita- 
tion upon  his  authority  to  do  so,  a  solicitor  intrusted  with  the  duty 
of  closing  the  contract  may  take  a  note  for  the  first  premium  and 
bind  his  company,  though  the  policy,  subsequently  delivered,  pro- 
vide that  it  shall  not  go  into  effect  until  the  premium  is  paid  in 
cash. 

Kimbro,  upon  signing  his  application,  gave  his  note  for  the  first 
premium  to  Haynes,  local  agent  for  the  defendant.  The  defendant 
on  receiving  the  application  decided  not  to  issue  the  policy  in  the 
form  applied  for,  but  sent  to  the  agent  a  different  form  of  policy 
to  be  submitted  to  Kimbro.  The  agent,  however,  made  no  men- 
tion of  the  alteration,  but  simply  notified  Kimbro  by  letter  of  the 
receipt  of  the  policy,  stating  that  he  would  deliver  it  on  the  day 
the  note  became  due.  Kimbro  was  ignorant  of  the  company's 
declination,  nor  did  he  know  that  the  policy  by  its  terms  was  not 
effective  without  prepayment  of  premium.  Meanwhile  he  was  taken 
sick  and  died  before  maturity  of  the  note.     During  his  illness  his 

1  Mutual  L.  Ins.  Co.  v.  Allen,  212  Manhattan  Life  Ins.  Co.  v.  Myers,  109 
111.  134.  72  N.  E.  200;  StewaH  v.  Ky.  372,  59  S.  W.  30;  Manhattan  L. 
Union  Mut.  L.  Ins.  Co.,  155  N.  Y.  257,  Ins.  Co.  v.  Patterson,  109  Ky.  624,  53 
49  N.  E.  876,  42  L.  R.  A.  147.  L.  R.  A.  378,  95  Am.  St.  R.  393. 

2  Penn  Mut.  Life  Ins.  Co.  v.  Nor-  *  Dwellinq  House  Ins.  Co.  v.  Hardie, 
cross,  163  Ind.  379,  72  N.  E.  132;  37  Kan.  674,  16  Pac.  92;  Montgomery 
Griffith  V.  Life  Ins.  Co.,  101  Cal.  627,  v.  Ins.  Co.,  14  Bush  (Ky.),  51;  Mut. 
36  Pac.  113,  40  Am.  St.  R.  96.  Life  Ins.  Co.  v.  French,  30  Ohio  St.  240, 

3  Iowa  Life  Ins.  Co.  v.  Lewis,  187  27  Am.  Rep.  443. 

U.  S.  335,  23  S.  Ct.  126,  47  L.  Ed.  204;  5  Lauze  v.  .V.  Y.  Life  Ins.  Co.  (N.  H., 

Thompson  v.  /n-s.  Co.,  104  T^.  S.  252;       Nov..  1907>,  fiS  Atl.  31. 


498 


MEANING    AND    LEGAL    EFFECT   OF    LIFE    POLICY 


wife  tendered  payment  of  the  premium  in  cash  to  the  agent  and 
demanded  delivery  of  the  policy,  which  was  refused.  The  court 
held  that  the  act  of  Haynes  in  accepting  a  note  in  place  of  cash, 
and  his  representation  that  the  policy  was  received  and  was  being 
held  for  Kirabro  were,  in  legal  effect,  the  act  and  representation 
of  the  insurance  company,  and  that  Kimbro  accordingly  had  the 
right  to  assume  that  his  application  was  accepted  as  proposed 
and  that  the  contract  was  closed.  The  judgment  for  the  plaintiff 
was  affirmed.^ 

If  the  previous  course  of  dealing  between  the  company  and  the 
insured  warrant,  or  if  the  company  accept  it,^  payment  may  be  by 
check,  or  other  equivalent,  instead  of  cash,  though  the  policy  call 
for  cash,^  and  the  receipt  and  retention  of  the  premium  at  the  home 
office  constitute  a  waiver  of  any  informality  in  the  method  of  pay- 


1  Kimbro  v.  N.  Y.  Life  Ins.  Co.  (la., 
Sept.,  1906),  108  N.  W.  861.  The  court 
said:  "That  agent  was  its  representa- 
tive, not  only  to  receive  and  forward 
the  application,  but  was  also  its  repre- 
•sentative  expressly  authorized  to  com- 
plete the  negotiations  and  deliver  the 
policy  which  the  appellant  prepared 
and  returned  for  the  applicant's  ac- 
ceptance. He  was  the  only  medium 
through  whom  the  business  between 
the  contracting  parties  was  carried  on. 
Within  the  scope  of  that  employment, 
his  hand  was  the  appellant's  hand,  his 
voice  was  its  voice,  and  his  promises 
and  assurances  were  the  promises  and 
assurances  of  his  principal,  notwith- 
standing any  undisclosed  instructions 
or  limitations  existing  in  his  contract 
of  employment."  And  see  §  375,  infra. 
The  South  Carolina  court  says:  "As 
insurance  agents  should  not,  and  as  a 
rule  do  not,  deliver  over  policies  with- 
out payment  of  the  premiums  unless 
they  intend  to  give  credit,  the  mere 
fact  of  delivery  without  demand  of  the 
premium  raises  a  presumption  that 
credit  is  intended,"  Dargan  v.  Equita- 
ble Life  Assur.  Soc,  71  'S.  C.  359; 
Cauthen  v.  Hartford  Life  Ins.  Co.  (S.  C, 
1908),  61  S.  E.  478.  But  where  the  in- 
sured has  given  a  note  instead  of  cash 
payment  of  premium,  it  is  held  that  the 
solicitor  has  no  implied  authority  to 
extend  the  time  of  payment  of  the 
note,  American  Ins.  Co.  v.  Hornbarger, 
85  Ark.  337,  108  S.  W.  213.  If,  by  a 
course  of  dealing,  the  company  has 
treated  an  unauthorized  agent  as  au- 
thorized to  collect  renewal  premiums. 


the  company  will  be  estopped,  though 
the  agent  has  failed  to  turn  over  the 
premium  to  it.  State  Life  Ins.  Co.  v. 
Murray,  159  Fed.  408.  So  also  if  a 
society  by  custom  allows  assessments 
to  be  paid  by  mail,  receipt  at  the 
designated  post  office  on  the  day  when 
due  will  save  from  forfeiture  though 
the  poUcy  provisions  are  otherwise, 
Vancura  v.  Zapadni  Cesko  Bratrska 
Zednota  (Neb.,  1907),  111  N.  W.  845. 

2  Mass.  Ben.  L.  Assoc,  v.  Robinson, 
104  Ga.  256,  30  S.  E.  918,  42  L.  R.  A. 
261:  Michigan  Mut.  Life  Ins.  Co.  v. 
Bowes,  42  Mich.  19,  51  N.  W.  962. 

3  Kenyan  v.  Knights  Templar  &  M. 
Mut.  Aid  Assoc,  122  N.  Y.  247,  25 
N.  E.  299;  Long  v.  Ins.  Co.,  137  Pa.  St. 
335,  20  Atl.  1014,  21  Am.  St.  R.  879; 
Union  Cent.  Life  Ins.  Co.  v.  Duvall,  20 
Ky.  L.  Rep.  441,  46  S.  W.  518  (check 
of  third  party);  Knickerbocker  Life  Ins. 
Co.  V.  Pendleton,  112  U.  S.  696,  5  S.  Ct. 
314,  28  L.  Ed.  866  (draft  on  third 
party);  Fidelitu  &  Cas.  Co.  v.  Johnson, 
72  Miss.  333,  17  So.  2,  30  L.  R.  A.  206 
(order  on  third  party).  If  the  course 
of  dealing  has  been  to  use  the  mail,  a 
check  mailed  apparently  in  good  time 
will  avail  to  prevent  forfeiture  though 
not  received  or  not  received  in  season; 
but  if  the  check  is  not  paid  the  pre- 
mium remains  due,  though  then  there 
is  no  forfeiture  of  policy,  Kenyon  v. 
Kninhts  Temvlar,  122  N.  Y.  247,  25 
N.  E.  299;  Hollowell  v.  Life  Ins.  Co., 
126  N.  C.  398,  35  S.  E.  616.  Remitting 
a  worthless  check  or  draft  is  no  pay- 
ment, National  Life  Ins.  Co.  v.  Gable, 
51  Neb.  5   70  N.  W.  503. 


PAYMENT   OF   PREMIUMS  499 

merit,  as  well  as  waiver  of  all  known  breaches  of  the  policy.'  And 
if  the  company  accept  a  note  or  other  instrument  in  payment  of 
the  premium  its  only  remedy  for  collection  will  be  upon  the  instru- 
ment so  accepted  in  substitution.  It  cannot  claim  a  forfeiture  of 
the  policy  on  the  ground  that  the  premium  remains  unpaid. ^ 

In  a  case  in  South  Carolina  the  insured,  Hill  by  name,  had  given 
his  note  for  the  first  premium,  and  this  had  been  duly  accepted  by 
the  agent  of  the  insurance  company,  and,  after  its  maturity,  had 
been  transferred  to  Doyle,  the  plaintiff,  who  brought  action  upon  it 
against  Hill.  Hill  defended  on  the  ground  that  the  policy  was 
avoided  from  the  inception  of  the  contract  and  that  therefore  there 
was  no  consideration  for  the  note.  He  offered  to  show  that  the 
policy  was  void  because  of  a  false  answer  written  in  the  application 
by  the  medical  examiner,  but  he  admitted  that  he  had  given  the 
correct  answer  orally  to  the  medical  examiner.  The  court  held  that 
the  proffered  testimony  was  not  admissible  and  that  the  defense 
was  not  established,  since  the  company  was  estopped  from  setting 
up  forfeiture  of  the  policy.^ 

The  New  York  standard  policies  as  amended  by  the  superintend- 
ent of  insurance  contain  the  following  clause,  "A  grace  of  thirty 
days  subject  to  an  interest  charge  at  the  rate  of per  centum 

1  John  Hancock  Ins.  Co.  v.  Schlink,  mium  in  place  of  cash,  Smith  v.  Prov. 

175  III.  284,  51  N.  E.  795;  Home  Ins.  Sav.  Life  Assur.  Sac,  65  Fed.  765,  13 

Co.  V.  Oilman,  112  Ind.  14,  13  N.  E.  C.  C.  A.  284;  Dilleber  v.  Knickerbocker 

112;  Rice  v.  New  Enq.  Mut.  Aid  Soc,  Life  Ins.  Co.,  76  N.  Y.  567;  National 

146  Mass.  248;  McGurk  v.  Met.  Life  Life    Ins.    Co.    v.    Tweddell,    22    Ky. 

Ins.   Co.,  56  Conn.  528;  De  Frece  v.  Law  R.  881,  58  S.  W.  699.    And  may 

National  Life  Ins.  Co.,  136  N.  Y.  144,  dispense  with  the  receipt  called  for  by 

48  N.  Y.   St.   R.   909,  32  N.   E.  556  the  terms  of  the  policy,  McNeilly  v. 

(waiver  of  prompt  payment  and  of  for-  Continental  L.  Ins.  Co.,  66  N.  Y.  23. 

feiture  by  a  subsequent  agreement  of  As  to  waiver  see  also  Peck  v.  Wash- 

the  parties).     But  a  local  agent  has  no  ington  Life  Ins.  Co.,  91  App.  Div.  597, 

implied  authority  to  take  anything  but  87  N.  Y.  Supp.  210,  aff'd  181  N.  Y.  585 

cash  in  payment  of  premium.  Carter  v.  (authority  to  waive  payment);  Russell 

Ins.  Co.,  56  Ga.  237;  Ratib  v.  N.   Y.  v.  Prudential  L.  Ins.  Co.,  176  N.  Y. 

Life  Ins.   Co.,   14   N.   Y.   St.   R.  573;  178,  68  N.   E.   252    (no  authority  to 

Tomsecek  v.  Ins.  Co.,  113  Wis.  114,  88  waive);  Stewart  v.  Union  Mut.  L.  Ins. 

N.  W.  1013,  57  L.  R.  A.  455,  90  Am.  Co.,  155  N.  Y.  257,  49  N.  E.  876  (au- 

St.    R.    846    (agent   cannot   offset  his  thority     to     waive     cash     payment); 

debt  due  to  the  insured).     But  com-  Hewitt  v.  Am.   Union  L.  Ins.  Co.,  85 

paveWooddifv.  Old  Dominion  Ins.  Co.,  App.  Div.  279,  83  N.  Y.  Supp.  232; 

31  Grat.  (Va.)  362,  31  Am.  Rep.  739.  Tooker  v.  Security  Trust  Co.,  26  App. 

An  agent  has  no  implied  authority  to  Div.  372,  49  N.  Y.  Supp.  814,  aff'd  165 

receive  property  as  payment  for  pre-  N.  Y.  608,  58  N.  E.  1093  (waiver  of 

mium,  Hoffman  v.  Ins.  Co.,  92  U.  S.  cash  payment). 

161,   23    L.    Ed.    539;    Equitable   Life  "^National   Ben.    Assn.    v.    Jackson, 

Assur.  Soc.  V.  Cole,  13  Tex.  Civ.  App.  114  111.  533,  2  N.  E.  414. 
486,  35  S.  W.  720.    President  or  secre-  3  Doyle  v.  Hill  (S.  C,  1906),  55  S.  E. 

tary  or  agent  if  possessing  actual  au-  446. 
thority  may  give  credit  for  the  pre- 


500  MEANING    AND    LEGAL    EFFECT   OF    LIFE    POLICY 

per  annum  shall  be  granted  for  the  payment  of  every  premium  aiter 
the  first  year  during  which  time  the  insurance  shall  continue  in  force. 
If  death  occur  within  the  days  of  grace  the  unpaid  portion  of  the 
premium  for  the  then  current  policy  year  shall  be  deducted  from 
the  amount  payable  hereunder."  ^  But  such  a  provision  does  not 
by  implication  provide  also  a  grace  of  thirty  days  for  payment  of 
a  note  given  for  a  past-due  premium. ^ 

If  by  a  statutory  provision,  as  for  example  in  Massachusetts  a 
grace  of  ''one  month"  is  specified,  it  will  not  do  for  the  company 
to  substitute  a  grace  of  thirty  days,  since  one  month  is  not  neces- 
sarily the  same  as  thirty  days.  The  provision  being  made  for  the 
benefit  of  the  insured  any  departure  from  it  must  be  as  favorable  to 
the  insured.^ 

And  the  policyholder  is  also  entitled  to  the  protection  and  bene- 
fit coming  from  the  provisions  described  in  the  next  two  sections, 
which  are  not  to  be  waived  or  disturbed  by  inconsistent  stipulations 
in  the  policy.^ 

§  360.  Statutory  Notice  of  Premiums  Due. — In  many  states  it  ia 
provided  that  before  claiming  forfeiture  for  nonpayment  of  premium 
the  insurance  company  must  send  a  specified  notice  to  the  insured, 
which  is  intended  to  operate  as  a  reasonable  warning.^ 

1  Ins.  L.  §  101.  St.  R.  774.    But  in  general  notice  is  to 

2  Bank  of  Commerce  v.  N.  Y.  Life  be  served  only  on  the  insured,  Osborne 
Ins.  Co.,  125  Ga.  552,  54  S.  E.  643.  v.  Home  Life  Ins.  Co.,  123  Cal.  610,  56 

3  Ai^.  Y.  Life  Ins.  Co.  v.  Hardison  Pac.  616.  If  the  company  has  been 
(Mass.,  1908),  85  N.  E.  410.  informed  of  absolute  assignment  of  the 

4  Equitable  Life  Assur.  Soc.  v.  policy,  notice  should  be  sent  to  the 
Clements,  140  U.  S.  226,  11  S.  Ct.  822,  assignee,  Brannin  v.  Ins.  Co.,  28 
35  L.  Ed.  497.  N.  J.  L.  92.     Otherwise  it  should  be 

5  Appendix,  ch.  I;  N.  Y.  Ins.  L.  §  92,  sent  to  the  original  insured,  Franklin 
given  in  Mut.  Life  Ins.  Co.  v.  Phinney,  Life  Ins.  Co.  v.  Am,.  Nat.  Bank,  74 
178  U.  S.  327,  20  S.  Ct.  906,  44  L.  Ed.  Ark.  1,  84  S.  W.  789.  The  company 
1088.  Under  the  New  York  statute  no  need  not  repeat  the  notice  on  maturity 
notice  need  be  given  if  the  term  is  less  of  a  note  taken  for  premium,  Banholzer 
than  a  year  or  if  the  premiums  are  v.  N.  Y.  Life  Ins.  Co.,  74  Minn.  387, 
payable  monthly  or  weekly,  Baldwin  77  N.  W.  295;  Conway  v.  Phoenix  Mut. 
V.  Prov.  S.  Life  Assur.  Soc,  23  App.  L.  Ins.  Co.,  140  N.  Y.'  79,  35  N.  E.  420. 
Div.  5,  48  N.  Y.  Supp.  463,  aff'd  162  Days  of  grace  do  not  affect  the  proper 
N.  Y.  636,  57  N.  E.  1103.  And  if  the  date  of  notice,  Trimble  v.  N.  Y.  Life 
insured  has  voluntarily  abandoned  the  Ins.  Co.,  20  Wash.  386,  55  Pac.  429. 
insurance  he  has  also  abandoned  the  As  to  what  notice  constitutes  a  com- 
right  to  statutory  notice,  Mut.  Life  pliance  with  the  statute,  see  Nederland 
Ins.  Co.  V.  Hill,  193  U.  S.  551,  24  S.  Life  Ins.  Co.  v.  Meinert,  199  U.  S.  171, 
Ct.  538.  If  the  company  knows  that  26  S.  Ct.  15,  disapproving  A^.  Y.  Life 
the_  insured  is  mentally  incapacitated,  Ins.  Co.  v.  Dingley,  93  Fed.  153.  And 
notice  should  be  sent  to  the  third  party  see  also  Schad  v.  Security  Mut.  L. 
beneficiary,  if  there  be  one,  Buchanan  Assoc,  11  App.  Div.  487,  42  N.  Y. 
V.  Supreme  Conclave,  178  Pa.  St.  465,  Supp.  314,  aff'd  155  N.  Y.  640,  49 
35  Atl.  873,  34  L.  R.  A.  436,  56  Am.  N.  E.  1104;  McDougaU  v.  Prov.  Sav. 


STATUTORY  NOTICE  OF   PREMIUMS   DUE 


501 


In  order  to  establish  forfeiture  of  the  poHcy  for  non-payment  of 
the  premium  the  burden  is  thrown  upon  the  insurer  to  prove  a 
compUance  with  the  terms  of  the  statute.^  The  fact  that  the  ir»- 
sured  is  financially  unable  to  pay  the  premium,  and  can  derive  no 
benefit  from  the  notice  furnishes  the  company  with  no  excuse  for 
omitting  to  conform  to  the  statutory  requirement.^ 

A  foreign  company  issuing  a  pohcy  in  New  York  is  subject  to  the 
New  York  statute;  ^  but  a  New  York  company  making  a  contract 
of  life  insurance  in  another  state  is  not  subject  to  the  New  York 
statute  unless  the  policy  so  provides."* 


Life  Assur.  Soc,  135  N.  Y.  551,  32 
N.  E.  251;  Baxter  v.  Ins.  Co.,  119  N.  Y. 
450,  23  N.  E.  1048,  7  L.  R.  A.  293; 
Phelan  v.  Northwestern  Mut.  Life  Ins. 
Co.,  113  N.  Y.  147,  20  N.  E.  827,  10 
Am.  St.  R.  441;  Carter  v.  Ins.  Co.,  110 
N.  Y.  15,  17  N.  E.  396.  Plaintiff  need 
not  prove  payment  of  premiums  under 
the  statute,  but  the  company  must 
plead  and  prove  a  service  of  the 
statutory  notice  followed  by  a  non- 
payment of  the  premium  within  the 
period  specified  for  that  purpose, 
Fischer  v.  Met.  Life  Ins.  Co.,  167  N.  Y. 
178,  60  N.  E.  431;  Seelei/  v.  Manhattan 
Life  Ins.  Co.,  73  N.  H.  339,  55  Atl.  425. 
Proof  of  proper  mailing  may  be  enough 
under  the  statute,  McConnell  v.  Soci- 
ety, 92  Fed.  769,  34  C.  C.  A.  663.  And 
the  court  will  allow  an  agent  of  the 
company  possessing  knowledge  in  a 
general  way  to  prove  a  prima  facie 
case  of  mailing  the  notice  though  the 
various  steps  involved  in  mailing  are 
taken  by  several  agents,  Wolarsky  v. 
.V.  Y.  Life  Ins.  Co.,  120  App.  Div.  99, 
104  N.  Y.  Supp.  1047.  Where  the 
amount  of  the  premium  is  variable  the 
burden  is  on  the  company  to  prove  the 
amount,  Gooduin  v.  Prov.  Sav.  L. 
Assur.  Soc,  97  Iowa,  226, 66  N.  W.  157. 
The  New  York  act  does  not  apply  to 
mortality  assessments,  Merriman  v. 
K.  M.  B.  Assoc.  138  N.  Y.  123,  33 
N.  E.  738.  It  has  been  held  that  it  is 
contrary  to  public  policy  to  allow  the 
insured  to  waive  the  provisions  of  the 
statute.  Forfeiture  in  such  case  is 
ultra  inres,  Griffith  v.  Ins.  Co.,  101  Cal. 
627,  36  Pac.  113.  40  Am.  St.  R.,  96. 
And  see  §  130,  supra.  In  New  York 
the  statutory  provision  does  not  apply 
to  fraternal  benefit  societies,  Bopple  v. 
Supreme  Tent,  18  App.  Div.  488.  Nor 
to  mutual  benefit  assessment  com- 
panies  incorporated   under   L.    1883, 


ch.  175,  Ronald  v.  M.  R.  L.  F.  Assn., 
132  N.  Y.  378.  Nor  to  associations 
conducting  assessment  life  and  accident 
insurance,  Greenwald  v.  United  L.  Ins. 
Ass.,  18  Misc.  (N.  Y.)  91. 

1  Strauss  v.  Union  Cent.  L.  his.  Co., 
170  N.  Y.  349.  The  affidavit  of  mail- 
ing must  show  contents  of  notice  and 
identify  the  policy,  McCall  v.  Pru- 
dential Ins.  Co.,  98  App.  Div.  (N.  Y.) 
225.  The  notice  must  be  addressed 
correctly  and  to  the  right  person, 
Equitable  L.  Assur.  So.  v.  Fonmmhold, 
75  111.  App.  43;  Nielson  v.  Prov.  Sav. 
L.  A.  Soc.  (Cal.,  1901),  66  Pac.  R.  663. 
Proof  must  show  that  postage  was 
prepaid,  Prov.  Sav.  L.  A.  Soc.  v. 
Nixon,  73  Fed.  144.  Day  of  mailing  is 
excluded  in  computing  30  days.  Hicks 
V.  Nat.  L.  Ins.  Co.,  60  Fed.  690. 
Affidavit  of  mailing  is  not  conclusive 
in  another  state,  and  proof  that  the 
notice  was  not  received  has  some  bear- 
ing, Equitable  Life  Assur.  Soc.  v. 
Nixon,  81  Fed.  796.  If  addressed  and 
mailed  in  pursuance  of  the  directions 
of  the  statute,  the  receipt  of  the  notice 
is  immaterial,  McConnell  v.  Prov.  Sav. 
Life  A.  Soc,  92  Fed.  769;  N.  Y.  Life  Ins. 
Co.  V.  Scott  (Tex.  Civ.  App.),  57  S.  W. 
677.  The  contract  in  general  is  to  be 
governed  by  the  statutes  of  the  place 
where  it  is  made.    See  §  92,  supra. 

2  Equitable  Life  Assur.  Soc.  v.  Per- 
kins (Ind.  App.,  1907),  80  N.  E.  682. 

3  Strauss  v.  Union  Cent.  Life  his. 
Co.,  170  N.  Y.  349,  63  N.  E.  347. 

*  Mut.  Life  Ins.  Co.  v.  Cohen,  179 
U.  S.  262,  21  S.  Ct.  106,  45  L.  Ed.  181; 
Mut.  Life  Ins.  Co.  v.  Hill,  193  U.  S. 
551,  24  S.  Ct.  538,  48  L.  Ed.  788;  Met. 
Life  Ins.  Co.  v.  Bradley,  98  Tex.  230, 
82  S.  W.  1031.  But  see  Nail  v.  Prov. 
S.  L.  Assur.  Soc  (Tenn.  Ch.  App.),  54 
S.  W.  109  (1899);  Summitt  v.  U.  S.  Life 
Ins.  Co.,  123  Iowa,  681,  99  N.  W.  563. 


502 


MEANING    AND    LEGAL    ICFFECT    OF    LIFE    POLICY 


§  361,  Extended  or  Paid-up  Insurance. — In  the  absence  of  stat- 
utory provision  or  express  agreement,  a  policy  lapsed  for  non- 
payment of  premium  has  no  surrender  value/  since  by  forfeiture 
all  rights  of  the  insured  under  it  are  terminated;  but  inasmuch  as 
the  premiums  during  the  earlier  years  are  larger  than  the  hazard  re- 
quires, the  lapsed  policy  has  what  is  called  a  surrender  value  which 
can  equitably  be  made  the  occasion  of  concession  to  the  honest  but 
delinquent  policyhol-d-er.  In  most  instances  this  benefit  is  secured 
to  him  either  by  statute  ^  or  express  agreement  or  both,  where  the 
policy  lapses  for  nonpayment  of  premium.  A  usual  provision  in 
such  a  case  gives  him  the  option  to  take  either  an  extension  of  the 
original  amount  for  such  further  time  as  the  net  reserve  will  fairly 
purchase,  or  paid-up  insurance  for  the  original  lifetime  or  other 
term,  but  for  a  commuted  or  reduced  amount,  provided  at  least 
two  or  three  annual  premiums  have  been  paid  before  default.^ 

It  is  a  condition  precedent  to  the  enjoyment  of  this  privilege 
that  the  insured  make  his  demand,  and  if  required  surrender  his 
policy,  within  the  period  specified  for  so  doing.'*  But  by  the  terms 
of  a  statute  or  statutory  policy,  as  in  the  case  of  the  New  York 
standard  policies,  although  the  owner  of  the  policy  shall  fail  to 


^Haskell  v.  Societij,  181  Mass.  341, 
63  N.  E.  899. 

2  See  Appendix,  ch.  I.  The  method 
of  computing  the  reserve  or  surrender 
value  of  lapsed  or  forfeited  policies  is 
defined  by  the  New  York  Ins.  L.  §  88. 

3  By  the  New  York  standard  hfe 
policies,  the  options  on  surrender  or 
lapse,  after  a  poHcy  has  been  in  force 
three  full  years,  are  .'specified  in  the 
policy  itself,  Ins.  L.,  §  101.  As  to  New 
York  statute,  see  Nielsen  v.  Society, 
139  Cal.  332,  73  Pac.  168,  96  Am.  St. 
R.  146.  As  to  Missouri  statute,  see 
Cravens  v.  Ins.  Co.,  148  Mo.  583,  50 
S.  W.  519,  53  L.  R.  A.  305,  71  Am.  St. 
R.  628;  Nichols  v.  Ins.  Co.,  176  Mo 
355,  75  S.  W.  664,  62  L.  R.  A.  657. 
As  to  rule  of  construction  applied  to 
nonforfeiture  statutes,  see  Ins.  Co.  v 
Butcher,  95  U  S.  269.  24  L.  Ed.  410 
(premium  paid  by  note);  Drury  v. 
.V.  Y.  Life  Im^.  Co..  115  Ky.  681,  74 
S.  W.  663,  61  L.  R.  A.  714;  Carter  v. 
Ins.  Co.,  127  Mass.  153  (endowment 
policy);  Hazen  v.  Mass.  Mvt.  Life  Ins. 
Co.,  170  Mass.  254.  49  N.  E.  119. 
Extended  insurance  referred  to  in  this 
section  is  sometimes  called  "tem- 
porary insurance,"  see  Burridge  v. 
-V.  Y.  Life  Ins.  Co.  (Mo.,  Feb.,  L890), 


37  Ins.  L.  J.  449.  On  "paid-up  in- 
surance" no  further  premiums  are 
payable. 

4  Knapp  V.  Homeopathic  Mut.  L.  Ins. 
Co.,  117  U.  S.  411,  6  S.  Ct.  807,  29 
L.  Ed.  960;  Nielsen  v.  Prov.  Sav.  L.  A. 
Soc,  139  Cal.  332,  73  Pac.  168;  Attor- 
neij  General  v.  Continental  Life  Ins. 
Co.,  93  N.  Y.  70;  Union  Cent.  Life  Ins. 
Co.  V.  Buxer,  62  Ohio  St.  385,  57  N.  E. 
66,  49  L.  R.  A.  737;  Universal  Life 
Ins.  Co.  V.  Devore,  88  Va.  778,  14  S.  E. 
532.  But  see  Kentucky  cases:  Equita- 
ble Life  Assiir.  Soc.  v.  Bank,  25  Ky. 
Law  Rep.  839,  75  S.  W.  275;  Washing- 
ton Life  Ins.  Co.  v.  Miles,  112  Ky.  743, 
66  S.  W.  740;  Manhattan  Life  Ins.  Co 
V.  Patterson,  109  Kv.  624,  60  S.  W.  383, 
53  L.  R.  A.  378.  95  Am.  St.  R.  393; 
Mut.  Life  bis.  Co.  v.  Jarboe,  102  Ky. 
80,  42  S.  W.  1097,  39  L.  R.  A.  504,  80 
Am.  St.  R.  343.  As  to  loss  of  policy 
as  an  excuse  for  failure  to  surrender  it 
to  the  company,  see  Wilco.v  v.  Society, 
173  N.  Y.  50,  65  N.  E.  857,  93  Am.  St. 
R.  579.  Time  limit  for  the  demand 
may  be  waived  by  the  insurer,  Linden- 
thai  v.  Germania  Life  Ins.  Co.,  174 
N.  Y.  76,  66  N.  E.  629;  Neihen  v. 
Prov.  S.  Life  A.  Soc,  139  Cal.  332,  73 
Pac.  168,  96  Am.  St.  R.  146. 


WHEN    PREMIUM    IS   A    UELT    COLLECTIBLE    BY    COMPANY      503 

exercise  the  options  specified,  the  insurance  must  be  continued  for 
his  benefit  as  provided  for.^ 

The  Kentucky  court,  however,  has  repeatedly  held  that  though 
a  policy  provide  that  surrender  of  policy  and  demand  for  a  paid-up 
policy  must  be  made  within  six  months  of  lapse,  nevertheless  time 
is  not  of  the  essence  of  the  contract  and  that  the  demand  may  be 
made  within  a  reasonable  time.^ 

Sometimes  the  certificate  or  policy  provides  that,  in  case  of  lapse 
for  nonpayment  of  premium,  the  delinquent  may  be  reinstated  on 
payment  of  arrears  and  on  furnishing  satisfactory  proof  of  good 
health.  On  complying  with  the  conditions  named,  the  applicant  is 
entitled  to  reinstatement.^  If,  however,  reinstatement  is,  by  the 
terms  of  the  policy,  made  subject  to  the  approval  of  certain  officers, 
their  duty  is  discretionary  rather  than  ministerial,  and  if,  in  refusing 
an  application  for  reinstatement,  their  action  is  not  fraudulent  or 
purely  arbitrary,  the  courts  cannot  interfere.'' 

§  362.  When  Premium  is  a  Debt  Collectible  by  Company. — The 

general  rule  applicable  to  all  branches  of  insurance  is,  that  in  the 
absence  of  express  provision  to  the  contrarj?^,  the  premium  or  com- 
pensation of  the  company  becomes  due  and  collectible  as  soon  as 
the  policy  is  delivered ;  ^  but  the  usual  provisions  of  the  life  policy 
and  the  custom  of  the  business  relating  to  payment  of  first  and 
subsequent  annual  premiums  differ  widely  from  the  corresponding 
•terms  of  the  fire  and  marine  policies  and  the  practice  of  under- 
writers in  issuing  them.  It  is  the  regular  thing  in  this  country  for 
the  fire  or  marine  insurer  to  issue  his  policy  without  exacting  pre- 
payment of  the  premium,  and  no  clause  of  the  usual  policy  pro- 

1  N.  Y.  Ins.  L.  §  101.  and  conditions  of  the  by-laws  above 

2  Washington  L.  Ins.  Co.  v.  Glover  quoted,  it  does  not  follow  that  the 
(Ky.,  1904),  78  S.  W.  146.  committee  was  bound  to  reinstate  her 

3  Lovick  V.  Life  Assn.,  110  N.  C.  to  membership  in  the  association. 
93,  14  S.  E.  506;  Wichman  v.  Met.  While  the  by-laws  empowered  them  to 
Life  Ins.  Co..  120  Mo.  App.  51,  96  grant  her  request,  they  were  not  bound 
S.  W.  695.  nor  could  they  be  compelled  to  do  so  ")• 

*  Butler  V.  Grand  Lodge.  146  Cni.  ^  loua  Life  his.  Co.  v.  Lewis,  187 
172;  Brun  v.  Supreme  Council,  15  Col.  U.  S.  335,  23  S.  Ct.  126  ("payment  of 
App.  538;  McLaughlin  v.  Supreme  the  premium  can  be  exacted  simul- 
Council,  184  Mas.<.  298;  Lane  v.  Fi-  taneously  with  the  delivery  of  the 
delity  Mut.  Lif"  Ins.  Co.  (N.  C,  1906),  policy");  Schi^vp  v.  Ins.  Co.,  124  111. 
54  S.  E.  8.^4;  Harrington  v.  Keystone  354,  16  N.  E.  229  (entire  premium  due 
Assn.,  190  Pa.  St.  77  ("conceding,  for  as  soon  as  risk  attaches);  Albert  v.  Ins. 
the  purrose  of  argument,  that  her  an-  Co.,  122  N.  C.  92,  30  S.  E.  327,  65 
pHcation  was  in  time,  and  that  she  Am.  St.  R.  693  (whole  annual  pre- 
compiled or  was  ready  and  willinfr  mium  earned  as  soon  as  risk  attaches 
to    fully  comply  with    all    the  terms  though  payable  quarterly). 


504  MEANJNG   AND    LEGAL    EFFECT    OF    LIFE    POLICY 

hibits  this;  but  as  soon  as  the  poHcy  is  deUvered  the  premium  for 
the  whole  term,  whether  one,  three,  or  five  years,  or  other  period, 
becomes  a  debt.  This  debt  for  premium  of  fire  insurance  is  not, 
however,  very  frequently  made  the  subject  of  Htigation,  since,  by 
promptly  invoking  the  aid  of  the  cancellation  clause,  the  under- 
writer is  enabled  to  relieve  himself  from  further  responsibility  before 
the  earned  portion  of  the  premium  has  assumed  serious  proportions. 
But  in  the  case  of  the  ordinary  life  policy,  the  liability  of  the  com- 
pany does  not  attach  at  all,  and  no  compensation  is  earned,  until  the 
first  premium  is  paid,  or  until  note,  or  credit,  or  other  substitute,  is 
accepted  in  its  stead.  Under  such  a  policy  the  only  result  of  non- 
payment of  the  first  premium  is  that  the  contract  is  not  closed.^ 

In  like  manner  when  the  second  premium  becomes  payable  under 
the  regular  life  policy,  if  the  insured  makes  default  in  its  payment 
the  insurance  terminates  ipso  facto,  and  no  premium  is  earned  or 
can  be  recovered  by  the  company  thereafter.^  Upon  nonpayment 
of  the  premium  in  such  a  case  the  insurance  ceases,  and  the  insured 
on  his  part  has  no  further  claim  upon  the  company  except  what  is 
conferred  by  the  nonforfeiture  clause;  ^  but  if  in  place  of  a  present 
cash  payment  the  company  gives  credit  in  any  form,  then,  as  soon 
as  the  risk  attaches,  the  compensation  or  premium  for  the  entire 
year  becomes  a  debt.'* 

Premium  notes  and  assessments  are  frequently  the  subject  of 
suit  brought  at  the  instance  of  life  insurance  companies,  and  as- 
sessment companies  generally. 

§  363.  Assessments. — In  mutual  associations  and  beneficiary  soci- 
eties the  premiums  are  often  paid  in  the  form  of  assessments,  and  it 
is  in  order  on  the  happening  of  a  death  to  call  for  an  assessment 
with  which  to  meet  it,  nonpayment  of  which  ipso  facto  usually  oc- 
casions suspension  or  forfeiture  of  all  rights  on  the  part  of  the  in- 
sured member.-*^ 

1  Northwestern  Mut.  Life  Ins.  Co.  v.  19  Am.  Rep.  495,  or  as  an  arrange- 
Elliott,  5  Fed.  225;  Cravens  v.  A^.  Y.  ment  for  life  conditioned  upon  the 
Life  Ins.  Co.,  148  Mo.  583,  599,  50  S.  W.  payment  of  each  annual  premium  as 
519,  53  L.  R.  A.  305,  71  Am.  St.  R.  in  N.  Y.  Life  Ins.  Co.  v.  Statham,  93 
628.  U.  S.  24,  23  L.  Ed.  789,  the  practical 

2  Lehman  v.  Clark,  174  111.  279,  51  result  is  as  stated  in  the  text.  So  held 
N  E.  222,  43  L.  R.  A.  648;  Clark  v.  in  People  v.  Security  Life  Ins.  Co.,  78 
Schromeyer,  23  Ind.  App.  565,  55  N.  E.  N.  Y.  114,  34  Am.  Rep.  522  (referring 
'°*^-        ,  to  both  the  preceding  cases). 

^Goodwin  V.  Ins.  Co.,  73  N.  Y.  480.  i  Albert  v.  Ins.   Co  ,   122  N    C    92 

Whether  the  contract  theoretically  is  30  S.  E.  327,  65  Am.  St.  R.  693 

regarded    as    an    arrangement   renew-  5  Butler  v.  Grand  Lodge,  146  Cal  172, 

able  from  year  to  year  during  life  as  in  79   Pac.    861;   Delaney   v.    Kelly,   103 

Worthington  v.  Ins.  Co.,  41  Conn.  372,  App.  Div.  (N.  Y  )  412  92  N   Y   Supp 


ASSESSMENTS  505 

Such  assessments  are  practically  deferred  premiums,  levied  upon 
members  to  meet  losses  of  others  occurring  during  the  term  of  mem- 
bership, and  based,  not  upon  estimated  laws  of  average,  but  rather 
upon  an  amount  of  ascertained  losses.^  They  are  a  part  of  the  con- 
sideration payable  by  the  member  to  the  association  in  return  for 
the  benefit  of  insurance  actually  enjoyed  by  him,  the  balance  of 
pecuniary  consideration  often  consisting  of  small  fees  and  dues  or 
stated  assessments  for  expenses.  Therefore,  by  reason  and  by  the 
great  weight  of  authority,  when  properly  levied,  assessments  con- 
stitute a  collectible  debt  in  favor  of  the  association,  regardless  of 
whether  the  member  has  expressly  promised  to  pay  them  or  whether 
their  nonpayment  occasions  forfeiture  of  his  rights  and  insurance.^ 

In  most  instances  an  express  promise  to  pay  assessments  can  be 
deduced  either  from  the  statutes,  by-laws,  application,  or  certificate 
applicable  to  the  case.^  Where,  however,  no  express  undertaking 
by  the  member  to  pay  assessments  can  be  found,  several  courts  and 
several  standard  text-writers  have  concluded  that  if  forfeiture  is  pre- 
scribed as  a  penalty  for  nonpayment  of  assessments  no  other  result 
can  be  inferred;  and  that,  therefore,  the  association  cannot  collect  the 
assessment  from  the  delinquent  member.^  But  the  difficulty  with 
these  decisions  is  that  they  allow  to  the  defaulting  member  his  own 
insurance  for  a  period  without  exacting  in  return  the  proper  con- 
sideration; and  their  authority  is  weakened  by  the  course  of  reason- 
ing adopted  in  the  opinions  rendered  in  their  support.  For  in  these, 
the  conclusion  seems  to  be  in  substance  based  upon  the  two  proposi- 


1021;    McNeil   v.    So.    Tier   Mas.    R.  Atl.  498.     And  see  loiva  Life  Ins.  Co 

Assn.,  40  App.    Div.   581,  58   N.    Y.  v.  Lews,  187  U.  S.  335,  23  S.  Ct.  126 

Supp.   119;  Sovereign  Camp  v.  Hicks  (if  liability  of  company  attaches  re- 

(Tex.  Civ.  App.,  1904),  84  S.  W.  425;  ciprocal  obligation  to  pay  for  it  is  in- 

Sterling  v.  Head  Camp,  28  Utah,  505,  curred). 

80    Pac.    375.      Examining    physician  ^Gray  v.  Daly,  40  App.  Div.  41,  57 

has  no  authority  to  receive  payment,  N.  Y.  Supp.  527;  McDonald  v.  Ross 

Teeter  v.  United  Life  Ins.  Assoc,  159  Lewin,  29  Hun  (N.  Y.),  87;  Baker  v. 

N.  Y.  411,  54  N.  E.  72.    But  payment  A^.  Y.  State  Mut.  Ben.  Assn.,  9  N.  Y. 

to  wife  of  secretary  was  held  good  by  St.  Rep.  653;  New  Era  Life  Assn.  v. 

custom,    Anderson    v.    S.    C.    O.    of  Rossiter,  132  Pa.  St.  314,  19  Atl.  140; 

Chosen   Friends,    135    N.    Y.    107,    31  Dettratt  v.  Kestner,  147  Pa.  St.  566,  23 

N.  E.  1092.  Atl.  889;  Fidton  v.  Stevens,  99  Wis. 

1  Supreme     Commandery     v.     Ains-  307,  74  N.  W.  803. 

worth,  71  Ala.  436,  443.  *  Lehman  v.  Clark,  174  111.  279,  51 

2  Cal'ins  v.  Angell,  123  Mich.  77,  81  N.  E.  222,  43  L.  R.  A.  648;  Covenant 
N.  W.  977;  Ellerhe  v.  Barney,  119  Mo.  Miit.  L.  Assn.  v.  Kentner,  188  111.  431, 
632,  25  S.  W.  384,  23  L.  R.  A.  435;  58  N.  E.  966;  Chicago  Mut.  L.  hidem. 
Re  Globe  Mut.  Benefit  At-sn.,  63  Hun,  Assoc,  v.  Hunt,  127  111.  257,  20  N.  E. 
263,  17  N.  Y.  Supp.  852,  aft'd  1.35  55,  2  L.  R.  A.  549;  Gibson  v.  Megrew, 
N.  Y.  280,  32  N.  E,  122;  Gray  v  Dalv,  154  Ind.  273,  56  N.  E.  674,  48  L.  R.  A. 
40  App.  Div.  41,  57  N.  Y.  Supp.  .V27;  362;  Re  Protection  Life  Ins.  Co.,  9 
Whipple  V.  Im.  Co.,  20  R.  1.  260,  38  Biss.  (U.  S.)  188. 


.'■)()6  MEANING    AND    LEGAL    EFFECT   OF    LIFE    POLICY 

tions  that  the  ordinary  life  policy  is  unilateral  and  that  the  assess- 
ment policy  should  be  governed  by  similar  doctrines. 

It  is  true  that  the  regular  life  policy  is  in  a  sense  unilateral.  The 
instrument  is  executed  by  only  one  party.  It  is  also  true,  that  where, 
;it  the  inception  of  the  contract,  the  assured  has  paid  the  entire 
premium  for  a  year's  insurance  there  is  nothing  more  for  him  to 
do  during  the  year.'  If,  on  the  other  hand,  the  applicant  for  insur- 
ance has  failed  to  make  advance  payment  of  the  first  premium,  the 
regular  policy  does  not  attach  to  the  risk.  There  is  no  contract. 
The  applicant  pays  nothing  and  gets  nothing.  The  insurance  com- 
pany cannot  sue  for  the  premium,  since  no  part  of  it  has  been  earned.^ 
These  well-established  principles,  however,  furnish  no  sanction  for 
a  rule  relieving  the  insured  member  in  an  assessment  company  from 
liability  for  assessment  for  deferred  premium  where  the  liability  of 
the  company  has  already  attached,  and  where  the  member  has  been 
actually  receiving  the  protection  of  his  certificate  for  at  least  a  por- 
tion of  the  corresponding  period.^ 

§  364,  Assessments  Must  be  Lawfully  and  Properly  Levied. — The 

association  can  be  compelled  in  equity  to  levy  a  mortuar}'  assess- 
ment pursuant  to  its  laws,  or  upon  its  failure  to  do  so  the  member 
may  sue  for  damages.'*  The  officials  lawfully  entrusted  with  this 
power  cannot  delegate  it  to  others.-''     Proper  proofs  of  death  must 

1  N.  Y.  Life  Ins.  Co.  v.  Statham,  93  786.  An  assessment  is  a  necessary 
U.  S.  24,  23  L.  Ed.  789;  Goodwin  v.  condition  to  an  action  on  a  premium 
Ins.  Co.,  73  N.  Y.  480.  note,  Savage  v.  Medhury,  19  N.  Y.  32. 

2  Cravens  v.  N.  Y.  Life  Ins.  Co.,  148  As  to  measure  of  damages  where  in- 
Mo.  583,  599,  50  S.  W.  519,  53  L.  R.  A.  surer  fails  to  levy  assessment,  see 
305,  71  Am.  St.  R.  628;  Northwestern  Lawler  v.  Murphy,  58  Coim  294  20 
Mxd.  L.  Ins.  Co.  v.  Elliott,  5  Fed.  225.  Atl.  457,  8  L.  R.  A.    113;  Keyser  v. 

3  If  any  assessment  is  lawfully  made  Mut.  R.  Fund  Assoc,  60  App.  Div. 
in  Massachusetts  by  a  corporation  of  (N.  Y.)  297,  70  N.  Y.  Supp.  32  (cost 
that  state  on  a  contract  made  there  of  putting  risk  in  sound  company  is  a 
with  a  New  York  citizen,  suit  may  be  rule  of  damages).  Assessments  how 
brought  in  New  York  to  collect  it  levied  in  case  of  the  insolvency  of  the 
though  the  company  has  not  qualified  insurer,  Langworthy  v.  Flouring  Mills 
to  transact  business  under  the  New  Co.,  77  Minn.  256,  79  N.  W.  974  (may 
York  statutes.  Western  Mass.  F.  Ins.  include  expenses'  of  winding  up)- 
S-  Jo  ^r'^^^"^'  c9  '^PP-  ^'''-  (N.  Y.)  Whital-er  v.  Meley,  61  N.  J.  L.  1,  38 
■f'  ?8  N.  \  Supp.  996;  Allgeyer  v.  Atl.  840;  Wood  v.  Standard  Mut.  L. 
Lommana,  165  U.  S.  578,  17  S.  Ct.  427.  Stock  Ins.  Co.,  154  Pa   St   157  26  Atl 

on  i'T'^ZJ-oH'''?!''^\  -^^  ^°""-  294,  103      (reasonable     discretion  '  as     to 

-U  Atl    457,  8  L.  R.  A.  113  (there  is  amount);  Camtal  City  Mut.  Fire  /tj.s. 

nnphed    a   promise    to   levy   to   meet  Co.  v.  Boggs,  172  Pa.  St.  91,  33  Atl. 

losses);  Covenant  Mut    Ben    Assn.  v.  349  (by  receiver);  Life  Ins.  Co.  v.  Ful- 

%Z^''    ^^Si"-    ^n^'   -^   ^-    E-    480;  ton,  101  Wis.  1,   76  N.  W.   775.    And 

^1  n    99  M  ^''"n'r.^'D  "^T- '  ^  M  ^-  Y-  ^^«  ^"^'^««  ''•■  ^^«-^-^-  Safet,,  Fund  Assn. , 

r    -J  ,oa  ^-  V    i, .    o^i^y-  ■^"so'^^c  147  Mass.  360,  17  N.  E.  874.  1  L.  R.  A. 

(rinld,  126  N.  Y.  615,  27  N.  E.  1037;  146;    Cornmonwealth  Mut.  F.  Ins.   Co. 

fac^son  Z-^<>jhxcesternMut.  R.  Assn.,  v.  Wood,  171   Mass.  484,  51  N.  E.  19. 

'3  Wis.  507,  41  N.  W.  708,  2  L.  R.  A.  s  Garretson  v.  Eq.  Mut  L.,  etc.,  Assn., 


ASSESSMENTS   MUST   BE   LAWFULLY   AND   PROPERLY   LEVIED  507 

first  be  received,*  and  the  requirements  of  the  charter  and  by-'aws 
must  be  observed.^  The  assessment  upon  a  member  must  not  m- 
elude  losses  occurring  before  he  became  a  member;  ^  but  may  in- 
clude losses  occurring  during  membership,  although  assessment 
therefor  is  not  levied  until  membership  has  ceased.'*  Illegal  assess- 
ments need  not  be  paid  to  avoid  forfeiture.^  It  is  said  that  the 
burden  is  upon  the  association  to  show  the  legality,  regularity,  and 
necessity  of  the  assessment.^  The  member  must  not  be  assessed  for 
more  than  his  just  proportion  of  the  loss; ''  nor  for  future  prospective 
losses;  *  unless  the  statute  or  by-laws  provide  for  it.** 

While  a  reasonable  discretion  must  be  left  to  the  directors  or  other 
officials  levying  the  assessment,  because  of  contingencies,  and  in 
view  of  the  fact  that  some  members  may  default,^"  yet  an  assessment 
for  twice  the  indebtedness  was  held  void.^^ 


93  Iowa,  402,  61  N.  W.  952;  Fee  v. 
yiat.  Masonic  Ace.  Assn.,  110  Iowa, 
271,  81  N.  W.  483;  Passenger  Con- 
ductors' L.  I.  Co.  V.  Birnbaum,  116 
Pa.  St.  565,  11  Atl.  378;  Miles  v.  Mut. 
R.  F.  Assn.,  108  Wis.  421,  84  N.  W. 
159. 

1  Coyle  V.  Ken.  Grangers'  Mut.  Ben. 
L.  Soc,  8  Ky.  L.  R.  604,  2  S.  W.  676. 

2  Grand  Lodge  v.  Bagley,  164  111. 
340,  45  N.  E.  538;  Mee  v.'  Assoc,  69 
Minn.  210,  72  N.  W.  74;  Chappie  v. 
Sovereign  Camp,  64  Neb.  55,  89  N.  W. 
423. 

3  Capital  City  Mut.  Fire  Ins.  Co.  v. 
Boggs,  172  Pa.  St.  91,  33  Atl.  349. 

*  Prov.  Mut.  R.  As.sn.  v.  Pelissier, 
69  N.  H.  606,  45  Atl.  562;  Ionia,  etc., 
Mid.  Fire  Ins.  Co.  v.  Ionia  Judge,  10() 
Mich.  606,  59  N.  W.  250,  32  L.  R.  A. 
481;  Peake  v.  Yule,  123  Mich.  672,  82 
N.  W.  514;  but  see  Gray  v.  Daly,  40 
App.  Div.  41,  57  N.  Y.  Supp.  527; 
Hendel  v.  Revest.  F.  Assn.,  2  Pa.  Dist. 
R.  116;  Fulton  v.  Stevens,  99  Wis.  307, 
74  N.  W.  803. 

5  Benjamin  v.  Mut.  R.  Fund  Assn., 
146  Cal.  34,  79  Pac.  517. 

6  Am.  Mut.  Aid  Soc.  v.  Helburn,  85 
Ky.  1,  2  S.  W.  495,  7  Am.  St.  R.  571; 
Shea  V.  Mass.  Ben.  Assn.,  160  Mass. 
289,  35  N.  E.  855,  39  Am.  St.  R.  475; 
Pacific  Mut.  Ins.  Co.  v.  Guse,  49  Mo. 
329,  8  Am.  Rep.  132  (must  show  that 
losses  have  actually  occurred);  Sus. 
Mut.  Fire  Ins.  Co.  v.  Gachenhach,  115 
Pa.  St.  492,  9  Atl.  90  (must  follow 
established  rule  of  levy);  Hartford  Ins. 
Co.  V.  Hijde,  101  Tenn.  396,  48  S.  W. 
968  (company  must  prove  regularity). 


But  as  to  prima  facie  regularity,  see 
Demings  v.  Supreme  Lodge,  131  N.  Y 
522,  30  N.  E.  572;  Raegener  v.  Willard, 
44  App.  Div.  41,  60  N.  Y.  Supp.  478; 
Anderson  v.  Association,  171  111.  40, 
49  N.  E.  205.  What  relief  can  be  had 
where  company  levies  too  large  an 
assessment.  People's  Mid.  F.  Ins. 
Co.  V.  Groff,  154  Pa.  St.  200, 26  Atl.  63. 
''  U.  S.  Mut.  Ace.  Assn.  v.  Mueller, 
151  111.  254,  37  N.  E.  882  (incorrect 
amount  named  in  notice);  Ehert  v. 
Assoc,  81  Minn.  116,  83  N.  W.  506 
(must  not  discriminate  between  classes, 
though  rate  may  be  changed);  Sands 
V.  Graves,  58  N.  Y.  94;  Pratt  v.  Dwell- 
ing H.  Mut.  Co.,  7  App.  Div.  544,  40 
N.  Y.  Supp.  179;  Bangs  v.  Gray,  12 
N.  Y.  477.  There  must  be  no  dis- 
crimination, Shaughnessey  v.  Ins.  Co., 
21  Barb.  (N.  Y.)  605;  Kcehler  v. 
Beeber,  122  Pa.  St.  291,  16  Atl.  354. 

8  Vandalia  Mut.  Co.  Fire  Ins.  Co.  v. 
Beasley,  84  111.  App.  138. 

9  A  member  is  liable  for  only  one 
assessment  to  meet  a  death  claim. 
People  V.  Assn.,  126  N.  Y.  615,  27 
N.  E.  1037.  A  member  of  an  insolvent 
mutual  assessment  company  cannot 
set  off  the  company's  indebtedness  to 
him  against  an  assessment  levied  upon 
him  to  pay  losses.  Stone  v.  N.  J.  &  H. 
R.  R.  &  Ferry  Co.  (N.  J.,  1907),  66 
Atl.  1072. 

^'^  Ionia,  etc.,  Mut.  Fire  Ins.  Co.  v. 
Ionia  Judge,  100  Mich.  606,  59  N.  W. 
250,  32  L.  R.  A.  481;  Seamans  v. 
Millers'  Mid.  Ins.  Co.,  90  Wis.  490, 
63  N.  W.  1059. 

11  Lawler  v.  Murphy,  58  Conn.  294, 


508 


MEANING    AND    LEGAL    EFFECT    OF    LIFE    POLICY 


Where  an  assessment  company  or  association  has  become  liable 
to  make  payment  upon  a  certificate,  and  refuses  to  levy  an  assess- 
ment to  meet  the  claim,  the  claimant  may  bring  action  at  law  with- 
out first  suing  in  equity  to  compel  the  levy  of  an  assessment.^ 

§  365.  Power  to  Change  Rate  of  Assessments. — The  nature  of  the 
contract  in  an  assessment  association  is  such  as  naturally  to  call 
for  a  varying  rate  of  assessment.  A  power  to  change  the  rate  equita- 
bly from  time  to  time  will  be  inferred  ^  unless  the  plain  meaning  of 
the  contract  prohibits;  ^  but  such  change  must  not  be  unreasonable, 
or  repugnant  to  vested  rights.'' 

The  member  often  expressly  agrees  to  be  bound  by  future  by- 
laws and  regulations  by  which,  in  that  event,  the  rate  may  be  changed 
pursuant  to  the  charter.""^  A  change  even  from  assessments  to 
regular  premiums  may  not  be  in  violation  of  the  Constitution  of  the 
United  States. « 

§  366.  Notice  of  Assessment  to  Insured. — Until  notice  of  the 
amount  of  a  mortuary  assessment  is  duly  given  to  the  member,  no 
obligation  to  pay  is  imposed  upon  him.'     A  subsequent  by-law, 


20  Atl.  457,  8  L.  R.  A.  113;  Thompson 
V.  Piedmont  Mut.  Ins.  Co.  (S.  C,  1907), 
58  S.  E.  341;  Batson  v.  S.  C.  Mut.  Ins. 
Co.  (S.  C.  1907),  58  S.  E.  936;  Jackson 
V.  Northwestern  Mut.  Relief  Ass.,  73 
Wis.  507,  41  N.  W.  708,  2  L.  R.  A.  786. 

1  Rosenberger  v.  Ins.  Co. ,  87  Pa.  St. 
207;  and  see  York  Co.  Mut.  Fire  Ins. 
Co.  V.  Boicden,  57  Me.  286.  So  if  mem- 
bers liable  are  knowingly  omitted, 
Swing  v.  Lumber  Co.,  62  Minn.  169, 
64  N.  W.  97.  Slight  errors  in  amount 
will  not  invalidate  the  assessment, 
Thropp  V.  Ins.  Co.,  125  Pa.  St.  427, 
17  Atl.  473,  11  Am.  St.  R.  909;  Wardle 
V.  Townsend,  75  Mich.  385,  42  N.  W. 
956,  4  L.  R.  A.  511.  But  an  unreason- 
ably excessive  amount  w^ill  avoid  the 
assessment.  People's  Eg.  Mut.  F.  Ins. 
Co.  V.  Babbitt,  7  Allen  (Mass.),  235; 
Traders'  Mut.  F.  Ins.  Co.  v.  Stone,  9 
Allen  (Mass.),  483;  Pencille  v.  State 
Farmers'  Mut.  Hail  Ins.  Co.,  74  Minn. 
67,  76  N.  W.  1026,  73  Am.  St.  R. 
326. 

2  EbeH  V.  Mut.  R.  Fund  L.  Assn.,  81 
Minn.  116,  83  N.  W.  506;  Messer  v. 
Grand  Lodge,  180  Mass.  321.  62  N.  E. 
252  (adoption  of  new^  by-law,  valid). 
But  see  Miller  v.  Tuttle  (Kan.,  1903), 
73  Pac.  88  (void). 


3  Hogan  v.  Pac.  Endowment  League, 
99  Cal.  248,  33  Pac.  924;  Covenant 
Mut.  L.  A.ssn.  v.  Tuttle,  87  111.  App. 
.309;  Covenant  Mut.  L.  Assn.  v.  Kent- 
ner,  188  111.  431,  .58  N.  E.  966. 

■*■  Strauss  v.  Mut.  R.  Fund  L.  Assoc, 
126  N.  C.  971,  36  S.  E.  3.52,  54  L.  R.  A. 
605,  83  Am.  St.  R.  699.  Contra,  Gaut 
v.  Mut.  R.  Fund.  L.  Assoc,  121  Fed. 
403. 

5  Fullenwider  v.  Supreme  Council, 
180  111.  621,  54  N.  E.  485,  72  Am.  St. 
R.  239;  Miller  v.  National  Council,  69 
Kan.  234,  76  Pac.  830;  Haydel  v.  Mut. 
R.  F.  L.  Assn.,  98  Fed.  200,  104  Fed. 
718;  Barbot  v.  Mid.  R.  F.  Assn.,  100 
Ga.  681,  28  S.  E.  498;  Crosbtj  v.  Mut. 
R.  F.  Assn.,  78  N.  Y.  Supp.  237,  38 
Misc.  708;  Seymour  v.  Mid.  R.  F. 
Assn.,  35  N.  Y.  Supp.  793,  14  Misc. 
151;  Mut.  R.  F.  A.s.sn.  v.  Tavlor,  99 
Va.  208, 37  S.  E.  854;  Sowles  v.  Mid.  R. 
F.  Assn.,  71  Vt.  466,  45  Atl.  1045. 

s  Wright  v.  Minnesota  Mut.  L.  Ins. 
Co.,  193  U.  S.  657,  24  S.  Ct.  549. 

7  Wright  v.  Supreme  Commandery, 
87  Oa.  426,  13  S.  E.  .564,  14  L.  R.  A. 
283;  Cronin  v.  Supreme  Council,  199 
111.  228,  65  N.  E.  323,  93  Am.  St.  R. 
127;  Co7irtney  v.  Assoc.  (Iowa),  53 
N.  W.  238.     But  notice  of  stated  dues 


SUICIDE 


509 


rescinding  a  provision  for  such  notice   before  forfeiture,  would  be 
unreasonable  and  inoperative.^ 

If  the  testimony  admits  of  doubt  the  jury  determines  whether 
the  notice  has  been  received.  If  not  received  there  is  no  forfeiture,^ 
unless  the  contract  provides  that  sending  or  mailing  of  the  notice 
is  sufficient  service.^ 


§  367.  Suicide. — Exemption  from  liability  for  suicide. 

Frequently  in  life  policies,  and  almost  invariably  in  accident 
policies,  there  is  a  provision  that  the  company  shall  not  be  liable 
in  case  the  injuries  named  are  self-inflicted,  or,  as  it  is  often  worded, 
if  the  insured  dies  "by  suicide,"  or  "by  his  own  hand  or  act,"  or 
"by  self-destruction,"  or  "takes  his  own  life."  These  have  been 
held  to  be  substantially  equivalent  forms  of  expression,"*  and  they 
are  valid  conditions,  binding  upon  the  assured,^  but  the  insurer  is 
liable,  in  spite  of  such  clauses,  where  death  is  purely  accidental  and 
not  the  result  of  an  intent  to  commit  self-destruction.^  The  rule 
of  construction  just  mentioned  applies,  though  the  contract  exemp- 
tion from  liability  is  worded  "self-destruction,  voluntary  or  involun- 


need  not  be  given,  Riddick  v.  Farmers' 
L.  Assn.,  132  N.  C.  118,  43  S.  E.  544; 
Smith  V.  Bown,  75  Hun,  231,  27  N.  Y. 
Supp.  11.  Though  a  "posting"  of  the 
notice  may  be  the  regulation,  the  mem- 
ber may  have  a  right  to  rely  upon  a 
long-continued  custom  of  receiving  a 
mailed  notice,  Giinther  v.  New  Orleans 
Cotton  Exch.,  40  La.  Ann.  776,  5  So. 
65,  2  L.  R.  A.  118,  8  Am.  St.  R.  554. 
As  to  what  is  sufficient  form  of  notice, 
see  Cronin  v.  Supreme  Council,  199  111. 
228,  65  N.  E.  323,  supra  (no  stamp  or 
seal);  Assn.  v.  Thompson,  91  111.  App. 
580  (demanding  payment  before  ma- 
turity); Hansen  v.  Supreme  Lodge,  40 
111.  App.  216  (amount  of  assessment 
was  through  another  channel  known 
to  member) ;  Bridges  v.  National  Union, 
73  Minn.  486,  76  N.  W.  270  (purpose 
was  through  another  channel  known 
to  member).  As  to  sufficiency  of  no- 
tices of  assessment,  see  also  Sands  v. 
Graves,  58  N.  Y.  94;  Bodle  v.  Chenango 
Mut.  Ins.  Co.,  2  N.  Y.  53,  59;  Bangs  v. 
Duckinfield,  18  N.  Y.  592. 

1  Thibert  v.  Supreme  Lodge,  78  Minn. 
448,  81  N.  W.  220,  47  L.  R.  A.  136,  79 
Am.  St.  R.  412. 

2  Courtney  v.  Assn.  (Iowa),  53  N.  W. 
238;  Garbutt  v.  Assn.,  84  Iowa,  293,  51 
N.  W.  148;  McCorkle  v.  Texas  Ben. 
Assoc,  71  Tex.  149. 


^Modern  Woodmen  v.  Terns,  117 
Fed.  369,  54  C.  C.  A.  293;  Union  Mut. 
Ace.  A.S.SOC.  v.  Miller,  26  111.  App.  230; 
Yoe  V.  Howard,  etc.,  Ben.  Assoc,  63 
Md.  86  (and  sickness  no  excuse  for 
nonpayment). 

•t  Connecticut  Life  Ins.  Co.  v.  Akens, 
150  U.  S.  468,  473,  14  S.  Ct.  155,  37 
L.  Ed.  1148;  Accident  Ins.  Co.  v. 
Crandal,  120  U.  S.  527,  7  S.  Ct.  685, 
30  L.  Ed.  740;  Mutual  L.  Ins.  Co.  v. 
Wis  well,  56  Kan.  765,  44  Pac.  996,  35 
L.  R.  A.  258;  Brignac  v.  Pac.  Mut.  L. 
Ins.  Co.,  112  La.,  574,  36  So.  595,  66 
L.  R.  A.  322. 

5  Hart  V.  Modern  Woodmen  of  Amer., 
60  Kan.  678, 57  Pac.  936,  72  Am.  St.  R. 
380;  Robson  v.  United  Order  of  Forest- 
ers, 93  Minn.  24,  100  N.  W.  381;  Van 
Slooten  V.  Fidelity  &  Cas.  Co.,  78  App. 
Div.  527,  79  N.  Y.  Supp.  608.  For  ef- 
fect of  incontestable  clause,  see  §  378. 
As  to  by-law  adopting  suicide  provision 
after  issuance  of  certificate,  see  Tisch 
v.  Protected  Home  Circle,  72  Ohio  St. 
233,  74  N.  E.  188. 

6  Knights  of  Golden  Rule  v.  Ains- 
worth,  71  Ala.  436,  46  Am.  Rep.  332; 
Equitable  Life  Assur.  Soc.  v.  Paterson. 
41  Ga.  338,  5  Am.  Rep.  535  (overdose 
of  laudanum  during  intoxication); 
Seitzinger  v.  Modern  Woodmen,  204 
111.  58,  68  N.  E.  478. 


510  MEANING    AND    LEGAL    EFFECT   OF    LIFE    POLICY 

tory,"  ^  or  where  the  phraseology  is  "if  the  insured  die  by  his  own 
hand  or  act."  '  In  all  such  cases,  to  relieve  the  company  from  lia- 
bility it  must  appear  that  the  insured  killed  himself  by  design; 
otherwise  the  main  purpose  of  the  contract  would  be  seriously  im- 
paired.^ The  obvious  intent  of  the  insured  in  taking  out  insurance 
is  to  secure  payment  in  the  event  of  accidental  death.  It  cannot, 
therefore,  readily  be  presumed  that  he  would  have  accepted  the 
policy,  if  for  self-destruction,  purely  accidental,  there  could  be  no 
recovery.  The  reasonable  purpose  of  the  insured  must  be  invoked 
to  aid  in  the  interpretation  where  the  company  chooses  the  lan- 
guage.'' Accordingly  the  company  is  still  Hable  though  the  insured 
unintentional!}^  kill  himself  by  the  act  of  his  own  hand,  for  instance, 
while  using  a  gun  or  other  dangerous  instrument,^  or  in  administer- 
ing poison  to  himself;  ^  or  by  the  act  of  his  own  feet  in  falling  over  a 
precipice;  since  his  unconscious  act  of  killing  is  not  to  be  regarded 
as  his  act  at  all  within  the  fair  meaning  of  the  policy. 

On  the  other  hand,  the  contract  of  insurance  being  one  of  the 
highest  good  faith,  it  is  obvious  that  if  the  insured  take  out  a  policy 
with  the  guilty  purpose  of  committing  suicide  the  contract  is  void 
ah  initio,  though  it  contain  no  suicide  clause  and  no  express  refer- 
ence to  self-destruction.'^  So  also  if  the  beneficiaries  intentionally 
compass  the  death  of  the  insured  after  the  policy  is  taken  out  they 
can  recover  nothing  upon  it,*  and  for  the  same  reason,  by  the  over- 
whelming weight  of  authority,  both  in  the  decisions  and  in  the 
text-books,  where  the  policy  is  payable  to  the  insured  or  to  his  estate, 

i  Knights  Templar  v.    Crayton,  209  ^Gooding  v.  U.  S.  Life  Ins.  Co.,  46 

111.  550,  557,  70  N.  E.  1066  (accidental       111.  App.  307. 
shooting  of  gun);  Penfold  v.  Universal  ^  Mich.  Mut.  L.  Ins.  Co.  v.  Naugle, 


Life  Ins.  Co.,  85  N.  Y.  317,  39  Am.  Rep 

660  (overdose  of  poisonous  medicine) 

2  Brignac  v.  Pac.  Mid.  L.  Ins.  Co. 

112  La.  574,  36  So.  595,  66  L.  R.  A 


322  (taking  morphine  without  intent       108  Iowa,  li7,  78  N.  W.  826;  Smith 


to  kill,  no  defense);   Courtemanche  \ 
Supreme  Court,  136  Mich.  30,  98  N.  W 


carbolic    acid    to    frighten    his    wife) 
Clement  v.  Supreme  Lodge,  113  Tenn 


130  Ind.  79,  29  N.  E.  393;  Mut.  Life 
Ins.  Co.  V.  Wiswell,  56  Kan.  765,  44 
Pac.  996,  35  L.  R.  A.  258. 

''Parker  v.  Des  Moines  Life  Assoc, 


V.  National  Ben.  Soc.,  123  N.  Y.  85,  25 
N.  E.  197,9L.  R.  A.  616. 


749,  64  L.   R.   A.   668   (insured  took  s  ]\t    y.  Mut.  Life  Ins.  Co.  v.  Arm- 


strong, 117  U.  S.  591,  6  S.  Ct.  877; 
Prince  of  Wales,  etc.,  A.^soc.  v.  Palmer, 


40  81  S.  ^^.  1249  (took  morphine  with  25  Beav.  605;   Clmvcr  v.  Mut.  Reserve 

probable  knowledge  of  fatal  result).  Fund  L.  Assoc.    (1892),  1   Q.   B.   147 

3Mauch  V.  Supreme  Tribe.  100  App.  (Mrs.  Maybrick,  beneficiarv,  was  con- 

iJiv.  49,  91   N.  Y.   Supn    367;  Grand.  victed  of  murdering  her  husband).     In 

^^fon   ^'-    I'^orne^-'an,    10    Kan.    Apn.  such  cases  there  is  a  resulting  tr'st  in 

5/7     63    Pac.    292;    Moore    v.    North-  favor  of  the  estate  of  the  insured,  the 

•■7;,.°?-         ^  Assoc,  sujyra.:  Supreme  Lodge  V.  Men'- 

Phitlips  V.  Louisiana  Eq.  Life  Ins.  hausen,  209  111.  277,  70  N.  E   567   65 

Co.,26La.  Ann.  404,21  Am.  Rep.  549.  L.   R.   A.  508,   101   Am.   St.  R.  239; 


SUICIDE 


511 


though  there  be  no  express  exemption  from  Hability  for  suicide, 
intentional  self-destruction  by  the  insured,  if  sane,  vitiates  the  con- 
tract.^ 

Thus  in  an  interesting  case  in  the  United  States  Supreme  Court, 
although  the  insured,  one  Runk,  had  warranted  and  agreed  in  the 
apphcation,  ''I  will  not  die  by  my  own  act,  whether  sane  or  insane," 
etc.,  nevertheless  as  the  company  had  omitted  to  attach  the  appli- 
cation to  the  policy  as  provided  for  by  the  Pennsylvania  statute  the 
warranty  could  not  be  considered  as  part  of  the  contract  or  admitted 
in  evidence,  and  therefore  the  question  arose  as  though  the  contract 
had  been  altogether  silent  on  the  subject  of  suicide.  There  was  no 
finding  by  the  jury  that  the  insured  had  taken  out  the  policy  in 
suit  with  the  purpose  of  committing  suicide.  Their  only  finding  was 
that  Runk  was  sane  when  he  committed  the  act.  He  had  misap- 
propriated large  sums  of  money  belonging  to  his  friends  and  relatives, 
and  believed  that  out  of  the  half  million  dollars  of  insurance  on  his 
life  which  he  was  carrying  his  obligations  would  be  paid.  The  court 
held  that  the  death  of  the  assured,  if  directly  and  intentionally 
caused  by  himself,  when  in  sound  mind,  was  not  a  risk  intended  to 
be  covered,  or  which  could  legally  have  been  covered  by  the  policies 
in  suit.^ 


Schmidt  v.  Northern  Life  Assn.,  112 
Iowa,  41, 83  N.  W.  800,  51  L.  R.  A.  141 , 
84  Am.  St.  R.  323;  A^  Y.  Life  Ins.  Co. 
V.  Davis,  96  Va.  737,  32  S.  E.  475,  44 
L.  R.  A.  305. 

i  Ritter  v.  Mut.  Life  Ins.  Co.,  169 
U.  S.  139,  18  S.  Ct.  300,  42  L.  Ed.  693. 
The  conclusion  is  put  upon  two  grounds, 
good  faith  and  public  policy.  An 
agreement  to  insure  intentional  self- 
destruction  would  be  void,  Knights 
Templar  v.  Jarman,  187  U.  S.  197,  23 
S.  Ct.  108,  approves  Ritter  case;  Mut. 
Life  Ins.  Co.  v.  Kelly,  114  Fed.  268; 
Supreme  Commandery  v.  Ainstcorth,  71 
Ala.  436,  46  Am.  Rep.  332;  Supreme 
Lodge  v.  Kidscher,  72  111.  App.  462; 
Monneii  v.  Ancient  Order,  114  Ky.  950, 
72  S.  W.  288;  Hatch  v.  Mvt.  Life  Ins. 
Co.,  120  Mass.  550,  552;  Shipman  v. 
Protected  Home  Circle,  174  N.  Y.  398, 
67  N.  E.  83,  63  L.  R.  A.  347;  Hall  v. 
Mvt.  Res.  Fund  L.  Assoc,  19  Pa. 
Super.  Ct.  31  (1902);  Hartman  v.  Key- 
stone Ins.  Co.,  21  Pa.  St.  466;  Cleaver 
V,  Mid.  Res.  Fund  L.  Assoc.  (1892), 
1  Q.  B.  147;  Amicable  Soc.  v.  Bolland, 
4  Bligh  (N.  S.),  194,  211;  Moore  v. 
Woolsey,  4  Ell.  &  Bl.  243,  254.    And 


see  Patterson  v.  National  Premium 
Mut.  L.  I.  Co.,  100  Wis.  118,  75  N.  W. 
980,  42  L.  R.  A.  253,  69  Am.  St.  R. 
899  (in  which  the  court  concludes  that 
the  doctrine  of  the  Ritter  case  on  the 
merits  "is  well-nigh  irresistible"). 

2  Ritter  v.  Mut.  Life  Ins.  Co.,  169 
U.  S.  139,  18  S.  Ct.  300,  42  L.  Ed.  693. 
The  court  held  as  follows:  "If  the  as- 
sured understood  what  he  was  doing, 
and  the  consequences  of  his  act  or 
acts,  to  himself  as  well  as  to  others — 
in  other  words,  if  he  understood,  as  a 
man  of  sound  mind  would,  the  conse- 
quences to  follow  from  his  contem- 
plated suicide,  to  himself,  his  char- 
acter, his  family  and  others,  and  was 
able  to  comprehend  the  wrongfulness 
of  what  he  was  about  to  do,  as  a  sane 
man  would,  then  he  is  to  be  regarded 
as  sane.  In  the  case  of  fire  insurance 
it  is  well  settled  that  although  a  pol- 
icy, in  the  usual  form,  indemnifying 
against  loss  by  fire,  may  cover  a  loss 
attributable  merely  to  the  negligence 
or  carelessness  of  the  insured,  unaf- 
fected by  fraud  or  design,  it  will  not 
cover  a  destruction  of  the  property  by 
the  willful  act  of  the  assured  himself  in 


512 


MEANING    AND    LEGAL    EFFECT    OF    LIFE    POLICY 


Opposed  to  this  rule  will  be  found  two  or  three  text-writers, 
supported  by  a  few  dicta  from  opinions  of  judges  in  cases  where 
the  point  was  not  involved.^  And  the  Nebraska  court  states  the 
general  principle  of  its  preference  broadly  in  the  following  terms: 
"Suicide  will  not  defeat  a  recovery  upon  a  contract  of  life  insurance 
or  a  mutual  benefit  certificate,  not  procured  by  the  insured  with  the 
intention  of  committing  suicide,  unless  the  contract  so  provides  in 
express  terms. ^ 

If,  however,  the  interest  in  the  policy  is  vested  in  third  parties  as 
beneficiaries,  and  the  contract  was  entered  into  in  good  faith,  the 
subsequent  guilty  act  of  self-destruction  by  the  insured  will  not 
vitiate  it  to  the  prejudice  of  the  beneficiaries,  in  the  absence  of  a 
suicide  clause.^  It  is  indeed  a  serious  matter  to  allow  an  insurance 
company  to  retain  premiums  of  a  lifetime  without  making  any 
return,  and  as  between  the  innocent  beneficiaries  and  the  company 
the  contract  may  well  be  enforced  in  such  a  case  in  the  absence  of 
a  suicide  clause;  ^  but  apparently  upon  grounds  of  public  policy  the 


setting  fire  to  it,  not  for  the  purpose  of 
avoiding  a  peril  of  a  worse  kind  but 
with  the  intention  of  simply  effecting 
its  destruction.  Much  more  should  it 
be  held  that  it  is  not  contemplated  by 
a  policy  taken  out  by  the  person  whose 
life  is  insured  and  stipulating  for  the 
payment  of  a  named  sum  to  himself, 
his  executors,  administrators  or  as- 
signs, that  the  company  should  be  lia- 
ble, if  his  death  was  intentionally 
caused  by  himself  when  in  sound  mind. 
When  the  policy  is  silent  as  to  suicide, 
it  is  to  be  taken  that  the  subject  of  the 
insurance,  that  is,  the  life  of  the  as- 
sured, shall  not  be  intentionally  and 
directly,  with  whatever  motive,  de- 
stroyed by  him  when  in  sound  mind. 
To  hold  otherwise  is  to  say  that  the 
occurrence  of  the  event  upon  the  hap- 
pening of  which  the  company  under- 
took to  pay,  was  intended  to  be  left  to 
his  option.  That  view  is  against  the 
very  essence  of  the  contract.  A  con- 
tract, the  tendency  of  which  is  to  en- 
danger the  public  interests  or  injuri- 
ously affect  the  public  good,  or  which 
is  subversive  of  sound  morality,  ought 
neyer  to  receive  the  sanction  of  a  court 
of  justice  or  be  made  the  foundation  of 
its  judgment." 

1  Supreme  Conclave  v.  Miles,  92  Md. 
613,  628,  48  Atl.  845,  84  Am.  St.  R. 
528;  Robson  v.  United  Order,  93  Minn. 
24,  100  N.  W.  381;  Morton  v.  Supreme 


Council,  100  Mo.  App.  76,  73  S.  W. 
259.  Opinion  of  Judge  Collins  in 
Campbell  v.  Supreme  Conclave,  66 
N.  J.  L.  274,  49  Atl.  550,  54  L.  R.  A. 
576  (whether  majority  of  court  agreed 
with  Judge  Collins  or  Judge  Garretson 
does  not  appear). 

2  Lange  v.  Royal  Highlanders  (Neb., 
1907),  HON.  W.  1110. 

3  Supreme  Council  v.  Pels,  110  111. 
App.  409,  aff'd  209  111.  33,  70  N.  E. 
697;  Parker  v.  Des  Moines  Life  Assn., 
108  Iowa,  117,  78  N.  W.  826;  Seiler  v. 
Economic  L.  Assn.,  105  Iowa,  87,  43 
L.  R.  A.  537,  74  N.  W.  941;  Supreme 
Conclave  I.  0.  of  H.  v.  Miles,  92  Md. 
613,  48  Atl.  845,  84  Am.  St.  R.  528; 
Robson  V.  United  Order,  93  Minn.  24, 
100  N.  W.  381;  Morton  v.  Supreme 
Council,  100  Mo.  App.  76,  73  S.  W. 
259;  Campbell  v.  Supreme  Conclave,  66 
N^  J.  L.  274,  49  Atl.  550,  54  L.  R.  A. 
576;  Supreme  Lodge  v.  Underwood 
(Neb.),  92  N.  W.  1051;  Darrow  v. 
Family  Fund  Societu,  116  N.  Y.  537, 
22  N.  E.  1093,  6  L.  R.  A.  495,  15  Am. 
St.  R.  430;  Fitch  v.  American  Popu- 
lar Life  Ins.  Co  ,  59  N.  Y.  557,  17  Am. 
Rep.  372;  Morris  v.  State  Mut.  L. 
Assur.  Co.,  183  Pa.  St.  563,  39  Atl. 
52,  41  W.  N.  C.  353;  Patterson  v. 
Natural  Premium  Mut.  L.  Ins.  Co.,  100 
Wis.  118,  42  L.  R.  A.  253,  75  N.  W 
980,  69  Am.  St.  R.  899. 

*  Campbell  v.  Supreme  Conclave,  66 


SUICIDE 


513 


federal  courts  extend  the  implied  ground  of  exception  or  forfeiture 
even  to  innocent  beneficiaries  with  vested  interests,  although  there 
be  no  suicide  clause  in  the  policy.^  While  other  courts,  applying  a 
criterion,  not  altogether  satisfactory,  find  in  the  act  of  suicide,  an 
implied  ground  for  forfeiting  the  rights  of  beneficiaries,  provided 
only  the  contract  be  such  that  the  power  of  making  new  appoint- 
ments is  reserved  to  the  insured.'  As  before  shown  such  power  is 
reserved  in  the  case  of  most  contracts  of  insurance  in  beneficiary 
associations.^  The  majority  of  the  courts,  however,  make  no  dis- 
tinction in  this  regard  between  beneficiaries  designated  in  the  ordi- 
nary life  policy  and  beneficiaries  designated  in  the  contract  of  the 
mutual  beneficiary  association  or  fraternal  society.'^  And  the  view 
of  the  majority  is  doubtless  supported  by  the  better  reason.  Con- 
siderations based  upon  good  faith  towards  the  company  and  the 
welfare  of  the  public  would  seem  to  apply  in  very  much  the  same 
degree  to  the  one  class  of  beneficiaries  as  to  the  other.  There- 
fore where  the  company  has  inserted  no  suicide  clause  in  its  contract 
the  rights  of  both  classes  of  innocent  beneficiaries  may  well  be  left 
undisturbed  by  the  subsequent  suicidal  act  of  the  insured  over  which 
they  had  no  control.^ 

The  foregoing  discussion  leads  up  to  the  recognized  rule,  that  in 


N.  J.  L.  274,  and  other  cases  supra; 
Moore  v.  Woolsey,  28  Eng.  L.  &  Eq. 
248. 

1  Mutual  Life  Ins.  Co.  v.  Kelhi,  114 
Fed.  268,  275;  Hophins  v.  North- 
uestern  Life  Assur.  Co.,  94  Fed.  729, 
aff'd  99  Fed.  199,  40  C.  C.  A.  1.  And 
see  Ritter  case,  supra,  169  U.  S.  139, 
18  S.  Ct.  300. 

^  Mooney  v.  Ancient  Order,  114  Ky. 
950,  72  S!  W.  288;  Shipman  v.  Pro- 
tected Home  Circle,  174  N.  Y.  398,  67 
N.  E.  83,  63  L.  R.  A.  347;  Weber  v. 
Supreme  Tent,  172  N.  Y.  490,  65  N.  E. 
258,  92  Am.  St.  R.  753.  So  also  the 
Massachusetts  court  seems  to  regard 
suicide  by  a  sane  man  as  a  risk  which 
is  not  covered  by  the  pohcy,  vmless  the 
appointment  of  the  beneficiary  is  irrev- 
ocable, Davis  V.  Supreme  Council 
(Mass.,  1907),  81  N.  E.  255. 

3  See  §  68,  supra. 

*  Supreme  Conclave  v.  Miles,  92  Md. 
613,  48  Atl.  845,  84  Am.  St.  R.  528; 
Robson  V.  United  Order,  93  Minn.  24, 
100  N.  W.  381;  Campbell  v.  Supreme 
Conclave,  66  N.  J.  L.  274,  49  Atl.  550, 
Darrow  v.  Family  Fund  Society,  116 
N.  Y.  537,  22  N.  E.  1093,  G  L.  R.  A. 

33 


495,  15  Am.  St.  R.  430  (without  dis- 
sent, but  overruled  by  Shipman  case, 
supra);  Patterson  v.  National  Prem. 
Mut.  Life  Ins.  Co.,  100  Wis.  118,  75 
N.  W.  980,  42  L.  R.  A.  253,  69  Am. 
St.  R.  899  (approving  the  Darroiv 
ca.w).  See  list  of  authorities,  4  Cooley, 
Ins.,  3226,  3227.  And  Rawson  v.  Mil. 
Mut.  L.  Ins.  Co.,  115  Wis.  641,  92 
N.  W.  378. 

5  Supreme  Conclave  v.  Miles,  92  Md. 
613,  628,  48  Atl.  845,  84  Am.  St.  R. 
528;  Campbell  v.  Supreme  Cojiclave,  66 
N.  J.  L.  274,  49  Atl.  550;  Darrow  v. 
Family  Fund  Society,  116  N.  Y.  537, 
22  N.  E.  1093,  supra.  A  contingent 
vesting  of  rights  in  favor  of  a  bene- 
ficiary and  against  the  insured,  the 
donor,  is  one  thing.  A  vesting  of 
rights  as  against  the  insurance  com- 
pany, where  the  insured  has  made  no 
neAv  appointment  of  beneficiaries,  is 
another  thing,  Patterson  v.  National 
Premium  Life  Ins.  Co.,  100  Wis.  118, 
75  N.  W.  980,  42  L.  R.  A.  253,  69  Am. 
St.  R.  899  (if  no  new  appointment  has 
been  made  the  rights  of  the  benefi- 
ciaries are  vested). 


514  MEANING   AND   LEGAL  EFFECT   OF   LIFE   POLICY 

the  absence  of  the  words  "sane  or  insane,"  in  the  suicide  clause, 
self-killing  by  a  man  while  non  co7npos  mentis  will  not  forfeit  his 
rights,  or  the  rights  of  other  beneficiaries  named  in  his  policy,  pro- 
vided the  insurance  was  taken  out  in  good  faith,^  since  in  that 
event  an  intelligent  conscious  intent,  which  alone  constitutes  the 
essence  of  the  offense,  is  lacking.^  In  other  words,  where  the  con- 
tract exemption  from  liability  simply  relates  to  self-destruction  or 
death  from  suicide,  without  the  additional  phrase  "sane  or  insane," 
the  exception  will  not  avail  the  insurers  as  a  defense,  if  it  appear  that 
the  insured  was  devoid  of  reason  when  he  took  his  life,  this  conclu- 
sion being  put  upon  the  ground  that  an  act  beyond  the  conscious 
control  of  the  insured  is  not  to  be  regarded  as  his  act  at  all  but 
rather  a  misfortune  befalling  him.^ 

By  the  New  York  standard  form  of  life  insurance  any  restriction 
of  liability  on  the  part  of  the  company  for  suicide  is  applicable  only 
to  suicide  committed  within  one  year  after  the  issuance  of  the  policy.^ 

§  368.  Degree  of  Insanity  Required  to  Save  the  Insurance. — As 

to  the  degree  of  insanity  which  will  operate  as  an  excuse  to  the  in- 
sured to  prevent  the  application  of  a  suicide  clause  not  containing 
the  words  "sane  or  insane,"  two  rules  in  general  have  been  laid  down. 
The  English,  New  York,  and  Massachusetts  courts,  and  others,  have 
adopted  the  view  that  to  relieve  from  the  suicide  clause  on  the 
ground  of  insanity,  the  insured  must  have  been  so  mentally  dis- 
ordered as  riot  to  understand  that  the  act  he  committed  would  cause 
his  death,  or  he  must  have  committed  it  under  the  influence  of  some 
uncontrollable  insane  impulse.  These  courts  hold  that  in  order  to 
escape  forfeiture,  it  is  not  sufficient  to  show  that  he  was  unconscious 
merely  of  the  moral  obliquity  of  the  act.^ 

But  the  United  States  Supreme  Court  and  many  others  following 
its  authority  have  with  greater  liberality  to  the  assured  defined  the 

1  Mut.   Life  Ins.    Co.    v.    Terrij,   15  <  See  §  357,  supra. 

Wall.  580,  21  L.  Ed.  236.  5  Borradaile  v.  Hunter,  5  M.   &  G 

^Shipman  v.  Ho77ie  Circle,  174  N.  Y.  639,  44  E.  C.  L.  335;  Cooper  v  Mass. 

398,  67  N.  E.  83,  63  L.  R.  A.  347.  Mut.  Life  Ins.  Co.,  102  Mass.  227,  3 

bimilarly  if  insane  beneficiary  kill  the  Am.  Rep.  451;  Van  Zandt  v.  Mutual 

insured    the    policy    is    not    voided,  Benefit  Life  Ins.  Co.,  55  N.  Y    169,  14 

Holdom  V.  Ancient  Order,  159  111.  619,  Am.  Rep.  215;  Weed  v.  Mut   Res  Ins 

43  N.  E.  772.  Co.,  70  N.  Y.  561;  Newton  v.  Mut.  Ben. 

3  Conn.  Mut.  Life  Ins.  Co.  v.  Akens,  Life  Ins.  Co.,  76  N.  Y    426    32  Am 

150  U.  S.  468,  14  S.  Ct.  155,  37  L.  Ed.  Rep.  335;  Nimick  v.  Ins.  Co  ,  3  Brewst. 

^^.4?j     ^^^    proper    meaning    of    the  (Pa.)  502;  Hathaway  v.  National  Life 

suicide  clause,  where  the  words  "sane  7ns.  Co.,  48  Vt.  335;  and  see  Equitable 

or  insane"  do  not  form  a  part  of  it  is  Life  Assur.  Soc.   v.  Paterson    41  Ga. 

traced  historically  at  length  in  May  338,  5  Am.  Rep.  535 
on  Ins. .  ch.  XV. 


SUICIDE  AND  SELF-DESTRUCTION,  SANE  OR  INSANE,  EXCEPTED   515 

rule  as  follows:  "This  court  on  full  consideration  of  the  conflicting 
authorities  upon  that  subject  has  repeatedly  and  uniformly  held 
that  such  a  provision,  not  containing  the  words  'sane  or  insane,' 
does  not  include  a  self-killing  by  an  insane  person,  whether  his 
unsoundness  of  mind  is  such  as  to  prevent  him  from  understanding 
the  physical  nature  and  consequences  of  his  act  or  only  such  as  to 
prevent  him,  while  foreseeing  and  premeditating  its  physical  conse- 
quences, from  understanding  its  moral  nature  and  aspect."  ^  The 
distinction  between  these  two  rules  of  law  is  perhaps  so  metaphysical 
as  to  make  it  of  somewhat  questionable  moment  in  many  instances 
whether  the  jury  is  charged  in  terms  of  the  one  or  in  terms  of  the 
other;  ^  but  the  Federal  Supreme  Court  considers  its  rule  as  sounder 
in  principle  as  well  as  simpler  in  application.^ 

§  369.  Suicide  and  Self-destruction,  Sane  or  Insane,  Excepted. — 

To  extend  for  their  benefit  the  operation  of  the  restriction,  the 
insurers  have  generally  added  to  the  suicide  clause  the  words  "sane 
or  insane,"  and  with  this  addition  the  exemption  covers  all  cases  of 
intentional  self-destruction.'*  Under  such  an  exception  the  insurers 
are  relieved  from  responsibility  unless  the  death  of  the  insured  is 
purely  accidental.^    And  it  matters  not  whether  the  policy  is  pay- 

1  Ace.  Ins.  Co.  V.  Crandal,  120  U.  S.  he   knowing   and    intending   that   his 

531;  Bigelow  v.  Berkshire  L.  Ins.  Co.,  93  death  shall  be  the  result  of  his  act,  but 

U.   S.   284,   19  Am.   Rep.   628,   note;  when  his  reasoning  faculties  are  so  far 

Ritter  v.  7ns.  Co.,  169  U.  S.  139,  18  S.  impaired  that  he  is  not  able  to  under- 

Ct.  300,  42  L.  Ed.  693;  Mich.  Mut.  stand   the  moral   character,   the  gen- 

Life  Ins.  Co.  v.  Naugle,  130  Ind.  79,  eral  nature,  consequences,  and  effect 

29  N.  E.  393;  Roval  Arcanum,  v.  Pels,  of  the  act  he  is  about  to  commit,  or 

209  111.  33,  70  N.  E.  697;  Royal  Circle  v.  when    he   is   impelled   thereto   by   an 

Achterrath,  204  111.  549,  558,  68  N.  E.  insane  impulse  which  he  has  not  the 

492,  33  Ins.  L.  J.  20,  58  Cent.  L.  J.  128,  power    to    resist,    such    death    is    not 

63  L.  R.  A.  452,98  Am.   St.  R.  224;  within  the  contemplation  of  the  parties 

Grand  Lodge  I.  0.  of  M.  A.  v.  Wieting,  to  the  contract  and  the  insurer  is  lia- 

168  111.  408,  48  N.  E.  59,  61  Am.  St.  ble,"  Mut.  Life  Ins.  Co.  v.  Terry,  15 

R.    123;    Hart    v.    Modern    Woodmen  Wall.  580,  21  L.  Ed.  236. 
of  Amer.,  60  Kan.  678,  57  Pac.  936,  ^  Spruill  v.  Ins.  Co.,  120  N.  C.  141, 

72  Am.   St.   R.  380;   Mut.   Ben.   Life  144,  29  S.  E.  39. 

7ns.  Co.  V.  Daviess,  87  Ky.  541,  9  S.  W.  3  Manhattan  Life  Ins.  Co.  v.  Brough- 

812;    Knickerbocker   Life   Ins.    Co.    v.  ton,  109  U.  S.  121,  3  S.  Ct.  99,  27  L. 

Peters,  42  Md.  414;  Blackstone  v.  7ns.  Ed.  878. 

Co.,  74  Mich.  592,  42  N.  W.   156,  3  i  Bigelow  v.  7ns.  Co.,  93  U.  S.  284, 

L.  R.  A.  486;  Knapp  v.  Order  of  Pendo,  23  L.  Ed.  918,  in  which  the  court  says, 

36  Wash.  601,  79  Pac.  209.     Mr.  Jus-  p.  287,  "nothing  can  be  clearer  than 

tice  Hunt  says:  "If  the  assured,  being  that  the  words  'sane  or  insane'  were 

in  the  possession  of  his  ordinary  rea-  introduced  for  the  purpose  of  except- 

soning    faculties,    from    anger,    pride,  ing  from  the  operation  of  the  policy 

jealousy,  or  desire  to  escape  from  the  any  intended  self-destruction,  whether 

ills  of  life  intentionally  takes  his  own  the  insured  was  of  sound  mind  or  in  a 

life,  the  proviso  attaches,  and  there  can  state  of  insanity." 
be  no  recovery.    If  the  death  is  caused  ^  Moore  v.  7ns.  Co.,  192  Mass.  468, 

by  the  voluntary  act  of  the  assured,  78  N.  E.  488  ("it  makes  no  difference 


516 


MEANING   AND   LEGAL   EFFECT  OF   LIFE   POLICT 


able  to  the  insured  or  to  his  estate  or  to  other  designated  bene- 
ficiaries, as,  for  instance,  creditors.  The  voluntary  suicidal  act  avoids 
the  policy  altogether.^  But  to  produce  forfeiture  of  such  a  policy 
there  must  be  something  more  than  a  mere  accident;  ^  there  must 
be  an  intent,  though  not  of  necessity  a  rational  intent,  to  commit 
the  act  of  self-destruction. ^  Such  intent  would  seem  logically  to 
involve  at  least  some  consciousness  of  the  physical  nature  or  con- 
sequences of  the  act  and  this  seems  to  be  the  prevailing  and  better 
doctrine.'' 

Other  cases  seem  to  draw  the  distinction  that  there  can  be  no 
recovery  where  the  insured,  while  insane,  commits  the  act  of  killing 
himself,  though  such  act  be  done  unconsciously  and  without  knowl- 
edge even  of  its  physical  nature  and  consequence.^  But  of  this  last 
rule  it  is  by  no  means  easy  to  make  a  satisfactory  application.  If, 
for  example,  a  sane  man  drinks  a  fatal  cup  of  poison  when  not  know- 
ing that  it  is  poison,  the  validity  of  his  policy  is  not  disturbed.  The 
unexpected  result  is  a  mere  accident  or  misfortune,  which  is  doubt- 
less covered  by  the  policy.®    If,  however,  an  insane  man  possessed 


what  the  state  of  mind  was");  -De 
Gogorza  v.  Knickerbocker  Life  Inc.  Co., 
65  N.  Y.  232;  Sargeant  v.  Ins.  Co.,  189 
Pa.  St.  341,  41  Atl.  351  (policy  void  if 
insured  killed  himself  by  his  own  act, 
before  incontestable  period  begins). 

1  Ellinger  v.  Mutual  Life  Ins.  Co. 
(1905),  i  K.  B.  31. 

2  Clarke  v.  Equitable  Life  Assur.  Soc, 
118  Fed.  374,  55  C.  C.  A.  200;  Dennis  v. 
Ins.  Co.,  84  Cal.  570,  24  Pac.  120; 
Soarth  V.  Security  Mut.  Life  Ins.  Co., 
75  Iowa,  346,  349  (the  exception 
"never  was  intended  to  include  death 
by  accident,  as  by  taking  poison  by 
mistake,  the  accidental  discharge  of  a 
gun  or  pistol  held  in  the  hands  of  the 
insured  or  the  like"). 

3  Union  Cent.  Life  Ins.  Co.  v. 
Hollowell,  14  Ind.  App.  611,  43  N.  E. 
277  (it  need  not  be  a  deliberate  intent). 

iBigelow  v.  Ins.  Co.,  93  U.  S.  286, 
23  L.  Ed.  918;  Jenkins  v.  National 
Union,  118  Ga.  587,  45  S.  E.  449; 
Supreme  Lodge  v.  Gelbke,  198  111.  365, 
64  N.  E.  1058  (there  must  be  purpose 
to  end  life;  but  it  need  not  be  a  ra- 
tional intent);  Hart  v.  Modern  Wood- 
men, 60  Kan.  678,  57  Pac.  936,  72 
Am.  St.  R.  380;  Supreme  Council  v. 
Heineman,  25  Ky.  L.  Rep.  1604,  78 
S.  W.  406  (enough  mind  to  know  th£it 
he  was  taking  his  life  by  poison); 
SprniU  v.   Northwestern   Mvt.    L.   Imi. 


Co.,  120  N.  C.  141,  27  S.  E.  39  ("there 
must  be  a  physical  intent,"  whatever 
that  means);  Sabin  v.  Union,  90  Mich. 
177,  51  N  W.  202  (insured  hung  him- 
self by  a  rope  arranged  by  himself,  in- 
tent was  presumed);  Streeter  v.  West. 
Union  Mut.  Life  Ins.  Co.,  65  Mich. 
199,  201,  31  N.  W.  780,  8  Am.  St.  R. 
883  (intentionally  with  a  pistol); 
Sparks  v.  Indemnity  Co.,  61  Mo.  App. 
109  (intentionally  with  a  razor).  But 
see  Ins.  Co.  v.  McConkey,  127  U.  S. 
661,  8  S.  Ct.  1360,  32  L.  Ed.  308  (the 
court  says:  "either  unintentionally  or 
when  insane,"  thus  intimating  that 
the  intent  of  the  insured  if  insane  need 
not  be  shown);  Latimer  v.  Sovereign 
Camp,  62  S.  C.  145,  40  S.  E.  155  (court 
equally  divided). 

5  Seitzinqer  v.  Modern  Woodmen,  204 
111.  58,  68  N.  E.  478;  Browerv.  Supreme 
Lodge,  74  Mo.  App.  495;  Havnie  v. 
Kniqhts  Templars,  139  Mo.  416,  41 
S.  W.  461 ;  Tritschler  v.  Kei'stone  Mut. 
Ben.  As.soc,  180  Pa.  St.  205,  36  Atl. 
734;  Keefer  v.  Modern  Woodmen,  203 
Pa.  St.  i29.  But  see  also  Scarth  v. 
Securitu  Mut.  Life  Ins.  Co.,  75  Iowa, 
346  (which,  however,  holds  that  an 
accident  will  not  avoid);  Billings  v. 
Accident  Ins.  Co.,  64  Vt.  78,  24  Atl. 
656,  33  Am.  St.  R.  913,  17  L.  R.  A.  89. 

0 Scarth  v.  Security  Mvt.  Life  Soc, 
75  Iowa,  346,  39  N.  W.  658;  Brovm  v. 


BURDEN   OF   PROOF— SUICIDE,   INSANITY  517 

of  no  csufficient  mental  power  to  discrimmate  between  what  is  poison 
and  what  is  harmless,  or  to  perceive  that  his  act  of  drinking  on  the 
one  occasion  differs  from  his  usual  habit,,  does  the  same  thing,  the 
phraseology  of  this  last  rule  would  seem  to  require  a  forfeiture  of 
his  insurance.'  It  is  to  be  observed  that  the  exercise  of  intent  is  a 
mental  operation,  and  when  the  mental  powers  of  the  insured  are 
abnormally  deficient,  or  seriously  disordered,  the  investigation  of  his 
intent  is  apt  to  produce  uncertain  results.  In  this  last  class  of  cases 
certain  judges  have  perhaps  laid  undue  stress  upon  the  practical 
difficulty  of  estimating  different  degrees  of  insanity,  and  conscious- 
ness, and  have  thus  been  led  to  adopt  a  rule  which  might  operate 
to  relieve  the  company  from  liability  in  cases  of  purely  accidental 
death. 

If,  however,  the  destructive  act  be  intended  and  its  character  be 
known  b}^  the  insured  to  be  destructive,  it  is  clear  that  neither  an 
irresistible  insane  impulse,'  nor  ignorance  and  unconsciousness  of 
the  moral  aspect  of  the  act  will  afford  any  excuse  to  the  insured  or 
other  beneficiary,  where  the  suicide  clause  contains  the  phrase, 
"sane  or  insane."  ^ 

§  370.  Burden  of  Proof — Suicide,  Insanity. — Neither  suicide  nor 
insanity  will  be  presumed;  therefore  if  the  company  sets  up  the 
defense  of  suicide,  the  burden  of  proof  rests  upon  it,  and  if  the  facts 
are  equally  susceptible  of  either  construction,  it  will  be  presumed 
that  death  was  the  result  of  an  accident  or  natural  cause  and  not 
of  a  wrongful  intent.'*    The  issue,  thus  raised,  is  usually  one  of  fact 

Sun  Life  Ins.  Co.   (Tenn.),    57  S.  W.  Daviess,   87   Ky.    541,   9   S.   W.   812; 

415,  51  L.  R.  A.  252.  Streeter  v.  West.  Union  Mut.  Life  Ins. 

1  Seitzinger  v.  Modern  Woodmen,  204  Co.,  65  Mich.  199,  31  N.  W.  780,  8  Am. 

111.  58,  68  N.  E.  478  (the  degree  of  in-  St.  R.  883;  Sabin  v.  Union,  90  Mich. 

sanity  thought  to  be  immaterial.    Act  177,  51  N.  W.  202.     A  policy  may  ex- 

of  killing  without  intent  held  to  avoid  pressly    exclude    accidents    from    in- 

the  policy) ;  Latimer  y.  Sovereign  Camp  juries,    though    unintentionally    self- 

62  S.  C.  145,  40  S.  E.  155  (the  com-  inflicted  by  the  insured  while  insane, 

pany    was    expressly    liable    for   acci-  Blvnt  v.  Fidelity  &  Cas.  Co.,  145  Cal. 

dents;  court  equally  divided  on  neces-  268,  78  Pac.  729. 

sity  of  intents ;   Billinqn  v.  Ace.  Ins.  *  Home  Ben.  Assoc,  v.  Sargent,  142 

Co.,  64  Vt.  78,  24  Atl.  656,  33  Am.  St.  U.  S.  691,  12  S.  Ct.  332,  35  L.  Ed.  1160 

R.  913,  17  L.  R.  A.  89  (the  degree  of  (pistol);  Travelers'    Ins.  v.  McConkey, 

insanity  thought  to  be  immaterial).  127  U.  S.  661,  8  S.  Ct.  1360,  32  L.  Ed. 

"i  Bigelow  v.  Ins.  Co.,  93  U.  S.  286.  SOS;  National  Unionv.  Fitz pair ick,  133 

23    L."   Ed.    918;    Supreme    Lodge    v.  Fed.    694;   Stephenson   v.   Assoc,   108 

Gelbke,   198  111.  365,  64  N.  E.   1058;  Iowa,  637,  79  N.  W.  459;  Carnes  v. 

Manhattan  Life  Ins.  Co.  v.  Beard,  112  Iowa  State,  etc.,  Assn.,  106  Iowa,  281, 

Ky.  455,  66  S.  W.  35.  76   N.  W.   683,  68  Am.   St.   R.   306; 

3  Bigelow  v.  Ins.  Co.,  93  U.  S.  286,  Furbush   v.    Maryland   Cas.    Co.,   133 

23  L.  Ed.  918;  HaH  v.  Modern  Wood-  Mich.  479,  95  N.  W.  551;  Laessig  v. 

m^n,  60  Kan.  678,  57  Pac.  936,  72  Am.  Travelers'   Protection  Assn.,   169   Mo. 

St.  R.  380;  Mvf.  Ben.  Ufe  Ins.  Co.  v.  272.  69  S.  W.  469;  Mallory  v.  Travel- 


518 


MEANING   AND   LEGAL   EFFECT  OF   LIFE   POLICY 


for  the  jury; '  but  if  the  facts  point  only  to  one  conclusion,  it  is  error 
to  submit  the  question  to  the  jury.^  If,  on  the  other  hand,  the 
plaintiff  relies  upon  insanity  of  the  insured  as  the  excuse  for  self- 
destruction  the  burden  rests  upon  the  plaintiff  to  establish  its  exist- 
ence by  a  preponderance  of  evidence.^  The  mere  fact  of  suicide  is 
not  sufficient  to  prove  insanity.^ 


lers'  Im.  Co.,  47  N.  Y.  52,  7  Am.  Rep. 
410.  See  also  Knights  Temp.  &  Mas. 
L.  I.  Co.  V.  Crayton,  209  lii.  550,  70 
N.  E.  1066;  Rumhold  v.  Supreme  Coun- 
cil, R.  L.,  206  111.  513,  69  N.  E.  590; 
Union  Casualty  &  Surety  Co.  v.  God- 
dard,  25  Ky.  Law  R.  "(1903)  1035, 
76  S.  W.  832.  "The  love  of  life  is 
ordinarily  a  sufficient  inducement  for 
its  preservation,  and,  in  the  absence  of 
proof  that  death  resulted  from  other 
than  natural  causes,  suicide  will  not 
be  presumed,"  Hale  v.  Life  Ind.  & 
Inv.  Co.,  61  Minn.  516,  519,  63  N.  W. 
1108,  52  Am.  St.  R.  616.  Intentional 
self-destruction  is  contrary  to  the  gen- 
eral conduct  of  mankind,  Union  Cas. 
&  S.  Co.  V.  Goddard,  25  Ky.  Law  R. 
1035,  76  S.  W.  832.  The  company 
must  show  that  every  reasonable 
hypothesis  of  accidental  death  is  ex- 
cluded, Boynton  v.  Assoc,  105  La. 
202,  29  So.  490,  52  L.  R.  A.  687. 
Upon  evenly  balanced  testimony  the 
law  assumes  innocence  rather  than 
crime,  Walcott  v.  Ins.  Co.,  64  Vt.  221, 
228,  24  Atl.  992,  33  Am.  St.  R.  923. 
Though  suicide  is  not  itself  made  a 
crime  in  America  generally,  but  rather 
an  illegal  act,  Ship>nan  v.  Protected 
Home  Circle,  174  N.  Y.  398,  67  N.  E. 
83,  63  L.  R.  A.  347;  Grand  Lodge  v. 
Wieting,  168  111.  408. 

1  Supreme  Lodge  v.  Beck,  181  U.  S. 
49,  21  S.  Ct.  532,  45  L.  Ed.  741;  Tack- 
man  V.  Brotherhood  (Iowa,  1906),  106 
N.  W.  350  (insured  was  found  hung  by 
bridle  from  a  peg) ;  Harms  v.  Metropoli- 
tan Life  Ins.  Co.,  67  App.  Div.  139, 
73  N.  Y.  Supp.  513.  Opinions  of  ex- 
perts and  others  on  the  subject  of 
sanity  are  often  received,  Grand  Lodge 
V.  Wieting,  168  111.  408. 

"^Supreme  Tent  v.  King,  142  Fed. 
678,  73  C.  C.  A.  678;  Masonic  Life 
Assn.  V.  Pollard  (Ky.,  1905),  89  S.  W. 
219  (shot  himself  before  witnesses); 
Moore  v.  Ins.  Co.,  192  Mass.  468,  78 
N.  E.  488  (shot  after  writing  a  good- 
bye); Sovereign  Camp  v.  Hruby,  70 
Neb.  5,  96  N.  W  998;  Seybold.  v.  Su- 
preme   Tent,    86    App.    Div.     195,    83 


N.  Y.  Supp.  149;  Clemens  v.  Royal 
Neighbors,  14  N.  Dak.  116,  103  N.  W. 
402;  Agen  v.  Ins.  Co.,  105  Wis.  217, 
80  N.  W.  1020,  76  Am.  St.  R.  905.  A 
letter  or  other  declaration  of  intent  by 
insured  to  commit  the  act  is  admissible 
in  evidence,  if  reasonably  contem- 
poraneous. Conn.  Mut.  Life  Ins.  Co.  v. 
Hillmon,  145  U.  S.  285,  295,  12  S.  Ct. 
909,  36  L.  Ed.  706;  Clemens  v.  Royal 
Neighbors  (N.  Dak.,  1905),  103  N.  W. 
402.  But  the  coroner's  verdict  in  this 
country  is  not  generally  admissible, 
JEtna  Life  Ins.  Co.  v.  Kaiser,  115  Ky. 
539,  74  S.  W.  203;  Wasey  v.  Travelers' 
Ins.  Co.,  126  Mich.  119,  85  N.  W.  459, 
Cox  V.  Royal  Tribe,  42  Ore.  365,  71 
Pac.  73,  60  L.  R.  A.  620,  95  Am.  St.  R. 
752;  Chambers  v.  Modern  W.  of  A.,  18 
S.  Dak.  173,  99  N.  W.  1107;  Fey  v. 
Ins.  Co.,  120  Wis.  358,  98  N.  W.  206. 
Contra  at  common  law  and  U.  S. 
Courts,  Life  Ins.  Co.  v.  Vocke,  129  111. 
557,  22  N.  E.  467,  6  L.  R.  A.  65; 
Fletcher  v.  Sovereign  Camp,  81  Miss. 
249,  32  So.  923;  Sharland  v.  Wash. 
Life  Ins.  Co.,  101  Fed.  206,  41  C.  C.  A. 
307.  Declarations  of  conspirators  are 
admissible,  Conn.  Mid.  Life  Ins.  Co.  v. 
Hillmon,  188  U.  S.  208.  Financial  em- 
barrassment or  other  circumstances 
making  suicide  probable  may  be 
shown,  Furbush  v.  Maryland  Cas.  Co., 
131  Mich.  234,  91  N.  W.  135,  100  Am. 
St.  R.  605;  Supreme  Conclave  v.  Miles, 
92  Md.  613,  48  Atl.  845,  84  Am.  St.  R. 
528.  Also  large  amounts  of  other  in- 
surance subsisting,  Elliott  v.  Des 
Moines  Life  Assn.,  163  Mo.  132,  63 
S.  W.  400. 

3  Travelers'  Ins.  Co.  v.  McConkey, 
127  U.  S.  661,  8  S.  Ct.  1360,  32  I,,  Ed. 
308;  Meacham  v.  N.  Y.  State  M,utual 
Benefit  Assn. ,  120  N.  Y.  237;  McClure  v. 
Mutual  Life  Ins.  Co.,  55  N.  Y.  651.  So 
also  to  prove  a  certain  degree  of  in- 
sanitv,  Dickerson  v.  7ns.  Co.,  200  111. 
270,  65  N.  E.  694.  Compare  Roval 
Arcanum  v.  Pels,  209  111.  33,  70  N.  E. 
697.  But  see  Schidtz  v.  Ins.  Co. ,  40  Ohio 
St.  217,  48  Am.  Rep.  676. 

^  Weed  V.    Mv(.    Ben.    Life   hi».    Co., 


BURDEN    OF    PKOOF—SUICIDE,    INSANITY  519 

Two  late  Minnesota  cases  on  the  subject  of  suicide,  resting  side 
by  side  in  the  reports,  are  instructive.  The  Western  Life  Indemnity 
Company,  the  defendant,  insured  the  Ufe  of  Kornig  by  a  poHcy 
which  provided  that  there  should  be  no  recovery  in  case  of  death 
by  suicide,  intentional  or  unintentional,  and  whether  deceased  was 
sane  or  insane  at  the  time.  Kornig  who  had  been  living  happily  and 
in  good  health  was  found  dead  one  afternoon  from  a  bullet  in  his 
head,  with  a  pistol  in  his  hand,  in  a  room  in  Minneapolis,  which  he 
had  leased  from  a  woman,  the  principal  witness  for  the  insurance 
company.  This  woman  testified  that  she  had  gone  to  the  room 
in  answer  to  Kornig's  complaint  that  it  was  not  in  order,  that  with- 
out a  word  he  shot  and  wounded  her  and  that  she  heard  no  second 
shot.  The  accuracy  of  this  narrative  was  slightly  impeached.  She 
denied  improper  relations  with  Kornig.  The  court  refused  to  dis- 
turb a  verdict  in  favor  of  the  widow. ^ 

Zearfoss  had  a  polic}^  from  the  Switchmen's  Union  containing  a 
clause  exonerating  the  association  in  case  of  deliberate  suicide.  He 
lived  with  his  family  and  on  good  terms.  He  stopped  working  as  a 
switchman  January  20,  and  took  his  pay.  Two  daj^s  later  he  went 
for  a  spree  to  a  lodging  house  near  his  home,  kept  by  the  Fishers, 
where  he  drank  and  played  cards  in  the  saloon  at  night,  and  took 
and  occupied  a  bedroom  above.  He  said  he  had  had  a  little  trouble 
in  the  family.  The  next  evening  about  seven  o'clock  he  was  found 
dead  in  the  bedroom,  where  a  bottle  with  carbolic  acid  was  also 
discovered.  The  post-mortem  examination  showed  that  the  de- 
ceased had  died  from  the  effects  of  carbolic  acid,  but  the  surgeons 
testified  that  there  were  no  burns  apparent  in  his  mouth  or  on  his 
fingers.  The  proprietor  of  a  neighboring  drug  store  identified  Zear- 
foss as  without  much  doubt  the  man  who  had  bought  the  acid, 
though  the  witness  would  not  swear  that  he  was  sure  of  it.    There 

70  N.  Y.  561.     Colorado  and  Missouri  932,  16  C.  C.  A.  618,  32  U.  S.  App.  753, 

have  adopted  statutes  that  suicide  will  30  L.  R.  A.  87.     See  Appendix,  ch.  I, 

not  avail  as  a  defense  if  the  insurance  for  statutes. 

was  taken  out  in  good  faith,  Knights  i  Kornig  v.  Western  Life  Indemnity 

Templars  v.  Jarman,  187  U.  S.  19?',  23  Co.    (Minn.,    1907),    112   N.    W.    1039 

S.  Ct.  108,  47  L.  Ed.  139;  McDonald  v.  (when   circumstantial  evidence  is  re- 

Banl-ers'  Life  Assoc,  154  Mo.  618,  55  lied  on,  defendant  must  establish  facts 

S.  W.  999.      See  Logan  v.  Fidelity  &  Avhich    preclude    any    reasonable    hy- 

C.   Co.,  146   Mo.   114,  47  S.  W.  948;  pothesis     of     natural     or     accidental 

Christian  v.   Connecticut  Mid.  L.  Ins.  death).     .\nd  see  Pythias  Knights  v. 

Co.,    143    Mo.    460,    45    S.    W.    268;  Beck,  181  U.  S.  49,  21  S.  Ct.  532,  45 

Havnie  v.  Knights  Templars'  &  M .  L.  L.    Ed.    741    (head   of   insured   blown 

I.   Co.,   139  Mo.  416,  41   S.  W.   461;  off   by  shot   gun.      He   had   gone   to 

National   Union  v.   Marlow,   74   Fed.  neighbor's  to  induce  his  own  wife  to 

775,  21  C.  C.  A.  89,  40  U.  S.  App.  95;  return    home.      Issue    of    suicide    for 

Mtna  L.  Ins.  Co.  v.  Florida,  69  Fed.  jxoiy). 


520  MEAxNING   AND   LEGAL   EFFECT   OF   LIFE   POLICY 

was  no  evidence  tending  to  show  that  the  insured  had  been  foully- 
dealt  with.  A  verdict  in  favor  of  the  widow  was  set  aside  by  the 
court  as  unsupported  by  the  evidence,  the  fair  meaning  of  which 
was  consistent  only  with  an  inference  of  deliberate  suicide.^ 

In  a  New  York  case  the  company  refused  to  pay  the  insurance 
upon  the  ground  that  the  insured,  Louise  L.  Buxton,  had  com- 
mitted suicide  within  a  year  after  the  policy  was  issued.  Some  time 
prior  to  her  death  the  insured  had  an  operation  at  St.  Luke's  Hospital 
and  thereafter  suffered  from  hemorrhages,  but  was  discharged  as 
cured  about  two  weeks  before  her  death.  The  evening  before  her 
death  she  came  downstairs,  appearing  greatly  excited  and  with  hair 
somewhat  disheveled.  The  next  day  she  was  found  dead  in  her  bed 
with  both  gas  jets  turned  on  but  not  lighted.  There  was  no  evi- 
dence tending  to  show  that  anyone  had  entered  the  room  from  the 
time  the  insured  retired  until  she  was  found  dead,  or  that  the  bed 
was  in  a  position  where  she  could  read  or  that  there  had  been  a 
turning  off  and  on  of  the  gas  supply  from  outside  the  room.  By  a 
divided  court  the  judgment  in  favor  of  the  plaintiff  was  reversed,^ 

§  37L  Exception  of  Death  by  the  Hands  of  Justice  or  in  Viola- 
tion of  Law. — Accident  policies  almost  universally  contain  an  ex- 
ception of  injuries  or  death  "in  consequence  of  violation  of  law," 
or  "while  engaged  in  violation  of  law,"  or  some  similar  clause;  and 
life  policies  also  not  infrequently  make  an  express  exception  of 
death  by  the  hands  of  justice,  or  in  violation  of  law,  or  of  known 
violation  of  law.  The  decisions  of  the  courts  in  the  interpretation 
of  this  exception  have  often  turned  upon  the  particular  phraseology 
of  the  clause.^ 

Crenshaw's  certificate  stipulated  that,  "if  death  is  caused  or 
superinduced  at  the  hands  of  justice  or  in  violation  of  or  attempt 

1  Zearfoss  v.  Switchmen's  Union  2  White  v.  Prudential  Ins.  Co.,  120 
(Minn.,  1907),  112  N.  W.  1044  ("the  App.  Div.  260.  The  court  said:  "The 
ultimate  fact  is  required  to  be  proven  law  indulges  in  the  presumption  that  a 
by  a  preponderance  of  evidence  only,  person  will  not  take  his  own  life,  and 
and  this  rule  is  in  no  way  affected  by  where  the  facts  and  circumstances  are 
the  subsidiary  requirement  that  de-  as  consistent  with  death  from  negli- 
fendant  must  by  the  evidence  exclude  gence,  by  accident  or  homicide,  as  by 
eveiy  other  reasonable  theory  of  ac-  suicide,  the  presumption  is  against 
counting  for  the  death").  In  the  last  suicide.  .  .  .  This  is  a  presumntion, 
two  cases  many  recent  authorities  were  however,  which  yields  to  evidence 
cited.  And  see  Supreme  Tent  v.  King,  tending  to  show  that  death  was  self- 
142  Fed.  678,  73  C.  C.  A.  349  (insured  inflicted,  and  where  no  other  reason- 
sick,  depressed,  in  need  of  money,  was  able  inference  may  be  drawn  from  the 
found  shot  with  revolver.  When  the  evidence,  it  is  the  duty  of  the  court  to 
reasonable  inference  is  irresistible,  the  direct  a  verdict  upon  the  theory  of 
court  may  withdraw  the  question  of  death  by  suicide." 
suicide  tfom  the  jury).  3  gee  also  §  403. 


EXCEPTION   OF   DEATH    BY   THE   HANDS   OF  JUSTICE  521 

to  violate  any  criminal  law,"  only  a  diminished  amount  would  be 
payable.  At  the  time  of  attempted  or  realized  criminal  relations 
between  Crenshaw  and  another's  wife,  the  husband,  in  a  burst  of 
indignation  over  the  discovery,  shot  and  killed  the  insured.  The 
court,  in  perhaps  a  border-line  decision,  refused  to  find  any  defense 
in  favor  of  the  insurer,  holding  that  the  death  was  not  caused  or 
superinduced  in  violation,  or  attempted  violation,  of  law  within  the 
meaning  of  the  polic5^^ 

It  has  been  held,  however,  by  the  Supreme  Court  of  the  United 
States,^  following  the  English  House  of  Lords, ^  that  even  in  the 
absence  of  any  such  exemption  the  rights  of  the  insured,  or  his 
assigns,  or  other  representatives,  would  be  forfeited  upon  his  con- 
viction and  execution  for  crime.  This  conclusion  also  finds  sup- 
port in  the  prevailing  view  regarding  the  effect  of  suicide  upon  the 
rights  of  the  insured  and  his  estate.^  And  in  analogy  to  the  rules 
respecting  suicide,  where  death  at  the  hands  of  justice  is  not  ex- 
pressly excepted  in  the  policy,  the  vested  rights  of  third  parties, 
innocent  beneficiaries  designated  as  payees,  would  seem  to  be  left 
undisturbed  by  the  legal  sentence  and  execution  of  the  insured  for 
crime,  many  courts  considering  that  any  question  of  public  policy 
on  the  one  side  is  more  than  offset  by  the  injustice  of  depriving 
innocent  survivors  of  their  natural  means  of  subsistence,  and  of 
leaving  with  the  insurance  company  both  the  premiums  and  the 
insurance  money .^  This  view  is  further  strengthened  by  the  cases, 
English  and  American,  which  infer  a  resulting  trust  in  favor  of  the 
estate  of  the  insured  where  a  designated  beneficiary  has  forfeited  his 
own  rights  by  murdering  the  insured.^ 

1  Supreme  Lodge  v.  Crenshaw  (Ga.,  courage  false  testimony  relating  to 
1907),  58  S.  E.  628.  The  court  said,  murder).  And  see  Collins  v.  Met.  Life 
"It  is  deducible,  from  the  authorities,      Ins.  Co.,  27  Pa  Super.  Ct.  345. 

that  a  stipulation  of  the  character  now  3  Amicable  Soc.  v.  Bolland,  4  Bligh 

under  consideration  must  be  given  a  (N.  S.),  194. 

reasonable  construction,  and  that  the  '  See  §  64,  supra. 

liability  of  the  company  is  not  to  be  ^  McDonald  v.  Order  of  Triple  Alli- 

discharged,  unless  the  violation  of  the  ance,  57  Mo.  App.  87  (in  the  absence 

law  consisted  in  an  act  of  which  the  of  express  provision  the  law  does  not 

death  of  the  insured  was  the  reason-  look  at  the  cause  of  death);  Campbell 

able  and  legitimate  consequence;"  cit-  v.  Supreme  Conclave,  66  N.  J.  L.  274, 

ing  Gatzman  v.  Conn.  Mut.  L.Ins.  Co.,  49  Atl.  550,  54  L.  R.  A.  576;  Fitch  v. 

3  Hun  (N.  Y.),  515,  and  other  cases.  Am.  Popular  Life  Ins.  Co.,  59  N.  Y. 

2  Burt  V.  his.  Co.,  187  U.  S.  362,  23  557,  17  Am.  Rep.  372;  Moore  v.  Wool- 
S.  Ct.  139,  47  L.  Ed.  216  (court  re-  sey,  28  Eng.  L.  &  Eq.  248,  4  El.  &  Bl. 
fused  to  admit  evidence  shoving  that  243.  And  many  cases  cited  in  §  307, 
conviction  was  unjust,  since  there  can  supra.  Compare  also  Collins  v.  Met. 
be  no  valid  insurance  against  a  mis-  Life  Ins.  Co.,  27  Pa.  Super.  Ct.  345 
carriage  of  justice.  Such  insurance  (void  as  to  the  estate  of  insured), 
might  tend  to  discredit  courts  and  en-  ^  See  §  64,  supra. 


522  MEANING   AND    LEGAL   EFFECT   OF    LIFE    POLICY 

But  the  doctrine  of  the  federal  courts,  which  with  the  Supreme 
Court  is  obiter  dictum,  seems  to  be  that  death  by  the  hands  of  justice 
or  by  suicide  is  not  a  risk  assumed  by  the  company,  although  the 
policy  purport  to  cover  death  from  any  cause,  and  that  therefore 
the  company  is  relieved  of  all  liabilit}'  to  any  class  of  beneficiaries 
for  death  from  such  a  cause,  in  like  manner  as  though  the  exception 
were  express.^  Where,  however,  such  a  restrictive  clause  is  in- 
serted in  the  contract,  it  will  be  enforced  against  all  beneficiaries,^ 
by  every  court,  in  the  absence  of  statutory  provision  to  the  con- 
trary. 

§  372.  In  Violation  of  Law. — Engaging  in  assault,  robbery,  mur- 
der and  similar  crimes  of  recognized  gravity  tends  largely  to  in- 
crease the  risk  of  death.  Such  occupations,  therefore,  may  well  be 
made  the  subject  of  exception  to  the  insurer's  liability.  Thus  death 
was  held  to  be  "in  the  known  violation  of  the  law"  where  the  in- 
sured died  within  a  few  hours  from  wounds  inflicted  by  the  husband 
of  a  woman  upon  whom  he  was  committing  assault  and  battery.^ 
On  the  other  hand,  there  are  multitudinous  laws  including  crimi- 
nal, civil,  federal,  state,  and  municipal,  statutes  and  ordinances 
and  many  of  them  seem  to  have  no  relation  to  any  question  of 
hazard  in  connection  with  insurance.  Accordingly  the  question 
presents  itself,  what  is  "a  violation  of  law"  within  the  fair  intend- 
ment of  this  clause  of  the  policy? 

The  Massachusetts  court  in  the  leading  case  of  Cluff  v.  Mutual 
Ben.  Life  Ins.  Co.^  concluded  that  a  similar  clause,  worded  "in 
known  violation  of  law,"  referred  to  known  violation  of  criminal 

1  Burt  V.  Ins.  Co..  187  U.  S.  362,  23  Union  Life  Guards,  136  Mich.  416,  99 
S.  Ct.  139,  47  L.  Ed.  216;  Ritter  v.  N.  W.  376;  Davis  v.  Modern  Woodmen, 
Mut.  Life  Ins.  Co.,  169  U.  S.  139,  18  98  Mo.  App.  713,  73  S.  W.  923.  But 
S.  Ct.  300,  42  L.  Ed.  693;  Mut.  Life  insured  may  lawfully  defend  himself 
Ins.  Co.  V.  Kelly,  114  Fed.  268.  Com-  against  personal  injury,  Overton  v.  St. 
pare  Lange  v.  Royal  Highlanders  (Neb.,  Louis  Mut.  Life  Ins.  Co.,  39  Mo.  122, 
1907),  110  N.  W.  1110.  90  Am.  Dec.  455.    As  to  exception  of 

2  Breasted  v.  Farmers'  Loan  &  Tr.  injuries  from  fighting,  see  Coles  v. 
Co.,  8  N.  Y.  299,  59  Am.  Dec.  482.  N.  Y.  Cas.  Co.,  87  App.  Div.  41,  83 
Burden  of  pleading  and  proving  the  N.  Y.  Supp.  1063;  and  see§  403. 
breach  is  upon  the  company,  Jones  v.  *  13  Allen  (Mass.),  308,  99  Mass.  318. 
Ace.  Assoc.,  92  Iowa,  653,  61  N.  W.  And  see  Lehman  v.  Great  Eastern  Cas. 
485  (visiting  house  of  ill  fame  and  carry-  &  Ind.  Co.,  7  App.  Div.  424,  39  N.  Y. 
ing  concealed  weapons.  Policy  not  Supp.  912.  aff'd  158  N.  Y.  689,  53  N.  e! 
avoided);  Matthes  v.  Imperial  Ace.  1127  (crossing  railroad  track  at  a  place 
Assoc,  110  Io\Aa,  222,  81  N.  W.  484.  where  persons  were  allowed  to  cross); 

3  Bloom  V.  Franklin  Life  Ins.  Co.,  97  Harper  v.  Phcenix  Ins.  Co  18  Mo  109 
Ind.  478,  49  Am.  Rep.  469.  See  also  19  Mo.  506;  Wolff  v.  Con7i.  Mut.  Life 
Prudential  Life  Ins.  Co.  v.  Higbee,  22  Ins.  Co.,  5  Mo.  App  236-  Brown  v 
Ky.  L.  R.  495,  57  S.  W.  614;  Payne  v.  Supreme  Lodge,  83  Mo.  App   633 


SUICIDE   NOT   A   CRIME  523 

law.  The  New  York  court  upon  the  same  facts,  in  an  action  brought 
by  an  assignee  of  Cluff,  refused  to  decicle  whether  violations  of 
criminal  law  alone  were  included  in  the  exception,  the  judges  dif- 
fering in  their  views. ^  Both  courts,  however,  found  material  issues 
of  fact  for  the  jury  to'  pass  upon.  In  this  case  Cluff,  the  insured, 
attempted  to  unhitch  and  take  forcible  possession  of  the  horses  of 
Cox,  his  debtor,  when  they  were  in  charge  of  Cox's  son,  who  was 
driving  them  with  a  wagon.  During,  or  just  after,  the  trespass  or 
assault,  the  son  shot  and  killed  Cluff  with  a  pistol.  Bad  feeling  had 
previously  been  engendered  between  the  families  which  might  have 
had  influence  in  leading  up  to  the  shooting.  The  New  York  court, 
reversing  a  judgment  obtained  by  the  defendant,  held  it  error  to 
refuse  to  allow  the  jury  to  decide,  whether  the  shooting  was  in  con- 
sequence of  the  unlawful  act  of  the  insured,  and  whether  the  in- 
sured knew  that  it  was  unlawful. 

It  is  not  easy  to  find  a  logical  theory  upon  which  this  clause  can 
be  limited  to  violations  of  criminal  law.  Certainly  any  violation  of 
law  that  substantially  enhances  the  risk  would  seem  to  be  contem- 
plated.^ A  voluntary  submission  to  illegal  abortion  is  clearly  a 
violation  of  criminal  law.^  But  to  bring  the  casualty  within  the 
exception  there  must  be  some  overt  unlawful  act  committed  in 
connection  with  it.  A  mere  purpose  or  preparation  to  violate  law 
is  not  enough.^ 

§  373.  Suicide  not  a  Crime. — Suicide  at  common  law  was  a  crime, 

i  Bradley  V.  Mut.  Ben.  Life  Ins.  Co.,  to   him;    was   refused    admission    and 

45  N.  Y.  422,  6  Am.  Rep.  115.  shot  himself  while  in  the  water-closet, 

2  Conboy  v.  Ace.  Assoc.,  17  Ind.  App.  perhaps  accidentally,  held,  no  forfeit- 
62,  46  N.  E.  363,  60  Am.  St.  R.  154  ure);  Smith  v.  .Etna  Life  Ins.  Co.,  115 
(seining  in  streams  above  tide  water);  Iowa,  217,  88  N.  W.  368,  56  L.  R.  A. 
Bloom  V.  Ins.  Co.,  97  Ind.  478,  49  Am.  271,  91  Am.  St.  R.  153  (insured  was 
Rep.  469;  Bradley  v.  Ins.  Co.,  45  N.  Y.  making  preparations  to  get  off  a  train 
422,  supra.  Getting  pigeons  from  in  motion);  Johanns  v.  Nat.  Ace.  Soc, 
cupola  seems  no  violation  of  Iowa  16  App.  Div.  104,  45  N.  Y.  Supp.  117 
Sunday  law,  Matthes  v.  Imperial  Ace.  (attempting  to  board  moving  street 
Assn.,  110  Iowa,  222,  81  N.  W.  484.  car,  is  not  standing  on  platform); 
Nor  is  riding  a  bicycle  to  a  funeral  a  Cornxcell  v.  Frat.  Ace.  Assn.,  6  N.  D. 
violation  of  the  Maine  Sunday  law,  201,  69  N.  W.  191,  40  L.  R.  A.  437,  66 
Eaton  V.  Atlas  Ace.  Ins.  Co.,  89  Me.  Am.  St.  R.  601  (starting  out  to  hunt 
570,  36  Atl.  1048.  prairie  chickens  in  closed  season  is  not 

3  Weds  V.  Neiv  En/jland  Mut.  Life  within  exception);  Lehman  v.  Great 
Ins.  Co.,  191  Pa.  St.  207,  43  Atl.  126,  Eastern  Cas.  &  Ind.  Co.,  7  App.  Div. 
.53  L.  R.  A.  327,  71  Am.  St.  R.  763;  424,  39  N.  Y.  Supp.  912,  aff'd  158 
Hatch  V.  Ins.  Co.,  120  Mass.  550,  21  N.  Y.  689,  53  N.  E.  1127  (statute  for- 
Am.  Rep.  541.  bade  walking  upon  or  along  the  track 

*  Pythias  Knights  v.  Beck,  181  U.  S.  insured  was  about  to  step  upon  it,  but 

49,  21  S.  Ct.  532,  45  L.  Ed.  741  (in-  there  was  a  crossing  there,  with  ac- 

sured  went  to  house  of  neighbor  to  quiescence  of  railroad  company;  held 

persuade  or  compel  his  wife  to  return  no  forfeiture). 


524  MEANING   AND   LEGAL   EFFECT  OF   LIFE  POLICY 

but  is  not  so  defined  in  the  statutes  of  most  of  the  United  States. 
In  those  states  it  is  held,  generally,  that  suicide  is  not  a  violation 
of  law  within  the  meaning  of  this  clause  of  the  policy.^ 

§  374.  Death  Must  be  Caused  by  Unlawful  Act.— To  effect  for- 
feiture it  is  held  that  there  must  be  some  causative  and  reasonably 
contemporaneous  connection  between  the  violation  of  law  and  the 
ensuing  death,  or  injury.^ 

For  example,  the  policy  is  not  avoided  because  the  insured  hap- 
pens to  be  engaged  illegally  in  selling  lottery  tickets  at  the  time 
when  he  is  stricken  with  heart  disease  unconnected  with  his  occu- 
pation;^ and  if  the  insured  is  accidentally  injured  by  a  gun  shot 
from  a  distance  the  company  is  not  relieved  because  by  chance  he 
is  in  the  act  of  violating  a  law  against  profane  swearing,"*  On  the 
other  hand,  the  insurer  was  held  not  liable  when  the  insured  met  his 
death  because  of  a  collision  that  occurred  during  a  horse  race  for- 
bidden by  law.^  And  where  the  insured  while  retreating  was  killed 
by  a  shot  fired  in  provocation,  caused  by  an  affray  that  had  ended, 
a  judgment  in  favor  of  the  insurer  was  sustained  on  the  ground  that 
if  the  acts  of  the  insured  were  such  as  to  produce  in  his  slayer  a 
high  degree  of  passion,  and  while  he  was  in  such  a  state  he  shot  and 
killed  the  insured,  though  perhaps  unintentionally,  the  death  was 
the  natural  consequence  of  the  assault.*'  So  also  where  the  insured 
in  trying  to  escape  shortly  after  committing  robbery  was  shot  by 
a  police  officer/ 

1  Royal  Circle  v.  Achterrath,  204  111.  of  law).     There  must  be  a  causative 

549,  68  N.  E.  492,  63  L.  R.  A.  452,  98  connection  between  the  unlawful  act 

Am.   St.   R.   224;   Kerr  v.   Assoc,  39  and  the  injury,  Jones  v.   U.  S.  Mid. 

Minn.  174,  39  N.  W.  312,  12  Am.  St.  R.  Ace.  Assn.,  92  Iowa,  692,  61  N.  W.  485. 

631;  Darrow  v.  Family  Fund  Soc,  116  3  Bradley  v.  Ins.  Co.,  45  N    Y    422 

N.  Y.  537,  22  N.  E.  1093,  6  L.  R.  A.  supra. 

495,  15  Am.  St.  R.  430  (suicide  not  a  *  Ace.  Ins.  Co.  v.  Bennett,  90  Tenn. 

crime);  Shipman  v.   Home  Circle,  174  256,   16    S.   W.    723,   25   Am     St     R 

N.  Y.  398,  67  N.  E.  83,  63  L.  R.  A.  347  685.                                              '       '       ' 

(but  is  said  to  be  a  wrongful  act  under  »  Travelers'  Ins.   Co    v    Seaver     19 

N.  Y.  Pen.  Code,  §  172);  Patterson  v.  Wall.    531,    22    L.    Ed.    155    (insured 

Ins.  Co.,  100  Wis.  118,  75  N.  W.  980,  jumped   down,    became   entangled    in 

42  L.  R.  A.  253,  69  Am.  St.  R.  899  reins  and  was  dragged  against  a  stone; 

(court  applied  the  usual  rule,  though  held,  all  one  continuous  transaction), 

suicide  technically  is  a  crime  in  that  6  Murray  v.  .V.  V.  Life  Ins   Co  ,  96 

state).    Defense  of  suicide  is  barred  by  N.  Y.  614,  48  Am.  Rep   658 

the  incontestable  clause,  §  382,  infra.  7  Prudervtial  Ins.  Co.  v.  Halev  91  111 

.n^;f#^^  AntvMs  V.  Bee'-,  181  U.  S.  Adp.  363.  aff'd  189  III.  317,  59  N.  E. 

49,  21  S.  Ct.  532,  45  L.  Ed.  741;  Conhov  545.     But  see  Griffin  v.  Western  Assn  , 

li  ^^'oa.^f^'':    ^l  ^"^-   ^PP-  62,  46  20  Neb.  620,  31   N.  W.  122,  57  Am. 

N.  k..  363,  60  Am  St.  R.  154;  Ace.  Ins.  Rep.  848  (the  phrase  under  considera- 

yoi\F'r'^k?^J^ao'^P^'^^^-'^-  t'°"  ^^'^S'  "die  while  violating  any 
723,  25  Am.  bt  R._685  (attack  upon  law,"  held,  that  the  insured  who  was 
the  wife  of  another  is  known  violation      shot  after  robbing  a  bank  waa  not  then 


AUTHORITY   01"   AGENTS  525 

§  375.  Authority  of  Agents. — Agents  not  authorized  to  make,  alter, 
or  discharge  this  or  any  other  contract  in  relation  to  the  matter  of  this 
insurance,  or  to  waive  any  forfeiture  hereof,  or  to  grant  permits,  or  to 
receive  for  cash  due  for  premiums  anything  but  cash. 

The  effect  of  this  waiver  clause  has  been  heretofore  discussed.* 

If  such  statements  contained  in  the  poUcy  relating  to  lack  of 
authority  on  the  part  of  certain  agents,  and  brought  actually  or 
constructively  to  the  notice  of  the  insured,  are  true,  the  insurer 
should  have  the  benefit  of  them.  But  as  shown  under  the  discus- 
sion of  waiver  and  estoppel  the  decisions  of  the  various  courts  are 
not  in  harmony  as  to  the  effect  of  this  and  similar  clauses, 
largely  because  the  courts  differ  in  their  views  as  to  the  extent  of 
the  actual  authority  of  such  agents  when  acting  for  their  prin- 
cipals. 

In  a  California  case  Iverson,  the  insured,  warranted  that  he  had 
never  had  paralysis.  The  soliciting  agent  of  the  defendant,  at  the 
time  the  application  was  signed  b}^  Iverson,  knew  that  he  had  had 
a  stroke  of  paralysis.  The  ofhcers  of  the  company  had  no  knowl- 
edge of  this.  In  the  application  was  a  stipulation  that  only  the 
officers  had  authority  to  determine  whether  the  policy  should  issue, 
and  that  no  statements  of  the  solicitor  should  be  binding  unless 
presented  in  writing  to  the  officers.  The  court  held  that  the  issu- 
ance of  the  policy  was  not  a  waiver  of  the  forfeiture,  that  the  so- 
licitor's knowledge  was  not  knowledge  by  the  company  and  that 
the  solicitor  had  no  authority  to  waive  the  forfeiture. ^  The  court 
adopted  substantially  the  course  of  reasoning  laid  down  in  the 
famous  federal  case,  which  has  heretofore  been  discussed  at  length,^ 
and  which  was  cited  with  approval  in  its  opinion  together  with 
other  cases. 

On  the  other  hand,  in  a  later  case,  the  South  Carolina  court,  with 
the  California  case  before  it,  takes  the  opposite  view,  and  concludes 
that  the  knowledge  of  the  solicitor,  acquired  in  the  course  of  his 
work  for  the  company,  is  imputable  to  the  company,  no  matter 
what  the  policy  says.  The  applicant  Rearden  made  a  false  answer 
in  his  application  regarding  his  fainting  fits,  but  the  soliciting  agent 

engaged    in    violating   law);    Supreme  Ins.  Co.,  63  Vt.  437,  22  Atl.  .530,  13 

Lodqe  V.  Bradley,  73  Ark.  274,  83  S.  W.  L.  R.  A.  637,  25  Am.  St.  R.  773  (in- 

10,55.  67  L.  R.  A.  770  (two  judges  dis-  sured   in   returning   from   hunting  on 

sentinp^);   Utter  v.   Travelers'  Ins.  Co.,  Sunday  slipped  on  frozen  ground,  held, 

65  Mich.  545,  32  N.  W.  812,  8  Am.  St.  comnanv  was  not  liable). 

R.  913.     In  Prader  v.  Ace.  A.-'sn.,  95  i  Ch.  VIII.  s^'vra. 

Iowa,  149,  63  N.  W.  601  (illegal  Sunday  2  Iverson  v.  Met.  Life  Ins.  Co.  (Cal., 

hunting   was    finished,  and    company  1907),  91  Pac.  609. 

was  held  liable).     Compare  Duran  v.  3  See  §§  173,  174,  supra. 


526  MEANING   AND    LEGAL   EFFECT   OF   LIFE   POLICY 

knew  the  facts.  The  application  provided  that  the  company  should 
not  be  bound  by  knowledge  of  the  solicitor  not  contained  therein. 
The  court  held  that  the  company  was  estopped  from  setting  up  the 
breach  of  warranty.^ 

An  agent  employed  to  collect  premiums  has  in  general  no  ap- 
parent power  to  waive  forfeitures,  when  the  policy  recites  that 
certain  officers  alone  have  that  power.^  And  where  a  policy  con- 
tains a  stipulation  that  "payments  of  premiums  to  be  recognized 
by  the  company  must  be  entered  at  the  time  of  payment  in  the 
premium  receipt  book  belonging  with  this  policy,"  one  suing  on  the 
policy  can  show  payments  only  by  the  book  or  by  proving  a  suffi- 
cient reason  for  the  absence  of  such  entry.^ 

But  on  the  other  hand  the  Arkansas  court  decided,  on  the  evi- 
dence before  it,  that  a  superintendent  of  agencies  had  actual  au- 
thority to  waive  forfeitures  and  to  accept  past-due  premiums, 
although  the  policy  declared  that  such  a  result  could  be  accom- 
plished only  by  a  writing  signed  by  the  president  or  secre- 
tary.^ 

Though  the  policy  provide  that  it  shall  not  take  effect  until  the 
first  premium  is  paid  at  the  home  office  or  until  it  is  paid  in  cash, 
nevertheless,  it  is  held,  that  by  authorizing  the  soliciting  agent  to 
make  delivery  of  the  policy  the  insurance  company  impliedly  em- 
powers him  to  take  a  note  or  give  credit  for  the  first  premium, 
provided  the  application  does  not  negative  his  authority  to  do  so.-^ 
But  if  it  is  provided  in  the  application  that  the  solicitor  has  no 
power  to  extend  the  time  of  payment  or  that  the  policy  shall  not 
be  in  force  until  the  first  premium  is  paid  in  cash,  such  provision, 
in  most  jurisdictions,  will  prevail  in  spite  of  the  delivery  of  the 
policy  by  the  solicitor.^ 

§  376.  Errors  in  Age. — Any  error  made  in  understating  the  age  of 

I  Rearden  V.  State  Mut.  Life  Ins.  Co.  1907),   68  Atl.   31    ("by  delivering  a 

(S.  C,  1908),  60  S.  E.  1106  (here,  how-  poHcy,  it  imphedly  ratifies  the  acts  of 

ever,    the    solicitor    affirmatively    ad-  the  soliciting  agent  as  to  the  payments 

vised  the  applicant  that   his  fainting  required  to  entitle  the  insured  to  the 

spells  amounted  to  nothing).  delivery");  Kilborn  v.  Prudential  Ins 

^Cayford  v.  Met.  L.  Ins.  Co.   (Cal.  Co.,   99   Minn.   276,    108  N     W    861- 

App.,  1907),  91  Pac.  266.  Michigan  Mut.  Life  Ins.  Co.  v.  Hall, 

^  McNicholas  v.  Prudentud  Ins.  Co.,  60  111.  App.  159;  A^  Y.  Life  Ins.  Co.  v. 

191    Mass.    304    (industrial    insurance  Greenlee   (Ind.  App.,   1908)    84  N    E 

with  weekly  payments).  1101.                                           ' 

4  Industrial     Mut.     Indem.     Co.     v.  8  Powell  v.  Prudential  Ins   Co   (Ala 

Thompson  (Ark.,  1907),  104  S.  W.  200.  1907),  45  So.  208;  Russel  v.  Prudential 

^Mutual    Res.     Life    Ins.     Co.     v.  Ins.  Co.,  176  N.  Y.  178,  68  N   E   252 

Heidel,    161    Fed.    535    (cases    cited);  98  Am.  St.  R.  656  (by  a  divided  coiirt)! 

Lame  v.  A^.  Y.  Ufe  Ins.  Co.  (N.  H.,  And  see  §  359,  supra. 


ASSIGNMENTS  527 

the  insured  mil  he  adjusted  by  paying  sux^h  amount  as  the  premiums 
paid  would  purchase  at  the  table  rate. 

This  provision  is  more  reasonable  than  a  stipulation  providing 
for  absolute  forfeiture  in  case  of  an  error  in  stating  the  age.' 

The  New  York  standard  policies  and  others  are  worded,  "if  the 
age  of  the  insured  has  been  misstated,  the  amount  payable  hereunder 
shall  be  such  as  the  premium  paid  would  have  purchased  at  the 
correct  age.^ 

§  377.  Assignments. — No  assignment  of  this  policy  shall  take  effect 
until  written  notice  thereof  shall  be  given  to  the  company. 

This  provision,  be  it  observed,  does  not  prohibit  an  assignment 
of  the  policy,^  but  only  relieves  the  company  from  the  obligation 
of  recognizing  it  until  written  notice  is  served.^  The  assignment 
without  a  compliance  with  the  regulations  of  the  company  may 
nevertheless  be  operative  as  between  the  parties  to  it.^  It  is  desir- 
able that  the  insured  should  have  the  opportunity  of  making  free 
commercial  use  of  his  life  insurance  as  available  property,  for  it  may 
often  be  convenient  to  secure  money,  by  loan  or  otherwise,  upon  it. 
Unlike  the  case  of  a  fire  policy,  as  before  shown,  a  life  policy  was 
considered  assignable  at  common  law.^  And,  by  the  better  opin- 
ion, a  policy  of  life  insurance  may  be  assigned  or  made  payable  to 
one  who  has  no  insurable  interest,  if  the  transaction  is  not  a  mere 
cover  for  a  wager7  The  demands  of  business  quite  outweigh  the 
remote  possibility  that  some  unscrupulous  assignee  may  succumb 
to  the  temptation  of  murdering  or  shortening  the  life  of  the  in- 

1  Singleton  v.  Prudential  Life  Ins.  pany  alone  can  take  advantage  of  the 
Co.,  11  App.  Div.  403,  42  N.  Y.  Supp.  requirement,  Lee  v.  Murrell,  9  Ky. 
446.  Similar  relief  is  sometimes  af-  L.  R.  104.  If  policy  so  provide,  an 
forded  by  statute,  Sieverts  v.  A'at.  Ben.  assignment  is  of  no  force  as  against 
Assn.,  95  Iowa,  710,  64  N.  W.  671;  the  company,  Moise  v.  Mut.  Res.  Fund 
Albert  v.  Mut.  Life  Ins.  Co.,  122  N.  C.  Assn.,  45  La.  Ann.  736,  13  So.  170; 
92,  30  S.  E.  327,  65  Am.  St.  R.  693.  Corcoran  v.  Mut.  Life  Ins.  Co.,  179  Pa. 
But  compare  Sup.  Council  v.  Bovle,  10  St.  132,  36  All.  203. 

Ind.  App.  301,  37  N.  E.  1105;  Kabok  v.  *  Colbum's  Appeal,  74  Conn.  463,  51 

Phoenix  Mut.  Life  Ins.   Co.,  51   Hun,  Atl.  139,  92  Am.  St.  R.  231;  but  com- 

639,  4   N.   Y.    Supp.    718;    Wiberg   v.  pare  Hogue  v.  Minn.  Packing  &  Pro. 

Minn.  S.  Relief  Assn.,  73  Minn.  297,  76  Co.,  infra,  59  Minn.  39,  60  N.  W.  812. 

'ii.W.37;  Doll  V.  Prudential  Ins.  Co.,  21  '^  He  wins  v.   Baker,  161    Mass.  320. 

Pa.  Super.  Ct.  434.  37  N.  E.  441;  Hogue  v.  Minn.  Packing 

2  See  §  353,  supra.  &  Pro.  Co.,  59  Minn.  39,  60  N.  W.  812; 

3  If  policy  provide  that  it  will  be  Kimball  v.  Lester,  43  App.  Div.  27,  59 
avoided  by  assignment  without  con-  N.  Y.  Supp.  540,  aff'd  167  N.  Y.  570, 
sent  of  company  the  provision  will  be  60  N.  E.  it  13. 

enforced,  Merrill  v.   New  Eng.   Mut.  6  See  §  63,  supra. 
Life  Ins.   Co.,  103  Mass.  245,  4  Am.  ''  N.  Y.  Mut.  Life  Ins.  Co.  v.  Arm- 
Rep.    548.      But   Iowa,   for   example,  strong,  117  U.  S.  591,  6  S.  Ct.  877,  29 
has    statute,    Crocker    v.    Hogin,    103  L.  Ed.  997;  Moore  v.  Chi.  Guar.  Furui 
Iowa,  243,  72  N.  W.  411.     The  com-  Life  Soc,  178  111.  202,  52  N.  E.  882; 


528 


MEANING  AND   LEGAL  EFFECT  OF   LIFE   POLICY 


sured  for  the  sake  of  hastening  payment  of  the  insurance  money.* 
Moreover,  there  would  seem  to  be  room  for  the  operation  of  any 
such  sinister  designs  regardless  of  whether  the  assignee  has  an  in- 
surable interest.  A  creditor,  for  example,  may  be  quite  as  strongly 
tempted,  as  the  donee  of  a  gift,  to  realize  a  prompt  payment  of  the 
insurance  upon  the  life  of  the  assignor.^ 

Any  one  of  those  named  as  beneficiaries  may  in  general  assign 
his  expectant  or  contingent  interest,  and  the  assignee  will  take  the 
right  to  which  he  was  entitled ;  ^  but  a  member  of  a  beneficiary 
society  may  not  assign  his  certificate  to  one  outside  the  classes  of 
permitted  beneficiaries.^  It  has  been  held,  however,  that  the  society 
may  waive  the  restriction.^ 

In  the  absence  of  restraining  statutes  a  wife  has  a  right  to  assign 
her  interest  in  a  policy.^    Many  states  have  passed  statutes  designed 


Davis  V.  Brown,  159  Ind.  644,  65  N.  E. 
908;  Milner  v.  Bowman,  119  Ind.  448, 
454,  21  N.  E.  1094,  5  L.  R.  A.  95; 
Steinback  v.  Diepenbrock,  158  N.  Y. 
24,  52  N.  E.  662,  44  L.  R.  A.  417,  70 
Am.  St.  R.  427;  Schuckmann  v.  Hein- 
rich,  93  App.  Div.  278,  aff'd  182  N.  Y. 
538  (insured  transferred  to  one  who 
did  not  become  his  fiancee  as  he  ex- 
pected); §  41,  supra.  This  appears  now 
to  be  the  rule  in  the  courts  of  New 
York,  Ohio,  Massachusetts,  Illinois, 
Michigan,  New  Jersey,  California, 
Minnesota,  Connecticut,  Louisiana, 
Rhode  Island,  Wisconsin,  Nebraska, 
Tennessee,  South  Carolina,  Mississippi, 
Maryland,  and  Indiana.  While  on 
grounds  of  supposed  public  policy  the 
contrary  view  is  entertained  by  the 
courts  of  the  following  states:  Ala- 
bama, Kansas,  Kentucky,  Missouri, 
North  Carolina,  Pennsylvania,  Texas, 
and  Virginia,  see  list  of  states  and  de- 
cisions given  in  Gordon  v.  Ware  Nat. 
Bank,  132  Fed.  444,  446-448.  Contra, 
for  example,  Warnock  v.  Davis,  104 
U.  S.  775,  26  L.  Ed.  924,  and  Cheeves 
v.  Anders,  87  Tex.  287,  47  Am.  St.  R. 
107,  28  S.  W.  274  (limit  of  creditors' 
interest  is  amount  of  debt,  interest 
thereon  and  expense  of  insurance; 
balance  to  go  to  estate  of  insured). 
With  the  majority  must  also  be  classed 
Georgia,  Steele  v.  Gatlin,  115  Ga.  929, 
42  S.  E.  253,  59  L.  R.  A.  129;  Morris  v. 
Banking  Co.,  109  Ga.  12,  34  E.  S.  378, 
46  L.  R.  A.  506,  and  England,  Re 
Turcan,  L.  R.  40  Ch.  Div.  5.  As  to  the 
views  of  the  federal  courts,  see  §  43, 
supra. 


1  Cator  v.  Mut.  Res.  Fund  Life  Ass., 
78  Md.  72, 26  Atl.  959  (different  rule  in 
fire  insurance). 

2  In  general  the  validity  of  an  assign- 
ment is  governed  by  the  law  of  place 
where  it  is  made.  Succession  of  Miller 
v.  Man.  Life  Ins.  Co.,  110  La.  652,  34 
So.  723;  Robinson  v.  Hurst,  78  Md.  59, 
26  Atl.  956,  20  L.  R.  A.  761,  44  Am. 
St.  R.  266;  Miller  v.  Campbell,  140 
N.  Y.  457,  .35  N.  E.  651.  And  see 
Conn.  Mut.  Life  Ins.  Co.  v.  Westervelt, 
52  Conn.  586;  Spencer  v.  Myers,  150 
N.  Y.  269,  44  N.  E.  942,  34  L.  R.  A.  175, 
55  Am.  St.  R.  675. 

3  Conn.  Mut.  Life  Ins.  Co.  v.  Bald- 
win, 15  R.  I.  106.  The  insured  may 
assign  his  contingent  interest  in  an 
endowment  policy.  Pierce  v.  Charter 
Oak  Life  Ins.  Co.,  138  Mass.  151; 
Miller  v.  Campbell,  140  N.  Y.  457,  35 
N.  E.  651.     See  p.  80,  note  1,  supra. 

4  Brierhj  v.  Equitable  Aid  Union, 
170  Mass.  218,  220,  48  N.  E.  1090,  64 
Am.  St.  R.  297;  Supreme  Conclave  v. 
Dailey,  61  N.  J.  Eq.  145,  47  Atl.  277. 
See  §§  68,  69,  supra. 

^  J  arris  v.  Binkley,  206  111.  541,  69 
N.  E.  582;  Coleman  v.  Anderson  (Tex. 
Civ.  App.),  82  S.  W.  1057.    See  §  130. 

6  Phoenix  Mut.  L.  Ins.  Co.  v.  Opper, 
75  Conn.  295,  53  Atl.  586;  Mente  v. 
Townsend,  68  Ark.  391,  59  S.  W.  41 
(to  secure  debt  of  her  husband);  Herr 
V.  Reinahl,  209  Pa.  St.  483,  58  Atl.  862. 
Husband  may  assign  his  own  interest 
in  policy  taken  out  in  part  for  wife, 
though  statute  restrain  her  .Travelers' 
Ins.  Co.  V.  Healey,  164  N.  Y.  607,  58 
N.  E.  1093. 


ASSIGNMENTS 


529 


to  secure  to  the  wife  and  children  of  the  insured  the  proceeds  of  his 
life  insurance  payable  to  them  free  from  claims  of  creditors.^  Under 
such  statutes  it  was  held  by  the  courts  of  New  York  and  Wisconsin 
that  it  was  the  legislative  intent  to  prohibit  the  wife  altogether 
from  assigning  her  interest;  ^  but  by  subsequent  statute  in  New 
York  the  wife  may  assign  her  interest  with  the  written  consent  of 
the  insured.^  In  other  jurisdictions  it  was  held  that  the  statutes 
protecting  policies  from  creditors  did  not  inferentially  restrain  an 
assignment  by  the  wife  of  her  interest.^ 

Policies  are  often  pledged  or  assigned  as  collateral  security  for  a 
loan,^  A  mere  pledge  or  deposit  of  a  policy  is  not  of  itself  an  as- 
signment within  the  meaning  of  that  term  as  used  in  the  policy.® 

A  transfer  of  a  policy,  where  not  prohibited  by  its  terms,  may 
be  valid  without  any  written  assignment,  either  by  way  of  gift,' 
or  in  return  for  a  valuable  consideration,*  provided  the  policy  be 


1  See   §  72,  supra. 

2  Eadie  v.  Slimmon,  26  N.  Y.  9,  82 
Am.  Dec.  395;  Brick  v.  Campbell,  122 
N.  Y.  337,  25  N.  E.  493,  10  L.  R.  A. 
259;  Dannhauser  v.  Wallenstein,  169 
N.  Y.  199,  62  N.  E.  160  (policy  pay- 
able to  husband's  "legal  representa- 
tives" is  not  for  benefit  of  wife); 
Ellison  V.  Straio,  116  Wis.  207,  92 
N.  W.  1094. 

3  L.  1896,  c.  272,  §  22,  superseding 
earlier  laws  and  construed  in  Kittel  v. 
Domeyer,  175  N.  Y.  205,  67  N.  E.  433. 
See  p.  80,  note  1,  supra.  As  to  written 
consent  of  husband,  see  Anderson  v. 
Goldsmidt,  103  N.  Y.  617.  9  N.  E.  495; 
Spencer  v.  Myers,  150  N.  Y.  269,  44 
N.  E.  942,  34  L.  R.  A.  175,  55  Am.  St. 
R.  675  (applies  to  policies  of  foreign 
companies);  Sherman  v.  Allison,  77 
App.  Div.  49,  80  N.  Y.  Supp.  148, 
aff'd  177  N.  Y.  574,  69  N.  E.  1131 
(husband  and  wife  each  executed  a 
separate  assignment);  Milhous  v.  John- 
son, 51  Hun,  639,  4  N.  Y.  Supp.  199. 
If  policy  is  matured  the  money  due  is 
subject  to  levy  for  wife's  debt,  other- 
wise not,  Amberg  v.  Manhattan  Life 
Ins.  Co.,  171  N.  Y.  314,  63  N.  E.  1111. 

*Mente  v.  Townsend,  68  Ark.  391, 
59  S.  W.  41;  Wirqman  v.  Miller,  98 
Ky.  620,  33  S.  W.  937;  Emerick  v. 
CoaT-hy,  35  Md.  188;  Baker  v.  Young, 
47  Mo.  453. 

5  Milt.  Ben.  Life  Ins.  Co.  v.  First 
Nat.  Bank  (Ky.,  1902),  69  S.  W.  1; 
Hurst  v.  Mut.  Res.  Fund,  78  Md.  59, 
26  Ati.  956;  Hirsch  v.  Mayer,  165  N.  Y. 
236.      On   payment  of  debt   title   to 

34 


policy  again  vests  in  assignor  without 
formal  reassignment,  Alabama  Gold 
Life  Ins.  Co.  v.  Garmany,  74  Ga.  51. 
But  renewal  of  note  will  not  cancel 
assignment  of  collateral,  Kendall  v. 
Eq.  Life  Assur.  Soc,  171  Mass.  568, 
51  N.  E.  464;  Corcoran  v.  A'.  Y.  Mut. 
L.  Ins.  Co.,  183  Pa.  St.  443,  39  Atl. 
50. 

^Griffey  v.  A'.  Y.  Cent.  Ins.  Co.,  100 
N.  Y.  417,  3  N.  E.  .309,  .53  Am.  Rep. 
202.  Default  by  pledgor,  Toplitz  v. 
Bauer,  161  N.  Y.  325,  55  N.  E.  1059. 
As  to  rights  of  pledgee  to  realize  on 
policy  as  collateral  see  Dungan  v. 
Mut.  Ben.  Life  Ins.  Co.,  46  Md.  469; 
Rathborne  v.  Hatch,  90  App.  Div.  161, 
85  N.  Y.  Supp  775;  Palmer  v.  Mut. 
Life  Ins.  Co.,  77  N.  Y.  Supp.  869,  38 
Misc.  318;  Bailey  v.  Am.  Deposit  & 
Loan  Co.,  52  App.  Div.  402,  65  N.  Y. 
Supp.  330;  Manton  v.  Robinson,  19  R.  I. 
405,  37  Atl.  8.  Purpose  of  assignment 
whether  absolute  or  for  collateral  may 
be  shown  by  parol,  Kendall  v.  Equit- 
able Life  Assur.  Soc,  171  Mass.  568, 
51  N.  E.  464;  Westbury  v.  Simmons,  57 
S.  C.  467,  35  S.  E.  764. 

'^  Hani  v.  Gcrmania  L.  Ins.  Co.,  197 
Pa.  St.  276,  47  Atl.  200,  80  Am.  St.  R. 
819;  Opitz  V.  Karel,  118  Wis.  527,  95 
N.  W.  948,  62  L.  R.  A.  982,  99  Am. 
St.  R.  1004. 

s  Hewins  v.  Baker,  161  Mass.  320, 
37  N.  E.  441.  No  particular  form  of 
words  is  essential  to  the  validity  of  an 
assignment  of  a  policy,  Ormond  v. 
Conn.  Mut.  L.  Ins.  Co.  (N.  C,  1907), 
58  S.  E.  997. 


530 


MEANING   AND   LEGAL  EFFECT  OF   LIFE   POLICY 


delivered  to  the  assignee  with  that  intent.  Likewise  if  the  assign- 
ment or  other  proper  evidence  of  the  transfer  is  duly  delivered  to 
the  assignee,  it  is  not  essential  that  the  policy  itself  be  delivered  to 
him  in  order  to  convey  an  interest.^  So  also  the  rights  of  an  as- 
signee may  become  perfected  without  an  actual  delivery  either  of 
an  assignment  or  of  the  policy  itself.^ 

Where,  with  the  consent  of  the  insurers,  an  assignment  has  been 
consummated,  this  amounts  to  a  new  contract  between  the  com- 
pany and  the  assignee.^  As  to  the  past,  however,  the  assignee  sim- 
ply steps  into  the  position  of  the  assignor,  and  can  only  recover 
under  the  policy  in  case  the  assignor  has  not  been  guilty  of  any 
breach."* 

No  one  except  the  company  can,  in  general,  make  objection  to 
an  assignment  from  the  original  insured,^  unless  the  policy  is  pay- 
able to  other  beneficiaries,  who  have  a  vested  interest  therein;  ® 
and  after  the  death  of  the  insured,  the  interest  in  the  policy  be- 
comes a  chose  in  action  which  can  be  assigned  without  consent  of 
the  insurers,  and  without  regard  to  any  provision  of  the  policy 
which  may  forbid  an  assignment.'^ 


1  McDonough  v.  ^trm  Life  Ins.  Co., 
38  Misc.  (N.  Y.)  625. 

2  Richardson  v.  White,  167  Mass.  58, 
44  N.  E.  1072  (equitable  assignment 
for  money  actually  advanced);  Janes 
V.  Folk,  50  N.  J.  Eq.  468,  26  Atl.  138, 
35  Am.  St.  R.  783  (declaration  of  trust 
by  executor  in  favor  of  the  estate). 
As  to  when  an  assignment  without  con- 
sideration or  by  way  of  gift  becomes 
complete,  see  Colburn's  Appeal,  74 
Conn.  463,  51  Atl.  139,  92  Am.  St.  R. 
231;  Weaver  v.  Weaver,  182  111.  287, 
55  N.  E.  338,  74  Am.  St.  R.  173;  A^.  Y. 
Life  Ins.  Co.  v.  Flack,  3  Md.  341,  56 
Am.  Dec.  742;  CocJcrell  v.  Cockrell,  79 
Miss.  569,  31  So.  203;  Kulp  v.  March, 
181  Pa.  St.  627,  37  Atl.  913,  59  Am. 
St.  R.  687;  Lard  v.  N.  Y.  Life  Ins.  Co., 
95  Tex.  216,  66  S.  W.  290,  56  L.  R.  A. 
596,  93  Am.  St.  R.  927.  Mere  prom- 
ises to  give,  or  statements  as  to  pur- 
pose and  intent  do  not  establish  com- 
pleted gifts,  Re  Webb's  Estate,  49  Cal. 
542;  Williams  v.  Chamberlain,  165  111. 
210,  46  N.  E.  250. 

^  Fogg  v.  Middlesex  Mxd.  Fire  Ins. 
Co.,  10  Cush.  (Mass.)  337.  The  as- 
signee m.ay  sue  in  his  own  name, 
Tremblay  v.  Ins.  Co.,  97  Me.  547,  55 
Atl.  509,  94  Am.  St.  R.  521;  Sovth. 
FeHilizer  Co.  v.  Reames,  105  N.  C.  283, 
11   S.  E.  467:  Mut.  Protection  Ins    Co. 


V.  Hamilton,  37  Tenn.  269.  Contra, 
Mut.  L.  Ins.  Co.  V.  Allen,  113  111.  App. 
89,  96,  aff'd  212  111.  134,  72  N.  E.  200. 
How  suit  is  to  be  brought  is  deter- 
mined by  the  law  of  the  forum,  Neder- 
land  Life  Ins.  Co.  v.  Hall,  84  Fed.  278, 
27  C.  C.  A.  390. 

4  Leonard  v.  Charter  Oak  Life  Ins, 
Co.,  65  Conn.  529,  33  Atl.  511;  Schmidt 
V.  Northern  Life  Assn.,  112  Iowa,  41, 
83  N.  W.  800,  51  L.  R.  A.  141,  84  Am. 
St.  R.  323;  Smith  v.  National  Ben.  Soc, 
123  N.  Y.  85,  25  N.  E.  197,  9  L.  R. 
A.  616;  McQuillan  v.  Mut.  Res.  Fund 
Assn.,  112  Wis.  665,  87  N.  W.  1069, 
56  L.  R.  A.  233,  88  Am.  St.  R.  986. 

^  Leinkauf  v.  Caiman,  110  N.  Y.  50. 
A  measure  of  damage  to  a  beneficiary 
whose  vested  rights  have  been  invaded 
is  cost  of  replacing  policy  in  a  sound 
company,  Keyser  v.  Mut.  Res.  Fund  L. 
Assoc,  60  App.  Div.  (N.  Y.)  297,  70 
N.  Y.  Supp.  32.  Compare  Mut.  L. 
Ins.  Co.  V.  Allen,  212  111.  134,  72  N.  E. 
200;  Quinn  v.  Suvreme  Council,  99 
Tenn.  80,  41  S.  W.  343.  And  see  Top- 
litz  V.  Bauer,  161  N.  Y.  325,  55  N.  E. 
1059. 

6  Robinson  v.  Duvall,  79  Ky.  83,  43 
Am.  Rep.  208;  Tremblay  v.  /Etna  Life 
Ins.  Co.,  97  Me.  547,  55  Atl.  509,  94 
Am.  St.  R.  521. 

7  Hall  V.   Dorchester  Mut.  Fire  In*. 


INCONTESTABLE   CLtUSE  531 

§  378.  Incontestable  Clause.— This  policy,  after  two  years,  mil  be 
incontestable,  except  for  non-payment  of  premium. 

To  win  popular  favor  the  life  insurance  contract  must  be  made 
attractive.  After  the  death  of  the  insured  it  is  often  difficult  for 
the  surviving  beneficiary  to  produce  competent  testimony  with 
which  to  meet  charges  of  breach  of  warranty  or  fraud,  then  for  the 
first  time  advanced  by  the  insurer.  The  company  is  very  apt  to 
claim  in  its  pleading  that  a  breach  of  warranty  involves  also  dis- 
honesty on  the  part  of  the  insured.  However  groundless  and  in- 
excusable the  charge,  if  made  and  insisted  upon,  the  issue  must 
always  be  fought  out  in  court  before  the  insurance  money  can  be 
collected.  It  is  obviously  a  matter  of  public  policy  that  widow, 
children,  or  dependents  should  not  be  deluded  with  a  mere  chose 
in  action  in  place  of  available  means  of  support  upon  decease  of 
the  breadwinner.  Remove  all  fear  of  lawsuits  and  the  soliciting 
agent  finds  that  his  business  is  prosperous.  Most  of  the  regular  life 
companies,  therefore,  advertise  and  insert  in  their  policies  as  a 
conspicuous  feature  the  incontestable  clause,  and  public  welfare 
is  clearly  on  the  side  of  its  full  enforcement.^ 

This  clause  is  somewhat  analogous  to  a  short  statute  of  limita- 
tion or' repose.  By  it  the  company  declares  in  effect,  that  within 
the  period  named  it  will  undertake  to  make  any  desired  and  need- 
ful investigation  into  the  circumstances  and  good  faith  of  the  as- 
sured, and  that  if  within  that  period  no  action  has  been  taken  by 
it  to  rescind  the  contract,  or  according  to  some  policies  ^  if  no  breach 
has  occurred  within  that  period,  thereafter  the  policy  shall  be  paid 
without  litigation.^ 


Co.,   Ill   Mass.   53,   15  Am.   Rep.    1;  policy,  the  period  again  runs  from  date 

Mellen  v.  Hamilton  Fire  Ins.  Co.,  17  of  reinstatement,   Teeter  v.    United  L. 

N.  Y.  609.  /n.s.  Assoc,  159  N.  Y.  411,54  N.  E.  72. 

1  Two  years  is  not  always  named  as  And   see   A  ustin   v.    Mut.   Res.   Fund 

the  period.     Some  policies  name  one  Assn.,  132  Fed.  555. 
year;   some  three,  some  five.     Occa-  ^  Kelley  v.  Mut.  Life  Ins.  Co.,  109 

sionally  one  is  incontestable  from  its  Fed.  56. 

date.     The   New   York   standard   life  ^Wright  v.  Mid.  Ben.  Life  Assn.,  118 

policies    provide,    "The    policy    shall  N.  Y.  237,  23  N.  E.  186,  16  Am.  St.  R. 

here  provide  that  it  shall   be  incon-  749,  6  L.  R.  A.  731  ("it  is  in  the  nature 

testable,  except   for   non-payment    of  of    and    serves    a    similar    purpose    as 

premiums,  either  from  its  date  or  after  statutes  of  limitation  and  repose,  the 

one  or  two  years."     Some  incontest-  wisdom   of   which   is   apparent   to   all 

able  clauses  specify  other  exceptions  reasonable    minds);    Bates    v.    United 

besides  non-payment  of  premiums;  for  Life  Ins.  Assn.,  68  Hun,  144,  52  N.  Y. 

instance,    misstatements    as    to    age,  St.  R.  86,  22  N.  Y.  Supp.  626,  aff 'd  142 

fraud  in  procurement,  change  to  for-  N.  Y.  677,  37  N.  E.  824;  Clements  v. 

bidden  employment,  sojourning  in  for-  Ins.  Co.,  101  Tenn.  22,  46  S.  W.  561, 

bidden  regions,  etc.     As  to  representa-  42  L.  R.  A.  247,  70  Am.  St.  R.  650. 

tions  inducing  reinstatement  of  lap.sed  And  see  Wheelton  v.  Hardisty,  8  El.  & 


532  MEANING   AND    LEGAL   EFFECT  OF   LIFE    POLICY 

Notwithstanding  the  incontestable  clause,  however,  the  claim- 
ant must  furnish  proofs  of  death  as  stipulated  by  the  policy,  and 
institute  any  action  on  the  policy  within  the  period  limited,  if  there 
be  a  limit  prescribed,  since  the  clause  is  not  aimed  at  remedies  or 
provisions  to  be  complied  with  by  the  claimant  after  death  of  the 
insured.^  The  incontestable  clause  within  its  own  phraseology 
usually  contemplates  payment  of  premiums  as  a  condition  precedent 
to  any  right  of  recovery  on  the  policy,^  and  such  a  proviso  is  reason- 
able, and  quite  consonant  with  the  liberal  purpose  of  the  clause. 

§  379.  Same  Subject — Policy  Procured  by  Fraud. — By  some  au- 
thorities the  contention  is  made  that  if  the  underwriter  can  show 
that  the  policy  was  procured  from  him  by  fraud,  he  should  be  re- 
lieved from  his  waiver  of  defense  as  contained  in  the  incontestable 
clause:^  the  argument  being  that  a  stipulation  induced  by  fraud 
should  be  held  inoperative,  but  this  line  of  reasoning  is  based  upon 
doubtful  premises,  and  certainly  is  not  available  where  the  incon- 
testable clause  is  provided  by  legislative  enactment. 

The  insured,  neither  in  the  Welch  case,  108  Iowa,  224,  nor  in  the 
Holden  case,  191  Mass.  153,  nor  in  any  other  case  cited  in  this  and 
the  following  section,  framed  this  clause  or  fraudulently  induced 
the  life  insurance  companies  to  adopt  it.  Either  by  compulsion  of 
statute,  or  of  their  own  volition  and  to  subserve  their  own  inter- 
ests, the  insurers  have  inserted  the  provision  in  the  policy  with  the 
manifest  purpose  of  inducing  the  insured  to  believe  that  if  the 
premiums  are  all  paid  and  the  claim  presented  with  due  formality, 
payment  of  the  insurance  money  will  promptly  follow  upon  maturity 
of  the  contract  without  complication  or  litigation  of  any  sort.  The 
companies  preparing  the  terms  of  their  engagement  deliberately 
concluded  to  make  no  exception  of  fraud,  and  so  far  as  they  are 
concerned  are  entitled  to  the  benefit  of  no  such  omitted  restriction. 
Courts  do  not  coerce  defendants  into  setting  up  defenses  founded 
upon  allegations  of  fraud.     It  is  always  optional  with  a  defendant 

El.   232.     Many  states  have  statutes  Co.  v.  Walton,  25  Ohio  Cir.  Ct.  587, 

providing  for  an  equitable  adjustment.  As  to  misstatements  relating  to  as;e, 

where  there  has  l)een  misstatement  of  see  Bradu  v.  Prudential  Ins.  Co.,  168 

age,  Appendix,  eh.  I.  Pa.  St.  645,  32  Atl.  102;  Doll  v,  Pru- 

^Mass.    Ben.    Life    As.'^ur.    Soc.    v.  dentinl  In.s.  Co.,  21  Pa.  ?>xiver.  Ct.  434. 

Robinson,  104  Ga.  256,  .30  S.  E.  918;  ^  Welch  v.  /n.s.  Co.,  108  Iowa,  224, 

Brady  v.  Ins.  Co.,  168  Pa.  St.  645,  32  78  N.  W  853,  50  L.  R.  A.  774  (holding 

Atl.  102.  that  clause  making  policy   incontest- 

^Schmertzv.  U.  S.  Life  Ins.  Co.,  118  able   from   its   date   would   not  cover 

Fed.  250,  55  C.  C.  A.   104;   Vetter  v.  fraud).     Contra,  Union  Cent.  Life  Ins. 

Mass.  Nat.  Life  Assn.,  29  App.   Div.  Co  v.  Fox,  106  Tenn.  347,61  S.  W.  62, 

72.  51  N,  Y.  Supp   393;  Met.  Life  Ins.  82  Am    St,  R.  885. 


INCONTESTABLE  CLAUSE— POLICY  PROCURED  BY  FRAUD   533 

to  waive  such  a  defense.  Apparently  the  right  of  waiver  may  be 
exercised  prior  to  the  action  as  well  as  at  the  time  of  pleading. 
The  fraud  of  the  insured  in  procuring  a  policy  does  not  vitiate  the 
contract.  It  merely  renders  it  voidable  at  the  insurer's  option, 
but  the  right  to  take  advantage  of  this  option  may  be  abandoned 
by  the  insurer.    Has  he  abandoned  it  by  the  clause  in  question? 

Two  pertinent  and  distinct  questions  are  presented  for  the  deter- 
mination of  the  courts  in  connection  with  this  subject;  first,  what 
does  the  language  of  the  clause  fairly  mean?  second,  if  it  is  so  worded 
as  to  include  fraud,  is  the  provision  so  far  opposed  to  public  policy 
as  to  be  void  to  that  extent?  The  answer  to  the  first  question  is 
clear.  Fraud  when  not  among  the  exceptions  is  covered.^  In  dis- 
posing of  the  second  question,  the  courts  have  very  generally  con- 
curred that  the  clause  is  not  invalid  though  intended  to  cover  fraud, 
and  that  the  company  is  not  excused  from  payment  because  of  fraud 
in  procuring  the  policy,  or  for  breach  of  warranty,  intentional  or 
unintentional,  provided  it  seeks  no  relief  until  after  the  expiration 
of  the  period  of  limitation  specified  in  its  contract.^  One  court, 
however,  has  decided  that  a  suit  in  chancery  for  rescission  of  the 
contract  on  the  ground  of  fraud  would  lie  if  brought  by  the  com- 
pany in  the  lifetime  of  the  assured  and  within  a  reasonable  time.^ 

In  an  Illinois  case  the  company  claimed  that  the  insured  had  made 
false  and  fraudulent  misrepresentations  as  to  his  health,  inducing 
it  to  take  the  risk,  but  the  policy  provided  that  it  should  be  incon- 
testable after  one  year  if  the  premiums  were  duly  paid.  When  the 
insured  died,  the  policy  had  been  running  more  than  three  years  and 
the  premiums  had  been  paid.  The  court  held  that  the  company  set 
up  no  defense,  and  affirmed  judgment  for  the  plaintiff.'* 

1  Mutual  Res.  Fund  Life  Assn.  v.  N.  W.  980,  42  L.  R.  A.  253,  69  Am.  St. 
Austin,  142  Fed.  398,  73  C.  C.  A.  498.  R.  899;  McQuillan  v.  Mut.  Res.  Fund 

2  Wright  v.  Mut.  Ben.  L.  Assn.,  118  L.  A.ssn.,  112  Wis.  665,  88  N.  W.  925, 
N.  Y.  237,  23  N.  E.  186,  16  Am.  St.  R.  87  N.  W.  1069.  It  is  sufficient  for  the 
749,  6  L.  R.  A.  731;  Mass.  Ben.  Life  company  to  begin  suit  for  relief  within 
Assn.  V.  Robinson,  104  Ga.  256,  30  the  period,  John  Hancock  Mut.  Life 
S.  E.  919,  42  L.  R.  A.  261;  Roiml  Circle  Ins.  Co.  v.  Houpt,  113  Fed.  572. 

V.  Achterrath,  204  111.  549,  68  N.  E.  3  .V  Y.  Life  Ins.  Co.  v.  Weaver,  114 
492,  63  L.  R.  A.  452,  98  Am.  St.  R.  Ky.  295,  70  S.  W.  629.  If  the  clause 
224;  Goodu-in  v.  Prudential  L.  Ins.  Co..  expressly  excepts  fraud,  the  company 
97  Iowa,  234,  66  N.  W.  157,  32  L.  R.  A.  may  then  set  up  actual  but  not  con- 
473,  59  Am.  St.  R.  411;  Murraif  v.  structive  fraud  in  defense,  Northwest- 
State  Mid.  Life  Ins.  Co.,  22  R.  I.  524,  em  Mut.  Life  Ins.  Co.  v.  Montgomery, 
48  Atl.  800,  53  L.  R.  A.  742;  Clement  v.  116  Ga.  799,  43  S.  E.  79;  Kline  v.  Nat. 
Ins.  Co.,  101  Tenn.  22,  46  S.  W.  561.  Ben.  Assn.,  Ill  Ind.  462,  11  N.  E.  620, 
42  L.  R.  A.  247,  70  Am.  St.  R.  650;  60  Am.  Rep.  703;  Met.  Life  Ins.  Co.  v. 
Franklin  Ins.  Co.  v.  Villeneuve,  25  Walton,  25  Ohio  Cir.  Ct.  587. 
Tex.  Civ.  App.  356,  60  S.  W.  1014;  *  Flanigan  v.  Federal  Life  Ins.  Co. 
PaUerscm  v.  Ins.  Co.,  100  Wis.  118.  75  (111.,  Dec,  1907),  83  N,  E.  178. 


534  MEANING  AND   LEGAL   EFFECT  OF   LIFE   POLICY 

§  380.  Incontestabi<^   from   Date — Policy   Procured  by  Fraud.— 

Certain  courts,  while  adhering  to  the  prevailing  rule  in  those  cases 
where  the  polic}^  giw-'g.  the  insurer  a  year  or  other  specified  period 
for  investigation,  have  held  that,  in  spite  of  an  incontestable  clause 
the  insuicr  may  show  in  defense  that  the  issuance  of  the  policy  was 
induced  by  fraud  on  the  part  of  the  insured,  in  those  cases  where 
the  clause  runs  from  date  of  the  contract.  This  conclusion  is  based 
on  considerations  of  public  po.Ucy.^  It  would  seem,  however,  that 
the  weight  of  public  intereK"^t  rest?  in  the  other  scale.  The  insurer 
makes  whatever  examination  ke  chooses  to  make  before  closing 
his  engagement  and  command;:;  niCihods  of  getting  at  the  material 
facts  with  a  measure  of  thoroughness  and  accuracy.  Now  and  again 
he  may  be  seriously  deceived  by  an  applicant;  nevertheless  it  is 
more  important  that  millions  of  holiest  families  should  purchase 
peace  of  mind  and  immunity  from  litigation  than  that  insurer; 
should  be  given  a  longer  and  better  opportunity  of  detecting  audi 
taking  advantage  of  occasional  fraud  which  in.  their  own  interest 
they  have  expressly  agreed  to  ignore.^ 

The  opposite  rule  is  not  without  some  reason  to  support  it;  but 
in  practice  it  does  not  work  well,  since  it  large/y  defeats  the  main 
purpose  of  the  incontestable  clause,  and,  despite  tfuch  a  clause,  puts 
it  within  the  power  of  the  insurer  to  throw  eveiy  claim,  no  matter 
how  meritorious,  into  complicated  litigation  by  a  mere  allegation 
of  fraud  in  a  pleading.  Furthermore,  it  must  be  remembered  that 
the  almost  universal  custom  is  for  the  insurer  to  make  hi?  investiga- 
tion of  the  risk  prior  to  the  issuance  of  the  policy,  not  during  the 
year  or  years  thereafter  while  the  policy  is  running.  It  may  also 
be  observed  that  if  the  fraud  complained  of  amounts  to  a  felony  of 
a  misdemeanor,  the  interests  of  the  public  are  protected  under  the 
penal  code. 

§  381.  Same  Subject— Insurable  Interest.— The  necessity  of  an 
insurable  interest  is  grounded  upon  considerations  of  public  policy, 
and  in  spite  of  the  incontestable  clause,  therefore,  it  must  appear 
that  the  original  insured  had  sufficient  insurable  interest  in  the  life 
insured  to  sustain  the  contract.^ 

I  Welch  V.  Ins.  Co.,  108  Iowa,  224,  =  Union  Central  L.  Ins.  Co    v    Fox, 

78  N.  W.  853,  50  L.  R.  A.  774;  Reagan  106  Tenn.  347,  61  S.  W    62    82  Am 

V.  C/mon  Mr/,'.  L?7e  7ns.  Co.,  189  Mass.  St.    R.    885.      Statutes    authorize    in- 

555,  76  N.  E.  217;  Holden  v.  Prudential  contestability  from  date,  for  example, 

L    Ins.   Co.,  191   Mass.    153.     Contra,  New  York  standard  life  policies,  Ins. 

Union  Central  L.  Ins.  Co.  v.  Fox,  106  L    §  101 

Tenn.  347,  61  S.  W.  62,  82  Am.  St.  R.  s  Clement  v.  Ins.  Co.,  101  Tenn    22, 

885.  46  S.  W.  561,  42  L.  R.  A.  247,  70  Am. 


INCONTESTABLE    FROM    DATE — SUICIDE  535 

§  382.  Same  Subject — Suicide. — By  the  general  incontestable 
clause,  according  to  the  prevaihng  rule,  the  company  is  obligated 
not  to  set  up  suicide  as  a  defense  and  is  bound  by  its  stipulation.' 
Whether  the  Federal  Supreme  Court  will  give  its  approval  to  this 
doctrine  is  rendered  uncertain  by  its  recent  decisions.  Apparently 
it  -will  not  do  so.-  That  high  court  has,  indeed;  enforced  and  given 
wide  range  to  the  Missouri  statute  denying  to  the  companies  the 
defense  of  suicide;  ^  and  there  is  no  intimation  in  the  opinion  that 
that  statute  is  void  as  contravenmg  public  poUcy;  •*  but  as  the 
court  declares  "the  same  words  may  require  a  difterent  construction 
when  used  in  different  documents  as,  for  instance,  in  a  contract  and 
a  statute."  ^ 

Accordingly,  it  is  clear  that  the  federal  courts  will  enforce  the 
following  provisions  of  the  New  York  standard  policies,  as  amended 
by  the  superintendent  of  insurance,  "  (The  policy  may  here  provide 
for  restrictions  of  liability  by  reason  of  travel,  occupation,  change  of 
residence  and  suicide.  These  restrictions  must  be  applicable  only 
to  cases  where  the  act  of  the  insured  provided  against  occurs  within 
one  year  after  the  issuance  of  the  policj'.)  Incontestability. — (The 
policy  shall  here  provide  that  it  shall  be  incontestable,  except  for 
non-payment  of  premiums  either  from  its  date  or  after  one  or  two 
years)." 

The  suicide  and  incontestable  clauses  may  be  so  worded  that  effect 
can  be  given  to  both  as  harmonious  and  independent  provisions.^ 

St.  R.  650  (the  assignment  was  a  mere  2  RUter  v.  Ins.  Co.,  169  U.  S.  139, 

cover  for  a  wager);  Andil  v.  Ins.  Co.  18  S.  Ct.  300,  42  L.  Ed.  693  (inten- 

(1899),  A.  C.  604  (no  insurable  interest  tional  self-destruction  by  a  sane  man 

within  Canada  Code).     But  see  Wright  not  a  risk  insured  against);   Burt  v. 

V.  Ben.  Assn.,  118  N.  Y.  237,  23  N.  E.  Ins.  Co.,  187  U.  S.  362,  23  S.  Gt.  139, 

186,  6  L.  R.  A.  731,  16  Am.  St.  R.  749.  47  L.  Ed.  216  (death  by  legal  execu- 

i  Mut.  Life  Ins.  Co.  V.Kelly, ll4Fed.  tion    for    crime    not    a    risk    insured 

268;  Goodwin  v.  Assurance  Assn.,  97  against). 

Iowa,  226,  66  N.  W.  157,  32  L.  R.  A.  3  Knights  Templars  v.  Jarman,  187 

473,  59  Am.  St.  R.  411;  Royal  Circle  v.  U.  S.  197,  23  S.  Ct.  108,  47  L.  Ed.  139. 
Ac/i^erm/^,  204  111.  549,  68  N.  E.  492,  *  Supreme    Court    v.    Updegraff,    68 
63  L.  R.  A.  452,  98  Am.  St.  R.  224;  Kan.  474,  75  Pac.  477,  478. 
Supreme  CouH  v.   Updegraff,  68  Kan.  ^  Knights  Templars  v.  Jarman,  187 

474,  75  Pac.  477;  Sun  Life  Ins.  Co.  v.  U.  S.  201,  supra. 

Taylor,  108  Ky.  408,  56  S.  W.  668,  94  e  Starck  v.  Union  Cent.  Life  Ins.  Co., 

Am.  St.  R.  383;  Mareck  v.  Life  Assn.,  134  Pa.  St.  45,  19  Atl.  703,  7  L.  R.  A. 

62  Minn.  39,  64  N.  W.  68,  54  Am.  St.  576,  19  Am.  St.  R.  674;  Childress  v. 

R.  613;  Holland  v.  Chosen  Friends,  54  Fraternal    Union   of   Am.,    113   Tenn. 

N.  J.  L.  490;  Simpson  v.  Ins.  Co.,  115  252,  82  S.  W.  832  (a  smaller  amount 

N.  C.  393,  20  S.  E.  517;  Mut.  Res.  Fund  payable  in  case  of  suicide,  and  clauses 

L.  Assn.  V.  Payne  (Tex.  Civ.  App.),  32  held  to  be  independent  and  both  en- 

S   W.  1063;  Patterson  v.  Ins.  Co.,  100  forceable).     So  also  Hall  v.  Mut.  Res. 

Wis.  118.  75  N.  W.  980,  42  L.  R.  A.  Fund  L.  Assn.,  19  Pa.  Super.  Ct.  31. 

253.  69  Am.  St.  R.  899.    But  see  §371,  But  see  Mareck   v.   Mut.   Res.   Fund 

tupra  Assoc,  62  Minn.  39,  64  N.  W.  68,  54 


j'dG  MKANING    AND    i.EGAL    EFFJHCT   OF    LIFE    FOLICY 

§  383.  Same  Subject — Death  at  Hands  of  Justice. — If  the  general 
incontestable  clause  bars  the  insurance  company  from  setting  up 
in  defense  the  act  of  suicide,  even  when  committed  by  a  sane  man, 
it  is  difficult  to  discover  any  sufficient  reason  for  allowing  the  com- 
pany to  except  from  its  application,  the  death  of  the  insured  by  legal 
sentence  and  execution  for  crime.  The  act  of  suicide,  it  may  often 
be  shown,  is  committed  with  the  express  purpose  of  hastening  pay- 
ment of  the  insurance  money;  whereas  it  rarely  appears  that  the  in- 
sured is  actuated  by  any  thought  of  insurance  on  his  own  life  when 
persuaded  to  commit  crime.  So  far  as  innocent  beneficiaries  are 
concerned  the  reasons  for  allowing  them  to  take  their  insurance 
money  are  no  stronger  in  case  of  suicide  than  in  the  case  of  legal 
execution;  and  so  far  as  the  insurance  company  is  concerned  it 
shows  no  equity  in  its  own  favor  in  either  case  inasmuch  as  it  has 
expressly  contracted  by  the  clause  in  question  to  raise  no  such 
defense. 

When  it  comes  to  any  question  of  public  policy,  it  should  be  ob- 
served that  whatever  rule  of  construction  may  be  applied  by  the 
court,  one  part}^  or  the  other  to  the  contract  is  V)ound  to  be  bene- 
fited pecuniarily  b}^  such  premature  and  enforced  death  of  the  in- 
sured— either  the  company  by  a  forfeiture  of  the  policy  with  reten- 
tion of  the  premiums  already  paid ;  or  the  beneficiaries  by  speedier 
maturity  of  the  policy.  Where  beneficiaries,  as  well  as  insurer,  are 
in  no  wise  responsible  for  hastening  the  date  of  maturity,  it  is  not 
altogether  clear,  that  in  disregard  of  the  express  terms  of  the  con- 
tract the  insurer  should  be  so  unexpectedly  favored,  and  the  bene- 
ficiaries so  heavily  penalized.  Premiums  are  often  paid  for  many 
years,  and  at  great  sacrifice,  a  sacrifice  felt,  perhaps,  by  all  the  mem- 
bers of  the  household.  Before  leaving  the  insurance  moneys  with  the 
company  and  depriving  innocent  widows  and  children  of  their  natu- 
ral means  of  support,  in  violation  of  the  terms  of  the  contract,  the 
courts  must  be  convinced  that  the  general  welfare  of  the  community 
will  thereby  be  promoted.  Accordingly  it  is  not  surprising  that  the 
drift  of  opinion  in  the  state  courts  is  in  the  direction  of  extending 
the  operation  of  the  incontestable  clause  to  the  fullest  protection  of 
innocent  beneficiaries.' 

Am.  St.  R.  613;  Simpson  v.  Life  Inn.  Union  Cent.  Life  Ins.  Co.,  187  U.  S. 

Co.,  115  N.  C.  393,  20  S.  E.  517.  362,  23  S.   Ct.    139,  47   L.   Ed.   216; 

^Siin  Life  Ins.   Co.   v.   Taylor,  108  Collins  v.  Met.  Life  Ins.  Co.,  27  Pa. 

Ky.  408,  56  S.  W.  668,  94  Am.  St.  R.  Super.  Ct.  353. 
383;   §  379,  supra.     But  see  Burt  v. 


CHAPTER  XVIII 

The  Accident  Policy 

§  384.  Introductory. — Accident  insurance  is  a  branch  of  life  in- 
surance, and  is  governed  by  the  same  general  principles  of  law.^ 

The  accident  policy  illustrates  conspicuously,  on  the  one  hand, 
the  disposition  of  the  insurers  to  narrow  liability  by  the  addition 
of  restrictive  clauses,'  and,  on  the  other  hand,  the  determination  of 
the  courts  to  hold  the  company  to  the  principal  obligation  of  the 
contract  by  evading  exceptions  which  are  unreasonably  inconsistent 
with  the  main  purpose  of  the  contract."'' 


1  State  V.  Federal  Investment  Co. ,  48 
Minn.  110,  50  N.  W.  1028.  And  the 
statutes,  applicable  to  life,  apply,  also, 
to  accident  insurance,  Maryland  Cas. 
Co.  V.  Gehrmann,  96  Md.  634,  54  Atl. 
678  (by  statute  warranty  must  be 
materially  or  fraudulently  false  to 
avoid);  Loqan  v.  Fidelity  &  Cas.  Co., 
146  -Mo.  114,  47  S.  W.  948  (suicide  no 
defense);  Pickett  v.  Pac.  Mut.  Life 
Ins.  Co.,  144  Pa.  St.  79,  22  Atl.  871,  13 
L.  R.  A.  661,  27  Am.  St.  R.  618; 
Zim.mer  v.  Cent.  Ace.  Ins.  Co..  207 
Pa.  St.  472,  56  Atl.  1003;  unless  the 
contrary  appears  from  the  wording 
of  the  statute,  Standard  L.  d:  A.  Ins. 
Co.  V.  Carroll,  86  Fed.  567,  30  C.  C.  A. 
253,  41  L.  R.  A.  194.  The  Massachu- 
setts court  holds  that  neither  health  nor 
accident  insurance  can  be  incorporated 
in  a  life  policy  as  a  subsidiary  feature, 
^tna  Life  Ins.  Co.  v.  Hardison  (Mass., 
1908),  84  N.  E.  407.  The  doctrines  of 
warranty  and  liberal  rule  of  construc- 
tion, of  course,  apply  to  accident  in- 
surance, for  example,  the  warranty  as 
to  sound  health,  French  v.  Fideliti/  & 
Cas.  Co.  (Wis.,  1908),  115  N.  W.  869; 
U.  S.  Health  &  Ace.  Ins.  Co.  v.  Bennett 
(Ky.,  1907),  105  S.  W.  433  (statute); 
warranty  as  to  amount  of  weekly  in- 
come, Heintz  v.  Continental  Cas.  Co., 
121  App.  Div.  (N.  Y.)  75.  But  in  the 
following  case  under  the  liberal  statute 
of  Kentucky  an  overstatement  of 
earnings  was  held  immaterial.  ,FJna 
Life  Ins.  Co.  v.  Claypool  (Kv..   1908) 

[ 


107  S.  W.  325.  The  doctrine  of  waiver 
applies  to  accident  insurance,  thus 
where  the  agent  of  the  insurer  knew 
the  true  age  of  the  insured,  Crawford  v. 
Travelers'  Ins.  Co.  (Ky.,  1907),  99 
S.  W.  963;  or  knew  that  the  insured 
was  crippled.  Standard  Life  &  Ace.  Ins. 
Co.  V.  Holloioay  (Ky.),  7i:  S.  W.  796. 

2  For  list  of  such  restrictive  clauses, 
see  Travelers'  Ins.  Co.  v.  McConkey, 
127  U.  S.  661,  8  S.  Ct.  1360,  32  L.  Ed. 
308.  But  the  accident  companies  in 
their  more  recent  forms  of  policies  are 
coming  to  realize  the  wisdom  of  show-, 
ing  greater  liberality  to  the  assured. 
An  older  form  of  policy  issued  by  the 
Travelers'  Ins.  Co.,  containing  numer- 
ous restrictions,  is  selected  for  this 
chapter  as  a  convenient  model  for 
consideration. 

3  Metropolitan  Ace.  Assn.  v.  Froi- 
land,  161  111.  30,  43  N.  E.  766,  52  Am. 
St.  R.  359.  To  construe  otherwise 
would  well-nigh  destroy  the  value  of 
the  contract  to  the  insured,  /Etna  Life 
Ins.  Co.  V.  Hicks,  23  Tex.  Civ.  App. 
74,  56  S.  W.  87.  Probable  intent  of 
the  parties  is  the  test  in  construing 
the  meaning  of  the  contract,  Lovelace 
V.  Travelers'  Protective  A.,  126  Mo.  104, 
28  S.  W.  877,  30  L.  R.  A.  209;  United 
States  Mnt.  A.  A.  v.  Newman,  84  Va. 
52,  58,  3  S.  E.  805.  Strict  construc- 
tion is  applied  against  the  company. 
Doubt  resolved  in  favor  of  the  insurer!, 
Globe  Ace.  I.  Co.  v.  Gerisch,  163  111. 
625.  54   Am.  St.   R.  486;   Peterson   v. 


537] 


oijN  MEANING    AND    LEGAL    EFFECT   <JF   ACCIDENT   POLICY 

• 

Life  insurance  protects  against  loss  by  death,  whether  caused  by 
old  age,  disease,  or  accident.^  Accident  insurance  is  limited  to  loss 
caused  by  accident,  whether  such  accident  result  in  death  or  only 
in  bodily  disabihty  or  injury. ^ 

§  385.  Accident  Defined— What  Constitutes. — An  accident  is  an 
event  which  takes  place  without  the  foresight  or  expectation  of  the 
person  acted  upon  or  affected;^  for  example,  an  inadvertent  fall 
from  a  moving  train.'*  Within  the  meaning  of  the  accident  policy, 
the  Indiana  court  defines  the  term  "accident"  as  an  event  which 
takes  place  without  one's  foresight  or  expectation,  and  which  pro- 
ceeds from  an  unknown  cause  or  an  unusual  effect  of  a  known  cause 
not  within  the  expectation  of  the  person  injured.^ 

The  United  States  Supreme  Court  approved  of  the  following 
statement  of  the  law:  "The  term  'accidental'  was  used  in  the  policy 
in  its  ordinary,  popular  sense,  as  meaning  happening  by  chance; 
unexpectedly  taking  place;  not  according  to  the  usual  course  of 
things;  or  not  as  expected.  If  a  result  is  such  as  follows  from  ordi- 
nary means,  voluntarily  employed,  in  a  not  unusual  or  unexpected 
way,  it  cannot  be  called  a  result  effected  by  accidental  means.  But 
if,  in  the  act  which  precedes  the  injury,  something  unforeseen,  un- 
expected, unusual  occurs  which  produces  the  injury,  then  the  injury 
has  resulted  through  accidental  means."  ^ 

If  the  injury  occur  without  the  intention  of  the  insured  it  may 

Modern   Brotherhood,    125    Iowa,    562,  472,  20  N.  E.  349,  3  L.  R.  A.  443,  8 

101  N.  W.  289,  67  L.  R.  A.  631  (tech-  Am.  St.  R.  758  (a  leading  case);  Steel 

nical  words,  how  construed);  Marshall  v.   Cammell  (1905),  2  K.  B.  232.     As 

\.  Com.  Travelers' Ace.  Assn.,  no  "^.Y .  for  distinction   between  accident  and 

434,  63  N.  E.  446;  Paul  v.  Travelers'  disease  see   §  396. 
Ins.  Co.,  112  N.  Y.  472,  20  N.  E.  347,  ^  Smith  v.  /Etna  Life  Ins.  Co.,  115 

8  Am.  St.  R.  7.58,  3  L.  R.  A.  443.    The  Iowa,  217,  88  N.  W.  368,  56  L.  R.  A. 

company  is  presumed  to  contract  with  271,  91  Am.  St.  R.  153. 
regard   to   previous   interpretations   of  5  Phoenix  Ace.  &  Sick  Ben.  Ass.  v. 

the  same  phrases  by  the  courts,  Fi-  Stiver  (Ind.  App.,  1908),  84  N.  E.  772 

delity,  etc.,  Co.  v.  Lowenstein,  97  Fed.  (the  insured  was  stabbed  on  the  high- 

17,  38  C.  C.  A.  29.  way  by  an  insane  man  without  provo- 

'  Life  insurance  often   has   also   an  cation  and  unexpectedly,  or  as  a  result 

investment  feature,  as  in  the  case  of  of  having  shortly  before  pushed   the 

an     endowment     policy.      See     §  34,  stabber  from  the"  premises  of  another, 

supra  not  in  consequence  of  any  assault  being 

2  Various  classes  of  accident  policies  then  committed  by  the  insured,  and 
are  described  in  Employers'  Liability  not  as  a  result  that  might  have  been 
A.s.swr.  Corp.  v  Merrill,  155  Mass.  404,  expected  from  a  prior  quarrel,  and  the 
29  N.  E.  529.  insurer  was  held  liable). 

3  Raihcay,  etc.,  Assn.  v.  Drummond,  ^  Mvt.  Ace.  Assn.  v.  Barry,  131  U  S 
56Nob.  235,  76  N.W.  562  (citing  many  100,  121,9  S.  Ct.  755,  33  L.  Ed.  60 
other  cases  giving  substantially  same  (jumping  from  a  platform  or  walk  to 
definition);  Paul  v.  Ins.  Co.,  112  N.  Y.  the  ground). 


ACCIDENT  DEFINED— WHAT    CONSTITUTES 


539 


be  termed  accidental  though  brought  about  designedly  by  another 
person.*  And,  again,  an  injury  happening  to  the  insured  without 
the  concurrence  of  his  will  or  intent  is  nevertheless  accidental  al- 
though resulting  from  his  own  intentional  act,  provided  only  such 
result  was  not  foreseen  by  him;  thus  in  case  of  an  injury  to  the  in- 
sured caused  by  intentionally  jumping  from  the  platform  of  a  train 
of  cars  under  such  circumstances  that  no  harm  could  reasonably 
have  been  expected  to  follow.-  The  same  conclusion  was  reached 
in  the  following  cases:  A  sprain  unexpectedly  caused  by  lifting 
heavy  weights;  ^  blood  poisoning  from  cutting  a  corn,''  or  from  the 
use  of  a  hypodermic  needle;^  an  unintentional  taking  of  poison;* 
an  injury  to  the  insured  caused  by  a  blow  from  the  handle  of  a 
pitchfork  slipping  through  his  hands  while  he  was  loading  hay, 
which  produced  peritoneal  inflammation  and  ultimately  death; ' 
rupture  of  a  blood  vessel  during  exercise  with  Indian  clubs;  *  exer- 
tion causing  unusual  dilation  of  the  heart;  ^  suicide  while  insane;  *° 
self-inflicted  injuries  while  insane.**  But  if  the  acts  of  the  insured 
are  purely  voluntary  and  usual,  and  the  results  natural,  the  injury 
has  been  held  not  to  be  accidental  within  the  meaning  of  the  policy, 


1  Ripley  v.  Railway  Pass.  Assur. 
Co.,  20  Fed.  Cas.  823,  aff'd  16  Wall. 
336,  21  L.  Ed.  469;  Fidelity  &  Cas. 
Co.  V.  Johnson,  72  Miss.  333,  17  So. 
2,  30  L.  R.  A.  206  (hanging  by  mob); 
Richards  v.  Ins.  Co.,  89  Cal.  170,  26 
Pac.  762,  23  Am.  St.  R.  455  (death  by 
a  blow);  Hutchcraft's  Exr.  v.  Travelers' 
Ins.  Co.,  87  Ky.  300,  8  S.  E.  570,  12 
Am.  St.  R.  484  (murdered  for  rob- 
bery); Am.  Ace.  Co.  V.  Carson,  99  Ky. 
441,  36  S.  W.  169,  34  L.  R.  A.  301,  59 
Am.  St.  R.  473  (killing  of  officer  by 
prisoner  resisting  arrest);  Accidental 
Ins.  Co.  V.  Bennett,  90  Tenn.  256,  16 
S.  W.  723,  25  Am.  St.  R.  685;  Button 
V.  Am.  Mut.  A.  A.,  92  Wis.  83,  65 
N.  W.  866  (insured  was  intentionally 
shot  and  injured). 

2  U.  S.  MvtJial  Accident  Asso.  v. 
Barry,  131  U.  S.  100,  9  S.  Ct.  755,  33 
L.  Ed.  60.  But  see  Southard  v.  Rail- 
ivay  Pass.  Assur.  Co.,  34  Conn.  574. 

^  Marti 71  v.  Travelers'  Ins.  Co.,  1 
F.  &  F.  505.  But  see  special  clause 
relating  to  overexertion,  §  402. 

*  Nax  V.  Travelers'  Ins.  Co.,  130 
Fed.  985. 

5  Bailey  v.  Interstate  Cas.  Co. ,  8  App. 
Div.  127,  40  N.  Y.  Supp.  513,  aff'd 
158  N.  Y.  723,  53  N.  E.  1123. 

^  Healey   v.    Mut.    Ace.    Assn.,    133 


111.  556,  25  N.  E.  52,  9  L.  R.  A.  371,  23 
Am.  St.  R.  637;  Mid.  Ace.  Asso.  v. 
Tuggle,  138  111.  428,  28  N.  E.  1066; 
Pollock  V.  U.  S.  Mut.  Ace.  As.m.,  102 
Pa.  St.  230,  48  Am.  Rep.  204.  But 
see  Bayless  v.  Travelers'  Ins.  Co.,  6 
Ins.  L.  J.  109;  Preferred  Mut.  Ace. 
Asso.  V.  Beidclman,  1  Monaghan  (Pa.), 
481.  Injuries  due  to  mistake  in  taking 
medicine,  Carnes  v.  Iowa  Traveling 
Men's  Assn.,  106  Iowa,  281,  76  N.  W. 
683,  68  Am.  St.  R.  306  (larger  dose  of 
morphine  than  intended).  And  see 
Dezell  V.  Fidelity  &  Cas.  Co.,  176  Mo. 
253,  75  S.  W.  1102.  Unintentional 
inhaling  of  gas,  U.  S.  Mut.  Ace.  Assn. 
V.  Newman,  84  Va.  52,  3  S.  E.  805. 

T  North  Am.  Ins.  Co.  v.  Burroughs 
69  Pa.  St.  43. 

8  McCarthy  v.  Travelers'  Ins.  Co.,  15 
Fed.  Cas.  1254,  8  Biss.  362. 

^  Horsfall  V.  Pac.  Mut.  L.  Ins.  Co., 
32  Wash.  132,  72  Pac.  1028,  63  L.  R. 
A.  425,  98  Am.  St.  R.  846. 

10  Blackstone  v.  Standard,  etc.,  Ins. 
Co.,  74  Mich.  592,  42  N.  W.  156,  3 
L.  R.  A.  486;  Mut.,  etc.,  Ins.  Co.  v. 
Daviess,  87  Ky.  541. 

11  Accident  Ins.  Co.  v.  Crandal,  120 
F.  S.  527,  7  S.  Ct.  685,  30  L.  Ed.  740. 
But  such  accidents  may  be  expressly 
excluded,  §  369. 


540  MEANING    AND    LEGAL    EFFECT    OF    ACCIDENT    POLICY 

although  unexpected.  Such  ruHngs,  however,  have  usually  turned 
upon  the  particular  phraseology  of  the  contract.^ 

Smouse,  the  insured,  was  convalescent  after  an  attack  of  pneu- 
monia, but  his  strength  was  not  fully  restored.  He  was  lying  on  a 
couch  asleep,  and  parti}'  dressed.  Being  suddenly  awakened  by  his 
wife  and  requested  to  dress  quickly,  he  arose  somewhat  dazed,  and 
hurriedly  attempted  to  remove  his  nightshirt  over  his  head.  While 
his  arms  were  raised,  he  became  in  some  manner  entangled  in  the 
garment,  and,  putting  forth  violent  exertion  to  extricate  himself, 
he  sustained  a  rupture  of  a  blood  vessel,  the  hemorrhage  from  which 
caused  his  death  within  a  few  minutes.  The  judgment  in  favor  of 
the  plaintiff  and  against  the  insurer,  was  reversed  on  appeal,  be- 
cause, assuming  the  charge  of  the  trial  judge  to  be  the  law  of  the 
case,  the  Supreme  Court  held  that  the  evidence  did  not  justify  the 
recovery.  The  jury  had  been  told  in  effect  that  if  the  rupture 
of  the  blood  vessel  was  the  result  of  voluntary  exertions  on  the 
part  of  Smouse  the  fatal  result  could  not  be  regarded  as  ac- 
cidental. Whether  this  part  of  the  charge  involved  error  the 
court  did  not  determine,  nor  did  it  pass  upon  the  merits  of  the 
case.^ 

Unless  expressly  excluded  by  the  terms  of  the  policy,  an  injury 
intentionally  inflicted  upon  the  insured  by  another,  in  the  course  of 
an  affray  or  combat  between  them,  may  be  included  in  the  phrase 
"accidental  injury."  •''    But  where  the  terms  of  the  poHcy  expressly 

1  Feeler  v.  Iowa,  etc..  A.s.sh.,  107  Iowa,  qua,  104  Ind.  133,  3  N.  E.  818,  54  Am 
538,  78  N.  W.  252,  43  L.  R.  A.  693,  70  Rep.  298;  Fwhnsh  v.  Maryland  Cas 
Am.  St.  R.  212  (rupture  in  reaching  Co.,  131  Mich.  2.34,  91  N.  W.  135  (in- 
to close  a  shutter);  Xiskern  v.  United  tentional  homicide,  the  insured  him- 
Brotherhood,  93  App.  Div.  364,  87  .self  being  in  no  wise  responsible); 
N.  Y.  Supp.  640  (the  insured,  a  car-  Lovelace  v.  Travelers'  Protective  Assn.] 
penter,  put  forth  usual  effort  which  126  Mo.  104,  28  S.  W.  877,  30  L.  R.  A. 
proved  too  much  for  him  in  a  weak-  209,  47  Am.  St.  R.  6.38  (in  attempting 
ened  condition);  Clidero  v.  Ins.  Co.,  29  to  eject  another  guest  from  a  tavern 
Scot.  L.  R.  303  (insured  stooping  to  the  insured  was  shot  and  killed  by 
put  on  socks  displaced  intestines).  him;  held,  an  accident,  since  the  in- 
But  violent  wrenching  of  body  causing  sured  had  no  reason  to  suppose  that 
rupture  was  held  to  be  accidental  and  the  other  was  armed)  The  company 
hence  covered  by  the  policy.  Standard  was  held  liable  where  the  insured  wa.s 
hj^r^-J'^^r  ^^-  J-  ^(^^^»"i^^'  66  Ark.  advancing  in  a  threatening  manner, 
588,  53  S.  W.  49,  74  Am.  St.  R.  112.  but  unaware  that  his  slayer  was  armed 
Jibmouse  v.  Iowa  State  TrdveUnq  Union  Casualty  &  S.  Co  v  HarroU 
Mens  Assn.,  118  Iowa,  436,  92  N.  W.  98  Tenn.  591,  40  S.  W  1080  60  Am' 
53  This  mjury  might  well  have  been  St.  R.  873.  The  rule  is  otherwise,  if 
held  to  be  caused  by  accidental  means,  the  fatal  results  are  naturally  to  be 
but  whether  the  accident  was  the  sole  expected  by  the  insured  who  deliber- 
cause  or  whether  the  antecedent  ately  enters  into  a  combat  as  ag- 
disease  contributed  to  the  result  pre-  gressor,  Taliaferro  v  Travelers'  Pro- 
sented  another  question.  tective  Assn.,  80  Fed    368    25  C   C  A. 

3  Order  of  Chosen  Friends  v.  Garri-  494,  49  U.  S.  App  275 


INJURIES   EFFECTED   THROUGH    EXTERNAL   MEANS  541 

exclude  an  injury  of  that  character,  the  restriction  of  the  contract 
will  prevail.^ 

Sunstroke  is  generally  classified  as  a  disease  rather  than  an  acci- 
dent.2  But  sunstroke  may  be  expressly  included  as  one  of  the 
insured  casualties. •■*  And  where  it  i^  so  included,  the  Kansas  court 
has  held  that  the  term  "sunstroke"  unexplained  denotes  a  condi- 
tion produced  bj^  any  heat,  solar  or  artificial.'* 

In  regard  to  negligence  of  the  insured,  where  the  policy  is  silent, 
the  rule  is  the  same  as  in  other  branches  of  insurance;  •'  but  the  usual 
conditions  of  the  accident  policy  modify  the  insurer's  liability  in 
this  respect.  Accidental  injury  is  a  phrase  of  broad  scope  and  the 
insurers  have  endeavored  to  limit  its  application  by  the  introduction 
into  their  conventional  policies  of  many  restrictive  provisions,  differ- 
ing somewhat  in  the  forms  of  policies  adopted  by  the  different 
companies.^ 

§  386.  Injuries  Effected  Through  External,  Violent,  and  Acci- 
dental Means. — The  phrase  "external  and  violent  means,"  added 
to  the  policy  by  the  insurers  for  the  purpose  of  restricting  their 
liability,  is  very  strictly  construed  against  them.  The  word  "ex- 
ternal" refers  to  the  force  or  cause  and  not  to  the  injury.  If  the 
cause  be  external  it  may  act  internally  without  relieving  the  com- 
pany ;  ^  And  to  hold  the  insurer  it  need  not  be  showm  that  the 
cause  was  violent  in  the  sense  of  breaking  tissues,  or  visibly  marring 
the  body.  Therefore,  notwithstanding  this  restrictive  clause,  it  is 
held  that  the  policy  covers  death  by  accidental  drowning;  *  death 

1  Travelers'  Ins.    Co.   v.    McConkey  Western  Travelers'  Ace.  Assn.  v.  Hol- 

127  U.    S.   661;   DeGraw   v.   National  brook,  65  Neb.  469,  91  N.  W.  276  (fall 

Ace.    Societ'i,    51    Hun    (N.    Y.),  142;  from  great  height);  Stevens  v.   Conti- 

Grimes  v.  Fidelity  &  Gas.  Co.,  33  Tex.  nental  Gas.  Co.,  12  N.  D.  463,  97  N.  W. 

Civ.  App.  275,  76  S.  W.  811.    See  §  401.  862.     Nevertheless,  on  the  whole  case, 

^  Dozier  v.  Fidelity  &  Casualty  Co.,  the  burden  of  proof  is  with  the  plain- 

46  Fed.  446,  13  L.  R.  A.  114;  Sinclair  tiff  to  show  a  right  of  recovery  against 

V.  Maritime  Passengers'  Assn.   Co.,  3  the  insurer,  Whitlach  v.  Casualty  Co., 

Ellis  &  El.  478.  149  N.  Y.  45,  43  N.  E.  405;  Lmsig  v. 

3  Railway  Officials,  etc.,  Association  Travelers'    Protective    Assn.,    169    Mo. 

V.  Johnson,  109  Ky.  261,  58  S.  W.  694,  272,  69  S.  W.  469;  Maryland  Casualty 

52  L.  R.  A.  401,  95  Am.  St.  R.  370.  Co.  v.  Glass,  29  Tex.  Civ.  App.  159,  67 

i  Continental  Gas.  Go.  v.  Johnson,  74  S.  W.  1062. 

Kan.    129,    85    Pac.    545    (prostration  ^  American  Ace.   Co.  v.  Reigart,  94 

from  heat  of  a  furnace).  Ky.  547,  21  L.  R.  A.  651 ,  23  S.  W.  191 , 

5  Schneider  v.  Providential  Life  Ins.  42  Am.  St.  R.  374.  The  falling  of 
Co.,  24  Wis.  28,  1  Am.  Rep.  157  (even  scalding  w-ater  into  the  ear  is  to  be 
gross  negligence  offers  no  defense  to  classed  as  an  external  and  violent  in- 
the  insurer);  Wilson  v.  Assn.,  53  Minn.  jury,  Driskell  v.  U.  S.  Health  &  Ace. 
470,  55  N.  W.  626.  And  see  §  49,  Ins.  Co.,  117  Mo.  App.  362,  93  S.  W. 
supra.  880. 

6  The  legal  presumption  is  of  acci-  « Manufacturing  Ace.  Ind.  Co.  v. 
dent  rather  than  of  murder  or  suicide,  Dorgan,  58  Fed.  945,  7  C.  C.  A.  581 


542        MEANING    AND    LEGAL    EFFECT    OF    ACCIDENT    POLICY 


by  accidental  inhaling  of  gas;  ^  intestinal  inflammation  from  eating 
spoiled  oysters;  2  choking  to  death  in  the  attempt  to  swallow  a 
piece  of  beefsteak;^  a  fatal  bite  of  an  insect  upon  the  toe  causing 
blood  poison;  ^  freezing  to  death  caused  by  the  collapse  of  a  wagon;  ^ 
a  stumbling  and  fatal  fall  against  a  locomotive  engine;^  a  blow 
intentionally  struck  by  another  person;  "^  a  rupture  caused  by  jump- 
ing from  a  train;*  lockjaw  from  a  self-inflicted  gunshot  wound;" 
and  hanging  at  the  hands  of  a  mob.^°  So  also  the  insurer  was  held 
liable  where  the  immediate  cause  of  death  was  fright,  but  caused 
in  conjunction  with  efforts  to  hold  a  runaway  horse. ^^  On  the  other 
hand,  where  an  existing  but  dormant  disease  is  brought  into  activity 
by  the  exertions  of  the  insured  it  is  decided  that  the  resulting  death 
is  not  caused  by  external,  violent,  and  accidental  means. ^^ 


22  L.  R.  A.  620;  Peek  v.  Provident 
Fund  Soc,  147  Ind.  543,  44  N.  E.  661; 
Wehle  V  United  States  M.  A.  Assn., 
153  N.  Y.  116,  47  N.  E.  35,  60  Am.  St. 
R.  598;  Mallory  v.  Travelers'  Ins.  Co., 
47  N.  Y.  52,  7  Am.  Rep.  410;  De  Van 
V.  Commercial  Travelers'  M.  A.  Assn., 
92  Hun,  256,  72  N.  Y.  St.  R.  304,  36 
N.  Y.  Supp.  931,  aff'd  157  N.  Y.  690, 
51  N.  E.  1090;  United  States  Mut.  A. 
Assn.  V.  Hubbell,  .56  Ohio  St.  516,  47 
N.  E.  544,  40  L.  R.  A.  453;  Trew  v. 
Rij.  Pass.  Assur.  Co.,  6  H.  &  N.  839; 
Tucker  v.  Mutual  Benefit  Life  Co.,  .50 
Hun  (N.  Y.),  .50,  121  N.  Y.  718,  24 
N.  E.  1102  (boat  upset  while  insured 
was  trying  to  rescue  a  wrecked  crew, 
insurer  liable).  But  see  Tennant  v. 
Travelers'  Ins.  Co.,  31  Fed.  322  (death 
during  a  plunge  bath  in  the  house,  held, 
not  covered  by  the  policy). 

1  Paul  V.  Travelers'  Ins.  Co.,  112 
N.  Y.  472,  20  N.  E.  347,  3  L.  R.  A. 
443,  8  Am.  St.  R.  758;  Pickett  v. 
Pacific,  etc.,  Ins.  Co.,  144  Pa.  St.  79, 
22  Atl.  871,  13  L.  R.  A.  661,  27  Am. 
St.  R.  618.  The  inadvertent  taking 
of  poison  is  so  considered  in  Illinois, 
Healeij  v.  Mut.  Ace.  As-m.,  133  III.  556, 
25  N.  E.  52,  9  L.  R.  A.  371,  23  Am. 
St  R.  6']7.  But  see  Bayless  v.  Trav- 
elers' Ins.  Co.,  2  Fed.  Cas.  1077;  Hill 
v.  Hartford  Ace.  Ins.  Co.,  22  Hun 
(N.  Y.),  187. 

2  Marijland  Cas.  Co.  v.  Hudgins 
(Tex.  Civ.  App.,  1903),  72  S.  W.  1047, 
reversed  on  another  point,  97  Tex.  124, 
76  S.  W.  745.  Injury  to  intestines 
from  swallowing  of  hard  substances, 
Miller  v.  Fidelity  &  Cas.  Co.,  97  Fed. 
836. 

^American  Ace.   Co.   v.  Reigart,  94 


Ky.  547,  23  S.  W.  191,  21  L.  R.  A. 
651. 

4  Omherg  v.  United  States  Mut.  Assn., 
101  Ky.  303,  40  S.  VV.  909,  72  Am.  St. 
R.  413.  But  compare  Bacon  v.  Asso- 
ciation, 123  N.  Y.  304,  25  N.  E.  399, 
9  L.  R.  A.  617,  20  Am.  St.  R.  748  (con- 
tact with  putrid  matter  caused  ma- 
lignant pustule  on  lip, /le/d,  disease  and 
not  accident). 

5  Northwest  Commercial  T.  A.  v. 
London  Guarantee  &  A.  Co.,  10  Mani- 
toba, 537. 

6  Equitable  Ace.  Ins.  Co.  v.  Osbom, 
90  Ala.  201,  9  So.  869,  13  L.  R.  A.  267. 
Same  rule  applies  though  fall  is  due 
to  unexpected  physical  disorder.  Metier 
V.  Fidelity  &  Cas.  Co.,  9G  Iowa,  378, 
65  N.  W.  328,  59  Am.  St.  R.  374. 

T  Richards  v.  Travelers'  Ins.  Co.,  89 
Cal.  170,  26  Pac.  762,  23  Am.  St.  R. 
455. 

8  Travelers'  Ins.  Co.  v.  Murray,  16 
Colo.  296,  26  Pac.  774.  But  compare 
Southard  v.  Railway,  etc.,  Assur.  Co., 
34  Conn.  574. 

9  Travelers'  Ins.  Co.  v.  Melick,  65 
Fed.  178,  12  CCA.  544. 

10  Fidelitii  &  Cas.  Co.  v.  Johnson,  72 
Miss.  333,  17  So.  2. 

11  McGlinchey  v.  Fidelitii  &  Casualty 
Co.,  80  Me.  251,  14  Atl.  13,  6  Am.  St. 
R.  190. 

12  Travelers'  Ins.  Co.  v.  Selden,  78 
Fed.  285,  24  C  C  A.  92,  42  U.  S.  App. 
253.  See  Scarr  v.  General  Ace.  Assur. 
Corp.  (1905),  1  K.  B.  387  (death  from 
heart  failure  brought  on  by  physical 
exertion,  not  an  accident).  So  of 
appendicitis  caused  by  ordinary  riding 
of  bicycle,  Appel  v.  ^tna  Life  Ins.  Co., 
86  App.  Div.  83,  83  N.  Y.  Supp.  238, 


INJURIES   EFFECTED   THROUGH    EXTERNAL   MEANS  543 

Fitzgerald,  the  insured,  went  to  sleep  with  his  hand  under  his 
head,  and  in  this  position  his  hand  rested  upon  the  edge  of  tlie  bed 
rail.  This  quiet  pressure,  continuing  for  a  considerable  period, 
resulted  in  an  inflammation  of  the  periosteum  of  certain  bones  of 
the  fingers,  rendering  an  operation  necessary.  The  court  held  that 
the  injury  was  by  "violent  means,"  within  the  purport  of  the 
policy.^ 

The  burden  is  on  the  plaintiff  in  an  action  on  the  policy  to  show 
that  the  alleged  accident  is  the  cause  of  the  death  or  injury.  Thus, 
in  a  federal  court  case,  Winfield  L.  Scott,  a  railway  postal  clerk, 
was  insured.  The  only  evidence  of  accidental  injury  was  a  red 
looking  bruise  on  his  left  shin,  five  or  six  inches  long  and  two  or  three 
inches  wide,  seen  by  his  wife  some  three  months  prior  to  his  death. 
But  for  a  long  time  before  sustaining  this  bruise,  the  defendant, 
who  was  sixty  years  old,  had  been  treated  for  double  hernia,  con- 
gestion of  the  liver  and  palpitation  of  the  heart.  The  court  con- 
cluded that  there  was  an  entire  absence  of  proof  tending  to  show 
that  death  had  resulted  from  bodily  injuries  received  through  ex- 
ternal, violent  and  accidental  means,  and  the  judgment  in  favor  of 
the  plaintiff  was  reversed.^ 

In  another  case  in  a  federal  court  the  death  of  the  insured  was 
due  to  rupture  of  the  heart.  The  walls  of  the  heart  were  thin,  aiu; 
weakened  by  fatty  degeneration.  Just  before  his  death  the  insured 
was  engaged  in  carrying  a  cellar  door,  weighing  about  86  pounds, 
from  one  of  his  buildings  to  another.  Upon  arriving  at  his  destina- 
tion he  exclaimed,  "I  am  tired."  A  few  seconds  afterward  his  lips 
turned  blue,  he  grabbed  the  door  with  both  hands,  and  fell  forward 
dead.  In  carrying  the  door,  there  was  no  stumble,  wrench,  slip  or 
fall.  There  was  no  unforeseen,  accidental,  or  involuntary  move- 
ment of  the  body.  The  court  held  that  the  rupture  was  due,  not  to 
accident,  but  to  disease,  and  affirmed  the  judgment  directed  by  the 
court  below  in  favor  of  the  defendant.^ 

aff'd   180   N.  Y.  514,  72  N.  E.  1139.  165  Ind.  317,  75  N.  E.  262  (the  acci- 

Burden  of  proof  is  on  plaintiff,  Larkin  dent,  not  the  resulting  disease,  was  to 

V.  Interstate  Cas.  Co.,  43  ApD.  Div.  365,  be  regarded  the  sole  cause  of  the  dis- 

60  N.  Y.  Supp.  205.    And  the  question  ability). 

under  this  clause  of  the  policy  is  often  2  National  Assn.  of  Ry.  Postal  Clerks 

for  the   jury,  il//rs.  Ace.  Indent.  Co.  v.  v.  Scnft,  155  Fed.  92. 

Dorgan,  58  Fed.  045,  7  C.  C.  A.  581,  '^  Shanberg  v.   Fidelity  i{-   Coi>.   Co., 

16  iJ.  S.  App.  290,  22  L.  R.  A.  620;  158  Fed.   1.     To  similar  effect  is  the 

Raihray,    etc.,    Ace.    Assn.    v.    Coadv,  English  case  of  Scarr  v.  General  Ace. 

80   111.    App.    563;    Modern   Woodmen  Ass.  Corp.  (1904),  1  K.  B.  387.    There 

Assn.    V.    Shryock,    54    Neb.    250,    74  the    policy    covered    bodily    injuries 

N.  W.  607,  39L.  R.  A.  826.  caused    by    "violent,    accidental,    ex- 

^  jEtna  Life  Ins.   Co.   v.   Fitzgerald,  ternal   and   visible  means."     The  as- 


544         MEANING   AND    LEGAL    EFFECT   OF    ACCIDENT    POLICY 

And  where  the  insured  died  of  septica-mia  after  an  operation  for 
appendicitis,  the  court  decided  that  the  death  was  due  to  disease 
and  not  to  external,  violent  and  accidental  means. ^ 

In  the  controversy  over  McCormack's  policy,  the  question  arose, 
whether  his  death  was  the  result  of  his  fall,  or  his  fall  the  result  of 
his  death.  On  the  trial,  evidence  was  received  tending  to  show  that 
the  assured  by  his  condition  and  habit  of  life  was  predisposed  to  an 
attack  of  apoplexy.  He  was  driving  a  buggy  in  the  city  of  St.  Paul. 
While  his  horse  was  on  a  walk,  and  while  he  was  putting  on  his 
gloves,  he  reached  forward,  apparently  to  gather  up  the  reins,  and 
at  that  instant  the  buggy  bumped  against  an  obstruction.  The 
assured  fell  forward,  struck  his  head  against  the  pavement  and  died 
within  a  few  minutes.  Conflicting  expert  testimony  was  received  as 
to  the  cause  of  death.  The  court  concluded  that  the  case  was  one 
for  the  jury. 2 

Where,  however,  it  appears  that  the  death  or  injury  was  caused 
by  an  accident,  the  burden  then  rests  on  the  insurer  to  show  that 
the  accident  happened  by  reason  of  something  that  was  excepted 
from  the  provisions  of  the  policy,  and  not  on  the  insured  to  af- 
firmatively show  that  the  accident  did  not  occur  by  reason  of  any 
or  all  of  the  exceptions  incorporated  therein.^ 

§  387.  Sole  and  Proximate  Cause. — Independently  of  all  other 
causes. 

By  the  last  section  it  was  shown  that  unless  the  injury  is  effected 
by  accidental  means  it  does  not  come  within  the  reach  of  the  policy; 
but  every  injury  must  be  the  result  of  a  combination  of  circum- 
stances which  in  a  sense  may  be  termed  contributing  causes.  And 
where  the  injury  is  the  result  of  an  accidental  occurrence,  acting 

sured  had  a  weak  and  unhealthy  heart,  his  legs  together,  separated  his  knees, 

though  he  was  not  aware  of  the  fact.  leaned  forward,  and  made  a  grab  at  the 

He  attempted  to  eject  a  drunken  man  marble,  and  in  doing  so  wrenched  his 

from  his  master's  premises.     In  conse-  knee.      The   contention   of   the   plain- 

quence  of  the  physical  exertion  needed  tiff's  coimsel  was  that,  as  the  plaintiff 

for  this   purpose   a   dilatation   of   the  did  not  mean  to  get  into  a  position  in 

heart   was   set  up   which   caused   the  which  he  might  wrench  his  knee,  there 

death  of  the  insured.     There  was  no  was  something  accidental.     The  court 

slip  or  fall  or  blow.    The  drunken  man  held  the  contention  sound,  Hamb'n  v. 

offered   only  passive   resistance.     The  Croivn   Accidental   Ins.    Co.    (1893),    1 

insured  pushed  or  pulled  him  exactly  Q.  B.  750. 

as  he  intended  to  do.     The  court  held  '  Herdic  v.  Maryland  Cas.  Co.,  146 

that  the  injury  was  not  sustained  by  Fed.  396. 

accidental  means.     In  another  English  2  McCornmck   v.    Illinois    C.    Men's 

case,  the  insured  was  stooping  forward  Ass.,  159  Fed.  114. 

to  pick  up  a  marble  dropped  bv  a  cliild  'Starr   v.    Ai!t7io    Life   Ins     Co.,   45 

as  it  rolled  from  him.     He  stood  witli  Wash.  128,  87  Par.  1119. 


SOLE  AND  PROXIMATE  CAUSE  545 

conjointly  or  contemporaneously  with  one  or  more  causes  expressly 
excepted  by  the  terms  of  the  policy,  like  disease,  for  example,  the 
question  whether  the  insurer  is  liable  or  exonerated  is  not  always 
easy  of  solution.* 

So  far  as  any  sanction  of  law  is  concerned  there  is  no  reason  why 
the  accident  policy  may  not  be  framed  to  cover  bodily  disability,  or 
even  death,  arising  from  accidental  sickness;  ^  and  most  sickness  is 
of  that  character.^  The  ordinary  accident  policy,  however,  specifi- 
cally excepts  disease  and  various  other  causes  of  injury,'*  and  it  is 
incumbent  upon  the  court  to  determine  under  what  circumstances 
the  casualty  insured  against  can  be  fairly  considered  the  sole  and 
proximate  cause  of  the  injury. 

The  policy  provision  that  the  injury  contemplated  must  be  ef- 
fected by  the  specified  means,  "independently  of  all  other  causes," 
if  understood  literally,  is  so  unreasonable  and  repugnant  to  the 
main  purpose  of  the  contract,^  that  the  courts  construe  it  very 
strictly  against  the  insurers,  and  sometimes  really  seem  to  disregard 
it  altogether.^  Thus,  though  the  policy  excepted  death  arising  from 
fits,  acting  directly  or  jointly  with  accidental  injury,  the  insurance 
w'as  held  to  cover  a  case  where  the  insured  was  seized  with  a  fit  and 
fell  under  the  wheels  of  an  engine  which  caused  his  death.'''  And 
likewise  the  federal  court  regarded  drowning  as  the  sole  and  proxi- 
mate cause  of  death  unless  the  other  cause,  a  fainting  fit,  would 
have  produced  the  injury  in  the  absence  of  water.^  Accordingly,  by 
the  prevailing  rule,  where  a  disease  follows  and  is  induced  by  the 
accident,  as  a  natural,  or  inevitable  consequence,  the  accident  is  re- 
garded the  sole  and  proximate  cause  of  the  injury  or  death.^    And 

1  Freeman  v.  Mercantile  Ace.  Assn.,  St.  R.  560  (where  kidney  was  ruptured 
156  Mass.  351,  30  N.  E.  1013,  17  by  an  accidental  fall  which  might  not 
L.  R.  A.  753.  Compare  doctrine  of  have  produced  rupture  except  for 
proximate  cause  in  marine  insurance,  diseased  condition  of  kidney). 
§§437-442,  infra;  in  fire  insurance,  ^  Lawrence  v.  Accidental  Ins.  Co.,  7 
§§  231,  278,  supra.  Q.    B.    D.    216;    Fitton   v.    Accidental 

2  The  ordinary  life  insurance  policy  Death  Ins.  Co.,  17  C.  B.  (N.  S.)  122; 
does  not  cover  non-fatal  injuries.  Winspear  v.  Ins.  Co.,  6  Q.  B.  D.  42 

3  Accident  companies  now  often  offer  (insured  seized  with  a  fit,  fell  into  the 
health   insurance,  that    is,  indemnity  river  and  was  drowned). 

for  loss  from  temporary  or  permanent  »  Mfrs.  Ace.  Indem.  Co.  v.  Dorgan, 

disablement  arising  from  sickness.    See  58  Fed.  945,  7  C.  C.  A.  581,  16  U.  S. 

health  clause  in  Appendix,  ch.  II.  App.  290,  22  L.  R.  A.  620. 

<  See  §396,  infra.  ^Western  Commercial  Travelers' Assn. 

5Mna  Life  Ins.   Co.   v.   Hicks,  23  v.  Smith,  85  Fed.  401,  56  U.  S.  App. 

Tex.  Civ.  App.  74,  56  S.  W.  87.  393,  29  C.  C.  A.  223,  40  L.  R.  A.  653 

6  It  is  held  that  the  words  of  the  (blood  poisoning  resulting  from  acci- 

exception  refer  to  proximate  and  di-  dental  chafing  of  toe  by  new  shoe); 

rect  and  not  to  remote  causes.  Fetter  Delaney    v.    Modern    Ace.    Club,    121 

v.  Fidelity  &  Cas.  Co.,  174  Mo.  256,  Iowa,  528,  97  N.  W.  91;  Travelers'  Ins. 

73  S.  W.  592,  61  L.  R.  A.  459,  97  Am.  Co.  v.  Hunter,  30  Tex.  Civ.  App.  489, 

35 


546  MEANING    AND    LEGAL    EFFECT    OF    ACCIDENT    POLICY 

even  where  before  the  accident  the  insured  is  afflicted  with  a  disease 
which  may  have  remotely  contributed  to  the  injury,  the  courts 
attribute  the  injury  to  the  accident  as  the  sole  and  proximate  or 
predominant  cause,  unless  such  a  construction  would  do  violence 
to  the  unmistakable  import  of  the  language  employed.^  But  where 
disease  is  unmistakably  excepted  from  the  chain  of  causation,  the 
rule  may  be  modified.'  Accordingly  it  seems  clear,  that  whether  the 
cooperating  cause  is  antecedent  or  subsequent  to  the  accident,  the 
courts  are  astute  to  regard  the  peril  insured  against  as  the  proximate 
and  sole  cause  of  the  injury. 
George  C.  French,  a  passenger  conductor,  had  an  accident  policy 


70  S.  W.  798  (accident  caused  rheu- 
matism which  in  turn  caused  death); 
Half  V.  American  Masonic  Ace.  Assn., 
86  Wis.  518,  57  N.  W.  366.  See  many 
cases  §  396.  Where  an  ac'^'ident  pro- 
duced a  weakened  condition  of  the 
system,  from  which  cold  and  pneu- 
monia resulted,  it  was  held  that  the 
whole  chain  of  events  was  caused  by 
the  accident  as  a  proximate  cause, 
Isitt  V.  Railway  Passengers'  Assur.  Co., 
L.  R.  22  Q.  B.  D.  .504.  Within  the 
same  principle  of  law  was  classed  an 
accident  which  caused  physical  in- 
juries which,  in  turn,  resulted  in 
apoplexy  and  death,  National  Benefit 
Assn.  V.  Grauman,  107  Ind.  288,  7 
N.  E.  233.  And  in  another  case,  al- 
though the  policy  expressly  excepted 
"injuries  from  taking  poison  in  any 
manner,"  the  Illinois  court  allowed  a 
recovery  for  death  from  an  overdose  of 
laudanum  taken  by  mistake,  Mid. 
Ace.  Asso.  V.  Tuggle,  1.38  111.  428,  28 
N.  E.  1066.  Contra,  Hill  v.  Ins.  Co., 
22  Hun  (N.  Y.),  187. 

1  Freeman  v.  Mercantile  Ace.  Assn., 
156  Mass.  351,  30  N.  E.  1013,  17  L.  R. 
A.  753  (fatal  peritonitis  induced  by  a 
fall.  Insured  had  previously  had  same 
disease).  In  the  last  case  the  court 
said:  "Where  different  forces  and  con- 
ditions concur  in  producing-  a  result, 
it  is  often  difficult  to  determine  which 
is  properly  to  be  considered  the  cause, 
and  in  dealing  with  such  cases  the 
maxim  causa  proximo,  non  remoia 
speetatur  is  applied.  But  this  does  not 
mean  that  the  cause  or  condition  which 
is  nearest  in  time  or  space  to  the  result 
is  necessarily  to  be  deemed  the  proxi- 
mate cause.  It  means  that  the  law  will 
not  go  farther  back  in  the  line  of 
causation    than    to    find    the    active, 


efficient,  procuring  cause,  of  which  the 
event  under  consideration  is  a  natural 
and  probable  consequence  in  view  of 
the  existing  circumstances  and  condi- 
tions. The  law  does  not  consider  the 
cause  of  causes  beyond  seeking  the 
efficient  predominant  cause  which, 
following  it  no  farther  than  those  con- 
sequences that  might  have  been  an- 
ticipated as  not  unlikely  to  result  from 
it,  has  produced  the  effect.  An  injury 
which  might  naturally  produce  death 
in  a  person  of  a  certain  temperament 
or  state  of  health  is  the  cause  of  his 
death  if  he  dies  by  reason  of  it  even 
if  he  would  not  have  died  if  his  tem- 
perament or  previous  health  had  been 
different;  and  this  is  so,  as  well  when 
death  comes  through  the  medium  of  a 
disease  directly  induced  by  the  injury, 
as  when  the  injury  immediately  in- 
terrupts the  vital  processes."  And  see 
Mna  Life  Ins.  Co.  v.  Hicks,  23  Tex. 
Civ.  App.  74,  56  S.  W.  87. 

^  Smith  V.  Accident  Ins.  Co.,  22 
L.  T.  N.  S.  861.  See  §  ,396,  infra.  To 
avail  the  insurer  the  excepted  risk 
must,  in  general,  be  the  direct  cause  of 
the  injury,  Wilkinson  v.  Travelers'  Ins. 
Co.  (Tex.  Civ.  App.,  1903),  72  S.  W. 
1016.  As  to  the  meaning  of  the  clause 
that  the  insurance  shall  not  extend  "to 
any  case  except  where  the  injuiy  is  the 
proximate  and  sole  cause  of  the  dis- 
ability or  death,"  see  Martin  v.  Mfrs. 
Ace.  Indem.  Co.,  151  N.  Y.  94,  45  N.  E. 
377  (if  accidental  wound  coincidently 
causes  blood  poisoning,  the  insurer  is 
liable).  But  see  Bacon  v.  U.  S.  Mnt. 
Ace.  Assn.,  123  N.  Y.  304,  25  N.  E. 
399,  20  Am.  St.  R.  748,  9  L.  R.  A.  61 7 
(malignant  pustule  held,  a  disease 
though  caused  by  contact  with  putrid 
matter). 


SOLE  AND  PROXIMATE  CAUSE  547 

for  $5,000.  He  accidentally  struck  the  lower  part  of  his  leg  against 
a  small  iron  safe  in  the  baggage  car,  causing  an  abrasion  of  the 
skin.  Septic  poison  set  in,  resulting  in  his  death  about  two  weeks 
after  the  happening  of  the  accident.  The  court  considered  that  the 
disease  of  blood  poisoning  was  to  be  regarded  as  a  mere  incident 
or  effect  of  the  accidental  injury  and  in  no  sense  an  independent 
cause;  and  held  that  the  claimant  was  entitled  to  recover  on  the 
policy.^ 

In  another  case  the  insured,  a  railway  employee,  by  being  pre- 
cipitated against  the  edge  of  timbers,  sustained  severe  bruises  on 
his  chest.  Pneumonia  or  pleurisy,  accompanied  by  a  large  ac- 
cumulation of  pus  resulted,  and  death  followed  about  two  months 
after  the  accident.  The  court  held  that  the  accident  was  to  be 
regarded  as  the  sole  cause  of  death. ^ 

The  federal  court  enforces  the  same  doctrine.  A  policy  sued  on 
in  that  court  insured  "against  disability  or  death  resulting,  directly 
and  independently  of  all  other  causes,  from  bodily  injuries  sustained 
through  external,  violent  and  accidental  means."  The  insured  en- 
gaged in  an  altercation  with  another  party,  and  struck  him  in  the 
mouth,  causing  an  abrasion  on  the  hand  of  the  insured.  Blood 
poisoning  set  in,  caused  by  microbes  in  the  mouth  of  the  person 
receiving  the  blow.  The  arm  of  the  insured  was  amputated  and 
death  ensued.    A  recovery  on  the  policy  was  sustained.^ 

In  a  Kansas  case  the  policy  insured  Despain  against  the  "effects 
of  bodily  injuries  sustained  during  the  term  of  this  policy  and  caused 
solely  by  external,  violent  and  accidental  means,"  and  provided  that 
indemnity  in  the  sum  of  $2,000   should  be  paid  in  case  "the  irre- 

'  French  v.  Fidelity  &  Cas.  Co.  (Wis.,  tive,  efficient  cause  that  sets  in  motion 

1908),  115  N.  W.  869  ("we  must  hold,  a  train  of  events  which  bring  about  a 

therefore,    that    where    death    results  result  without  the  intervention  of  any 

from  disease  which  follows  as  a  natu-  force    from    a    new    and    independent 

ral,  though  not  the  necessary,  conse-  source  may  be  regarded  as  the  direct 

quence  of  an  accidental  physical  injury,  and  proximate  cause.     If  the  immedi- 

it  is  within  the  terms  of  the  accident  ate  cause  of  death  is  a  disease  produced 

policy;   the   death   being  deemed   the  wholly  by  an  injury,  the  death  must  be 

proximate  result  of  the  injury,  and  not  attributable  to  the  injury  and  not  to 

of    the    disease    as    an    independent  the  disease.     In  this  case,  the  insured 

cause";  many  cases  cited).  was  a  strong  young  man  in  vigorous 

2  Continental    Cas.     Co.     v.     Colvin  health  at  the  time  he  received  the  in- 

(Kan.,  1908).  95  Pac.  565.    The  court  jury,  and  his  condition  thereafter  was 

said:  "An  injury  may  be  said  to  be  the  clearly  traceable  to  the  injury  as  the 

sole  producing  cause  of  death  when  it  effective  and  producing  cause  thereof; 

stands  out  as  the  predominating  factor  it  must,   therefore,  be  held  that    the 

in  the   production  of  the   result.     It  injury    was    the    sole    cause    of     his 

need  not  be  so  violent  and  vinilent  as  death." 

to  have  necessarily  and  inevitably  pro-  3  Carroll  v.  Fidelity  &  Cas.  Co.,  137 

duced  the  result  regardless  of  all  other  Fed.  1012.     And  see  Mardorf  v.  Ace 

circumstances  and  conditions.    The  ac-  Injt.  Cn.  (1903),  1  K.  B.  584, 


54S  MEANING   AND   LEGAL   EFFECT   OF   ACCIDENT   POLICY 

coverable  loss  of  the  sight  of  both  eyes"  should  "result  from  such 
injuries  within  ninety  days  independently  of  all  other  causes;" 
and  further  provided  that  the  insurance  did  not  cover  "anything  of 
which  the  sole  or  secondary  or  contributory  cause  is,  or  which 
occurs  while  affected  by,  or  under  the  influence  of,  bodily  infirmity." 
During  the  life  of  the  policy,  Despain  met  with  injuries  which  re- 
sulted in  his  total  blindness,  but  some  three  months  before  the 
issuance  of  the  policy  his  right  eye  had  been  so  injured  as  to  require 
medical  treatment  in  a  hospital  for  about  a  month.  The  severity 
and  effect  of  this  earlier  wound  were  in  dispute.  The  plaintiff's 
testimony  tended  to  show  that  his  right  eye  had  been  restored  to  its 
normal  condition  more  than  a  month  before  the  policy  issued. 
The  defendant's  testimony  tended  to  prove  that  the  first  injury 
was  serious,  its  effects  lasting,  and  likely  to  produce  the  destruction 
of  the  other  eye  within  the  course  of  a  few  months,  through  sym- 
pathetic inflammation.  The  court  reversed  the  plaintiff's  judg- 
ment on  the  ground  that  the  issue  should  have  been  submitted  to 
the  jury  as  to  whether  the  earlier  injury  was  not  the  secondary  or 
contributory  cause  of  the  blindness.^ 

§  388.  Same  Subject—"  Immediately  and  Wholly  Disable."— The 
word  "immediately"  in  this  clause  is  construed  as  referring  to  time 
and  not  to  the  proximate  or  remote  character  of  the  cause. ^ 

The  meaning  of  the  phrase,  "wholly  disable  him  from  transacting 
any  and  every  kind  of  business  pertaining  to  his  occupation,"  must 
depend  largely  upon  the  character  of  the  occupation  in  which  the 
insured  is  engaged.^  If  he  cannot  safely  and  efficiently  follow  his 
usual  employment,^  or  can  work  only  with  great  pain,^  though  he 

^PacificMut.  Life  Ins.  Co.  V.  Despain  39  Atl.  1117.     Twenty-four  days  held 

(Kan.,  1908),  95  Pac.  580.  to  be  too  late,  Vess  v.   United  Benev. 

2  Merrill  v.  Travelers'  Ins.  Co.,  91  Soc,  120  Ga.  411,  47  S.  E.  942.  And 
Wis.  329,  64  N.  W.  1039.  See  also  see  Marshall  v.  Commercial  Trav.  Mut. 
Pepperv.Order  of  Commercial  Travelers,  Ace.  Assn.,  170  N.  Y.  434,  63  N.  E. 
113  Ky.  918,  69  S.  W.  956.  But  see,  446;  Rorick  v.  Railway,  etc.,  Assn.,  119 
contra,  Thera  v.  Ocean  Ace.  &  G.  Corp.,  Fed.  63,  55  C.  C.  A.  369;  Aw.  Ace.  Ins. 
32  Ont.  411;  Pac.  Mut.  Life  Ins.  Co.  v.  Co.  v.  Norment,  91  Tenn.  1,  18  S.  W. 
Branham,  34  Ind.  App.  243,  70  N.  E.  395.  Insured,  a  doctor,  was  allowed 
174.  The  disability,  therefore,  must  to  recover  though  he  succeeded  in  visit- 
appear  within  a  short  time  of  the  in-  ing  a  patient  the  next  day,  but  was 
jury,  Preferred  Mut.  Ace.  Assn.  v.  afterward  confined  to  house,  Brendan 
Jones,  60  111.  App.  106;  Haqadorn  v.  v.  Traders'  &  Travelers'  Ace.  Co.,  84 
Masonic  Eq.  Aec.  Assn.,  59  App.  Div.  App.  Div.  530,  82  N.  Y.  Supp.  860. 
321,  69  N.  Y.  Supp.  831.  But  not  'iWolcott  v.  United  Life,  etc.,  Assn., 
necessarily  at  once,  Williams  v.  Pre-  55  Hun  (N.  Y.),  98;  Beach  v.  Supreme 
f erred  Mut.  Ace.  Assn.,  91  Ga.  698,  Tent,  177  N.  Y.  100,  69  N.  E.  281. 
17  S.  E.  982.  Three  or  four  days  held  *  U.  S.  Casualty  Co.  v.  Hanson,  20 
to  be  within  the  term  "immediately,"  Colo.  App.  393,  79  Pac.  176. 
Riiter  v.  Ace.  Assn.,  185  Pa.  St.  90,  ^  Hohn  v.   Interstate   Cas.    Co.,   115 


IMMEDIATELY   AND   WHOLLY   DISABLE 


549 


may  be  able  toTvisit  his  store  or  office  and  perform  some  trivial  acts 
in  connection  with  his  business,  he  is  held  to  be  totally  disabled.' 
The  disability  may  be  either  physical  or  mental;  ^  and  the  insurer 
is  not  to  be  relieved  simply  because  the  insured  is  able  to  perform 
light  duties,  or  easy  work  disconnected  with  his  usual  occupation.-'' 
Death,  how^ever,  is  not  the  kind  of  disability  here  referred  to.'' 

Where  the  insured,  after  the  accident,  is  able  to  take  substantial 
management  of  his  business  though  his  efforts  be  accompanied  by 
some  pain  and  inconvenience,  the  insurer  must  be  allowed  the 
benefit  of  this  restrictive  clause.^ 


Mich.  79,  72  N.  W.  1105.  For  exam- 
ple, intolerable  discomfort  from  Avear- 
ing  truss  for  hernia,  McMahon  v.  (Su- 
preme Council,  54  Mo.  App.  468. 

1  Young  v.  7ns.  Co.,  80  Me.  244,  13 
Atl.  896  (merchant  may  be  totally 
disabled  though  physically  able  to  go 
to  store  and  do  inconsiderable  acts 
especially  if  at  risk  of  health);  Lobdill 
V.  Laboring  Men's  Mut.  Aid  Assn.,  69 
Minn.  14,  71  N.  W.  696,  38  L.  R.  A. 
537,  65  Am.  St.  R.  542  (if  common 
prudence  require  him  to  desist  from 
business).  See  also  Mutual  Ben.  Assn. 
V.  Nancarrow,  18  Colo.  App.  274,  71 
Pac.  423  (able  to  go  to  his  physician's 
office);  Turner  v.  Fidelity  &  C.  Co.,  112 
Mich.  425,  70  N  W.  898,  38  L.  R.  A. 
529,  67  Am.  St.  R.  428;  Faulhner  v. 
Grand  Legion,  63  Kan.  400,  65  Pac.  653 
(partial  paralysis  of  arm,  shoulder,  and 
side).  Compare  McKinley  v.  Bank- 
ers' Ace.  Ins.  Co.,  106  Iowa,  81,  75 
N.  W.  670. 

2  McMahon  v.  Supreme  Council,  54 
Mo.  App.  468.  For  instance,  lunacy, 
McCullough  v.  Expressmeri's,  etc., 
Assn.,  133  Pa.  St.  142,  19  Atl.  355,  7 
L.  R.  A.  210. 

3  Starling  v.  Supreme  Council,  108 
Mich.  440,  66  N.  W.  340,  62  Am.  St.  R. 
709;  Neill  v.  Order  United  Friends,  149 
N.  Y.  430,  44  N.  E.  145,  52  Am.  St.  R. 
738.  A  solicitor,  confined  to  his  room, 
though  able  to  conduct  correspondence 
was  held  ''totally  disabled,"  Hooper  v. 
Ins.  Co.,  5  H.  Ar'N.  546,  7  Jur.  (N.  S.) 
73,  6  H.  &  N.  839.  But  an  attorney  is 
not  totally  disabled  by  loss  of  use  of 
one  hand,  U.  S.  Mut.  Ace.  Assn.  v. 
Millard,  43  111.  App.  148.  A  surgeon, 
not  a  pharmacist,  is  totally  disabled 
by  loss  of  a  hand,  Smith  v.  Supreme 
Lodge,  62  Kan.  75,  61  Pac.  416. 
Twisting  of  a  knee  was  held  to  disable 
a    physician    "immediately,    continu- 


ously and  wholly"  though  he  was  able 
to  go  home  in  a  street  car,  Brendan  v. 
Traders'  &  Trav.  Ace.  Co.,  84  App. 
Div.  530,  82  N.  Y.  Supp.  860. 

*  Shaw  V.  Equitable  Mut.  Ace.  Assn. 
(Neb.,  1904),  99  N.  W.  672. 

5  Coad  V.  Travelers'  Ins.  Co.,  61  Neb. 
563,  85  N.  W.  558.  Not  enough  that 
insured,  "a  leather  cutter  and  mer- 
chant," was  disabled  as  a  leather  cut- 
ter only,  Ford  v.  U.  S.,  etc..  Relief  Co., 
148  Mass.  153,  19  N.  E.  169,  1  L.  R.  A. 
700  (insurer  not  liable).  Loss  of  time 
may  be  the  specified  criterion  to  de- 
termine right  of  recovery,  not  total  or 
permanent  disability.  Bean  v.  his.  Co., 
94  Cal.  581,  29  Pac.  1113;  Pennington 
v.  Pac.  Mut.  L.  his.  Co.,  85  Iowa,  468, 
52  N.  W.  482,  39  Am.  St.  R.  306.  The 
provision  is  worded  in  various  terms, 
thus  "disability  from  carrying  on  all 
kinds  of  business,"  Supreme  Tent  v. 
King,  79  111.  App.  145;  Lyon  v.  Assur. 
Co.,  46  Iowa,  631;  Rhodes  v.  Railway 
Pass.  Ins.  Co.,  5  Lans.  (N.  Y.)  71; 
Supreme  Tent  v.  Cox,  25  Tex.  Civ. 
App.  366,  60  S.  W.  971.  "Total  in- 
ability to  labor,"  Bal.  &  O.  Employees' 
R.  Assn.  V.  Post,  122  Pa.  St.  579,  15 
Atl.  885,  2  L.  R.  A.  44,  9  Am.  St.  R. 
147.  Sometimes  confinement  to  house 
is  made  a  condition  of  the  company's 
liabilitv.  Dunning  v.  Mass.,  etc.,  Assn., 
99  Me.'^390,  59  Atl.  535;  Bishop  v.  U.  S. 
Cas.  Co..  99  App.  Div.  530,  91  N.  Y. 
Supp.  176.  But  it  ha.s  been  held  that 
insured  need  not  stay  in  the  house  con- 
tinuously, indeed,  such  a  course  might 
prevent  recoverv,  Hoffman  v.  Michi- 
gan, etc.,  Assn.,  128  Mich.  323,  87  N.  W. 
265,  54  L.  R.  A.  746;  Scales  v.  Masonic 
etc.,  A.^sn.,  70  N.  H.  490,  48  Atl.  1084. 
But  the  insured  must  not  be  well 
enough  to  go  to  his  business  two  or 
three  hours  a  dav.  Shirts  v.  Phainix 
etc..  .4.s-.sn..  135  Mich.  4.39.  97  N.  W 


550  MEANING    AND    LEGAL    EFFECT    OF    ACCIDENT    POLICY 

Bishop  Green,  a  freight  handler,  was  insured  by  a  policy  which 
provided  that  it  should  be  liable  in  case  of  injury  "at  once  resulting 
in  continuous  total  disability"  to  engage  in  business.  January  31st 
Green  was  seriously  injured  by  a  heavy  crate  of  glass  which  fell 
upon  him.  February  2d,  however,  he  returned  to  his  work  and 
continued  at  it  until  March  25th,  when  he  died  in  consequence  of 
the  accident.  The  appellate  court  below,  applying  to  the  policy  a 
liberal  rule  of  construction  in  favor  of  the  insured,  held  that  the 
terms  of  the  policy  requiring  the  inability  to  be  continuous  had  no 
reference  to  a  death  loss  and  affirmed  the  judgment  in  favor  of  the 
plaintiff.  But  the  Supreme  Court  reversed,  holding  that  the  lan- 
guage of  the  policy  being  without  ambiguity,  and  the  disability 
resulting  from  the  accident  not  being  continuous,  the  claimant  was 
entitled  to  no  recovery  from  the  defendant.^ 

Letherer's  policy  provided  indemnity  for  loss  of  time  resulting 
from  bodily  injuries  which  should  "immediately,  wholly  and  continu- 
ously disable  and  prevent  the  assured  from  performing  any  and  all 
duties  pertaining  to  any  business  or  occupation."  The  insured  fell 
and  struck  a  scantling.  The  injury  finally  resulted  in  his  giving  up 
work  altogether,  but  meanwhile  he  continued  his  duties  in  connec- 
tion with  running  an  engine  in  a  cider  mill  for  over  a  week,  though 
the  labor  was  accompanied  with  great  pain.  The  court  held  that 
he  was  not  entitled  to  recover  his  insurance  money,  and  reversed 
his  judgment.^ 

In  the  last  two  cases,  if  the  insured  had  been  less  impatient  to 
return  to  work,  it  seems  probable  that  they  would  have  succeeded 
in  collecting  their  insurance. 

In  an  earlier  Michigan  case  the  plaintiff,  Hohn,  was  a  barber.  He 
was  injured  on  Friday.  On  Saturday  he  went  to  his  shop  late  and 
did  some  work  but  not  nearly  as  much  as  he  would  have  done  if 
well.  He  rested  on  Sunday.  On  Monday  he  again  went  to  his  shop, 
and  attempted  to  work,  but  suffered  such  pain  that  he  fainted  away; 
a  physician  was  called,  and  the  plaintiff  was  taken  home  in  a  car- 
riage.    He  continued  to  visit  his  shop  during  the  week,  suffering 

966.    And  see  Liston  v.  N.  Y.  Cas.  Co.,  '  Continent  Cas.  Co.  v.  Wade  (Tex., 

58  N.   Y.  Supp.   1090,  28  Misc.   240.  1907).  105  S.  W.  35. 

For  meaning  of  "fontinnins  or  per-  ^  Letherer  v..  U.  S.  Health  d' Ace.  Ins. 

manent  di'^ability,"  see  Grand  Lodne  Co.,  145  Mich.  310,  108  N.  W.  401.    If 

V.  Orrell,  206  111.  208,  69  N.   E.   68;  the  insured  was  able  to  perform  his 

Pac.  Mut.  L.  Ins.  Co.  v.  Branham,  34  usual  work  for  a  week  he  was  not  im- 

Ind.  App.  243,  70  N.  E.   174:  HoJlo-  mediatphi  disabled,  Preferred  Masonic 

hauqh  V.  People's,  etc.,  Ass7i.,  138  Pa.  Mid.  Ace.  Ass.  v.  Jones,  60  111.  Anp. 

•St,  595,  22  Atl.  29;  Gonlon  v.  U.  S.  Cas.  106;   Williams  v.  Ace.  Assn.,  91   Ga. 

Co.  (Tenn.  Ch.  App.,  1899),  54  S.  W.  98.  698. 


LOSS   or    BODILY    MEMBER  551 

pain  all  the  while,  and  occasionally  working  a  little,  but  was  unable 
to  perform  all  the  duties  of  his  business  because  of  the  pain  he  suf- 
fered.   The  court  held,  that  the  case  was  one  for  the  jury.^ 

Colehouse  held  a  certificate  in  a  fraternal  order,  organized  for  the 
protection  of  switchmen,  the  laws  of  which  provided  that  any  mem- 
ber who  should  become  totally  blind  should  bo  considered  per- 
manently disabled  and  receive  the  full  amount  of  his  certificate,  and 
also  for  any  physical  disability  that  might  permanently  disqualify 
a  member  from  performing  the  duties  of  a  switchman.  The  insured 
lost  one  eye,  not  two  eyes,  but  because  of  his  defective  eyesight  he 
was  unable  to  retain  his  position  with  his  employer,  a  railroad  com- 
pany, and  for  the  same  reason  he  was  refused  employment  by  an- 
other railroad  company.  The  defendant  contended  that  the  certifi- 
cate covered  only  total  blindness  and  injuries  of  an  entirely  different 
character,  but  the  court,  construing  the  language  liberally  in  favor 
of  the  insured,  held  that  the  later  clause  of  the  certificate  would 
apply  to  the  plaintiff's  case.^ 

§  389.  Same  Subject — Loss  of  Bodily  Member. — The  clause  en- 
titling the  insured  to  a  recovery  for  the  loss  of  an  entire  hand  does 
not  mean  that  the  entire  hand  must  be  severed  or  amputated  as  a 
result  of  the  injury,  but  there  may  be  a  recovery  if  the  member  is 
so  injured  as  to  become  practically  useless.'"'  So  also  where  the  in- 
sured was  shot  in  the  back,  causing  a  paralysis  which  involved  the 
loss  of  the  use  of  his  feet,  it  was  held  to  be  a  loss  of  "  two  entire  feet."  "* 

>  Hohn   V.   Interstate   Cas.    Co.,    115  Ben.  Assn.,  139  Pa.  St.  214,  20  Atl. 

Mich.  79,  72  N.  W.  1105.  1047,  11  L.  R.  A.  564  (insured  lost  his 

^Switchmen's     Union    v.    Colehouse  only  eye),  Mavnard  v.  Locomotive,  etc., 

(III.,  1907),  81  N.  E.  696.  citing,  among  Assn.,  16  Utah,  145,  51  Pac.  2.59,  67 

other  cases,  TerwiUiger  v.  Nat.  Masonic  Am.  St.  R.  602.  Loss  of  a  foot,  Sheanon 

Ace.  Assn.,  197  111.  9,  63  N.  E.  1034;  case,  77  Wis.  618,  46  N.  W.  799.     But 

Forest  City  Ins.  Co.  v.  Hardesty,   182  see  Stevers  v.  People's  Ins.  Assn..  150 

111.  39,  55  N.  E.  139,  74  Am.  St.  R.  161.  Pa.  St.  132,  24  Atl.  662,  16  L.  R.  A. 

3  Lord  V.  American  Mut.  Ace.  Assn.,  446;  Fuller  v.  Locomotive,  etc.,  As.m., 

89  Wis.  19,  61  N.  W.  293,  26  L.  R.  A.  122  Mich.  548,  81  N.  W.  326,  48  L.  R. 

741;  Sisson  v.  Supreme  Court,  104  Mo.  A.  86,  80  Am.  St.  R.  598.     Violini.'^ts, 

App.  54,  78  S.  W.  297;  Supreme  Court  pianists,  and  other  professional  musi- 

V.  Turner,  99  111.  App.  310.     "Loss  by  cians    sometimes    insure    each    finger 

severance   of  one   entire   hand"   con-  separately. 

stnied  similarly  in  Sneck  v.  Traveler.'^'  *  Sheanon  v.  Pacific  Mutual  Life  Ins. 

Im.  Co  ,  88  Him,  94,  .34  N.  Y.  Supp.  Co.,  77  Wis.  618,  46  N.  W.  799,  20  Am. 

545.     Same  rule  applied  as  to  loss  of  St.  R.  151,  9  L.  R.  A.  685,  83  Wis.  507. 

an  arm,  Garcelon  r.  Commercial  Trav-  53  N.  W.  878.     Where  a  leg  was  am- 

elen^'  Fasfprn  Ace.  Assn.,  184  Mass.  8,  putated   three   months   after   accident 

67  N.  E.  868  (cut  off  a  little  below  the  the  company  was  held  liable.  Marshall 

elbow).     Loss  of  an  eye,  or  eyesight,  v.  Com.  Travelers'  Mut.  Ace.  Assn.,  170 

Mooi   V.  Societe,  etc.,  167   Mass.  298,  N.  Y.  434,  63  N.  E.  446.     The  term 

39  L.  R.  A.  736;  Humphreys  v.  Nat.  "breaking  of  a  leg"  was  defined  in  the 


552 


MEANING    AND    LEGAL    EFFECT    OF    ACCIDENT    POLICY 


§  390.  Exception  of  Hazardous  Employment.— The  clause  ex- 
cepting the  insurer  from  liabiUty  for  a  loss  resulting  from  an  injury 
received  in  a  more  hazardous  occupation  than  that  stated  in  the 
policy  is  binding  upon  the  insured  or  his  beneficiary  and  the  in- 
surer is  not  hable  in  the  case  of  an  injury  so  received.^  But  where 
a  person  is  insured  as  engaged  in  a  certain  specified  occupation,  ho 
may  do  whatever  customarily  appertains  to  such  an  occupation,^ 
including  acts  that  may  be  forbidden  by  general  restrictions  in  the 
policy.^  And  an  employment  or  occupation  does  not  refer  to  some 
unusual  and  incidental  act,  which  a  person  may  chance  to  be  en- 
gaged in  temporarily,  for  convenience,  pleasure,  or  recreation,  but 
to  his  regular  and  usual  vocation  or  calling  in  life.^  Thus  where  the 
insured,  cashier  of  a  bank,  lost  his  hand  while  engaged  in  trying  to 


policy  in  Peterson  v.  Modern  Brother- 
hood, 125  Iowa,  562,  101  N.  W.  289,  67 
L.  R.  A.  631;  "Broken  leg"  defined 
by  by-law,  see  Ross  v.  Modern  Brother- 
hood, 120  Iowa,  692,  95  N.  W.  207. 

1  Standard  Life  cfe  A.  I.  Co.  v.  Mar- 
tin, 133  Ind.  376,  33  N.  E.  105  (whether 
risk  is  increased  is  often  a  question  for 
the  jury;  brakeman  of  passenger  train 
became  brakeman  of  construction 
train).  Recovery  was  allowed  for 
death  by  cyclone  because  wholly  un- 
connected with  the  change  of  occupa- 
tion. Standard  Life  &  Ace.  Ins.  Co.  v. 
Koen,  11  Tex.  Civ.  App.  273,  33  S.  W. 
133. 

2  Bean  v.  Travelers'  Ins.  Co.,  94  Cal. 
581,  29  Pac.  1113  ("capitalist"). 

^Richards  v.  Travelers'  Ins.  Co.,  18 
S.  D.  287,  100  N.  W.  428  ("a  cattle 
dealer  visiting  yards"  is  not  bound  by 
a  clause  restricting  to  passenger  cars); 
Daily  v.  Preferred  Masonic  Mut.  Ace. 
Assn.,  102  Mich.  289,  57  N.  W.  184, 
26  L.  R.  A.  171  (railway  conductor 
may  enter  moving  train,  in  spite  of 
general  prohibition);  Wilson  v.  North- 
western Mut.  Ace.  Assn.,  53  Minn.  470, 
55  N.  W.  626  ("pointing"  a  building  is 
part  of  a  brickmason's  trade).  "Cattle 
shipper,"  covers  "tender  of  horses," 
Brock  V.  Brotherhood  Ace.  Co.,  75  Vt. 
249,  54  Atl.  176.  A  railroad  employee 
crossing  tracks  on  way  home  is  "in 
discharge  of  duty,"  Kinney  v.  B.  &  0., 
etc.,  Assn.,  35  W.  Va.  385,  14  S.  E.  8, 
15  L.  R.  A.  142. 

4  Berliner  v.  Travelers'  Ins.  Co.,  121 
Cal.  458,  53  Pac.  918,  41  L.  R.  A.  467 
(a  mining  expert  casually  riding  in 
locomotive  is  not  an  engineer  or  fire- 


man); Travelers'  Preferred  Ace.  Assn. 
V.  Kelsey,  46  111.  App.  371  (a  farmer 
may  recover,  though  temporarily  act- 
ing as  police  at  state  fair);  Union 
Mutual  Ace.  Assn.  v.  Frohard,  134  111. 
228,  25  N.  E.  642,  10  L.  R.  A.  383,  23 
Am.  St.  R.  664  (merchant  injured 
hunting,  not  "a  hunter");  Holiday  v. 
American  Mut.  Ace.  Assn.,  103  Iowa, 
178.  72  N.  W.  448  (same  rule  applies 
to  a  bookkeeper);  Wildey  Ca.'i.  Co.  v. 
Sheppard,  61  Kan.  351.  59  Pac.  651, 
47  L.  R.  A.  650  (a  barber  hunting  is 
not  "a  hunter");  Kentucky  L.  Ins.  Co. 
v.  Franklin,  102  Ky.  512,  43  S.  W.  709 
(grocer,  imnting);  Stone  v.  U.  S. 
Casualty  Co.,  34  N.  J.  L.  371  (teacher 
fell  from  building  which  he  was  hav- 
ing built.  No  change  of  occupation); 
Hoffman  v.  Standard  Life  &  Ace.  Co.,  127 
N.  C.  337,  37  S.  E.  466  ("a  flagman  is 
not  a  switchman"  when  engaged  in  a 
single  act  of  coupling);  Fox  v.  Masons' 
Fraternal  Ace.  Assn.,  96  Wis.  390,  71 
N.  W.  363  ("  mill  owner  overseeing  only" 
engaged  in  incidental  act  of  cutting  tree 
for  sawmill);  McNeven  v.  Canadian 
Ril.  Co.,  32  Ont.  284  ("baggage  man" 
killed  while  casually  coupling  cars). 
But  the  policy  may  expressly  prohibit 
even  temporary  change  or  temporary 
exposure,  Thomas  v.  Masons'  Fraternal 
Ace.  Assn.,  64  App.  Div.  22,  71  N.  Y. 
Supp.  692  (restriction  as  to  hunting); 
Dood^i  V.  National  Masonic  Ace.  Assn., 
66  Neb.  493,  92  N.  W.  613,  60  L.  R.  A. 
424  (restriction  as  to  using  firearms). 
As  to  meaning  of  phrase  "usual  or 
some  other  occupation,"  see  N^eill  v. 
Order  of  U.  F.,  149  N.  Y.  430,  44  N.  E. 
145. 


EXCEPTION    OF   HAZARDOUS   EMPLOYMENT  553 

saw  some  boards  for  use  in  making  a  cabinet,  he  was  allowed  to 
recover.^  And  riding  a  bicycle  for  recreation  is  consistent  with  any 
vocation  if  not  specifically  forbidden.^  But  operating  a  buzz  saw 
for  amusement  is  not  permissible,  within  the  meaning  of  the  policy, 
it  has  been  said,  to  one  insured  as  a  "retired  gentleman."'  •' 

An  unauthorized  employment  must  be  actually  entererl  upon  to 
affect  the  policy.  An  intent  to  adopt  a  new  occupation,  until  con- 
summated, does  not  amount  to  a  prohibited  change.  For  example, 
where  a  lawyer  intending  to  become  a  prospecting  miner  in  Alaska 
lost  his  life  on  his  way  thither,  it  was  held  that  the  insured  hdd  not 
yet  commenced  to  be  a  miner.^ 

In  a  Nebraska  case,  Simmons  was  insured  with  the  defendant  as 
a  traveling  salesman  for  a  wholesale  drug  company.  Having  lost 
his  position,  for  a  period  of  some  two  years  while  trying  to  obtain 
another  position  he  lived  on  his  father's  ranches.  He  came  and 
went  at  his  own  will,  put  in  most  of  his  time  hunting  or  visiting 
from  one  place  to  another,  and  though  he  sometimes  communicated 
orders  from  his  father  to  the  employees  on  the  ranches,  he  received 
no  compensation  and  was  never  employed  as  a  superintendent. 
The  occupation  of  "stock  farmer,  owner  or  superintendent,  super- 
vising only"  was  classed  by  the  policy  as  more  hazardous  than 
salesman.  The  father  of  Simmons  asked  him  to  examine  the  wind- 
mills at  two  of  the  wells  to  see  if  they  were  pumping  properly.  In 
compliance  with  this  request  Simmons  stopped  at  the  Lost  Tank 
well  and  there  accepted  an  invitation  to  dine  with  Mr.  Franklin, 
the  foreman  of  the  ranch.  He  sat  down  on  the  ground  with  Frank- 
lin to  eat  dinner,  when  a  large  rattlesnake  came  out  of  the  grass 
and  bit  him  so  that  he  died  the  following  day.  In  the  action  on  the 
policy  the  court  held  that  Simmons  had  not  changed  his  occupa- 
tion to  the  more  hazardous  employment.^ 

Some  policies  provide,  not  that  the  insurance  shall  be  avoided 
but  that  the  indemnity  shall  be  diminished  ^  if  the  insured  be  in- 
jured while  engaged  in  an  employment  classified  as  more  hazardous 
than  that  named  by  him.  The  same  principles,  already  explained, 
are  appHcable.      Thus  if  a  man   insure  as  "a  stockdealer  visiting 

^  Hess    V.    Preferred    Masonic    Ace.  *  Mtrm  Life  Ins.  Co.  v.  Frierson,\l^ 

As.9n.,  112  Mich.  196,  70  N.  W.  460,  40  Fed.  56,  51  C.  C.  A.  424. 

L    R    A    444;  Hess  v.  Van  Auken,  32  ^  Simmons  y   Western  Travelers'  Ace. 

N.  Y.  Supp.  126,  11  Misc.  422.  Ass.  (Neb.,  1907),  112  N.  W.  365. 

2  Baldwin  v.  Fraternal  Ace.  Assn.,  21  6  Such  clause  is  a  consent  to  charge 
Misc  124,  46  N.  Y.  Supo.  1016;  Com-  of  occupation,  Standard  L.  <<:  Ace.  Ins. 
stock  V.  Same,  1 16  Wis.  382, 93  N.  W.  22.  Co.  v.  Carroll,  86  Fed   567,  30  C.  C.  A. 

3  Knapp  V.  Preferred,  etc.,  Assn.,  53  253,  41  L.  R.  A.  194;  Xational  Masonic 
Hun,  84,  6  N.  Y.  Supp.  57.  Ace.  Assn.  v.  Seed,  95  111.  App.  43. 


554  MEANING    AND   LEGAL   EFFECT   OF   ACCIDENT   POLICY 

yards,  not  tending  in  transit,"  when  in  reality  at  the  time  of  injury 
his  vocation  is  that  of  "stockdealer  and  tender  in  transit,"  classified 
in  such  a  policy  as  more  hazardous,  his  recovery  will  be  reduced 
accordingly.^  But  a  farmer's  occupation  does  not  change  to  that 
of  a  "pile  driver,"  because  he  temporarily  engages  in  driving  piles 
in  the  construction  of  a  private  bridge.^ 

The  policy  issued  to  the  plaintiff  by  the  defendant  contained  the 
clause:  "If  the  assured  shall  change  his  occupation  to  or  be  injured 
in  any  occupation  or  exposure  or  in  performing  acts  classified  by 
this  company  as  more  hazardous  than  that  in  which  the  member 
was  classed  when  accepted,  then  and  in  all  such  cases,  the  insur- 
ance, fixed  indemnity  or  weekly  indemnity  payable  shall  be  only 
the  amount  fixed  for  such  increased  hazard  in  accordance  with 
the  classification  of  risks  by  the  company  and  as  per  the  table  on 
the  back  hereof."  Kenny  was  insured  as  a  manager  of  a  mill,  but 
when  on  a  visit  of  a  few  days  at  his  brother's  farm  he  undertook 
to  work  with  his  brother's  new  six-foot  McCormick  mowing  ma- 
chine. The  season  was  unusually  wet.  The  horses  attached  to  the 
machine  jumped  a  ditch  of  water  with  which  Kenny  had  not  been 
made  acquainted.  As  a  result  Kenny  was  thrown  into  the  air  and 
on  his  descent  struck  his  leg  and  back  on  the  front  part  of  the  seat 
receiving  injuries  which  developed  into  traumatic  neuritis.  The 
court  held  that  Kenny  was  none  the  less  a  miller  because  tem- 
porarily occupied  in  riding  a  mowing  machine  as  an  act  of  exercise 
or  diversion,  and  the  larger  scale  of  indemnity  was  allowed  him.'' 

If,  however,  the  more  hazardous  work  in  connection  with  which 
the  injury  is  sustained  is  not  incidental  or  occasional,  but  amounts 
to  a  change  of  vocation,  though  only  for  a  limited  season,  the  in- 
sured cannot  claim  the  benefit  of  the  original  classification.     Thus 

^  Loesch  V.  Union  Cas.  &  Sur.  Co.,  App.  97.  Grocer  may  occasionally 
176  Mo.  654,  75  S.  W.  621;  Emplotjers'  deliver  goods,  Hall  v.  Aitierican  Ma- 
Liability  Assur.  Corp.  v.  Back,  102  .some  Ace.  Ass?i.,  86  Wis.  518,  57  N.  W. 
Fed.  229,  42  C.  C.  A.  286  ("an  im-  366.  "Ice  man  proprietor"  may  de- 
porter  and  dealer"  became  "a  fore-  liver  ice,  Neafie  v.  Mfrs.  Ace.  Ind.  Co., 
man  of  labor");  Metropolitan  Ace.  55  Hun,  111 ,  8  N.  Y.  Supp.  202. 
Assn.  V.  Hilton,  61  111.  App.  100  3  Kenny  v.  Banker.<i'  Ace.  Ins.  Co. 
("proprietor"  was  injured  driving  (Iowa,  1907),  113  N.  VV.  566  (the 
cab);  Eaton  v.  Ins.  Co.,  89  Me.  570,  policy  also  contained  the  provision, 
36  Atl.  1048  (a  business  trip  on  a  "Insurance  in  this  company  is  not 
bicycle  was  extended  for  amusement;  forfeited  by  a  temporary  change  of 
^eW,  that  the  insured  brought  himself  occupation,"  but  the  court  said  that 
within  the  exception  "if  engaged  for  this  clause  did  not  affect  the  result), 
pleasure");  Standard  Life  &  Ace.  Ins.  Policy  gave  occupation  as  "superin- 
Co.  V.  Taylor,  12  Tex.  Civ.  App.  386,  tendent  of  inspection."  There  was  not 
34  S.  W.  781  (blacksmith  became  car  such  an  office.  Question  when  for 
coupler).  jury.   Wilder  v.  Continental  Cas.  Co., 

2  National  Ace.  Soc.  v.  Taylor,  42  111.  150  Fed.  92. 


NOTICE   AND   PROOF   OF   ACCIDENT   AND   INJURY 


555 


where  the  supervisor  of  a  gristmill  became  overseer  of  haying  for 
the  summer  and  was  injured  while  riding  a  horse  rake  to  shelter, 
the  insurance  was  avoided.^  But  if  the  agent  of  the  company,  after 
being  correctly  advised  of  the  facts,  by  his  own  mistake  makes  an 
erroneous  classification  without  fault  of  the  insured,  the  company 
will  be  bound.^ 


§  391.  Notice  and  Proof  of  Accident  and  Injury. — "  Immediate 
written  notice  with  full  particulars  is  to  be  given  said  company  of  any 
accident  and  injury,'^  etc.,  "  Unless  affirmative  proof  of  death,  loss  of 
limb  or  sight  or  duration  of  disability,"  etc.,  "is  so  furnished  ivithin 
seven  months  from  time  of  such  accident  all  claims  based  thereon  shall 
be  forfeited." 

"Immediate  notice"  means  within  a  reasonable  time  under  all 
the  circumstances  of  the  case.^    If  the  agent  of  the  company  gives 


1  Estabrook  v.  Union  Cas.  &  Sur. 
Co.,  74  Vt.  473,  52  Atl.  1048,  93  Am. 
St.  R.  906.  As  to  where  a  conductor 
acted  temporarily  as  brakeman,  com- 
pare Aldrich  v.  Mercantile  Mut.  Ace. 
Assn.,  149  Mass.  457, 21  N.  E.  873,  with 
Standard  L.  &  Ace.  Ins.  Co.  v.  Ka;n,  11 
Tex.  Civ.  App.  273,  33  S.  W.  133. 

2  Pacific  Mut.  Life  Ins.  Co.  v.  Snow- 
den,  58  Fed.  342,  12  U.  S.  App.  704,  7 
C.  C.  A.  264  (agent  erroneously  classi- 
fied insured  as  "a  cattleman  not  ac- 
companying shipments").  Compare 
Emploijers'  Liability  Assur.  Corp.  v. 
Back,  102  Fed.  229,  42  C.  C.  A.  286 
(recovery  reduced  though  agent  knew 
the  facts).  The  company  is  bound  by 
the  method  of  classification  which  ap- 
pears on  the  face  of  policy  though 
erroneous,  Ford  v.  U.  S.  Mut.  Relief 
Co.,  148  Mass.  153,  19  N.  E.  169,  1 
L.  R.  A.  700;  Schmidt  v.  Am.  Mut. 
Ace.  Assn.,  96  Wis.  304,  71  N.  W.  601. 
Burden  is  upon  plaintiff  to  allege  and 
prove  that  he  is  entitled  to  larger 
amount  and  not  the  restricted  amount, 
American  Ace.  Co.  v.  Carson,  99  Ky. 
441,  36  S.  W.  169,  59  Am.  St.  R.  473, 
34  L.  R.  A.  301.  Whether  one  occupa- 
tion is  more  hazardous  than  another  is 
for  the  jury,  unless  the  policy  contains 
its  own  classification,  Eggenberger  v. 
Guarantee  Mutual  Ace.  Assoc,  41  Fed. 
172;  Standard  Life  &  A.  I.  Co.  v. 
Martin,  133  Ind.  376,  33  N.  E.  105; 
Tucker  v.  Mutual  Benefit  Life  Co.,  50 
Hun,  50,  aff'd  121  N.  Y.  718,  24  N.  E. 
1102;  Knapp  v.  Preferred  Mutual  Ace. 
Assoc,  53  Hun  (N.  Y.),  84.    Whether 


insured  was  engaged  in  a  more  hazard- 
ous occupation  is  usually  for  the  jury, 
Fox  V.  Masons'  Fraternal  Ace.  Assn., 
96  Wis.  390,  71  N.  W.  363. 

3  Nax  v.  Travelers'  Ins.  Co.,  130  Fed. 
985  (delay  of  sixty-six  days;  existence 
of  policy  was  unknown;  question  when 
for  jury);  Konrad  v.  Union  Cas.  &  S. 
Co.,  49  La.  An.  636,  21  So.  721  (delay 
of  two  months;  existence  of  policy  un- 
known); American  Ace.  Co.  v.  Card, 
13  Ohio  Cir.  Ct.  154,  7  O.  C.  D.  504 
(delay  of  four  months;  existence  of 
policy  unknown);  Lyon  v.  Railuay 
Pass.  Assur.  Co.,  46  Iowa,  631  (delay 
of  four  weeks,  under  medical  treat- 
ment); Kentzler  v.  American  Mut.  Ace 
As.sn.,  88  Wis.  589,  60  N.  W.  1002 
(insured  not  found  in  water  for  over 
five  months).  Twenty-nine  days  after 
knowledge  of  accident  held  too  late, 
Foster  v.  Fidelity  &  Cas.  Co.,  99  Wis. 
447,  75  N.  W.  69  (when  for  jury).  So 
also  unexcused  delay  of  four  months 
avoided  policy,  Dunshee  v.  Travelers' 
Ins.  Co.,  25  Pa.  Super.  Ct.  559.  Like- 
wise six  days,  Railwav  Pass.  Assur.  Co. 
V.  Burwell,  44  Ind.  460.  On  the  other 
hand,  delay  of  ten  days  held,  not  un- 
reasonable, McFarland  v.  U .  S.  Mut. 
Ace  Assn.,  124  Mo.  204,  27  S.  W.  436 
(for  jury).  So  also  delay  of  twelve 
days,  Horsfall  v.  Pac.  Mid.  Life  Ins. 
Co.,  32  Wash.  132,  72  Pac.  102S.  63 
L.  R.  A.  425,  98  Am,  St.  R.  846. 
Likewise  delay  of  two  weeks  occa- 
sioned by  autopsy,  Ewing  v.  Com- 
mercial Travelers'  Mut.  Ace.  Assn.,  55 
App.  Div.  241,  66  N.  Y.  Supp.  lOSfi. 


556 


MEANING    AND    LEGAL    EFFECT    OF    ACCIDENT    POUCY 


a  notice  containing  the  information,  that  will  be  regarded  as  a  suffi- 
cient compliance.^  As  to  the  purport  of  the  notice,  the  claimant 
need  only  give  the  best  information  possessed  at  the  time.^ 

In  a  Wisconsin  case  the  plaintiff,  who  was  the  beneficiary,  had 
no  knowledge  of  the  existence  of  the  policy  until  about  sixty  days 
after  her  husband  died.  As  soon  as  she  obtained  such  knowledge 
she  complied  with  the  terms  of  the  policy  respecting  notice  to  the 
defendant.  The  policy  provided  that  "immediate  written  notice 
must  be  given  the  company  of  any  accident  and  injury  for  which 
a  claim  is  to  be  made."  The  court  held  that  the  notice  was  season- 
ably served.^ 

The  policy  often  provides  for  sending  notice  within  a  specified 
time,  for  instance,  ten  days.  If  expressly  made  a  condition  precedent, 
the  provision  must,  if  possible,  be  complied  with;"*  but  strict  com- 
pliance will  not  be  exacted  if  the  delay  is  occasioned  by  circum- 


aff'd  170  N.  Y.  590,  63  N.  E.  1116. 
Time  of  appearance  of  serious  results 
of  accident  has  a  bearing  on  the  ques- 
tion of  reasonable  delay,  People's  Ace. 
Assn.  V.  Smith,  126  Pa." St.  317,  17  Atl. 
605,  12  Am.  St.  R.  870;  Am.  Ace.  Ins. 
Co.  V.  Norment,  91  Tenn.  1,  18  S.  W. 
395.  But  delay  of  thirteen  months  was 
held  fatal,  Coldham  v.  Pae.  Mut.  Life 
Ins.  Co.,  2  Ohio  Dec.  314.  And  see 
Harrison  v.  Masonic  Mid.  Ben.  Soc, 
59  Kan.  29,  51  Pac.  893.  Disability  of 
insured  affects  the  question,  what  is 
reasonable  time  for  servina;  proofs, 
Mfrs.  Ace.  Indem.  Co.  v.  Fletcher,  5 
Ohio  Cir.  Ct.  633,  3  O.  C.  D.  308  (delay 
of  thirty-five  days).  And  see  Conn. 
Mut.  Life  Ins.  Co.  v.  Duerson,  28  Grat. 
630  (death  in  south  during  civil  war). 
Claimant  need  not  give  the  "immedi- 
ate notice"  until  he  has  knowledge, 
Mandell  v.  Fidelity  &  Cas.  Co.,  170 
Mass.  173,  49  N.  E.  110,  64  Am.  St.  R. 
291  (liability  policy);  Woolverton  v. 
Fidelity  <&  Cas.  Co.,  98  App.  Div.  275, 
89  N.  Y.  Supp.  292  (liability  policy). 
Aggravation  of  injury  or  continuation 
of  disability,  when  the  basis  of  further 
claim,  should  be  made  the  occasion  for 
further  proofs  of  loss,  Clanton  v. 
Travelers'  Protective  Assn.,  101  Mo. 
App.  312,  74  S.  W.  510;  Woodall  v. 
Pacific  Mut.  L.  Ins.  Co.  (Tex.  Civ. 
App.),  79  S.  W.  1030.  Requirement 
for  full  particulars  must  be  reason- 
ably met.  Standard  &  Ace.  Ins.  Co.  v. 
Strong,  13  Ind.  App.  315,  41  N.  E.  604; 
Stephenson  v.  Ban'-ers'  Life  A.ssn.,  108 
Iowa,  637,  79  N.  W.  459  (waiver). 


1  Van  Eman  v.  Fidelity  &  Cas.  Co., 
201  Pa.  St.  537,  51  Atl.  177;  Brown  v. 
Fraternal  Ace.  Assn.,  18  Utah,  265,  55 
Pac.  63. 

2  Root  V.  London  Guarantee  &  Ace. 
Co.,  92  App.  Div.  578,  86  N.  Y.  Supp. 
1055,  aff'd  180  N.  Y.  527,  72  N.  E. 
1150.  A  notice  of  the  accident  should 
include  the  cause  of  the  accident, 
Standard  Life  <&  Ace.  Ins.  Co.  v.  Strong, 
13  Ind.  App.  315,  41  N.  E.  604;  Si- 
mons V.  Iowa  State  Trav.  Men's  Assn., 
102  Iowa,  267,  71  N.  W.  254.  Com- 
pany cannot  demand  of  an  assignee 
proof  of  his  assignment,  unless  the 
policy  so  provide,  Braher  v.  Conn. 
Indem.  Assn.,  27  App.  Div.  234,  50 
N.  Y.  Supp.  547. 

3  Cady  v.  Fidelity  <^  Cas.  Co.  (Wis., 
1907),  113  N.  W.  967  (citing  authori- 
ties including  Comstock  v.  Fraternal 
Ace.  A.'isn.,  116  Wis.  382;  McElroy  v. 
John  Hancock  Life  Ins.  Co.,  88  Md. 
137).  Delay  in  giving  notice  held 
excusable,  Edgefield  Mfg.  Co.  v.  Mary- 
land Cas.  Co.  (S.  C,  1907),  58  S.  E.  969. 
The  question  is  elaborately  discussed  in 
the  Comstock  case,  supra,  where  the 
accident  itself  incapacitated  the  in- 
sured from  giving  the  ten  day  notice. 

*  United  Ben.  Soc.  v.  Freeman,  111 
Ga.  355,  36  S.  E.  764.  But  see  HuH 
V.  Employer.'^'  Liability  A.^.^ur.  Corp., 
122  Fed.  828  (though  named  as  a 
"condition  precedent,"  no  specific 
penalty  of  forfeiture  was  declared  in 
policy);  Fidelity,  etc.,  Co.  v.  Loioen- 
stein,  97  Fed.  17,  38  C.  C.  A  29,  46 
L.  R.  A.  450. 


RIGHT  TO   EXAMINATION    OR    AUTOPSY 


557 


stances  over  which  the  claimant  has  no  control.^  And  the  period 
for  serving  notice  and  proofs  will,  if  possible,  be  construed  to  run 
from  the  time  of  acquiring  knowledge  of  the  facts,-  or  from  the  time 
of  disability,*  rather  than  from  the  date  of  the  accident. 

The  furnishing  of  proof  of  death  or  disability  within  the  seven 
months  or  other  time  specified  is  held  to  be  a  condition  precedent.'' 


§  392.  Right  to  Examination  or  Autopsy. — Company  shall  have 
the  right  and  opportunity  to  examine  the  person  when  and  so  often  as 
it  requires  in  case  of  injury  and  to  make  an  autopsy  in  case  of  death. 

In  availing  itself  of  this  extraordinary  right,  the  insurer  is  held  to 


^  Hayes  v.  Continental  Cas.  Co.,  98 
Mo.  App.  410,  72  S.  W.  135;  Western 
Travelers'  Ace.  Assn.  v.  Holbrook,  65 
Neb.  469,  94  N.  W.  816  (circumstances 
not  attributable  to  his  laches);  Trippe 
V.  Provident  Fund  Soc,  140  N.  Y.  23, 
35  N.  E.  316;  Comstock  v.  Fraternal 
Ace.  Assn.,  116  Wis.  382,  93  N.  W.  22 
(incapacity  excuses).  Thus,  dementia 
excuses  prompt  performance,  Wood- 
men Ace.  Assn.  V.  Pratt,  62  Neb.  673, 
87  N.  W.  546,  55  L.  R.  A.  291,  89  Am. 
St.  R.  777  (citing  many  cases).  Rule 
of  construction  must  be  liberal  in 
favor  of  insured,  Peele  v.  Provident 
Friend  Soc,  147  Ind.  543,  44  N.  E. 
661  (sixteen  days  in  time).  Delay  of 
the  mail  will  not  affect  claimant's 
rights,  Western  Travelers'  Ace.  Assn. 
V.  Holbrook,  65  Neb.  469,  91  N.  W. 
276.  But  a  more  literal  compliance 
is  required  by  certain  courts.  See 
Gamble  v.  Accident  Assnr.  Co.,  4  Ir. 
R.  C.  L.  204;  Patton  v.  Emplovers' 
Liability  Assur.  Corp.,  20  Law  Rep. 
(Ir.)  93.  If  notice  is  sent  within  the 
ten  days  it  will  avail  though  all  the 
required  particulars  are  not  sent 
within  that  period,  Martin  v.  Mjrs. 
Ace.  hid.  Co.,  151  N.  Y.  94,  106,  45 
N.  E.  377. 

2  Trippe  v.  Provident  Fund  Soc,  140 
N.  Y.  23,  35  N.  E.  316. 

3  Rorick  v.  Railway  Officials  &  E.  A. 
Assn.,  119  Fed.  63,' 55  C.  C.  A.  369; 
Odd  Fellows,  etc.,  Assn.  v.  Earl,  70 
Fed.  16,  16  C.  C.  A.  596,  34  U.  S.  App. 
285;  Grant  v.  North  Am..  Cas.  Co.,  88 
Minn.  397,  93  N.  W.  312;  McFarland 
v.  U.  S.  Mut.  Ace  Assn.,  124  Mo.  204, 
27  S.  W.  436. 

4  Thornton  v.  Travelers'  Ins.  Co.,  116 
Ga.  121,  42  S.  E.  287,  94  Am.  St.  R. 
99,  119  Ga.  455,  46  S.  E.  678;  Legnard 
y.  Standard  Life  &  Ace.  Ins.  Co.,  81 


App.  Div.  320,  81  N.  Y.  Supp.  516; 
Meech  v.  National  Ace  Soc,  50  App. 
Div.  144,  63  N.  Y.  Supp.  1008;  Mar- 
tin V.  Equitable  Ace  Assn.,  61  Hun, 
467,  16  N.  Y.  Supp.  279;  Dean  v. 
.'Etna  Life  Ins.  Co.,  62  N.  Y.  642; 
Foster  v.  Fidelity  &  Cas.  Co.,  99  Wis. 
447,  75  N.  W.  69,  40  L.  R.  A.  833.  But 
see  Heywood  v.  Maine  Mut.  Ace.  Assn., 
85  Me.  289,  27  Atl.  154;  Whalen  v. 
Equitable  Ace  Co.,  99  Me.  231,  58 
Atl.  1057.  But  courts  have  refused 
to  regard  the  requirement  as  a  con- 
dition precedent  where  the  claimant 
was  not  cognizant  of  the  existence  of 
the  policy,  McElroy  v.  John  Hancock 
Mut.  Life  Ins.  Co.,  88  Md.  137,  41 
Atl.  112,  71  Am.  St.  R.  400;  Mnnz  v. 
Standard  Life  &  Ace  Ins.  Co.,  26 
Utah,  69,  72  Pac.  182,  62  L.  R.  A. 
485,  99  Am.  St.  R.  830.  Also  where 
claimant  must  first  take  out  letters 
of  administration.  Globe  Ace  Ins.  Co. 
V.  Gerisch,  163  111.  625,  45  N.  E.  .563, 
54  Am.  St.  R.  486.  Also  where  claim- 
ant is  ignorant  of  the  nature  of  the 
injurv  or  facts,  U.  S.  Cas.  Co.  v.  Han- 
son, 20  Colo.  App.  393,  79  Pac.  176; 
Pcde  V.  Prov.  Fund  Soc  147  Ind.  543, 
44  N.  E.  601,  46  N.  E.  990;  Phillips  v. 
U.  S.  Ben.  Soc,  120  Mich.  142,  79  N.  W. 
1 ;  Hoffman  v.  Mfrs.  Ace  Ind.  Co. ,  56  Mo. 
App.  301;  Woodman  Ace  Assn.  v.  Pratt, 
62  Neb.  673,  87  N.  W.  546.  55  L.  R.  A. 
291,  89  Am.  St.  R.  777;  Walsh  v. 
Metropolitan  Life  Ins.  Co.,  105  App. 
Div.  186,  93  N.  Y.  Supp.  445;  Trippe 
V.  Provident  Fund  Soc,  140  N.  Y.  23, 
35  N.  E.  316,  37  Am.  St.  R.  .529,  22 
L.  R.  A.  432;  Kentzler  v.  Am.  Mut. 
Ace  Assn.,  88  Wis.  589,  60  N.  W.  1002, 
43  Am.  St.  R.  934.  As  to  limitation 
of  time  for  bringing  action,  see  Kelten- 
ring  v.  Northwestern  Masonic  Aid 
Assn.,  96  Fed.  177;  Ritch  v.  Masons' 


558 


MEANING    AND    LEGAL    EFFECT    OF    ACCIDENT    POLICY 


promptness  of  action,  and  only  under  unusual  circumstances  will 
the  privilege  of  holding  an  autopsy  be  allowed  after  interment.^ 

The  United  States  Circuit  Court  has  held,  aside  from  any  policy 
provision,  that  a  court  of  equity  in  furtherance  of  justice,  though 
not  in  an  action  at  law,  may  order  an  exhumation  of  the  body  of  the 
deceased  insured.^ 

§  393.  Disappearances. — This  insurance  does  not  cover  disappear- 


The  most  natural  method  of  establishing  death  is  to  prove  an  in- 
spection of  the  dead  body;  ^  but  where  the  insured  has  disappeared 
from  sight  and  no  such  proof  of  death  is  forthcoming,  the  law  allows 
the  indulgence  of  certain  presumptions.  Thus  at  common  law  when 
a  person  has  not  been  seen  or  heard  from  for  seven  years  he  is,  speak- 
ing generally,  presumed  to  be  dead.^  And  again,  if  it  appears  that 
a  person  is  in  contact  with  some  specific  peril  or  impending  danger 
likely  to  destroy  life  at  the  time  of  his  disappearance,  this  circum- 
stance may  wai-rant  the  inference  that  he  was  killed  by  the  peril.^ 


Fraternal  Ace.  Assn.,  99  Ga.  112,  25 
S.  E.  191;  Dennison  v.  Masons'  Fra- 
ternal Ace.  Assn.,  59  App.  Div.  294, 
69  N.  Y.  Supp.  291;  People  v.  Am. 
Steam  Boiler  Co.,  10  App.  Div.  9,  41 
N.  Y.  Supp.  631.  And  see  §  326,  supra. 
As  to  when  physician  of  the  insured 
may  testify  on  trial,  see  Meyer  v. 
Supreme  Lodge,  178  N.  Y.  63,  70  N.  E. 
Ill,  Id.  198,  U.  S.  515,  25  S.  Ct.  754, 
citing  cases. 

1  Am.  Employers'  Liability  Ins.  Co. 
V.  Barr,  68  Fed.  873,  16  C.  C.  A.  51, 
32  U.  S.  App.  444;  Wehle  v.  U.  S.  Mid. 
Ace.  Assn.,  153  N.  Y.  116,  47  N.  E.  35, 
60  Am.  St.  R.  598  (demand  for  autopsy 
ten  days  after  burial  held,  too  late); 
Root  V.  London  G.  &  Ace.  Co.,  92  App. 
Div.  578,  86  N.  Y.  Supp.  1055,  aff'd 
180  N.  Y.  527,  72  N.  E.  1150  (demand 
day  after  burial  too  late);  Eiving  v. 
Commercial  T.  Mut.  Ace.  A.s.<tn.,  55 
App.  Div.  241,  66  N.  Y.  Supp.  1056, 
aff'd  170  N.  Y.  590.  The  right  to  ex- 
amine confers  no  right  to  treat  medi- 
cally, and  for  negligence  or  misconduct 
of  its  medical  adviser  insm-er  will  be 
liable,  TompHns  v.  Pnc.  Mut.  L.  Ins. 
Co.,  53  W.  Va.  479,  44  S.  E.  439,  62 
L.  R.  A.  489.  The  word  "autopsy" 
perhaps,  but  not  the  word  "exami- 
nation," carries  with  it  the  right  to 
dissect  the  body,  Suddidh  v.  Travelers' 
Ins.  Co.,  106  Fed.  822.     Exhumation 


is  abhorrent  to  the  sensibilities  of 
relatives  and  should  be  allowed  only 
to  prevent  fraud,  Union  Cent.  Life 
Ins.  Co.  v.  Hollowell,  14  Ind.  App. 
611,  43  N.  E.  277;  Grangers'  Ins.  Co. 
V.  Brown,  57  Miss.  308,  34  Am.  Rep. 
446.  Notice  to  local  agent  of  holding 
of  autopsy  is  an  effective  notice,  Leg- 
nard  v.  Standard  L.  &  Ace.  Ins.  Co., 
81  App.  Div.  .320,  81  N.  Y.  Supp.  516. 
And  see  Laesch  v.  Union  Cas.  &  L. 
Co.,  176  Mo.  654,  75  S.  W.  621. 

3  Mutual  Life  Lis.  Co.  v.  Griesa,  156 
Fed.  .398  (suicide  strongly  suspected). 

3  This  method  is  not  exclusive, 
Rogers  v.  Manhattan  Life  Ins.  Co.,  138 
Cal.  285,  71  Pac.  348;  Travelers'  hu. 
Co.  V.  Sheppard,  85  Ga.  751 ,  12  S.  E.  18. 

*  Fidelit'i  Mut.  Life  Assn.  v.  Mettler, 
185  U.  S.  308,  22  S.  Ct.  662,  46  L.  Ed. 
922;  Kendriek  v.  Grand  Lodge,  8  Ky.  L. 
R.  149.  But  see  Miller's  Estate,  9 
N.  Y.  Supp.  639;  Schneider  v.  ^tna 
Life  Ins.  Co.,  32  La.  Ann.  1049,  36 
Am.  Rep.  276.  The  presumption  may 
be  rebutted,  Policemen's  Benev.  A.'isn. 
y.  Ryce,  213  111.  9,  72  N.  E.  764.  Thus 
it  is  relevant  to  show  that  he  wns  a 
fugitive  from  justice.  Mutual  Ben. 
Life^  Ins.  Co.  v.  Martin,  108  Ky.  II, 
55  S.  W.  694;  or  a  defaulter,  Winter  v. 
Supreme  Lodge,  96  Mo.  App.  1,  69 
S.  W.  662. 

^  Davie   v.    Briggs.    97   U.    S.    828; 


SUICIDE— SANE   OR   INSANE  569 

The  Kansas  court  says:  "In  order  that  the  presumption  that  a 
person  once  shown  to  have  been  ahve  continues  to  live  may  be 
overcome  by  the  presumption  of  death  arising  from  seven  years' 
unexplained  absence  from  home  or  place  of  residence,  there  must 
be  a  lack  of  information  concerning  the  absentee  on  the  part  of 
those  likely  to  hear  from  him  after  diligent  inquiry."' 

The  purpose  and  legal  effect  of  the  policy  exception  is  to  deprive 
the  claimant  of  the  benefit  of  such  legal  inferences  and  to  require 
the  production  of  more  positive  proof  of  death.' 

§  394.  Suicide — Sane  or  Insane. — The  exemption  from  liability 
for  suicide,  sane  or  insane,  has  been  considered  in  the  discussion  of 
the  clauses  of  the  life  policy.^ 

Cady,  the  insured,  went  to  a  hospital  March  28th,  in  very  low 
spirits,  and  was  put  in  charge  of  a  trained  nurse.  His  thoughts 
dwelt  upon  the  subject  of  dying.  The  same  day  he  executed  a 
will.  The  night  thereafter  he  was  somewhat  delirious.  March  30th 
during  the  temporary  absence  of  his  nurse,  who  went  at  his  request 
to  get  him  a  glass  of  hot  water,  he  ran  up  several  flights  of  stairs, 
rapidly,  in  his  night  robe.  On  being  hailed  by  a  person,  he  quickened 
his  pace,  put  his  hands  on  a  railing  around  an  open  shaft,  leaped 
over,  fell  to  the  bottom  and  died  in  about  three  minutes.  Judg- 
ment in  favor  of  the  beneficiary  was  affirmed.^ 

Travelers'   Ins.    Co.    v.    Sheppard,    85  Co.,  12  Pa.  Super  Ct.  250.    The  ques- 

Ga.  751,  12  S.  E.   18   (hunter  disap-  tion  of  identification  is  often  for  the 

peared  leavino;  g;un  and  hat  in  bateau);  jury,  Waclerle  v.  Mut.  Life  Ins.  Co., 

Lancaster  v.  Washington  Life  Ins.  Co.,  14   Fed.   23.     As  to  how  to  establish 

62    Mo.    121    (passenger    disappeared  identity,  see  Supreme  Lodge  v.  Gold- 

froni   steamer   on   Lake    Huron);    Su-  berger,    72    111.    App.    320;    Baxter    v. 

preme  Council  v.  Bo'ie,  10  Ind.  App.  Covenant  Mut.  Life  Ins.  Co.,  77  Minn. 

301     (nerson    went    bathing,   leaving  80,   79   N.   W.   596;   Potter  v.    Union 

apparel   which  was  found   on  shore).  Cent.  Life  Ins.  Co.,  195  Pa.  St.  557,  46 

A  yet  more  liberal  rule  has  been  laid  Atl.  111. 
do-um,  Tisdale  v.  Conn.  Mut.  Life  Ins.  ^  §  3'>9,  supra. 

Co.,  26  Iowa,  170,  2S  Iowa,  12;  John  *  Cady  v.  Fidelity  &  Cas.  Co.  (Wis., 

Hanrncl-  Mut.  Life  Ins.  Co.,  v.  Moore,  1907),  113  N.  W.  967.    In  the  last  case 

34  Mif^h.  41.  the  court  said,  "death  resulting  from 

*  Modern  Woodmen  v.  Gerdom  (Kan.,  an  act  committed  under  the  influence 
1908),  94  Pac.  788  ("The  parents  of  delirium,  as  by  one  who  in  a  par- 
should  only  be  held  to  the  exercise  of  oxysm  of  fear  precipitates  himself  from 
reasonable  diligence  in  endeavoring  to  a  window,  or  having  been  bled  re- 
obtain  tidings  of  their  son.  They  were  moves  the  bandage,  or  takes  poison  by 
not  required  to  prove  conclusively  that  mistake  and  death  ensues,  never  re- 
he  was  dead")-  ceived   nor   deserved   the   name   'sui- 

2  Porter  V.   Home  F.  Soc,  114  Ga.  cide,' r.nd  is  not  within  the  meaning  of 

937,  41    S.   E.   45;   Kelly  v.   Suvreme  the  language,  'death  by  suicide,  felo- 

Council,  46  Apo.   Div.  79,  61   N.   Y.  nious  or  otherwise,   sane   or   insane.' 

Supp.    394.      Burden    of    identifying  Such  language  does  not  include  an  act 

insured  after  decease  is  on  the  claim-  of  self-destruction  resulting  in   death 

;int,  Quirk   v.   Metropolitan  Life  Ins.  whether    intentional    or    not,     unac- 


560  MEANING   AND   LEGAL  EFFECT  OF   ACCIDENT   POLICY 

The  issue  of  suicide  must  often  go  to  the  jury  with  appropriate 
instructions  by  the  trial  judge,  but  where  the  facts  clearly  indicate 
death  by  suicide  there  is  no  presumption  of  accidental  death.  And 
where  an  inference  of  suicide  is  the  only  inference  that  reasonable 
minds  could  fairly  gather  from  the  testimony,  it  is  not  error  to 
withdraw  the  question  from  the  jury.^ 


§  395.  Visible  Mark  of  Injury  Required. — Injuries  not  covered  of 
ivhich  there  is  no  visible  mark  on  the  body,  the  body  itself  in  case  of 
death  not  being  deemed  such  mark. 

The  purpose  of  this  clause  is  to  guard  the  insurers  from  liability 
for  injuries  and  death  due  solely  to  natural  causes  and  for  other 
fictitious  or  j^retended  accidents.^  By  virtue  of  this  condition  the 
burden  is  put  upon  the  claimant  to  show  some  sign  or  mark  of  the 
injury  of  such  a  character  that  it  may  be  apprehended  by  one  of 
the  senses;  but  a  very  strict  rule  of  construction  against  the  company 
is  adopted.^    Thus  a  discoloration  of  the  skin,'*  or  pallor,^  or  emacia- 


companied  by  a  purpose  to  effect 
death,  with  the  absence  of  all  design  to 
take  life.  ...  It  does  not  appear  that 
Mr.  Cady  had  ever  been  in  that  part  of 
the  building  where  he  went  to  his 
death  prior  to  the  occasion  in  question. 
There  is  evidence  tending  to  show  that 
he  might  probably  have  left  his  room 
in  a  state  of  delirium  and  continued  in 
euch  condition  to  the  instant  of  the 
fatal  act,  not  realizing  what  he  was 
doing.  There  is  evidence  tending  to 
prove  that  when  he  ran  to  the  side  of 
the  shaft  he  was  in  a  state  of  alarm  and 
was  fleeing  from  some  fancied  danger, 
and  that  a  person  in  a  delirious  state  is 
liable  to  do  things  dangerous  to  his 
own  life  or  the  lives  of  others  under  a 
misapprehension  of  what  he  is  doing 


and  its  consequences.  On  the  whole, 
there  is  room  for  belief  that  when  Mr. 
Cady  went  over  the  railing  he  did  not 
appreciate  that  he  was  going  into  the 
shaft;  that  he  was  not  conscious  of  the 
nature  of  his  act  and  did  not  have  in 
mind  any  idea  of  self-destruction 
which,  as  we  have  seen,  is  essential  to 
suicide." 

'  Supreme  Tent  v.  King,  142  Fed.  678 
(the  insured,  a  policeman  in  need  of 
money,  shot  himself). 

2  Union  Cas.  &  Surety  Co.  v.  Mondy, 
18  Colo.  App.  39.5,  401,  71  Pac.  677; 
Gale  V.  Mut.  Aid  &  Ace.  A.ssn.,  66  Hun, 
600,  21  N.  Y.  Supp.  893.  Formerly 
the  exception  was  often  worded  "any 
bodily  injury  of  which  there  shall  be 
no  external  or  visible  signs  upon  the 


3  Union  Cafi.  &  Surety  Co.  v.  Mondy, 
18  Colo.  App.  ,395,  71  Pac.  677.  In 
Barry  v.  U.  S.  Mut.  Ace.  Assn.,  23 
Fed.  712,  aff'd  131  U.  S.  100,  9  S.  Ct. 
7.55,  33  L.  Ed.  60,  the  jury  was  charged, 
"  'Visible  signs  of  injury,'  within  the 
meaning  of  this  policy,  are  not  to  be 
confined  to  broken  limbs  or  bruises 
on  the  surface  of  the  body.  There  may 
be  other  external  indications  or  evi- 
dences of  an  injury.  Complaint  of 
pain  is  not  a  visible  sign  because  pain 
you  cannot  see.  Complaint  of  internal 
soreness  is  not  such  a  sign,  for  that  you 
cannot  see.      But  if  the   internal   in- 


jury produces,  for  example,  a  pale  and 
sickly  look  in  the  face;  if  it  causes 
vomiting  and  retching  or  bloody  and 
unnatural  discharges  from  the  bowels; 
if,  in  short,  it  sends  forth  to  the  ob- 
servation of  the  eye,  in  the  struggle 
of  nature,  any  sign  of  injury — then 
those  are  external  and  visible  signs, 
provided  they  are  the  direct  result  of 
the  injury." 

*  Sun  Ace.  Assn.  v.  Olson,  59  III. 
App.  217. 

5  Horsfall  v.  Pac.  Mut.  L.  Ins.  Co., 
32  Wash.  132,  72  Pac.  1028,  63  L.  R. 
A.  42.5,  98  Am.  St.  R.  846. 


VISIBLE   MARK   OF   INJURY   REQUIRED 


561 


tion  or  decline,^  may  be  visible  signs  of  internal  injury  sufficient  to 
satisfy  the  policy  requirement.^ 

Indeed,  the  court  will  not  limit  the  phrase  "visible  signs"  to  evi- 
dence which  may  be  perceived  by  the  sense  of  sight.  On  the  contrary, 
it  is  held  sufficient  if  the  indication  of  the  injury  affects  the  .sense 
of  touch  or  smell.  Thus  where  a  physician  was  able  to  feel  the  effect 
of  a  sprain  in  the  muscles,  though  nothing  unusual  was  visible  to 
the  eye.^  So  also  the  emanation  of  illuminating  gas  from  the  body 
of  the  insured  as  the  effect  of  artificial  respiration  was  held  to  be 
"an  external  and  visible  mark  upon  the  body.'"*  Nor  is  it  essential 
that  the  sign  of  injury  should  appear  upon  the  outside  surface  of  the 
body;  ^  or  that  it  should  become  visible  immediately  after  the  acci- 
dent; ^  or  that  it  should  remain  visible  until  ensuing  death.'' 


body  of  the  insured."  Under  that 
wording  the  exception  does  not  apply 
to  fatal  injuries,  Eggenbcrger  v.  Guar- 
anty Mut.  Ace.  Assn.,  41  Fed.  172, 
Bernays  v.  U.  S.  Mut.  Ace.  Assn.,  45 
Fed.  455;  Paul  v.  Travelers'  Ins.  Co., 
112  N.  Y.  472,  20  N.  E.  347,  .3  L.  R.  A. 
443,  8  Am.  St.  R.  758;  McGlinchey  v. 
Fidelity  &  Cas.  Co.,  80  Me.  251,  14 
Atl.  13,  6  Am.  St.  R.  190  (the  dead 
body  itself  "is  external  and  visible 
sign  enough  that  the  injury  was  re- 
ceived"). In  consequence  of  these 
rulings  the  clause  was  extended  by 
the  companies  as  recited  in  tlje  head- 
ing of  this  section;  but  the  New  York 
court  says  of  the  later  phraseology: 
"The  defendant  evidently  intended 
that  this  clause  should  exclude  lia- 
bility in  case  of  death  from  accident, 
unless  there  is  a  visible  mark  upon 
the  body.  It  is  very  doubtful  whether 
the  scope  of  the  language  will  be  so 
extended  in  any  event,"  Root  v.  Lon- 
don Guarantee  &  Ace.  Co.,  92  App. 
Div.  578,  582,  86  N.  Y.  Supp.  1055, 
aff'd  without  opinion,  180  N.  Y.  527. 

1  Root  v.  London  Guaratiiy  &  Ace. 
Co.,  92  App.  Div.  578,  86  N.  Y.  Supp. 
1055. 

2  Thayer  v.  Standard  Life  &  Ace. 
his.  Co.,_  68  N.  H.  577,  41  Atl.  182 
("any  visible  evidence"  "which  may 
appear  within  a  reasonable  time"  is 
sufficient;  it  "need  not  be  a  bruise, 
contusion,  laceration,  or  broken  limb"); 
Whitehouse  v.  Travelers'  Ins.  Co.,  29 
Fed.  Cas.  1038  (bleeding  from  nose); 
Summers  v.  Fidelity  Mut.  Aid  Assn., 
84  Mo.  App.  605  (hernia);  Wehle  v. 
U.  S.  Mut.  Ace.  A.^sn.,  153  N.  Y.  116, 
47  N.  E.  35,  60  Am.  St.  R.  598  (water 

36 


running  out  of  the  mouth  as  proof  of 
drowning);  U.  S.  Mut.  Ace.  Assn.  v. 
Neuman,  84  Va.  52,  3  S.  E.  805 
(bloody  froth  exuding  from  mouth 
as  proof  of  asphyxiation). 

3  Gale  V.  Mtd.  Aid  &  Ace.  Assn.,  66 
Hun,  600,  21  N.  Y.  Supp.  893  ("the 
evidence  of  the  injury  must  be  ex- 
ternal, objective,  but  it  must  not 
necessarily  be  visible  to  the  eye.  .  .  . 
An  object  that  is  noticeable,  apparent 
to  the  touch  may  be  said  to  be  visi- 
ble"); U.  S.  Cas.  Co.  V.  Hanson.  20 
Colo  App.  .393,  79  Pac.  170  (sufficient, 
if  perceptible  to  a  digital  examination). 

•*  Menneiley  v.  Employers'  Liability 
A.sur.  Corp.,  148  N.  Y.  596.  43  N.  E. 
54,  31  L.  R.  A.  686,  51  Am.  St.  R.  716. 
"Direct  and  positive"  proof  of  in- 
jury does  not  necessarily  mean  by 
eyewitnesses.  Peck  v.  Equitable  Ace. 
Assn.,  52  Hun  (N.  Y.),  255.  The  char- 
acter of  the  injury  itself  may  furnish 
evidence  sufficiently  "  direct  and  posi- 
tive "  where  there  is  no  presumption 
that  the  injury  was  intentionally  in- 
flicted. Travelers'  Ins.  Co.  v.  MeConkey, 
127  U.  S.  661,  8  S.  Ct.  1360,  32  L. 
Ed.  308;  Utter  v.  Travelers'  Ins.  Co., 
65  Mich.  545,  32  N.  W.  812,  8  Am.  St. 
R.  913. 

5  Union  Cas.  &  Sureti/  Co.  v.  Mondy, 
18  Colo.  App.  395,  71  Pac.  677;  Free- 
man v.  Mercantile  Ace.  Assn.,  156 
Mass.  351,  30  N.  E.  1013  (redness  of 
one  lobe  of  the  brain  revealed  by 
autopsy). 

6  Pennington  v.  Pacific  Mut.  Life 
Ins.  Co.,  85  Iowa,  468,  52  N.  W.  482, 
39  Am.  St.  R.  306. 

7  Bernays  v.  U,  S.  Mid.  Ace.  Assn., 
45  Fed.  455. 


562  MEANING  AND   LEGAL  EFFECT  OF   ACCIDENT   POLICY 

In  a  Massachusetts  case,  the  liability  of  the  insured,  by  the  terms 
of  the  policy,  was  limited  in  case  of  drowning,  where  the  facts  were 
not  shown  by  eyewitnesses  or  the  body  recovered.  Five  minutes 
before  drowning  the  insured  was  seen  rowing  in  a  canoe  which  could 
easily  be  overturned.  It  was  held  that  the  facts  were  shown  by  eye- 
witnesses within  the  meaning  of  the  policy. ^ 

A  study  of  the  many  cases  cited  in  this  section  brings  conviction 
that  the  courts  are  not  inclined  to  pay  much  respect  to  provisions  of 
the  policy  which  purport  to  control  or  modify  the  laws  of  evidence.^ 
In  case  of  any  disputed  material  fact  the  question  whether  the  injury 
was  accidental  must  go  to  the  jury.^  The  jury,  too,  is  apt  to  decide 
the  fact  upon  the  testimony  before  them,  without  much  regard  to 
any  rule  of  evidence  that  may  be  specified  in  the  contract. 

§396.  Accidents  Caused  by  Disease,  etc.,  Excepted. — "Nor  acci- 
dent, nor  death,  nor  loss  of  limb,  or  sight,  nor  disability,  resulting 
wholly  or  partly,  directly  or  indirectly  from  any  of  the  following  causes, 
or  while  so  engaged  or  affected:  Disease  or  bodily  infirmity,  hernia,  fits, 
vertigo,  sleepwalking,  medical  or  surgical  treatment,  except  amputa- 
tions necessitated  solely  by  injuries  and  made  within  ninety  days  after 
accident."  ^ 

The  distinction  between  an  accident  and  a  disease,  within  the  mean- 
ing of  the  accident  policy,  is  sometimes  very  subtle.  Thus  it  has 
been  held  that  blood  poisoning,  the  result  of  a  chafing  or  rubbing  of 
the  toe  by  a  new  shoe,  is  an  accident.^  But  on  the  other  hand,  typhoid 
fever  contracted  by  the  unintentional  swallowing  of  noxious  germs 
hidden  in  water  is  undoubtedly  a  disease.  And  it  is  also  held  that 
a  malignant  pustule  caused  by  putrid  matter  accidentally  brought 
into  contact  with  the  lip  must  be  classified  as  a  disease.^ 

'  Lewis  V.  Brotherhood  Ace.  Co.,  194  the  system  through  wounds  in  profes- 

Mass.  1,  79  N.  E.  802.  sional  operations;  held,  that  septic  mat- 

"^  Reynolds  v.  Equitable  Ace.  Assoc,  ter  introduced  into  the  eye  of  a  dentist 

59  Hun  (N.  Y.),  13,  15  ("The  evidence  from   the   mouth   of   a   patient   while 

was  sufficient  within  the  rules  of  law,  coughing,    which    did    not    bruise    or 

and  the  language  of  the  policy  ['direct  penetrate    the    membrane,    was    not 

and  affirmative']  cannot  be  construed  within  the  policy,  Fidelity  &  Cas.  Co. 

to  take  the  case  out  of  the  ordinary  v.  Thornpson,  154  Fed.  484. 

rules  of  evidence").  ^Western      Commercial       Travelers' 

3Mfrs.  Ace.  Ind.  Co.  v.  Dorgan,  58  Assn.  v.  Smith,  85  Fed.  401,  56  U    S 

Fed.  945,  7  C.  C.  A.  581,  16  U.  S.  App.  App.  393,  29  C.  C.  A.  223,  40  L  R.  A. 

290,  22  L.  R.  A.  620.  653.     So  also  of  blood  poisoning  from 

*  This  and  similar  clauses  are  omitted  cutting  a  corn,  Nax  v.  Travelers'  Ins. 

from  the  policy  of  health  insurance.  Co.,  130  Fed.  985. 

An    accident    policy    insured    against  « Bacon   v.    Association,   123   N.   Y. 

blood  )  oisoning  sustained  by  surgeons  304,  25  N.  E.  399,  9  L.  R.  A.  617,  20 

through  septic  mnttor  introduced  into  Am,  St.  R.  748.     Same  holding  where 


ACCIDENT   CAUSED   BY   DISEASE,    ETC.,    EXCEPTED  563 

The  authorities,  however,  are  well  agreed  that  within  the  fair 
meaning  of  this  exception  a  slight  or  temporary  disorder  or  derange- 
ment of  the  functions  is  not  to  be  regarded  as  a  disease  or  bodily 
infirmity.^  For  example,  fainting  due  to  an  attack  of  indigestion 
does  not  amount  to  a  bodily  infirmity;  and  in  a  case  much  cited  the 
court  concluded  that  drowning,  though  it  happened  in  conjunction 
with  such  a  temporary  bodily  condition  of  fainting  or  unconscious- 
ness, was  to  be  regarded  the  sole  cause  of  the  death,  unless  it  were 
shown  that  death  would  have  resulted  without  the  presence  of  the 
water.^  Indeed,  the  rule  is  firmly  established  that  to  constitute  "a 
disease"  or  "bodily  infirmity"  there  must  be  a  material  impairment 
of  the  bodily  powers,  an  actual  inroad  upon  the  physical  health/"^ 
An  accident  policy,  before  a  federal  court  for  construction,  covered 
death  which  "resulted  proximately  and  solely  from  accidental  causes, 
and  excluded  death  resulting  wholly  or  partly,  directly  or  indirectly, 
from  disease,  in  any  form,  either  as  a  cause  or  effect;"  the  court 
allowed  the  claimant  to  recover  on  the  policy  although  the  insured 
went  to  the  platform  of  a  railway  car  to  vomit,  and  in  consequence 
sustained  a  fatal  fall.'* 

Earner's  policy  issued  by  the  defendant  contained  two  kinds  of 
insurance,  one  against  accidents  and  the  other  against  disease. 
The  part  relating  to  accidents  provided  insurance,  "For  loss  through 

personal,   bodily    injuries  caused  solely  through  accidents 

due  wholly  to  violent  means  external  to  the  body  ....  and  such 
as  are  not  caused  or  contributed  to  by  any  deformity  or  disease." 
Another  provision  of  the  policy  declared:  "All  cases  of  ...  .  con- 
tact with  poison,  or  with  poisonous  or  infectious  substances,  are 
covered  only  under  the  health  provisions  of  this  policy."  While 
Farner  was  sitting  in  front  of  his  hotel  holding  a  little  dog  on  his 
lap,  someone  came  behind  him  and  pinched  the  dog's  tail,  where- 
upon the  dog  bit  the  insured  on  his  thumb,  from  the  poisonous 

an  unintentional  fretting  of  the  proas  ^  Black  v.  Travelers'  Ins.  Co.,  121 
muscle  from  use  of  a  bicycle,  resulted  Fed.  732,  58  C.  C.  A.  14  (previous  gun- 
in  appendicitis,  Appel  v.  ^Et7ia  Life  shot  wound  fracturing  skull  does  not 
Ins.  Co.,  86  App.  Div.  83,  83  N.  Y.  necessarily  result  in  subsequent  state 
Supp.  238,  aff'd  180  N.  Y.  514,  72  of  "bodily  infirmity. "  Question  for 
N.  E.  1139.  jury). 

1  Meyer  v.  Fidelity  &  Cas.  Co.,  96  *  Preferred  Ace.  Ins.  Co.  v.  Mmr, 
Iowa,  378,  65  N.  W.  328,  59  Am.  St.  126  Fed.  926,  61  C.  C.  A.  456  ("Muir's 
R.  374  (staggering  before  fall  not  sickness  at  the  stomach  was  a  mere 
attributed  to  "fits  or  vertigo;"  com-  coincidence.  It  was  the  occasion  of 
pany  liable).  his  going  upon   the   platform   of  the 

2  Mfrs.  Ace.  Indem.  Co.  v.  Dorgan,  car,  but  it  was  net  a  cause  of  death 
58  Fed.  945,  7  C.  C.  A.  581,  16  U.  S.  within  the  fair  meaning  of  this  pro- 
App.  290,  22  L.  R.  A.  620.  vision"). 


564  MEANING    AND    LEGAL    EFFECT    (JF    ACCIDENT    POLICY 

effects  of  which,  two  weeks  thereafter,  he  died.  The  court  held  that 
within  the  meaning  of  the  pohcy  it  was  a  case  of  accident  and  not 
of  disease  or  poisoning,  and  that  the  bite  was  to  be  regarded  as  the 
sole  cause  of  the  death. ^ 

Bailey's  policy  excepted  injuries  resulting  directly  or  indirectly 
from  any  disease.  The  insured  was  a  physician,  and,  being  in  a  some- 
what emaciated  and  exhausted  condition  due  to  a  prior  injury,  in 
order  to  gain  stimulus  during  his  drive  on  the  highway  in  the  coun- 
try, he  dissolved  a  tablet  of  morphia,  as  he  had  been  accustomed 
to  do,  and  injected  it  into  his  leg  with  a  hypodermic  needle,  while 
sitting  in  his  carriage.  Owing  to  the  disease  of  cellulitis,  or  blood 
poisoning,  which  shortly  resulted.  Dr.  Bailey  was  disabled  for  about 
twenty  weeks.  On  appeal,  the  judgment  of  nonsuit  was  reversed 
and  it  was  held  that  the  question  whether  the  injuries  complained 
of  were  sustained  through  external,  violent,  and  accidental  means 
should  have  been  submitted  to  the  jury.- 

But  if  the  insured  is  afflicted  with  a  real  disease  at  the  time  of  the 
accident,  except  for  which  the  accident  would  not  have  resulted  in 
death,  or  if  such  disease  aggravates  the  injury,  there"^  can  be  no  re- 
covery under  such  a  clause.^  Many  instances  may  be  cited  by  way  of 
illustration.  Thus  if  in  consequence  of  delirium  accompanying  a 
feverish  condition,  due  to  grippe,  an  insured  patient  falls  out  of  the 
window  of  a  hospital,  his  insurer  is  relieved  from  liability;  ^  or  if,  in 
consequence  of  a  fit  or  vertigo,  the  insured  falls  into  the  water  and  is 
drowned;  ^  or  if  a  tumor  at  the  base  of  the  brain  is  the  cause  of  his 
fall  and  injury;  ^  or  if,  because  of  an  apoplectic  stroke  and  consequent 
fall,  the  insured  is  run  over  and  crushed  to  death  by  an  approaching 

*  Farner  v.  MasH.  Mut.   Ace.  Assn.  3  Western       Commercial       Travelers' 

(Pa.  St.,  1907),  67  Atl.  927.    The  court  Assn.  v.  Smith,  85  Fed.  401,  29  C.  C.  A. 

said:  "The  insured  died  from  the  bite  223,  40  L.  R.  A.  653  (causing  or  aggra- 

of  a  dog — certainly  an  accident,  not  a  vating  injury);   Commercial   Travelers' 

disease.    The  proximate  cause  of  death  Mut.   Ace.   Assn.   v.   Fulton,   79   Fed. 

was  the  bite,  and  the  way  in  which  it  423,  24  C.  C.  A.  654,  45  U.   S.  App! 

operated  to  produce  death,  whether  by  578;  Binder  v.  National  Masonic  Ace. 

hemorrhage  or  lockjaw  or  blood  poison-  Assyi.,  127    Iowa,  25,   102    N.  W.  190 

ing,  was  a  medical  detail  which  did  not  (causing  or  aggravating  injury);  AUtna 

affect  the  material  fact  of  death   re-  Life  Ins.   Co.   v.  Dorney,  68  Ohio  St. 

suiting  from   the   accident."     Similar  151,  67  N.  E.  254. 

ruling  in  Kenny  v.  Bankers'  Ace.  Ins.  «  Carr  v.  Pacific  Mut.  Life  Ins.  Co., 

Co.    (Iowa,    1907).    113    N.    W.    566.  100  Mo.  App.  602,  75  S.  W.  180. 

Same  doctrine  applied  to  the  fire  policy  s  Mfrs.  Ace.  &  Indem.  Co.  v.  Dorgan, 

where  fire  is  the  risk  and  explosion  the  58  Fed.  945,  7  C.  C.  A.  581,  22  L.  R.  A. 

exception,    German    Am.    Ins.    Co.    v.  620. 

>H^.?/moM  (Colo.,  1908),94  Pac.  27.    And  «  Sharpe    v.    Commercial    Travelers' 

see  §§  278,  .386,  supra.  Mut.  Ace.  Assn.,  139  Ind.  92,  37  N.  E. 

2  Bailey  v.  Interstate  Cos.  Co.,  8  App.  353. 
Div.  127,  aff'd  158  N.  Y.  723. 


ACCIDENT   CAUSED    BY    DISEASE,    ETC.,    EXCEPTED 


565 


wagon;  ^  or  if  sleepwalking,^  or  hernia,^  or  heart  disease,''  is  a  con- 
tributing cause  of  the  injury,  the  exception  is  operative  and  the  in- 
surer is  exonerated. 

The  court,  however,  justly  attaches  great  importance  to  the  word 
"causes"  in  this  exception,  and  if  it  appear  that  a  disease  in  no 
sense  contributes  to  the  accident,  but  is  either  wholly  independent 
of  it,  or  simply  a  result  of  it,  a  strained  construction,  if  need  be,  will 
be  put  upon  the  other  restrictive  words  of  the  clause  in  order  to 
grant  indemnity  for  an  injury  purely  accidental.^ 

For  example,  in  a  Colorado  case  the  claimant  was  allowed  to  pre- 
vail against  the  insurer  under  the  form  of  policy  recited  at  the  head 
of  this  section,  notwithstanding  the  phrase  "or  while  so  engaged  or 
afflicted,"  where  the  accident  resulted  in  hernia  followed  by  an  un- 
successful surgical  operation,  in  turn  causing  fatal  peritonitis.^  Like- 
wise the  Texas  court,  under  the  same  form  of  policy,  refused  to 
release  the  company  where  an  injury  purely  accidental  caused 
rheumatism  which  in  turn  caused  death. ^  And  the  same  court 
allowed  a  recovery  where,  though  the  insured  was  diseased  at  the 
time,  the  accident  did  not  result  wholly  or  partly,  directly  or  in- 
directly, from  the  disease.^ 


1  Clark  V.  Employers'  Liahility  Assur. 
Co.,  72  Vt.  458,  48  Atl.  639  (apoplexy 
the  remote  cause,  but  covered  by  the 
word  "indirectly").  Compare  Win- 
spear  v.  Accident  Ins.  Co.,  L.  R.,  6 
Q.  B.  D.  42;  Laurence  v.  Accidentallrus. 
Co.,  L.R.,  7  Q.  B.  D.  216. 

2  Travelers'  Ins.  Co.  v.  Harvey,  82 
Va.  949,  5  S.  E.  553. 

3  Miner  v.  Travelers'  his.  Co. ,  3 
Ohio  Dec.  289,  2  Ohio  N.  P.  103. 

*  National  Masonic  Ace.  Assn.  v. 
Shryock,  73  Fed.  774,  20  C.  C.  A.  3, 
36  U.  S.  App.  658. 

5  To  hold  otherwise  would  well-nigh 
annul  the  contract,  /Etna  Life  Ins.  Co,. 
V.  Hicks,  23  Tex.  Civ.  App.  74,  56 
S.  W.  87.    See  cases  §  387,  supra. 

6  Travelers'  Ins.  Co.  v.  Murray,  16 
Colo.  296,  26  Pac.  774,  25  Am.  St.  R. 
267.  Substantially  the  same  ruling 
was  made  in  Thornton  v.  Travelers' 
Ins.  Co.,  116  Ga.  121,  42  S.  E.  287,  94 
Am.  St.  R.  99;  Miner  v.  Travelers' 
Ins.  Co.,  3  Ohio  Dec.  289,  2  Ohio  N.  P. 
103.  Also  held  in  following  cases  that 
the  insurer  is  not  relieved  if  hernia  is 
caused  by  the  accident,  all  the  courts 
enforcing  the  view  that  the  natural 
results  are  to  be  attributed  to  the  one 
sole  proximate  cause,  to  wit,  the  acci- 


dental injury,  Atlantic  Ace.  Assn.  v. 
Alexander,  104  Ga.  709,  30  S.  E.  939, 
42  L.  R.  A.  188;  Summers  v.  Fidelity 
Mid.  Aid  Assn.,  84  Mo.  App.  605. 
And  where  a  resulting  disease  is  a  mere 
incident  of  the  accident  the  latter  is 
construed  to  be  the  sole  cause,  Jiroch 
V.  Travelers'  Ins.  Co.,  145  Mich.  375, 
108  N.  W.  728  (diabetes);  Cary  v. 
Preferred  Ace.  Ins.  Co.,  127  Wis.  67 
(blood  poisoning).  Otherwise  where 
the  excepted  cause,  a  disease,  existed 
at  time  of  accident,  White  v.  Stand., 
etc.,  Ins.  Co.,  95  Minn.  77,  103  N.  W. 
735.  And  prior  disease  though  still 
existing  if  not  a  contributory  cause 
does  not  exonerate  the  company. 
Commercial  Travelers'  Mut.  Ace.  Assn. 
V.  Fulton,  79  Fed.  423,  24  CCA.  6.54; 
Thornton  v.  Travelers'  Ins.  Co.,  116 
Ga.  121,  42  S.  E.  287,  94  Am.  St.  R.  99. 
.&na  L.  Ins.  Co.  v.  Hicks,  23  Tex.  Civ. 
App.  74,  56  S.  W.  87. 

7  Travelers'  Ins.  Co.  v.  Hunter,  30 
Tex.  Civ.  App.  489,  70  S.  W.  798. 

» ^tna  Life  Ins.  Co.  v.  Hicis,  23 
Tex.  Civ.  App.  74,  56  S.  W.  87.  As 
between  disease  and  accident  as  a 
cause  for  the  injury  it  is  said  that  there 
is  no  legal  presumption,  Taylor  v. 
General  Ace.  Assuf.  Corp.,  208  Pa   St 


566  MEANING   AND   LEGAL   EFFECT   OF   ACCIDENT   POLICY 

§  397.  Intoxication  or  Narcotics. — It  is  reasonable  to  require  that 

the  insured,  wPien  exposed  to  hazards,  shall  not  be  culpable  of  volun- 
tarily putting  himself  under  disturbing  or  exciting  influences,  likely 
to  affect  his  judgment,  or  calculated  to  interfere  with  the  full  exercise 
of  his  faculties  in  their  normal  condition.  Lack  of  sobriety  brings 
peril,  as  shown  by  a  case  in  New  York  The  insured,  one  of  the 
guests  at  a  convivial  dinner,  had  been  drinking  freely  of  stimulants. 
One  of  his  boon  companions  present  boasted  of  his  skill  in  the  use  of 
his  pistol  and  declared  his  aljility  to  shoot  the  insured  in  the  ear 
without  hurting  him  elsewhere.  Presumably  owing  to  his  condition, 
the  insured  made  no  objection  to  the  experiment.  He  was  shot  in 
the  forehead  and  killed  by  his  friend.^     The  policy  w^as  avoided. 

Habits  of  intemperance  in  general,  however,  will  not  bring  the 
insured  within  this  particular  exception  unless  he  was  intoxicated, 
or  under  the  influence  of  narcotics,  at  the  time  of  the  accident;' 
but,  to  make  the  exception  operative,  it  need  not  appear  that  the 
contemporaneous  intoxication  caused  the  injury  or  contributed  to  it.^ 

§  398.  Poison,  etc. — Voluntary  or  involuntary  taking  of  poison  or 
contact  with  poisonous  substances. 

This  exception  covers  the  accidental  taking  of  poison;  ^  but  many 

439,  57  All.  830  (insured  fell  going  up  to    intoxication,    see    Standard    L.    & 

office  steps);   Keefer   v.    Pacific   Mut.  Ace.  Ins.  Co.  v.  Jones,  94  Ala.  434,  10 

Life  Ins.  Co.,  201  Pa.  St.  448,  455,  51  So.  530;  Prader  v.  Nat.  Masonic  Ace. 

Atl.  366,  88  Am.  St.  R.  822.     But  it  Is  Assn.,  95  Iowa,  149,  63  N.  W.  601; 

also  held  that  the  burden  is  on    the  Campbell   v.   Fidel.    &    Cas.    Co.,   109 

company  to  show  that  disease,  being  Ky.  661,  60  S.  W.  492;  Conadean  v. 

a  specified  exception,  is  the  cause  of  Am.  Ace.  Co.,  95  Ky.  280,  25  S.  W.  6; 

the    injury,    McCarthy    v.     Travelers'  Travelers'  Ins.  Co.  v.  Harvey,  82  Va. 

Ins.  Co.,  15  Fed.  Cas.  1254;  Fetter  v.  949,  5  S.  E.  553  (insured  fell  out  of  a 

Fidelity  &  Cas.  Co.,  174  Mo.  256,  73  window  of  a  boarding  house).     As  to 

S.  W.  592,  61  L.  R.  A.  459,  97  Am.  St.  what  questions  are  pertinent  on  the 

R.  560.    And  so,  generally,  the  burden  trial  to  prove  a  condition  of  sobriety 

is  on  the  defendant  to  show  that  the  or  drunkenness,  see  Cook  v.  Standard 

injury  falls  within  any  exception  relied  Life  &  Ace.  Ins.  Co.,  84  Mich.  12,  47 

upon  for  defense,  Antho7iy  v.  Mercantile  N,  W.  568.    And  compare  §  355.    Bur- 

Mut.  Ace.  Assn.,  162  Mass.  354, 38  N.  E.  den  is  on  the  company  to  allege,  Jojies 

73, 26  L.  R.  A.  406, 44  Am.  St.  R.  367.  v.  U.  S.  Mnt.  Ace.  Assn.,  92  Iowa,  652 

1  Shader  v.  Assurance  Co.,  66  N.  Y.  61  N.  W.  485  (not  on  plaintiff  to  nega- 
441,  23  Am.  Rep.  65.  tive);  and  establish  intoxication  as  a 

2  Prader  v.  National  Masonic  Ace.  defense,  Sutherland  v.  Standard  L.  & 
As.m.,  95  Iowa,  149,  63  N.  W.  601;  Ace.  Ins.  Co..  87  Iowa,  505,  54  N.  W. 
Covadeau  v.  Am.  Aec.  Co.,  95  Ky.2S0,  453  (insured  fell  from  street  car); 
25  S.  W.  6;  Flint  v.  Travelers'  Ins.  Co.  Hester  v.  Fidel.  &  Cas.  Co  ,  69  Mo 
(Tex.  Civ.  App.),  43  S.  W.  1079,  death  App.  186.  The  issue  is  usually  for  the 
from  hypodermic  dose  of  morphine  ad-  jury;  Follis  v.  U.  S.  Mnt.  Ace.  A.'isn., 
ministered  by  physician  to  relie\^e  de-  94  Iowa,  435,  62  N.  W.  807,  28  L.  R.  A. 
iiriuni  tremens.  78,  58  Am.  St.  R.  408;  DeVan  v.  Com- 

^  Standard  L.  &  .ice.  his.  Co.  V.Jones,  mercial  Travelers' .Mut   Ace   As,m    92 

94  Ala.  434,  10  So.  530;  Shader  v.  Rail-  Hun,  256,  36  N.  Y.  Supp    931    aflf'd 

way  Pass.  Assur.   Co.,  66  N.  Y.  441,  157  N.  Y.  690,  51  N.  E.  1090. 

23  Am.  Rep.  65.    As  to  what  amounta  *  Early  v.  Standard  Life  &  A.  Co., 


POISON,    ETC. 


567 


courts  agree  that  if  the  exception  contain  only  the  phrase  "taking 
poison,"  the  insurer  will  not  be  relieved  from  liability  in  the  case  of  a 
purely  accidental  taking,  since  the  word  "taking"  points  to  a  con- 
scious act.^  And  the  New  York  court  was  of  opinion  that  the  phrase 
"injury  caused  by  poison"  does  not  apply  to  death  from  a  malignant 
pustule  resulting  from  contact  between  an  abraded  part  of  the  lips 
and  a  putrid  animal  substance,  but  that  poison  in  its  meaning  is 
confined  to  the  internal  reception  of  a  poisonous  substance.  It 
was,  however,  held,  that  the  pustule  in  question  was  a  disease,  and 
so  the  case  was  brought  within  another  exception  in  favor  of  the 
company.2 

113  Mich.  58,  71  N.  W.  200;  67  Am. 
St.  R.  445  (aqua  ammonia  swallowed 
by  mistake;  held,  "death  by  poison" 
and  company  not  liable);  Meehan  v. 
Traders'  &  Travelers'  Ace.  Co..  34 
Misc.  158,  68  N.  Y.  Supp.  821  (carbolic 
acid  thrown  by  a  woman  in  the  face 
of  the  insured);  Hill  v.  Hartford  Ace. 
Ins.  Co.,  22  Hun,  187;  Pollock  v.  U.  S. 
Mut.  Ace.  Assn.,  102  Pa.  St.  234,  48 
Am.  Rep.  204;  Maryland  Cas.  Co.  v. 
Hudgins,  97  Tex.  124,  76  S.  W.  745,  64 
L.  R.  A.  349  ("poison  or  anything 
accidentally,  or  otherwise,  taken,  ad- 
ministered, absorbed,  or  inhaled;" 
the  insured  was  poisoned  by  eating 
one  or  two  bad  oysters,  company  not 
liable);  Preferred  Ace.  Ins.  Co.  v. 
Robinson  (Fla.),  33  So.  1005  (same 
form  of  policy  as  the  last;  held,  ex- 
ception covered  inflammation  of  eye 
caused  by  contact  with  poisonous  ivy); 
Kennedy  v.  /Etna.  Life  Ins.  Co.,  31 
Tex.  Civ.  App.  .509,  72  S.  W.  602  (over- 
dose of  poisonous  medicine  instead  of 
doctor's  prescription);  Kasten  v.  Inter- 
state Cos.  Co.,  99  Wis.  73,  74  N.  W. 
534,  40  L.  R.  A.  651  (septic  poisoning 
from  dentist's  cotton);  Cole  v.  Ace. 
Ins.  Co.,  61  L.  T.  N.  S.  227.  Other 
courts  take  a  different  view  of  like 
clauses  and  hold,  despite  them,  that 
if  a  poisoning  is  purely  accidental,  the 
company  is  not  to  be  relieved  by  the 
exception,  Dezell  v.  Fidelity  &  Cas. 
Co.,  176  Mo.  253,  75  S.  W.  1102.  And 
see  Metropolitan  Ace.  Assn.  v.  Froiland, 
161  111.  30,  43  N.  E.  766,  52  Am.  St. 
R.  359;  Traveler.'^'  Ins.  Co.  v.  Dunlap, 
160  111.  642,  43  N.  E.  765.  52  Am.  St. 
R.  355;  Miller  v.  Fidelit'i  &  Cas.  Co., 
97  Fed.  836.  The  word  "absorbed" 
used  in  such  a  clause  means  imbibing 
through   the   pores,   Fidelity   &    Cas. 


Co.  V.  Waterman,  161  111.  632,  44  N.  E. 
283,  32  L.  R.  A.  654. 

I  Miller  v.  Fidelity  &  Cas.  Co.,  97 
Fed.  836;  Travelers'  Ins.  Co.  v.  Dun- 
lap,  160  111.  642,  43  N.  E.  765,  52  Am. 
St.  R.  355;  Healey  v.  Mut.  Ace.  Assn., 
133  111.  557,  25  N.  E.  52,  9  L.  R.  A. 
371,  23  Am.  St.  R.  637;  Dezell  v.  Fi- 
delity (fc  Cas.  Co.,  176  Mo.  253,  75 
S.  W.  1102;  Panl  v.  Travelers'  Ins.  Co., 
112  N.  Y.  472,  20  N.  E.  347,  8  Am.  St. 
R.  758,  3  L.  R.  A.  443,  Contra,  Richard- 
son V.  Travelers'  Ins.  Co.,  46  Fed.  843 
and  Preferred.  Ace.  Ins.  Co.  v.  Robin- 
son (Fla.),  33  So.  1005.  A  federal 
court  decided  that  the  exception  of 
"death  resulting  from  poison"  covered 
an  accidental  drinking  of  poison  by 
the  insured  in  the  belief  that  it  was 
harmless,  although  the  phrase  "taking 
poison"  might  involve  the  notion  of  a 
conscious  act,  MeGlothcr  v.  Prov.  Mid. 
Ace.  Co.,  89  Fed.  685,  32  C.  C.  A.  318; 
Westmoreland  v.  Preferred  Ace.  Ins.  Co., 
75  Fed.  244  (chloroform  administered 
by  physician).  The  exception  does 
not  cover  the  poisonous  bite  or  sting 
of  an  insect,  Omberg  v.  Assoc,  101  Ky. 
303,  40  S.  W.  909,  72  Am.  St.  R.  413. 
Whether  coal  gas  is  a  poison  was  left  to 
the  jury,  U.  S.  Mut.  Ace.  Assn.  v.  New- 
man,84Ya.  52, 3S.E.  805.  The  burden 
is  on  the  company  to  show  that  the 
death  is  within  the  exception.  Travel- 
ers' Protective  Ass?i.  v.  Gilbert,  111 
Fed.  269,  49  C.  C.  A.  309,  55  L.  R.  A. 
538. 

^  Bacon  v.  U.  S.  Mut.  Ace.  Assn., 
123  N.  Y.  304,  25  N.  E.  .399,  9  L.  R.  A. 
617,  20  Am.  St.  R.  748.  The  Penn- 
sylvania court  suggests  that  poison 
must  be  taken  internally  to  come 
within  the  exception.  Preferred  Mut. 
Ace.  Assn.  V.  Beidelman,  1  Monag. 
(Pa.)  481. 


568  MEANING    AND    LEGAL    EFFPXT    OF    ACCIDENT    POLICY 

Garvey,  a  railroad  yard  conductor,  had  an  accident  policy  which 
provided  that  in  the  event  of  injuries  or  disabiUty  resulting  directly 
or  indirectly,  accidentally  or  otherwise  from  poison  or  infection, 
the  compan3''s  liability  should  be  limited  to  one-tenth  of  the  amount 
otherwise  designated.  While  walking  up  an  incline  leading  to  the 
platform  of  a  freight  house,  the  insured  slipped  and  fell,  sustaining 
a  severe  and  lacerated  wound  about  two  inches  long  on  the  left  leg 
below  the  knee.  About  a  week  later  septic  or  p3'emic  symptoms 
appeared.  The  insured  was  totally  disabled  for  about  four  months. 
This  prolonged  disability  was  caused  by  the  infectious  condition  of 
the  wound  which  retarded  the  process  of  healing.  The  court  con- 
cluded that  the  disability  did  not  result  from  the  poison,  but  the 
poison  from  the  injury  and  sustained  the  plaintiff's  judgment  for 
the  larger  amount.^ 

§399.  Inhaling  of  Gas  or  Vapor. — The  words  "inhaling  gas" 
have  been  construed  as  applying  to  an  intentional,  voluntary  or  con- 
scious act  of  the  insured.'  Hence  in  some  policies  the  exception  has 
been  further  strengthened  by  the  addition  of  the  words  "voluntary 
or  involuntary."  ^  Where  the  insured  died  from  the  effects  of  chloro- 
form intentionally  administered  it  was  held  that  the  exception  was 
operative  to  release  the  company.'' 

The  strong  leaning  of  the  courts  towards  a  construction  of  the 
terms  of  the  accident  policy  which  shall  favor  the  insured  is  strik- 
ingly illustrated  by  an  Illinois  case.  The  policy  provided:  "This 
insurance  shall  not  cover  ....  death  ....  resulting,  wholly  or 
partly,  directly  or  indirectly  ....  from  any  gas  or  vapor."  The 
insured  met  his  death  by  reason  of  the  unconscious  and  involuntary 
inhaling  of  escaping  gas  at  night  while  he  was  asleep.  The  court 
allowed  the  plaintiff  to  recover  on  the  policy,  interpreting  the 
clause  to  refer  to  a    conscious  inhaling  of    gas  in  connection  with 

^Garvey  v.  Phoenix  P.  Ace.  Ins.  Co.,  A.  29,  46  L.  R.  A.  450;  Paul  v   Trav- 

123  App.  Div.  (N.  Y.)  106  ("conditions  elers'  Ins.  Co.,  112   N.  Y.  472,  8  Am. 

which  inevitably  or  ordinarily  are  the  St.  R.  758,  20  N.  E.  347,  21  N.  Y.  St. 

effect  of  a  disability  covered   by  the  R.    624.   3   L.    R.    A.    443;    Pickett   v. 

policy   are    also    within    its    compass,  Pacific  Mid.  Life  Ins.  Co., 'l44  Pa.  St. 

otherwise  the  contract  is  a  sham").  79,  22  Atl.  871,  13  L.  R.  A.  661,  27 

^Menneilley  v.  Emvloyer.'i'  Liability  Am.    St.    R.    618    (insured    descended 

Assur.  Corp.,  148  N.  Y.  596,  43  N.  E.  into  a  well  to  repair  a  pump  and  was 

54,  31  L.  R.  A.  86,  and  see  Fidelity  &  asphixiated.     Company     held     liable. 

Cas.  Co.  V    Waterynan,  161  111.  632,  44  "To  inhale  gas  reouiros  an  act  of  voli- 

N.-E.  283,  32  L.  R.  A.  654.  tion").     But  see  Richardson  v.  Travel- 

3"Breathmg  gas"   involuntarily  is  ers' /ns.  Co.,  46  Fed.  843. 

not  "inhaling  gas,"  Fidelity   &   Cas.  *  Westmoreland  v.  Preferred  Ace.  Ins. 

Co.  V.  Loivenstein,  97  Fed.  17,  38  C.  C.  Co.,  75  Fed.  244 


INTEN  TJ  ON  A  L    1  \  .1 U  RIES 


569 


medical   or   surgical    treatment,  or   dentist's   work,   or   a  suicidal 
purpose.^ 

§  400.  Duelling  or  Fighting. — This  exception  should  not  be  con- 
strued as  meaning  that  the  insured  shall  submit  without  resistance 
to  whatever  violence  may  be  offered  him."  But  if  the  insured  is 
injured  in  consequence  of  his  voluntary  engagement  in  a  fight  the 
insurer  will  be  exonerated  from  liabilitv  under  this  clause.^ 


§  401.  Intentional  Injuries. — Intentional  injuries  inflicted  by  the 
insured  or  any  other  'person. 

The  insurance  contract  being  one  of  highest  good  faith  '*  the  in- 
sured would  not,  even  in  the  absence  of  such  a  clause,  be  permitted 
to  take  advantage  of  injuries  designedly  inflicted  by  himself. 

Intention,  which  is  a  question  of  fact  to  be  inferred  from  the  act 
itself  and  surrounding  circumstances,  is  an  essential  element  under 
this  clause  to  relieve  the  insurer  from  liability.^  But  though  the 
injury  may  be  wholly  accidental  to  the  insured  in  that  it  was  unfore- 
seen by  him,  yet,  if  intended  by  his  assailant,  there  can  be  no  recovery 
under  this  exception.®  And  such  an  intent  exists  where  a  person  has 
intentionally  struck  the  insured  in  order  to  protect  himself  though 
without  intent  to  inflict  the  particular  injury  sustained.' 


'  Travelers'  Ins.  Co.  v.  Ayers,  217 
111.  390,  75  N.  E.^  506  (citing  many 
Illinois  and  Nev/  York  cases). 

2  Coles  V.  Nem  York  Cas.  Co.,  87  App. 
Div.  41 ,  83  N.  Y.  Supp.  1063  (insured 
bartender  forcibly  ejected  a  noisy  per- 
son, insurer  liable);  Robinson  v.  Uni- 
ted States  Mxd.  Ace.  A.ssn.,  68  Fed.  825. 
Compare  U.  S.  Mid.  Ace.  Assn.  v.  Mil- 
lard, 43  111.  App.  148;  Gresham  v.  Equi- 
table Ace.  Ins.  Co.,  87  Ga.  497,  13  S.  E. 
752,  13  L.  R.  A.  838,  27  Am.  St.  R.  263, 
where  both  parties  voluntarily  en- 
gaged in  combat.  See  clause  under 
life  policy  as  to  violation  of  law,  §§  371, 
372,  supra. 

3  Jones  V.  [/.  S.  Mut.  Aec.  Ass.,  92 
Iowa,  653,  61  N.  W.  485  (insured  was 
shot  in  the  street  in  connection  with  a 
quarrel  about  a  hack  after  a  visit  by 
himself  and  a  companion  to  a  house  of 
ill  fame). 

*  §  94,  supra. 

^Stevens  v.  Continental  Cas.  Co.,  12 
N.  D.  463,  97  N.  W.  862  (in  case  of 
death  from  gunshot  presumption  is  of 
accident.  Burden  of  proof  is  on  de- 
fendant; many  ca.ses  cited).    See  Rail- 


n-ay  Officials  &  E.  A.  Assn.  v.  Drum- 
mond,  56  Neb.  235,  76  N.  W.  562 
(shooting  was  by  a  robber  and  jury 
was  allowed  to  find  for  plaintiff).  The 
Kentucky  court  construed  "injuries" 
as  meaning  non-fatal  injuries  only. 
Am.  Aec.  Co.  v.  Carson,  99  Ky.  441, 
36  S.  W.  169,  34  L.  R.  A.  301,  59  Am. 
St.  R.  473. 

^Orr  v.  Travelers'  Ins.  Co.,  120  Ala. 
647,  24  So.  997;  Fischer  v.  Travelers' 
Ins.  Co.,  77  Cal.  246,  19  Pac.  425,  1  L. 
R.  A.  572;  Travelers'  Ins.  Co.  v.  McCar- 
thy, 15  Colo.  351,  25  Pac.  713,  11  L.  R. 
A.  297,  22  Am.  St.  R.  410;  De  Graw  v. 
National  Ace.  Soc.,51  Hun,  142,  4  N.  Y. 
Supp.  912;  Butero  v.  Travelers'  Ace. 
Ins.  Co.,  96  Wis.  536,  71  S.  W.  811,  65 
Am.  St.  R.  61. 

T  Fidelity  &  Cas.  Co.  v.  Smith,  31 
Tex.  Civ.  App.  Ill,  71  S.  W.  391.^  And 
see  Matson  v.  Travelers'  Ins.  Co.,  93 
Me.  469,  45  Atl.  518,  74  Am.  St.  R.  368; 
Richards  v.  Travelers'  Ins.  Co.,  89  Cal. 
170,  26  Pac.  762,  23  Am.  St.  R.  455 
(held,  construing  a  clause  differently 
worded,  that  company  was  not  re- 
lieved unless  assailant  "designed"  not 


OIO  MEANING    AND    LEGAL    EPTECT    OF    ACCIDENT    POLICY 

By  virtue  of  this  exception,  if  the  insured  is  murdered  the  com- 
pany is  relieved  from  Uability.'  And  if  a  constable  is  intentionally 
injured  in  making  an  arrest  or  serving  a  process  this  exception  in  his 
accident  policy  becomes  applicable.^  But  the  act  of  an  insane  person 
incapable  of  forming  a  rational  intent  will  not  fall  within  the  restric- 
tion.^ 

Weidner  had  an  accident  policy  which  provided  that  only  a  limited 
j)roportion  should  be  paid  in  case  of  intentional  injuries  at  the 
iiands  of  another,  except  in  case  of  assaults  for  the  sole  purpose  of 
robbery.  Weidner  and  his  wife  had  spent  the  morning  with  Wotta- 
shek  at  Hale's  Corners.  In  the  afternoon  Wottashek  started  to 
drive  them  and  others  back  to  Milwaukee  in  an  express  wagon. 
As  they  approached  the  toll  gate  they  passed  two  men,  one  of  whom, 
named  Tinger,  asked  for  a  ride,  and  handed  to  one  of  the  party  a 
toll  ticket.  There  were  seven  in  the  wagon  and  the  request  was 
i-efused.  Tinger  demanded  his  ticket  back.  It  had  been  returned 
to  the  other  man  who  said,  "Come  on!  come  on!  I  got  the  ticket." 
Tinger  then  took  from  the  floor  of  the  wagon  a  pair  of  rubber  boots 
belonging  to  Weidner  and  started  off.  Weidner  got  out  of  the 
wagon,  exclaiming,  "See  here!  those  are  my  boots,  and  I  want  them 
back."  Thereupon  Tinger,  retaining  possession  of  the  boots,  struck 
Weidner,  knocked  him  down  and  while  lying  on  the  ground,  he  hit 
him  with  the  heel  of  the  rubber  boot  breaking  his  glasses  and  his 
nose.  Septic  poisoning  and  death  resulted  a  few  days  later  from  the 
wound.  The  trial  court  granted  a  nonsuit  in  the  action  on  the 
policy,  deciding  as  matter  of  law  that  robbery  was  not  the  sole  pur- 
only  to  strike  but  to  kill).  The  use  of  Marceau  v.  Travelers'  Im.  Co.,  101 
a  deadly  weapon  may  raise  a  presump-  Cal.  338,  35  Pac.  856,  36  Pac.  813. 
tion  of  intent  to  kill,  Travelers'  Ins.  Intoxication  may  prevent  "  an  intent  " 
Co.  V.  Wyness,  107  Ga.  584,  34  S.  E.  Northwestern  Benev.  Sac  v  Dudleii 
113.  27  Ind.  App.  327,  61  N.  E.  207.     Fi- 

1  Travelers  Ins.  Co.  v.  McConkey,  nancial  condition  of  insured  bears 
127  U.  S.  661,  8  S.  Ct.  1360,  32  L.  Ed.  upon  issue  whether  injuries  were  self- 
308;  Jarnajin  v.  Travelers'  Protec.  inflicted,  Mna  L.  Ins  Co  v  Vandecnr 
.IssTi.  133  Fed,  892,  66  C.  C.  A.  622;  86  Fed.  282,  30  C.  C.-A.'  48;  Lonq  v' 
Iravelers  Protective  Assn.  v.  Langholz,  Travelers'  Ins.  Co  113  Iowa  259  85 
f  ^'i-J\'^^  ^'  ^ri.  ^-  P^;  52  U.  S.  N.  W.  24.  Burden  is  on  company  to 
App  543;  Ginj  v.  Iravelers'  Ins.  Co.,  plead,  Cobnrn  v.  Trnvelers'  Ins  'Co 
74  Minn.  505,  77  N.  W.  291.  But  see  145  Mass.  226,  13  N  E  604-  Stevens  v 
Arri.  Ace  Co.  v.  Carson,  99  Kv.  441,  Contmentnl  Cos.  Co  ,  12  N  D  463  97 
34  LR.  A.  301  59  Am,  St.  R.  473.  N.  W.  862;  and  prove  the  exception, 

^Grimes  V.  Fidelity  &  Cas.  Co.,  33       LampHn    v.    Travelers'    Im.     Co      11 
Tex.  Civ.  App.  275,  76  S.  W.  811;  Mil-      Colo.  App.  249,  52  Pac    1040      If  the 
cl  '"^V./,"^^''^^"^*  ^^^-  C'^'-.  17  Pa.  Super.       evidence    is    conflietins    the    question 
;  n,  m        ,      ,  T.  whether  the  injury  was  intentional  or 

JLorCeyv.  Iravelers'  Protection  Assn.,  accidental  is  for  jury,  Giddenkirch  v 
105  Fed.  854,  46  C.  C.  A.  278;  Berger  v.  U.  S.  Mnt.  Ace.  Assn.,  5  N  Y  Supp' 
Pacific  Mid.  L.  Ins.  Co.,  88  Fed.  241;      428 


IN    VIOLATION    OF    LAW  571 

pose  of  the  assault.  But  the  Supreme  Court  by  a  divided  vote  re- 
versed, holding  that  the  question  whether  the  assault  was  com- 
mitted for  the  sole  purpose  of  robbery  was  one  of  fact  for  the  jury.^ 

§  402.  Voluntary  Overexertion. — Under  the  exception  the  in- 
sured does  not  lose  his  right  to  recover  unless  there  has  been  a  con- 
scious or  intentional  overexertion  or  a  reckless  disregard  of  conse- 
quences.^ 

§  403.  In  Violation  of  Law. — This  exception  was  considered,  in 
dealing  with  the  provisions  of  the  life  policy. •"' 

The  Nebraska  court  holds  that  by  collecting  dues  on  the  policy 
with  knowledge  of  the  facts,  the  insurer  waives  forfeiture  caused  by 
conviction  for  the  crime  of  felony.^  Further  illustration  may  be 
useful. 

Duran's  accident  policy  provided  that  the  insurance  did  not 
cover  an  injury  resulting  wholly  or  partly,  directly  or  indirectly, 
from  violation  of  law.  The  Vermont  statutes  prohibited  hunting, 
and  unnecessary  traveling,  on  Sunday.  On  a  Sunday,  however, 
Duran  set  out  from  Burlington  for  Colchester  on  a  hunting  expedi- 
tion. After  hunting,  he  started  for  home  in  the  afternoon  through 
a  field,  and  while  crossing  frozen  plowed  ground  to  get  to  the  high- 
way, his  foot  slipped  upon  the  frozen  ground  and  his  knee  was 
injured.  The  court  held  that  the  injury  was  caused  by  the  viola- 
tion of  law  and  that  the  risk  was  one  not  assumed  by  the  company.^ 


^Weidner  v.  Standard  Life  &   Ace.  Reynolds  v.   Equitable  Ace.  Assn.,  59 

7ns.  Co.,  130  Wis.  10,  110  N.  W.  246.  Hun,  13,  1  N.  Y.  Supp.  738,  aff'd   121 

The  majority  of  the  court  gave  to  the  N.  Y.  649,  24  N.  E.  1091.    Indulging  in 

word  "robbery"  a  somewhat  popuhir  a   bicycle   race    raises    a   question   for 

meaning.     The  dissenting  judges  were  jury  under  this  clause,  Keeffe  v.  Na~ 

of  opinion  that  there  was  no  robbery,  tional  Ace.  Soc,  4  App.  Div.  392,  38 

since  the  only  violence  followed,  and  N.  Y.  Supp.  854.    The  issue  is  usually 

did  not  precede  or  accompany,  the  tak-  for   the   jury,    McKinley   v.    Banlers' 

ing  of  the  boots.  Ace.  Ins.  Co.,  106  Iowa,  81,  75  N.  W. 

2  Rvsfin  V.  Standard  Life  &  A.  A.  L  670.     But  a  verdict  was  held  against 

Co..  58  Neb.  792,  76  N.  W.  712,  46  L.  the  weight  of  evidence  in  Metropolitan 

B.  A.  253.  76  Am.  St.  R.  136  (lifting  a  Ace.  Assn.  v.  Bristol,  69  111.  App.  492. 

300  pound  weight  is  not  within  the  ex-  3  §§  371,  372,  supra.     Burden  is  on 

cention   as   matter   of   law).      Raising  insurer    to    establish     the    exception, 

heavv  machinery  in  regular  course  of  Smith  v.  Mtva  Life  Ins.  Co.,  115  Iowa, 

employment  is  no  offense  under  this  217,  88  N.  AV.  368. 

clause'.  Standard  L.  &  Ace   Ivs.  Co.  v.  *  Prinple  v.  Modern  Woodmen  (Neb, 

Schmaltz,  66  Ark.  588,  53  S.  W.  49,  74  1907),  113  N.  W.  231. 

Am.  St.  R.   112.     Great  exertion  de-  ^  Duran  v .  Standard  Life  &  Ace.  Ins. 

manded   in  time  of  danger  does  not  Co.,  63  Vt.  437,  22  Atl.  530,  13  L.  R.  A. 

come    within    this    restrictive    clause,  637,  25  Am.  St.  R.  773.    Compare  case 


572  MEANING    ANM)    LEGAL    EFFKCT    OF    ACC'IDKVJ'    POLICY 

Walters'  certificate  was  to  be  null  and  void  if  he  "should  die  in 
consequence  of  a  duel  or  in  consequence  of  the  violation  or  at- 
tempted violation  of  the  laws  of  the  State,  or  of  the  United  States." 
Walters  and  Spinks,  his  brother-in-law,  lived  together  in  Kentucky. 
Walters  had  been  absent  from  home  for  a  few  days,  and,  upon  his 
return,  went  into  the  room  occupied  by  Spinks  and  his  family, 
where  Walters'  wife  was.  The  wife  of  Spinks  was  sick  in  bed  at  the 
time,  and  his  little  baby  was  in  a  dying  condition.  After  leaving 
the  room  Walters  and  his  wife  returned  shortly  with  their  own 
baby.  A  few  words — not  of  serious  import — passed  between  the 
men,  and  immediately  they  began  shooting  at  each  other,  it  ap- 
pearing by  the  weight  of  evidence  that  Spinks,  as  the  aggressor, 
fired  the  first  shot.  In  a  few  moments  both  men  were  lying  dead 
in  the  hall  adjacent  to  the  room.  The  court  sustained  the  verdict 
in  favor  of  the  insured,  holding  that  there  was  no  sufficient  evidence 
to  support  the  theory  of  a  duel,  and  that  the  insured  was  not  guilty 
of  a  violation  of  law,  if  he  used  his  pistol  in  the  belief  that  Spinks 
was  then  about  to  take  his  life,  or  inflict  upon  him  great  bodily 
harm.^ 

In  an  interesting  case  of  first  impression  in  Illinois,  recently 
reported,  Kilpatrick,  the  insured,  was  convicted  and  executed  for 
murder.  The  defendant  had  issued  to  him  a  policy  of  life  insurance 
which  contained  no  special  stipulation  relating  to  loss  of  life  in 
violation  of  law  or  at  the  hands  of  justice.  In  an  action  on  the 
policy  the  defendant  contended,  that  considerations  of  public  policy 
precluded  a  recovery,  and  the  courts  l)elow  so  decided.  But  the 
Supreme  Court  reversed,  holding  tliat  the  argument  was  erroneous 
and  rested  upon  the  same  grounds  that  were  urged  centuries  ago  in 
support  of  the  now  obsolete  doctrine  of  attainder  and  corruption 
of  blood.2 

§  404.  Voluntary  Exposure  to  Unnecessary  Danger. — A  con- 
spicuous object  of  insurance  is  to  provide  indemnity  for  misfortunes 
resulting  from  inadvertent  heedlessness.^     By  the  insertion  of  an 

when    hunting    expedition    was    con-  hausen,   209   111.   277,  70   N.   E.   567; 

eluded     and     company     held     liable,  Shellenberger  v.  Ransom,  41  Neb.  641, 

Prader  v.  Accident  Assn.,  95  Iowa,  149,  59  N.  W.  935,  25  L.  R.  A.  564;  Ou-ens  v. 

63  N   W,  601.  Owens,   100  N.  C.  240,  6  S.  E.   794; 

>  Woodmen  of  the  World  v.  Walters  Carpenter's  Estate,  170  Pa.  St   203,  32 

(Ky.,  1907),  99  S.  W.  930.  Atl.  637,  29  L.  R.  A.  145,  50  Am.  St.  R. 

2  Collins  V.  Met.  Life  Ins.  Co.   (IW.  765. 

Dec,    1907),    83    N.    E.    542,    citing,  ^  Providence  Life  Ins.  &  Inv.  Co.  v. 

among  other  cases,  Knights  v.  Menk-  Martin,  32  Md.  310,  313;  Lehman  v. 


VOLUNTARY    EXPOSURE   TO    UNNECESSARY    DANGER 


573 


exception  covering  injury  or  death  caused  by  voluntary  exposure  to 
unnecessary  danger/  insurers  against  accidental  injuries  have  at- 
tempted to  impose  a  very  considerable  restriction  upon  their  general 
liability.  While  this  provision  of  the  contract  may  not  be  altogether 
ignored,  the  courts  do  not  construe  the  words  as  meaning  the  same 
as  contributory  negligence  in  the  law  of  torts."  They  hold  rathei 
that  there  must  be  a  conscious  and  intentional  exposure  to  unneces- 
sary danger,  that  is  to  say,  that  the  insured  must  he  aware  of  such 
danger  and  purposely  assume  the  risk  of  it,  before  the  insurer  can 
invoke  the  aid  of  this  clause  in  defense.^  Self-defense,  apparently 
necessary,  is  justifiable.^    An  act  is  not  unnecessary  if  porformed  in 


Great  Eastern  Cas.  &  Ins.  Co.,  7  App. 
Div.  424,  39  N.  Y.  Supp.  912,  aff'd  158 
N.  Y.  689,  53  N.  E.  1127. 

1  Sometimes  "due  diligence  for  per- 
sonal safety  or  protection  "  is  required, 
§  408,  infra. 

2  Travelers'  Ins.  Co.  v.  Randolph, 
78  Fed.  754,  24  C.  C.  A.  305,  47  U.  S. 
App.  260  (cases  cited);  Keene  \  ,  Xeir 
Eng.  Mut.  Ace.  Assn.,  164  Mas:j.  170, 
41  N.  E.  203;  Wilson  v.  Xortkwestern 
Mut.  Ace.  Assn.,  53  Minn.  470,  ^79,  55 
N.  W.  626  (distinction  explained). 
But  see  Sargent  v.  Central  Ace.  Ins. 
Co.,  112  Wis.  29,  87  N.  W.  790,  88  Am. 
St.  R.  946;  Shevlin  v.  Association,  94 
Wis.  180,  68  N.  W.  866,  36  L.  R.  A.  52. 

3  Ashenfelter  v.  Emploiiers'  Liability 
Assur.  Corp.,  87  Fed.  682,  31  C.  C.  A. 
193  (contractor  suffocated  by  burning 
bucket  of  tar,  company  liable);  Col- 
lins V.  Ban! ers'  Ace.  Ins.  Co.,  96  Iowa. 
216,  64  N.  W.  778,  ,59  Am.  St.  R.  307 
(fishing  in  the  dark  from  boat  without 
knowledge  of  snags,  company  liable); 
Irwin  V.  Phoenix  Ace.,  etc.,  Assn.,  127 
Mich.  630,  86  N.  W.  1036  (not  mere 
thoughtlessness  meant,  as  where  mason 
stepped  on  unsupported  end  of  scaf- 
fold), Thomas  v.  Masons'  Fraternal 
Ace.  Assn.,  64  App.  Div.  22,  71  N.  Y. 
Supp.  692  (gun  standing  against  a 
tree  slipped  and  injured  hunter.  The 
court  said,  "voluntary  exposure  in 
such  cases  is  not  mere  carelessness  and 
recklessness,  but  implies  that  the  per- 
son accused  has  knowingly  and  with- 
out reason  put  himself  in  the  way  of 
some  danger  from  which  injury  is 
likely  to  occur").  It  is  not  enough 
that  the  act  of  the  insured  is  voluntary; 
there  must  also  be  knowledge  of  the 
danger,  Equitable  Ace.  Ins.  Co.  v.  Os- 
bom,  90  Ala.  201,  9  So.  869,  13  L.  R.  A. 


267.  The  words  are  not  to  be  strictly 
and  literally  interpreted  as  including 
every  exposure  avoidable  by  exercise 
of  due  care,  U.  S.  Mut.  Ace.  Assn.  v. 
Hubbell,  .56  Ohio  St.  516,  47  N.  E.  544, 
40  L.  R.  A.  453  (traveling  salesman 
drowned  in  a  slough  which  he  delib- 
erately attempted  to  cross,  company 
held  liable).  Some  courts  hold  even 
that  the  negligence  must  be  "gross 
and  wanton"  to  avail  the  company, 
Johnson  v.  London  G.  &  Ace.  Co.,  115 
Mich.  86,  72  N.  W.  1115,  40  L.  R.  A. 
440,  09  Am.  St.  R.  549  (insured  at- 
tempted to  drive  a  bull  out  of  a  pas- 
ture, company  liable);  So  it  is  said, 
there  must  be  knowledge  of  the  special 
danger;  thus,  a  warning  that  it  is  dan- 
gerous in  general  to  sleep  over  a  steam- 
boat boiler  is  not  knowledge  of  danger 
from  steam  escaping  from  safetv  v^alve 
of  boiler,  Travelers'  Ins.  Co.  v.  Clark, 
109  Ky.  .350,  59  S.  W.  7,  95  Am.  St. 
R.  374.  But  knowledge  of  danger  does 
not  mean  knowledge  that  injury  will 
surely  ensue.  Carpenter  v.  American 
Ace.  Co.,  46  S.  C.  541,  24  S.  E.  500  (in- 
sured handled  a  kicking  mule.  The 
court  said:  "If  the  unnecessary  danger 
be  such  that  a  reasonable,  prudent 
man  ought  to  have  known  it,  and  he 
voluntarily  goes  into  it,  it  would  be  a 
voluntary  exposure  to  unnecessary 
danger").  And  see  De  Loij  v.  Travel- 
ers' Ins.  Co.,  171  Pa.  St.  1,  32  Atl.  1108, 
50  Am.  St.  R.  787  (intention  may  be 
determined  in  some  cases  from  acts 
and  conduct  and  if  a  man  acts  so  care- 
lessly as  to  show  an  utter  disregard  of  a 
known  danger  he  then  may  be  said  to 
voluntarily  expose  himself  within  the 
meaning  of  the  provision). 

4  Campbell  v.   Fidelitif   &   Cas.   Co., 
109  Ky.  661,  60  S.  W.  492. 


571 


MEANING    AND    LEGAL    EFFECT    OF    ACCIDENT    POLICY 


the  line  of  duty.^  Attempts  to  save  life  are  not  prohibited,  for  ex< 
ample,  to  prevent  a  person  from  being  run  over;  '  or  to  rescue  wrecked 
sailors.^ 

The  exception  as  worded  above,  however,  is  applicable  to  a  death 
or  injury  where  the  insured  is  struck  by  a  railroad  train  while  need- 
lessly running  along  the  track  at  night."*  But  if  the  insured  is  injured 
when  boarding  a  slowly  moving  street  car  a  question  for  the  jury  is 
presented.^  And  whether  going  upon  or  crossing  a  railroad  track  is 
within  the  exception,  it  is  usually  for  the  jury  to  say.^ 


1  Pacific  Mut.  Life  Ins.  Co.  v.  Snow- 
den,  58  Fed.  342,  7  C.  C.  A.  264  (cattle 
dealer  in  transit),  Rustin  v.  Ins.  Co., 
58  Neb.  792,  79  N.  W.  712,  46  L.  R.  A. 
253,  76  Am.  St.  R.  136  (proprietor  of 
pleasure  resort  to  test  veracity  of  one 
of  his  performers  raised  a  very  heavy 
dumb-bell,  company  liable);  Freeman 
V.  Travelers'  Ins.  Co.,  144  Mass.  572,  12 
N.  E.  372  (employee  of  railroad  com- 
pany shoveling  snow);  Bateman  v. 
Travelers'  Ins.  Co.,  110  Mo.  App.  443, 
85  S.  W.  128  (flagman  involuntarily 
went  to  sleep);  Jamison  v.  Continen- 
tal Cos.  Co.,  104  Mo.  App.  306,  78  S. 
W.  812  (flagman  fell  asleep,  question 
for  jury,  many  cases  reviewed);  Coles  v. 
A^.  Y.  Cas.  Co.,  87  App.  Div.  41,  83 
N.  Y.  Supp.  1063  (bartender  ejected  a 
noisy  customer);  Richards  v.  Travelers' 
Ins.  Co.  18  S.  D.  287,  100  N.  W.  428 
67  L.  R.  A.  175  ("cattle  dealer  visiting 
yards").  When  the  insured  was  en- 
gaged regularly  in  electric  light  repair- 
ing, and  fell  from  a  tree  while  so  en- 
gaged it  was  not  voluntary  exposure  to 
unnecessary  danger.  Continental  Cas. 
Co.  V.  Jennings  (Tex.  Civ.  App.,  1907), 
99  S.  W.  423. 

2  William's  v.  U.  S.  Mid.  Ace.  Assn., 
82  Hun,  268,  31  N.  Y.  Supp.  343,  aff'd 
147  N.  Y.  693,  4 J  N.  E.  726. 

3  Tucker  V.  Ins.  Co.,  50  Hun,  50, 
4  N.  Y.  Supp.  505,  aff'd  121  N.  Y.  718. 

*  T utile  V.  Travelers'  Ins.  Co.,  134 
Mass.  175,  45  Am.  Rep.  316.  And  see 
Cornish  v.  Accident  Co.,L.  R.,  23  Q.  B. 
D.  453.  The  exception  applies  in 
favor  of  the  company  when  the  in- 
sured is  injured  sitting  on  tlie  track. 
Metropolitan  Ace.  Assn.  v.  Taylor,  71 
111.  App.  132.  (But  compare  Fidelity  & 
Cas.  Co.  v.  Chambers,  93  Va.  138,  24 
S.  E.  393,  40  L.  R.  A.  432.)  Or  cross- 
ing at  an  improoer  place,  Glass  v. 
Masons'  Fraternal  Ace.  Assn.,  112  Fed. 
495.  Or  attempting  to  cross  between 
freight   cars,  Willard  v.  Masonic  Eq. 


Ace.  Assn.,  169  Mass.  288,  47  N.  E. 
1006,  61  Am.  St.  R.  285.  Or  climbing 
over  car  couplings.  Bean  v.  Employers' 
L.  Assur.  Corp.,  50  Mo.  App.  459.  Or 
where  the  insured  is  injured  by  jump- 
ing from  a  moving  train  after  passing 
station,  Smith  v.  Preferred  Mid.  Ace. 
Assn.,  104  Mich.  634,  02  N.  W.  990; 
Shevlin  v.  American  Mid.  A.  Assn.,  94 
Wis.  180,  68  N.  W.  860,  36  L.  R.  A.  52 
(rapidly  moving  car,  gross  negligence). 
Or  needlessly  attempting  to  pass  over 
a  dangerous  trestle  on  a  dark  night, 
Travelers'  Ins.  Co.  v.  Jones,  80  Ga.  541, 
7  S.  E.  83,  12  Am.  St.  R.  270;  Follis  v. 
Assoc,  94  Iowa,  435,  62  N.  W.  807, 
28  L.  R.  A.  78,  .58  Am.  St.  R.  408.  Or 
needlessly  making  a  passageway  of  a 
blocked  railroad  yard  and  boarding  a 
moving  freight  train.  Alter  v.  Union 
Cas.  &  Surety  Co.,  108  Mo.  App.  169, 
83  S.  W.  276.  Or  steeplechase  riding,. 
Smith  V.  .Etna  Life  Ins.  Co.,  185  Mass. 
74,  69  N.  E.  10.59,  64  L.  R.  A.  117,  102 
Am.  St.  R.  326.  Or  lowering  himself 
from  a  window  to  escape  a  policeman, 
Shaffer  v.  Travelers'  Ins.  Co.,  31  111. 
App.  112,  22  N.  E.  589.  Or  pulling  a 
loaded,  cocked  gun  through  a  fence, 
Sargent  v.  Central  Ace.  Ins. Co.,  112  Wis. 
29,  87  N.  W.  796,  88  Am.  St.  R.  946. 

^  Johanns  v.  Nat.  Ace.  Soc,  16  App. 
Div.  104,  45  N.  Y.  Supp.  117. 

6  Keene  v.  New  Eng.  Mid.  Ace.  Assn., 
161  Mass.  149,  36  N.  E.  891;  Meadows 
V.  Pac.  Mut.  Life  Ins.  Co.,  129  Mo. 
76,  31  S.  W.  578,  50  Am.  St.  R.  427; 
Duncan  v.  Preferred  Mut.  Ace.  Assn., 
59  N.  Y.  Super.  145, 13  N.  Y.  Supp.  020, 
aff'd  129  N.  Y.  622,  29  N.  E.  1029. 
So  of  bicycle  racing,  Keeffe  v.  Nat.  Ace. 
Soc,  4  App.  Div.  392,  38  N.  Y.  Sunp. 
854.  And  of  engaging  in  a  fight, 
Campbell  v.  Fidel.  &  Cas.  Co.,  109 
Ky.  661,  60  S.  W.  492;  Collins  v.  Fidel. 
&  Cas.  Co.,  63  Mo.  App.  253;  Union 
Cas.  &  S.  Co.  v.  Ilarroll,  98  Tenn.  591, 
40  S.  W.  1080,  60  Am.  St.  R.  873. 


VOLUNTARY    EXPOSURE   TO    UNNECESSARY   DANGER  575 

An  insured  does  not,  however,  voluntarily  expose  himself  to  un- 
necessary danger  by  scaling  a  bank  with  a  loaded  gun;  '  or  by  clean- 
ing a  gun  in  ignorance  that  it  is  loaded;  -  or  by  crossing  a  railroad 
track  at  a  point  recognized  as  a  thoroughfare;  ^  or,  as  matter  of  law, 
by  standing  on  the  platform  or  steps  of  a  railroad  car;  ''  or  by  passing 
from  one  car  to  another  in  a  vestibuled  train. ^  And  where  the  in- 
sured stepped  from  a  train  through  a  hole  in  the  floor  of  a  bridge,  on 
which  the  train  had  temporarily  stopped,  the  assured  having  no 
reason  to  suspect  the  existence  of  the  hole,  the  court  held  that  the 
exception  did  not  apply  and  that  the  company  was  liable.^ 

Rebman's  policy  contained  the  provisions;  "Nor  does  this  con- 
tract extend  to,  nor  insure  against,  death  or  any  kind  of  disable- 
ment resulting  wholl}'  or  parth',  directly  or  indirectly,  from  voluntary' 
exposure  to  unnecessary  danger.  The  certificate  holder  is  required 
to  use  all  due  diligence  for  personal  safety  and  protection."  Reb- 
man  had  frequently  taken  the  1 :  02  p.  m.  train  for  Pittsburg  at  a 
station  near  his  home.  Shortly  before  the  accident,  orders  had  been 
given  not  to  take  on  passengers  at  this  station,  but  mail  was  re- 
ceived and  discharged  there.  Rebman  did  not  know  of  this  order. 
He  went  to  the  station  expecting  the  train  to  stop.  He  saw  it  ap- 
proach with  steam  off  and  at  reduced  speed.  While  it  was  running 
six  or  eight  miles  an  hour  and  passing  to  his  right,  he  seized  the 
handrail  at  the  front  platform  of  the  last  car  with  his  left  hand, 
placed  his  left  foot  on  the  lower  step,  and  was  in  the  act  of  raising 
his  body,  when  his  hold  was  broken,  and  he  fell  backward  and  was 
killed.  He  was  nearly  sixty-six  years  of  age,  weighed  184  pounds, 
and  had  an  umbrella  under  his  left  arm.  The  Pennsylvania  Su- 
preme Court  held  that  a  judgment  of  nonsuit  was  proper,  since  the 
insured  was  injured  by  exposing  himself  to  a  risk  not  covered  by 
the  policy.  ''' 

1  Cornivell  v.  Fraternal  Ace.  Assn..  A.  271,  91  Am.  St.  R.  153.  Especially 
6  N.  D.  201,  69  N.  W.  191,  40  L.  R.  A.  if  forced  out  of  the  car  by  the  crowd, 
437,  66  Am.  St.  R.  601.  Equitable  Ace   Ins.  Co.  v.  Sandijer,  12 

2  Union  Cas.  &  S.  Co.  v.  Goddard,  Kv.  L.  R.  797.  Or  by  illness,  Pre- 
25  Ky.  L.  R.  1035,  76  S.  W.  832;  jcrrcd  Ace.  Ins.  Co.  v.  Muir,  126  Fed. 
Miller  v.   American  Mut.  Ace.  Assn.,  926,  61  C.  C.  A.  456. 

92  Tenn.  167,  21  S.  W.  39,  20  L.  R.  A.  &  Robinson  v.  Societij,  132  Mich.  695. 

765.  94N.  W.  211. 

s  Payne    v.    Fraternal    Ace.    Assn.,  ^  Bur  hard    v.    Travelers'    Ins.    Co., 

119  Iowa,  342,  93  N.  W.  361;  Lehman  102   Pa.    St.   262,   48   Am.   Rep.   205; 

V.  Great  Eastern  Cas.  d"  /.  Co.,  7  App.  Scheiderer   v.    Travelers'    Ins.    Co.,   58 

Div.  (N.  Y.)  424,  39  N.  Y.  Sur^n.  912.  Wis.  13,  46  Am.  Rep.  618. 

*  Travelers'  Ins.  Co.  v.   Mitchell,  78  ^  Rehman  v.   General   Ace.    Ins.    Co. 

Fed.  754,  24  C.  C.  A.  305,  47  U.  S.  (Pa.    St.),   66   Atl.    859    ("the   words 

.\pp.2G0;  Smith  y.  .■^tna  Life  Ins.  Co..  'voluntary    exposure    to    unnecessary 

115  Iowa,  217,  88  N.  W.  368,  56  L.  R.  danger'  ....  have    been    construed 


576  MEANING    AND    LEGAL    EFFECT   OF    ACCIDENT    POLICY 

Ihe  Massachusetts  court  came  to  a  somewhat  similar  conclusion. 
The  defendant  had  issued  to  the  plaintiff,  Garcelon,  its  policy,  by 
the  terms  of  which  no  indemnity  was  to  be  paid  to  anyone  for  an 
injury  caused  wholly  or  in  part,  directly  or  indirectl}-,  by  voluntary 
exposure  to  unnecessary  danger,  or  for  any  injury  which  he  might 
have  averted  or  prevented  by  the  exercise  of  ordinar}'  care,  prudence 
and  foresight,  or  to  which  his  own  negligence  might  have  contributed. 
Garcelon  was  a  commercial  traveler  and  desired  to  go  by  a  freight 
train  from  one  town  in  Nebraska  to  another.  He  arrived  seasonably 
at  the  railroad  station,  found  the  freight  train  there,  and  put  his 
baggage  in  the  caboose  which  was  the  last  car  of  the  train.  Seeing 
that  the  train  was  not  ready  to  start,  he  got  off  the  caboose  and  went 
along  the  street  a  short  distance  away  from  the  train,  and  was  then 
returning  toward  the  train  when  it  suddenly  started.  Believing 
that  the  train  was  proceeding  on  its  journey  he  ran  up  to  it,  and, 
while  it  was  in  motion,  started  at  a  point  in  the  street  to  climb  up 
the  iron  ladder  upon  the  side  of  one  of  the  freight  cars,  intending 
to  reach  the  top  of  that  car,  and,  by  walking  upon  the  top  of  it  and 
the  following  cars  while  the  train  was  in  motion,  to  reach  the  caboose. 
As  he  grasped  one  of  the  rounds  of  the  ladder,  the  train,  which  was 
still  in  motion,  gave  a  sudden  and  violent  jerk,  and  he  was  thrown 
to  the  ground  in  such  a  manner  that  his  left  hand  and  arm  extended 
over  one  rail  of  the  track  and  the  car  wheel  passed  over  it  and  crushed 
it,  necessitating  its  amputation.  It  was  shown  that  commercial 
travelers  in  Nebraska  and  the  neighboring  states  are  accustomed 
to  take  the  same  risks  that  Garcelon  took.  The  court  on  appeal 
held  that  a  verdict  for  the  defendant  was  rightly  ordered  because 
upon  the  undisputed  facts  the  inference  was  unavoidable  that 
Garcelon's  negligence  contributed  to  the  injury  for  which  he  sued.^ 

In  another  case,  the  plaintiff's  recovery  was  affirmed  on  appeal. 
The  insured  was  employed  as  a  brakeman  on  a  freight  train  known 
as  "Extra  East."  His  train  was  backed  in  on  a  side-track  at  Balfour 
to  permit  train  No.  108,  which  was  due  there  soon,  to  pass.  It  was 
his  duty  to  close  the  switch  after  his  train  had  backed  upon  the 
side-track.  The  engineer  of  "Extra  East"  testified  that  it  was  the 
duty  of  the  insured  to  remain  on  the  engine  when  not  at  work, 
but  there  was  no  evidence  that  he  disobeyed  any  instructions  or 

by   this   court   and   generally,    as   an  '  Garcelon  v.   Commercial  Travelers' 

intentional  and  unnecessary  exposure      E.  Ace.  Assn.,  195  Mass.  531,  81  N.  E. 
to  danger  so  obvious  that  a  prudent      201  (citing  many  ca.ses). 
person  exercising  reasonable  foresight, 
would  have  avoided  it"). 


VOLUNTARY    EXPOSURE    TO    UNNECESSARY   DANGER  577 

rules  in  remaining  at  the  switch  some  thirty  or  forty  minutes  until 
the  arrival  of  train  No.  108.  This  train  in  some  way  passed  over 
both  his  feet  and  ankles,  causing  injuries  from  which  death  ensued. 
The  appellate  court  held  that  the  most  that  could  have  been  claimed 
by  defendant  was  that  there  was  sufficient  evidence  to  require  the 
submission  to  the  jury  of  the  question  as  to  whether  the  injury  re- 
sulted from  "unnecessary  exposure  to  danger  or  to  obvious  risk  of 
injury."  ^ 

Hunt's  policy  excepted  injuries  resulting  from  "voluntary  or  un- 
necessary exposure  to  danger."  Hunt,  thirty-six  years  of  age,  was 
engaged  in  playing  a  game  of  indoor  baseball  in  a  gymnasium  of 
the  Young  Men's  Christian  Association.  The  floor  was  slippery. 
Having  batted  the  ball,  he  overran  first  base  and,  as  he  was  in  the 
habit  of  doing  to  stop  himself,  he  put  out  his  foot  and  hand  against 
the  side  wall  of  the  gymnasium  which  was  between  six  and  ten  feet 
beyond  the  base.  In  doing  this  he  broke  his  ankle.  He  admitted 
that  he  could  have  stopped  short  of  the  wall  if  he  had  tried.  The 
court  below  directed  a  verdict  for  the  defendant.  The  judgment 
was  reversed  and  a  new  trial  ordered. - 

It  must  be  observed  that  while  in  ordinary  actions  for  personal 
injuries  the  burden  of  proof  rests  upon  the  plaintiff  to  prove  his  due 
care,  or  absence  of  contributory  negligence,  under  the  clauses  of  the 
accident  policy  the  burden  is  upon  the  insurance  company  to  show 
that  there  was  a  voluntary  exposure  to  unnecessary  danger  or  a 
lack  of  due  diligence.^ 

Where  the  exemption  was  worded  to  except  injuries  from  "ex- 
posure to  obvious  risk,"  the  English  court  gave  the  following  rule: 

*  Kephart    v.    Continental    Cas.    Co.  playing  baseball  in  the  usual  manner 

(N.  Dak.,  1908),  116  N.  W.  349.  is  repugnant  to  the  provisions  of  the 

2  Hunt  V.  U.  S.  Ace.  .4s.sn.,  146  Mich.  policy.    The  same  doctrine  would  seem 

.521,  109  N.  W.  1042.     The  court  sug-  to    be    applicable    to    football,    polo, 

gested  that  Hunt  might  have  slipped  swimming,  etc.,  but  some  policies  pro- 

on  the  floor  if  he  had  tried  to  stop  short  vide  for  a  lesser  indemnity  for  injuries 

of  the  wall,  and  held  that  the  clause  received  while  the  insured  is  engaged 

refers   to    cases   in   which   there    is    a  in    such    sports.      And    see    Keefe    v. 

realization  that  an  accident  will  in  all  National  Ace.  Soc,  4  App.  Div.  392,  38 

probability  result,  and  an  injury  fol-  N.  Y.  Supp.  854. 

low,  from  the  action  about  to  be  taken,  3  Garcelon  v.   Commercial   Travelers' 

and  that   the  danger  of  injury  must  E.  Ace.  Assn.,  195  Mass.  531,  81  N.  E. 

be  obvious,  citing  many  cases  among  201 ;  Xoyes  v.  Commercial  Travelers'  E. 

them,    Johnson   v.    Accident    Co.,    115  .4cc. /Issn.,  190  Mass.  171,  183.    Where 

Mich.  86,  40  L.  R.  A.  440,  where  it  was  a  party  has  the  burden  of  proving  a 

said:  "The  term  'voluntary  exposure  fact  by  the  testimony  of  witnesses  the 

to  unnecessary  danger'  ....  means  jury  cannot  often  be  required  by  the 

a   conscious   or  intentional   exposure,  court  to  say  that  the  fact  is  proved, 

involving  gross  or  wanton  negligence  Anthony  v.  Mercantile  Ace.  Assn.,  162 

on  the  part,  of  the  insured."     There  Mass.  354,  357. 
seems  to  have  been  no  contention  that 

37 


578 


MEANING    AND    LEGAL    EFFECT    OF    ACCIDENT    POLICY 


"Two  classes  of  accidents  are  excluded  from  the  risks  insured  against: 
viz.  (1)  accidents  which  arise  from  an  exposure  by  the  insured  to 
risk  of  injury,  which  risk  is  obvious  to  him  at  the  time  he  exposes 
himself  to  it;  (2)  accidents  which  arise  from  an  exposure  by  the  in- 
sured to  risk  of  injury,  which  risk  would  be  obvious  to  him  at  the 
time,  if  he  were  paying  reasonable  attention  to  what  he  was  doing."  ^ 

§  405.  Boarding  or  Leaving  Cars  in  Motion. — Entering  or  trying 
to  enter  or  leave  a  moving  conveyance  using  steam  as  a  motive  'power, 
except  cable  and  electric  street  cars. 

This  provision  is  valid  and  enforceable. ^  That  the  insured  had 
alighted  at  an  intermediate  station  and  had  not  expected  the  train 
to  start  so  suddenly  offers  no  excuse  for  failing  to  observe  the  policy 
restriction.^  If,  however,  the  car  is  not  moving  when  the  insured 
begins  his  attempt  to  enter,  but  just  afterwards  moves  and  causes  his 
fall,  the  insurer  will  be  liable.'* 


1  Cornish  v.  Accident  Ins.  Co.,  L.  R., 
23  Q.  B.  D.  453  (1889).  The  insured 
must  not  wantonly  take  the  risk  of  a 
known  danger,  North  Am.  Ace.  Ins. 
Co.  V.  Gulick,  25  Ohio  Cir.  Ct.  395. 
But  there  is  no  obvious  danger  to  an 
experienced  house  painter  in  using  a 
rope-sling,  thirty  feet  above  the  floor, 
Matthes  v.  Imperial  Ace.  Assn.,  110 
Iowa,  222,  81  N.  W.  484.  The  policy 
provision  is  held  to  include  those  cases 
where  the  insured  negligently  exposes 
himself  to  unnecessary  danger.  Price 
V.  Standard  Life  &  Ace.  I.  Co.,  92  Minn. 
238,  99  N.  W.  887  (attempting  to  light 
fire  with  kerosene;  question  for  jury); 
as  where  he  attempts  to  board  a  train, 
running  eight  or  ten  miles  an  hour, 
Small  V.  Travelers'  Protective  A.ssn., 
118  Ga.  900,  45  S.  E.  706,  63  L.  R.  A. 
510.  Whether  an  act  constitutes  "vol- 
untary exposure  to  unnecessary  dan- 
ger" is  often  for  jury.  Traders',  etc.. 
Ace.  Co.  V.  Waglei/,  74  Fed.  457,  20 
C.  C.  A.  588,  45  U.  S.  App.  39;  Fidelity 
&  Cas.  Co.  V.  Sittig,  181  111.  Ill,  54 
N.  E.  903,  48  L.  R.  A.  359  (getting  on 
car  when  moving);  Anthony  v.  Mercan- 
tile Mut.  Ace.  AsSn.,  162  Mass.  354, 
38  N.  E.  973,  44  Am.  St.  R.  367,  26 
L.  R.  A.  406.  The  burden  is  on  the 
company  to  allege  the  facts  in  defense, 
Voluntary  R.  Depart,  of  Penn.  Lines  v. 
Spencer,  17  Ind.  App.  123,  46  N.  E. 
477.  And  to  prove  the  facts  in  de- 
fense, De  Greayer  v.  Fidelity  Cas.  Co., 
126  Cal.  17,  58  Pac.  390  (shot  In  alter- 


cation with  park  policeman),  Anthony 
V.  Mercantile  Mut.  Ace.  Assn.,  162 
Mass.  354,  38  N.  E.  973,  44  Am.  St. 
R.  367,  26  L.  R.  A.  406  (citing  cases); 
Meadows  v.  Pac.  Mut.  Life  Ins.  Co., 
129  Mo.  76,  31  S.  W.  578,  50  Am.  St. 
R.  427. 

2  Miller  v.  Travelers'  Ins.  Co.,  39 
Minn.  548;  Travelers'  Ins.  Co.  v.  Snow- 
den,  45  Neb.  249,  63  N.  W.  392.  See 
cases  in  last  section. 

3  Travelers'  Ins.  Co.  v.  Brookover,  71 
Ark.  123,  71  S.  W.  246.  Nor,  if  mak- 
ing an  attempt  to  enter,  is  it  any  excuse 
that  the  insured  slips  and  falls  just 
before  taking  hold  of  the  rail,  Huston 
V.  Travelers'  Ins.  Co.,  66  Ohio  St.  246, 
64  N.  E.  123. 

••  Terwilliger  v.  National  Masonic 
Ace.  Assn.,  197  111.  9,  63  N.  E.  1034. 
And  going  to  a  platform  of  the  moving 
train  to  voznit  is  not  within  the  excep- 
tion, Prejerred  Ace.  Ins.  Co.  v.  Muir, 
126  Fed.  926,  61  C.  C.  A.  456.  In  some 
policies  the  exception  is  aimed  speci- 
fically at  "riding  on  the  platform  or 
steps."  This  is  held  to  mean  some- 
thing more  than  being  there  tempo- 
rarily and  necessarily,  Standard  Life  & 
Ace.  Co.  V.  Thornton,  100  Fed.  582,  40 
C.  C.  A.  564,  49  L.  R.  A.  116.  But  see 
Hull  V.  Equitable  Ace.  Assn.,  41  Minn. 
231,  42  N.  W.  936;  Saiotelle  v.  Rail- 
waij  Pass.  Assur.  Co.,  21  Fed.  Cas. 
555,  15  Blatch.  216.  Sometimes  the 
phraseology  of  the  clause  is  "in  any 
part  of  the  conveyance  not  provided 


WALKING   OR   BEING   ON   RAILWAY   BRIDGE   OR   ROADBED       579 

§  406.  Riding  in  or  on  any  such  conveyance  not  provided  for  trans- 
portation  of  passengers. 

Under  this  clause  it  was  held  that  the  company  is  not  reUeved  from 
Uabihty  by  reason  of  the  fact  that  the  insured  when  injured  is  tem- 
porarily riding  in  a  locomotive  constituting  part  of  a  passenger  train.* 

The  defendant  insured  Ward  as  a  "contractor,  office  and  travel- 
ing," these  words  being  written  in  the  policy.  By  its  printed  terms, 
the  policy  did  not  cover  injury  or  death,  "while  or  in  consequence 
of  riding  in  or  on  any  locomotive."  Ward,  in  his  capacity  of  rail- 
road contractor  and  in  company  with  the  superintendent  of  the 
road  and  a  bridge  contractor,  was  riding  over  the  Rutland  railroad 
in  the  Nehasane.  This  conveyance  was  in  fact  a  locomotive,  though 
part  of  it  was  a  cab  or  observation  car  regularly  used  by  the  officials 
of  the  road.  Being  stopped  to  permit  an  inspection  of  bridge  No.  78, 
the  locomotive  was  started  again,  causing  Ward  to  fall  accidentally 
from  the  cab.  He  was  run  over  by  the  locomotive  as  he  lay  upon 
the  track  and  his  head  severed  from  his  body.  The  court  held  that 
the  written  words  of  the  policy  must  be  given  precedence  over  the 
printed  clauses,  and  that  since  Ward  was  insured  as  a  railroad  con- 
tractor he  impliedly  had  the  right  to  travel  in  the  Nehasane  in  con- 
nection with  his  business,  notwithstanding  the  inconsistent  pro- 
visions of  the  printed  clauses.^ 

§  407.  Walking  or  being  on  Railway  Bridge  or  Roadbed. — This 
exception  is  not  aimed  at  defects  in  bridges  and  roadbeds  causing 

for  occupancy  by  passengers,"  Over-  insured  is  covered  by  the  policy  until 
beck  V.  Travelers'  Ins.  Co.,  94  Mo.  App.  he  has  completely  alighted  in  spite  of 
453,  68  S.  W.  236.  Such  general  pro-  the  above  exception,  King  v.  Travel- 
visions  do  not  apply  if  inconsistent  ers'  Ins.  Co.,  101  Ga.  64,  28  S.  E.  661, 
with  the  orderly  conduct  of  the  occu-  65  Am.  St.  R.  288.  And  see  Travelers' 
pation  of  the  insured  stated  in  policy.  Preferred  Ace.  Assn.  v.  Stone,  50  111. 
Cotten  V.  Fidel.  &  Cas.  Co.,  41  Fed.  App.  222.  Burden  is  on  the  insured 
506  (baegage  cheoker);  Daileri  v.  Pre-  to  establish  facts  within  the  exception, 
ferred  Masonic  Mvt.  Ace.  Assn.,  102  Anthony  v.  Mercantile  Mnt.  Ace. 
Mich.  299,  60  N.  W.  694,  26  L.  R.  A.  Assn.,  162  Mass.  354,  38  N.  E.  973, 
171  (conductor);  Emvlo^'ers'  Liability  26  L.  R.  A.  406,  44  Am.  St.  R.  367; 
Assur.  Corp.  v.  Rochdle,  13  Tex.  Civ.  Smith  v.  ^tna  Life  Ins.  Co.,  115  Iowa, 
App.  232,  35  S.  W.  869  (railroad  217,  88  N.  W.  368,  56  L.  R.  A.  271,  91 
employee).  An  alleged  practice  of  in-  Am.  St.  R.  153.  Issue  often  for  jury, 
sured  to  jump  on  cars  in  motion  is  not  Myler  v.  Standard  L.  &  Ace.  Ins.  Co., 
relevant  and  cannot  be  shown  by  the  92  Fed.  861,  35  C.  C.  A.  55. 
company,  Mulville  v.  Pac.  Mut.  Life  ^  Berliner  v.  Travelers'  Ins.  Co.,  121 
his.  Co.,  19  Mont.  95,  47  Pac.  650.  Cal.  458,  53  Pac.  918,  41  L.  R.  A.  467. 
Some  policies  provide  a  double  in-  66  Am.  St.  R.  49.  But  see  Mna  Life 
demnity,  "If  such  injuries  are  sus-  Ins.  Co.  v.  Vandecar,  86  Fed.  282,  30 
tained  while  riding  as  a  passenger  in  C.  C.  A.  48. 

any  passenger  conveyance  using  steam,  2  Trow  v.    Preferred   Ace.   Iris.   Co, 

cable  or  electricity  as  a  motive  power; "  (Vt.,  1907),  67  Atl.  821. 
under  this  clause  it  is  held  that  the 


580        MEANING    AND    LEGAL    EFFECT    OF    ACCIDENT   POLICY 

injury  to  passengers  engaged  in  lawful  transit,  but  rather  at  the  need- 
less danger  of  voluntary  and  unnecessary  track  walking.' 

In  construing  the  meaning  of  the  term  "roadbed"  the  court  limits 
it  to  the  dangerous  space  occupied  by  track  and  ties.  Hence  the 
prohibition  of  the  policy  applies  only  to  the  danger  zone  as  so  de- 
fined and  does  not  extend  to  the  entire  right  of  way  of  the  railway 
company. 2  Nor  does  the  term  "roadbed"  include  a  space  of  ten 
feet  in  width  between  double  tracks.^ 


§  408.  Due  Diligence  for  Personal  Safety  and  Protection.— The 

provision  found  in  some  policies  calling  for  due  diligence  for  personal 
safety  and  protection  is  satisfied  if  reasonable  diligence  is  exercised.^ 

1  Metropolitan  Ace.  Assn.  v.  Taylor, 
71  111.  App.  132.  Thus  the  insurer  was 
held  liable  where  the  insured  alighting 
from  a  stationary  train  on  a  bridge  fell 
through  a  concealed  hole  in  it,  Burk- 
hard  v.  Travelers'  Ins.  Co.,  102  Pa.  St. 
262,  48  Am.  Rep.  205.  Also,  where 
the  insured  unintentionally  stumbled 
dowTi  a  bank  against  the  engine, 
Equitable  Ace.  Ins.  Co.  v.  Osborn,  90 
Ala.  201,  9  So.  8G9,  13  L.  R.  A.  267. 
Also  where  the  insured  properly  went 
on  the  roadbed  to  take  a  train,  De  Loy 
V.  Travelers'  Ins.  Co.,  171  Pa.  St.  1, 
32  Atl.  1108.  Or  properly  crossed  the 
track  to  reach  the  station,  Duncan 
V.  Prejerred  Mut.  Ace.  Assn.,  13  N.  Y. 
Supp.  620,  aff'd  129  N.  Y.  622.  Or 
was  bitten  by  a  dog  or  struck  by 
lightning  when  on  the  track  or  bridge, 
Dougherty  v.  Pac.  Mut.  L.  Ins.  Co., 
154  Pa.  St.  385,  25  Atl.  739.  Or 
crossed  the  track  at  the  regular  place 
provided  for  that  purpose.  Traders'  & 
T.  A.  Co.  V.  Wajley,  74  Fed.  457,  20 
C.  C.  A.  588,  45  U.  S.  App.  39;  Payne 
V.  Fraternal  Ace.  Assn.,  119  Iowa,  342, 
93  N.  W.  361;  Dougherty  v.  Pacific 
Mut.  L.  I.  Co.,  154  Pa.  St.  385,  25  Atl. 
739.  But  see  Keene  v.  New  England 
Mut.  Ace.  Assn.,  164  Mass.  170,  41 
N.  E.  203.  That  many  others  may  be 
in  the  habit  of  using  the  same  portion 
of  the  track  for  a  similar  purpose  offers 
no  justification  to  the  insured  for  vio- 
lation of  restriction,  Piper  v.  Mercan- 
tile Mut.  Ace.  Assn.,  161  Mass.  589, 
37  N.  E.  759;  Weinschenk  v.  ^tna 
Life  I.  Co.,  183  Mass.  312,  67  N.  E. 
242. 

2  Standard  Life  &  A.  I.  Co.  v.  Lang- 
ston,  60  Ark.  381,  30  S.  W.  427  (ends 
of  extra  long  ties  held  to  be  not  in- 
cluded in  the  restriction);   De  Lay  v. 


Travelers'  Ins.  Co.,  171  Pa.  St.  1,  32 
Atl.  1108. 

3  Meadows  v.  Pac.  Mut.  L.  Ins.  Co. , 
129  Mo.  76,  31  S.  W.  578,  50  Am.  St. 
R.  427. 

*  Kentucky  L.  &  Ace.  Ins.  Co.,  102 
Ky.  512,  43  S.  W.  709  (hunter  on  fence 
with  gun  cocked).  The  burden  of 
proof  is  on  the  insurer,  Keene  v.  New 
Englarui  Mut.  Ace.  Assn.,  161  Mass. 
149,  36  N.  E.  891  (crossing  railway 
tracks);  Freeman  v.  Travelers'  Ins. 
Co.,  144  Mass.  572,  12  N.  E.  372. 
And  the  issue  is  usually  for  the  jury, 
U.  S.  Cos.  Co.  v.  Hanson,  20  Colo. 
App.  393,  79  Pac.  176  (failing  to  follow 
advice  of  physician);  Sutherland  v. 
Stand.  L.  &  Ace.  Ins.  Co.,  87  Iowa,  505, 
54  N.  W.  453  (riding  on  platform  of 
street  car);  Badenfeld  v.  Mass.  Mut. 
Ace.  Assn.,  154  Mass.  77,  27  N.  E.  769, 
13  L.  R.  A.  263  (insured  found  dead 
on  the  edge  of  the  track);  Stone  v. 
U.  S.  Cas.  Co.,  34  N.  J.  L.  371  (a  fall 
from  barn  in  process  of  construction); 
Duncan  v.  Preferred  Mut.  Ace.  Assn., 
59  N.  Y.  Super.  Ct.  145,  13  N.  Y.  Supp. 
620,  afif'd  129  N.  Y.  622  (crossing 
track);  North  Am.,  etc.,  Ins.  Co.  v. 
Burroughs,  69  Pa.  St.  43  (accidental 
strain).  But  the  court  will  hold  cer- 
tain acts  of  negligence  to  be  plainly 
within  the  exception.  Standard  L.  & 
Ace.  Co.  V.  Langston,  60  Ark.  381,  30 
S.  W.  427  (fell  asleep  on  railroad  tie); 
Morel  V.  Miss.  Val.  L.  Ins.  Co.,  4 
Bush  (Ky.),  535  (put  arm  out  of  car 
window);  Tuttle  v.  Travelers'  Ins.  Co., 
134  Mass.  175,  45  Am.  Rep.  316  (ran 
along  track  at  night  in  front  of  moving 
train).  The  insured  may,  however,  do 
whatever  naturally  appertains  to  hia 
occupation  as  stated  in  policy,  Pac. 
Mvt.  L.  Ins,  Co.  V.  Snowdon,  58  Fed. 


INSURANCE   AGAINST   INJURIES   RECEIVED   WHILE   TRAVELING   581 

§  409.  Insurance  against  Injuries  received  while  Traveling. — 
Many  policies  are  confined  to  an  insurance  against  loss  while  travel- 
ing by  public  or  private  conveyances  for  transportation  of  passengers. 
Under  this  class  of  insurance  the  assured  was  allowed  to  recover  for 
an  injury  received  by  a  fall  on  a  sidewalk  while  walking  from  a  steam- 
boat landing  to  a  railway  station,  this  walk  being  usual  for  travelers 
on  that  route,  although  he  might  have  ridden  in  a  hack;  the  court 
regarding  the  act  of  walking  as  an  inseparable  part  and  incident  of 
an  uncompleted  journey.^  But,  in  general,  walking  cannot  be  held 
to  be  a  "  traveling  by  public  or  private  conveyance."  ^ 

Ira  H.  Wood  was  insured  against  loss  by  accident  while  actually 
riding  as  a  passenger  in  or  on  any  regular  passenger  conveyance.  He 
was  by  occupation  a  United  States  railway  mail  clerk.  In  pursuance 
of  the  duties  of  his  employment  he  was  in  the  mail  car  of  a  moving 
train,  when  an  accident  by  derailment  caused  his  death.  The  court 
held  that  the  phraseology  of  the  policy  would  not  cover  the  case.^ 

Where  double  compensation  is  allowed  by  the  policy  for  injuries 
received  "while  riding  as  a  passenger  in  a  passenger  conveyance" 
such  compensation  cannot  be  recovered  if  the  insured  is  injured  while 
riding  on  the  open  platform  of  a  railway  car."* 


342,  7  C.  C.  A.  264.  A  passenger  on  a 
vestibuled  train  is  not  guilty  of  negli- 
gence in  going  into  the  dining  car  when 
the  train  is  moving  at  full  speed,  if  he 
does  not  know  that  a  side  door  of  the 
vestibule  is  open,  Robinson  v.  U.  S. 
Ben.  Soc,  132  Mich.  695,  94  N.  W. 
211.    See  cases  §  404,  supra. 

1  Northrup  v.  Railway  Passenger 
Assur.  Co.,  43  N.  Y.  516,  3  Am.  Rep. 
724,  and  see  Theobald  v.  Railway 
Passengers'  Assur.  Co.,  10  Ex.  45. 
And  injuries  were  covered  sustained 
in  boarding  a  train  at  an  intermediate 
station,  Tooley  v.  Raihcay  Pass. 
Assur.  Co.,  24  Fed.  Cas.  53. 

2  Ripley  v.  Ins.  Co.,  16  Wall.  336,  21 
L.  Ed.  469  (attacked  bj'  robbers 
walking  home  after  railway  journey 
ended).  Insured  to  recover  must  be 
a  passenger  at  the  time.  Fidelity  & 
Cas.  Co.  v.  Tcter,  136  Ind.  672,  36 
N.  E.  283  (stock  dealer  fell  from  loft 
of  livery  stable;  company  not  liable), 
Hendrick  v.  Employers'  Liability  Assur- 
Corp.,  62  Fed.  893  (returning  to  speak 
to  train-man  after  journey  ended  is 
not  enough  to  make  the  insured  still 
"a  passenger").  Pay  car  is  not  "a 
public  conveyance  for  transportation 
of  passengers,"  Travelers'  In.t.   Cn.  v. 


Austin,  116  Ga.  264.  42  S.  E.  522,  59 
L.  R.  A.  107,  94  Am.  St.  R.  125.  But 
insured,  a  prospector,  is  a  passenger 
on  steamboat,  though  steamboat  com- 
pany shares  the  profits  of  the  expedi- 
tion, /Etna  Life  Ins.  Co.  v.  Frierson, 
114  Fed.  56,  51  C.  C.  A.  424.  The  shot 
that  killed  the  insured  was  fired  from 
a  passing  street  car,  but  the  insured 
was  on  the  front  steps  of  her  house. 
The  defendant  was  not  liable,  Wheeler 
V.  Fidelity  &  Cas.  Co.,  129  Ga.  237, 
58  S.  E.  709. 

3  Wood  V.  General  Ace.  Ins.  Co.,  160 
Fed.  926.    See  note  38  C.  C.  A.  3. 

■«  ^tna  Life  I.  Co.  v.  Vandecar,  86 
Fed.  282,  30  C.  C.  A.  48,  57  U.  S.  App. 
446;  Van  Boklelen  v.  Travelers'  Ins. 
Co.,  34  App.  Div.  399,  54  N.  Y.  307, 
aff'd  167  N.  Y.  590.  But  see  Berliner 
v.  Travelers'  Ins.  Co.,  121  Cal.  458,  53 
Pac.  918,  41  L.  R.  A.  467,  66  Am.  St. 
R.  49  (a  recovery  was  not  precluded 
from  the  fact  that  the  insured  rode  on 
the  engine).  An  engineer  may  ride 
on  his  engine.  Brown  v.  Railway  Pass. 
Assur.  Co.,  45  Mo.  221.  And  a  cattle 
dealer  on  freight  cars,  Richards  v. 
Travelers'  Ins.  Co.,  18  S.  D.  287,  100 
N.  W.  428,  67  L.  R.  A.  175. 


CHAPTER  XIX 


The  Marine  Policy^ 


§  410.  Introductory. — The  marine  policy  in  common  use  in  this 
country  ^  is  largely  a  transcript  from  the  policy  formerly  adopted  by 
English  Lloyds.^ 

The  conventional  marine  policy  is  in  marked  contrast  with  many 
other  classes  of  policies,  in  that  it  is  occupied  mainly  in  describing 
what  the  underwriters  are  content  to  bear  or  undertake,  not  what 
they  refuse  to  undertake. '  It  is  to  this  circumstance,  namely,  the 
general  tenor  of  the  contract  itself  as  framed  by  marine  under- 


1  In  the  first  edition  of  this  book  pre- 
pared for  an  impending  course  of  reci- 
tations in  a  law  school,  this  chapter  and 
the  next  contained  many  excerpts  from 
the  excellent  treatises  on  Marine  In- 
surance by  Mac  Arthur  and  Lowndes, 
the  phraseology  of  which  is  in  part  still 
retained. 

2  See  Appendix,  ch.  II. 

3  English  policy  is  given  in  full  in 
Arnould,  Ins.  §  10;  Chalmers  &  Owen, 
Ins.  (1907),  138.  Adopted  as  a  stand- 
ard form  for  England  in  35  Geo.  3, 
c.  63,  30  Vict.,  c.  23  and  Mar.  Inf.  Act 
(1906),  §  30.  Its  use  is  not  compul- 
sory, Mar.  Ins.  Act  (1906),  §  30,  which 
provides,  "a  policy  may  be  in  the  form 
in  the  First  Schedule  to  this  Act."  If 
a  special  clause  is  inconsistent  with  the 
provisions  of  the  general  form,  the 
special  clause  will  control,  Hydarnes 
S.  S.  Co.  V.  Indemnity  Mnt.  M .  Ins. 
Co.  (1895),  1  Q.  B.  500.  For  descrip- 
tion of  English  Lloyds  and  Lloyds 
policy,  see  §  10,  notes,  supra.  In  Eng- 
land and  in  Continental  countries  the 
marine  insurance  contract  must  be  in 
writing;  see  54  &  55  Vict.,  c.  39,  §  93; 
and  in  England  the  term  of  a  time 
policy  must  not  exceed  12  months, 
Royal  Exch.  Assur.  Corp.  v.  Sjoforsak- 
rings,etc.  (1902),  2  K.  B.  384.  Stat- 
utory provisions  as  to  type  refer  to 
what  clauses,  Cline  v.  Western  Assur. 
Co.,  101  Va.  496,  44  S.  W.  700.  As  to 
whether  under  the  English  stamp  act, 
a  binding  slip  if  stamped,  will  become 
a  v.nlid  polioy,  see  Home  Mar.  /?>.~;.  Co. 


V.  Smith  (1898),  2  Q.  B.  351,  67  L.  J. 
Q.  B.  (N.  S.)  777,  78  Law  T.  Rep.  734. 
Compare  lonides  v.  Pacific,  etc.,  Co., 
L.  R.  7  Q.  B.  517  (it  may  be  evidence); 
Cory  V.  Patton,  L.  R.  9  Q.  B.  577;  Lish- 
man  v.  Northern  Mar.  Ins.  Co.,  L.  R. 
10  C.  P.  179.  In  construing  the  mean- 
ing of  a  marine  policy  great  weight 
is  given  to  usage,  §§  10,  89,  supra, 
1  Arn.  Ins.  §§  55, 56  et  seq.;  1  Duer,  Ins., 
p.  158  et  seq.;  Merf  v.  South  Car o. Ins. 
Co.,  3  Brev.  (S.  C.)*  329,  331;  Kingston 
v.  Knibbs,  1  Camp.  508  n.  But  evidence 
of  usage  is  not  admissible  if  the  usage 
is  repugnant  to  the  terms  of  the  policy 
as  written,  Hearne  v.  Mar.  Ins.  Co.,  20 
Wall.  488,  249,  22  L.  Ed.  395  (citing 
cases);  The  Schooner  Reeside,  2  Sumn. 
567  (Story,  J.);  Trueman  v.  Loder,  11 
A.  &  E.  589.  See  also  Moore  v.  Uni- 
ted States,  196  U.  S.  157,  166  ("usage 
may  be  resorted  to  in  order  to  make 
definite  what  is  uncertain,  clear  up 
what  is  doubtful,  or  annex  incidents, 
but  not  to  vary  or  contradict  the  terms 
of  a  contract");  Lillard  v.  Kentucky, 
etc.,  Co.,  134  Fed.  168  (citing  many 
cases).  Written  and  special  clauses 
prevail  over  general  printed  form, 
Hagan  v.  Scottish  Ins.  Co.,  186  U.  S. 
423,  428,  429,  22  S.  Ct.  862.  As  to 
rules  of  construction  generally,  see 
§§  84-93,  supra. 

i  Except  where  the  underwriters  add 
special  restrictive  clauses  in  their  own 
favor.  The  modem  memorandum 
clause  constituteR  one  of  such  restric- 
tioii.'^.  soe  5  456,  infra. 

2] 


NAME    OF    THJ-;    At^.SURED  583 

M'riters,  that  we  must  look  to  find  a  reasonable  explanation  of  the 
iriendly  attitude  of  the  courts  towards  that  class  of  underwriters 
in  matters  pertaining  to  the  interpretation  of  the  meaning  and 
effect  of  the  marine  policy,  as  compared  with  the  attitude  of  the 
courts  in  construing  other  classes  of  policies.' 

It  is  also  interesting  to  note,  that  in  spite  of  obscure  phraseology 
in  certain  portions  of  the  instrument ,2  the  British  Parliament,  when 
codifying  marine  insurance  law  in  the  year  1906,  gave  the  seal  of 
its  approval  to  the  form  of  policy  adopted  long  ago  and  known  as 
the  English  Lloyd's  policy,,  almost  every  word  of  which  has  been 
judicially  construed. '"* 

In  maritime  matters,  Great  Britain,  as  ocean  carrier  of  the  world's 
goods,  has  always  occupied  a  foremost  place  among  the  Powers. 
The  marine  policy  has  naturally  been  regarded  by  her  courts  as  a 
commercial  instrument  of  the  highest  importance,  and  ever  since 
the  accession  of  Lord  Mansfield  to  the  bench  we  find  that  the  great 
judges  of  England,  including  that  illustrious  jurist,  have  devoted 
their  ability  and  learning  without  stint  to  a  consistent  and  har- 
monious development  of  marine  insurance  law,  difficult  of  attain- 
ment in  our  own  country,  where  there  are  some  fifty  independent 
jurisdictions,  one  for  each  State  in  the  Union,  and  federal  courts 
besides.  In  this  connection,  however,  it  is  worthy  of  mention  that 
the  English  judges,  as  well  as  the  American,  often  cite  with  approval 
a  text-book  on  this  subject  written  many  years  ago  by  a  New  Eng- 
land gentleman,'*  which  ranks  in  merit  with  the  standard  work  of 
old  England  by  Mr.  Arnould. 

§411.  Name  of  the  Assured. — All  persons  except  alien  enemies, 
that  is,  subjects  of  a  foreign  state  at  war  with  the  home  country, 
have  the  right  to  protect  their  property  with  the  home  insurer.^ 

1  See,    for    example,     §  107,   notes,  rules  existing  in  their  favor,  and  bor- 
swpra,  §§  440,  446,  injra.     In  view  of  rowed  from  marine  insurance  law,  t(< 
the   unsympathetic    attitude,  of   both  wit,  that  the  contract  is  one  of  highest 
legislatures    and    courts,  towards    fire  good  faith,  and  that  therefore,  on  peril 
and  life  insurance  companies,  it  is  a  of  forfeiture,  there  must  be  no  misrep- 
question   whether  it  would   not  have  resentation  or  concealment  of  material 
been  more  expedient  for  those  com-  facts  in  negotiating  the  contract,  and 
panics  originally  to  have  framed  their  no  willful  enhancement  of  the  risk  by 
contracts  of  insurance  in  very  simple  the  insured  diiring  the  period   of  in- 
form,   making   suitable   provision    for  surance,  §§  10,  94,  107,  81/7^0. 
requiring  proofs  of  loss  or  death,  but  -  See,  for  example,  §  456,  injrn. 
as  to  other  matters  trusting  verj'  much  ^  Mar.  Ins.  Act  (1906). 
for  their  own  protection  to  their  pre-  *  Phillips  on  Ins. 
liminary  examination  of  the  proffered  5  Sands  v.  A'.    Y.  Life  Ins.  Co.,  50 
risk,  and  to  the  stringent  common-law  N.  Y.  626,  10  Am.  Rep.  535;  Ex  parte 


584 


MEANING    AND    LEGAL    EFFECT    OF    MARINE    POLICY 


The  name  of  the  insured  should  be  inserted  after  the  words  "on 
account  of."'  The  words  "on  account  of  whom  it  may  concern," 
or  similar  phrases,  are  frequently  added  to  the  marine  policy;  ^ 
but  without  them  a  marine  policy  is  assignable  at  common  law, 
even  before  loss,  to  the  assignee  of  the  thing  insured.^ 

§  412.  Lost  or  not  Lost. — The  effect  of  this  stipulation  ^  is  that 
the  insurer  takes  upon  himself  not  only  the  risk  of  future  loss,  but 
also  loss,  if  any,  that  may  have  already  happened.^  The  necessity 
for  such  a  retrospective  apphcation  in  policies  is  evident;  for,  owing 


Lee,  13  Ves.  Jr.  64.  It  is  contraiy  to 
public  policy  to  allow  a  subject  insur- 
ance company  to  give  help  and  pe- 
cuniary indemnity  to  foreign  enemies, 
Brandon  v.  Curling,  4  East,  410;  Fur- 
tado  V.  Rodgers,  3  B.  &  P.  198.  But  see 
Driejontcin,  etc..  Gold  Mines  v.  Jan^on 
(1901),  2  K.  B.  419.  Unless  the  alien 
enemy  is  licensed  to  trade  in  the  home 
country,  Usparicha  v.  Nohle,  13  East, 
332. 

1  By  the  phrase  often  used  in  con- 
nection with  the  name  of  the  insured 
in  the  marine  policy  "on  account  of 
whom  it  may  concern,"  only  those 
classes  are  included  who  were  intended 
by  the  insured  to  be  covered  when  the 
insurance  was  procured,  Hagan  v. 
Scottish  Ins.  Co.,  186  U.  S.  423,  22  S. 
Ct.  862,  46  L.  Ed.  1229.  But  to  make 
the  phrase  operative  the  insured  need 
not  have  in  mind  a  specific  individual 
of  the  intended  class,  Munich  Assur. 
Co.  v.  Dodwell,  128  Fed.  410  (citing 
many  cases);  Palmer  v.  Great  Western, 
10  Misc.  167,  30  N.  Y.  Supp.  1044,  aff'd 
153  N.  Y.  660.  A  person  intended  to 
be  included  is  covered  by  such  a  gen- 
eral description  though  his  name  was 
not  disclosed  to  the  underwriter  when 
the  policy  issued.  Buck  v.  Chesapeake 
/ns.  Co.,  1  Pet.  151,7  L.  Ed.  90.  Only 
those  parties  for  whose  benefit  the 
policy  was  in  fact  effected,  are  covered 
by  general  descriptions,  Boston  Fruit 
Co.  V.  British  <fc  For.  Mar.  Ins.  Co. 
(190.5),  1  K.  B.  637.  Insurance  effected 
in  good  faith  by  one  person  on  behalf 
of  another  may  be  ratified  by  the  lat- 
ter even  after  loss.  Hoover  v.  Robinson, 
98  U.  S.  528,  25  L.  Ed.  219;  Williams  v. 
North  China  Ins.  Co.,  L.  R.  1  C.  P.  D. 
757, 3  Asp.  M.  C.  342, 35  L.  T.  884;  Eng. 
Mar.  Ins.  Act  (1906),  §86.  Query, 
must  there  not  be  mutuality  to  the 
contract?    Can  principal  ratify  where 


underwriter,  without  such  ratifica^ 
tion,  could  have  held  no  one  for  the 
premium?  See  §§  236,  238,  supra,  and 
notes.  "For  whom  it  may  concern," 
Munich  Assur.  Co.  v.  Dodwell,  128  Fed. 
410;  Mannheim  Ins.  Co.  v.  Hollender, 
112  Fed.  549;  Scottish  Union  &  Nat. 
Ins.  Co.  V.  Hollender,  102  Fed.  919. 

2  English  Lloyd's  policy  begins:  "Be 
it  known  that  ....  as  well  in  ...  . 
own  name  as  for  and  in  the  name  and 
names  of  all  and  every  other  person  or 
persons  to  whom  the  same  doth,  may, 
or  shall  appertain,  in  part  or  in  all 
doth  make  assurance  and  cause  .... 
and  them,  and  every  of  them,  to  be  in- 
sured." An  undisclosed  principal  may 
sue  in  his  own  name,  though  the  con- 
tract be  made  by  an  agent  in  the 
agent's  name,  Maspons  v.  Mildred,  9 
Q.  B.  D.  530. 

3  See  §  63,  supra.  But  if  the  char- 
acter of  the  interest  of  the  assignee,  for 
instance  of  a  ship,  is  such  as  to  materi- 
ally change  the  character  of  the  risk, 
the  consent  of  the  underwriter  to  an 
assignment  before  loss  should  be  pro- 
cured, Mackenzie  v.  Whittvorth,  L.  R. 
1  Exch.  36. 

*  Or  any  words  showing  similar  in- 
tention and  such  intent  may  be  indi- 
cated by  antedating  the  policy,  Mer- 
cantile Mut.  Ins.  Co.  v.  Folsom,  18 
Wall.  237,  21  L.  Ed.  827;  without  evi- 
dence of  such  intent  the  policy  would 
not  attach  if  subject-matter  were  al- 
ready destroyed.  Mead  v.  Phcenix  Ins. 
Co.,  158  Mass.  124,  32  N.  E.  945;  Com- 
mercial Ins.  Co.  V.  Hallock,  27  N.  J.  L. 
645,  72  Am.  Dec.  379. 

5  Hoover  v.  Robinson,  98  U.  S.  528, 
25  L.  Ed.  219;  General  Ins  Co.  v. 
Ruggles,  12  Wheat.  408,  6  L.  Ed.  674; 
Sutherland  v.  Pratt,  11  M.  &  W.  311, 
312;  Paddock  v.  Franklin  Ins.  Co.,  11 
Pick.  (Mass.)  227. 


master's  name— ship's  name  585 

to  the  time  occupied  in  the  transmission  of  advices  from  abroad  or 
other  unavoidable  causes,  property  is  often  exposed  to  marine  risks 
before  the  parties  interested  are  cognizant  of  the  fact  or  have  had 
an  opportunity  to  protect  themselves  by  insurance.^ 

The  phrase  "lost  or  not  lost"  is  applicable  also  to  reinsurances 
which,  indeed,  are  frequently  effected  in  case  of  overdue  vessels. 

October  3d  the  Phcenix  Insurance  Company  insured  a  cargo  by 
the  Alata,  lost  or  not  lost,  from  Philadelphia  to  Rochfort.  Novem- 
ber 14th  the  Alata  arrived  safely  at  Rochfort.  She  discharged  there 
her  cargo  undamaged,  and  sailed  thence  December  18th.  Decem- 
ber 23d  the  insurer  effected  a  policy  of  reinsurance  on  the  same  cargo 
and  risk  to  the  extent  of  £1500  at  a  premium  of  75  guineas  per  cent 
at  English  Lloyd's,  neither  insurer  nor  reinsurer  having  any  knowl- 
edge of  the  safe  arrival  of  the  ship  the  month  before.  The  action 
was  brought  by  the  reinsurer  against  the  original  insurer  to  recover 
the  premium,  and  was  defended  on  the  ground  that,  the  voyage 
being  completed  before  the  reinsurance  was  taken  out,  there  was 
no  risk  to  which  the  policy  of  reinsurance  could  attach.  The  Lloyd's 
reinsurer  recovered  judgment  for  his  premium. ^ 

§  413.  Master's  Name — Ship's  Name. — Provision  is  made  in  the 
policy  for  the  insertion  of  the  master's  name,  partly  as  a  means  of 
distinguishing  the  ship  insured  from  others  of  the  same  name,  and 
partly  because  the  personal  character  and  professional  reputation 
of  the  captain  are  not  infrequently  taken  into  account  by  the  under- 
writers in  their  estimation  of  the  risk.  But  in  practice  the  blank  left 
for  that  purpose  is  often  unfilled. 

In  immediate  sequence  to  this  blank  are  the  words,  "or  whoever 
else  shall  go  for  master  in  the  said  vessel,"  etc.  In  case  the  person 
originally  mentioned  to  the  underwriter  as  the  master  of  the  vessel 
is  prevented  from  going  in  her,  and  another  is  substituted  for  him, 
the  insurance  is  not  vitiated,  even  though  the  original  name  may 

ijF/cns/iaiwv./ns.  Co.,  73  N.Y.Supp.  Boehm,  3  Burr,  1905,  1909,  1  W.  Bl. 

1,  36  Misc.  405.    If  the  assured  is  aware  593.     But  if,  at  the  time  -when  the  in- 

of  the  loss  at  the  time  when  the  in-  surance  is  effected,  the  vessel  has  ar- 

surance  is  effected  he  cannot  recover  rived  in  safety,  the  underwriters  ^yill 

from  the  underwriter  who  undertook  be  entitled  to  the  premium  on  a  policy 

the  risk  in  ig-orance  of  the  fact,  Mc-  "lost  or  not  lost,"  provided  tlipy  and 

Lanahan  v.  Urivenal  Ins.  Co.,  1  Pet.  the  assured  were  alike  ignorant  of  the 

170,  7  L.  Ed.  9P;  Gavvtldt  v.  Sea  Ins.  fact,  Peorle  v.  Dijnic'-,  107  N.  Y.  13, 

Co.,   127  Mih.  504,  86  N.  W.   1047.  14  N.  E.  178;  Bradford  v.  S;i7nondso7i^ 

Nor   is   it   permissible   for   an   under-  4  Asp.  Mar.  L.  C.  455,  45  L.  T.  364,  7 

wi-iter  to  retain  the  premium  if  at  the  Q.  B.  D.  456. 

time  of  such  insurance  he  is  privately  2  Bradford  v.  Symondson,   L.   R.   7 

informed  of  the  ship's  arrival,  Carter  v.  Q.  B.  D.  456. 


i)86  MEANING    AND    LEGAL   EFFECT   OF   MARINE    POLICY 

have  been  inserted  in  the  pohcy,  and  may  never  have  been  altered, 
provided  the  assured  has  acted  throughout  in  good  faith.'  Again, 
if  the  master  resign  his  command,  or  become  incapacitated  during 
the  voyage  through  sickness,  and  another  is  appointed  in  his  place, 
the  validity  of  the  insurance  is  not  compromised  b}^  the  change.' 

A  mistake  in  the  ship's  name,  however  innocently  made,  will 
vitiate  the  policy  if  it  materially  misled  the  underwriter  as  to  the 
identity  of  the  risk,  but  otherwise  not.^ 

Sometimes,  especially  in  insuring  consignments  from  abroad,  the 
ship  is  not  named,  the  goods  being  insured  per  ship  or  ships. ^  The 
usual  course  in  such  cases  is  to  "declare"  the  interest  by  an  indorse- 
ment on  the  policy  as  soon  as  the  ship  by  which  they  are  to  come  is 
known.^ 

§  414.  The  Subject  of  Insurance. — Upon  the  body,  tackle,  apparel, 
and  other  furniture  of  the  good  ship,  or  upon  all  kinds  of  lawful  goods 
and  merchandise  laden  or  to  be  laden  on  board  the  good  ship,  or  upon 
the  freight  of  all  kinds  of  lawful  goods  and  merchandises  laden  or  to  be 
laden,  etc. 

This  phraseology  covers  the  general  description  of  ship,  cargo, 
and  freight  in  the  three  principal  classes  of  American  policies,  re- 
spectively.^ 

As  before  shown,'  prospective  profits  may  also  be  insured.  In- 
surance of  profits  on  merchandise  is  sometimes  accomplished  by 
adding  a  percentage  to  the  amount  representing  the  value  of  the 
goods;  but  if  the  intention  is  to  insure  profits  this  must  in  some 
form  be  expressly  shown  in  the  policy.* 

1  Walden  v.  Firem.en's  Ins.  Co.,  12  ten  description  of  the  particular  in- 
John.  128.  terest  which  it  is  intended  to  insure, 

2  1  Am.  §  194.  §  87;    Manilla  Prize  Cases,  188  U.  S. 

3  lonides  v.  Pacific  F.  &  M.  Ins.  Co.,  254,  268,  23  S.  Ct.  415;  Gale  v.  Laurie. 
L.  R.  6  Q.  B.  674,  aff'd  L.  R.  7  Q.  B.  5  Barn.  &  C.  156,  11  E.  C.  L.  187;  Hill 
517,  41  L.  J.  Q.  B.  190,  26  I..  T.  738,  v.  Patten,  8  East,  375;  Brovgh  v.  Whit- 
1  Asp.  M.  C.  330,  21  W.  R.  22  (policy  more,  4  Term.  R.  206  (provisions  for  crew 
avoided).  Policy  not  avoided  in  Hall  are  covered).  So  also  certain  cloths 
V.  Molineaux,  6  East,  385;  Le  Mesurier  and  mats  though  not  in  use,  Hogarth 
v.  Vaughan,  6  East,  382;  Clapham  v.  v.  Walker  (1900),  2  Q.  B.  283.  If  ship 
Cologan,  3  Camp.  382.  is  a  steamer,  machinery,  and  coal  as 

*  Known    as    a    floating  policy,   see  well  as  outfit  in  stores  and  provisions 

§  420.    With  such  a  policy  a  mistake  in  are  covered,  Roddick  v.  Indemnity,  etc., 

declaring  the  name  of  the  ship  appar-  Ins.  Co.  (1895),  1  Q.  B.  842;  Forbes  v. 

ently  would  not  be  fatal,  Robinson  v.  Asjnnall,  13  East,  323. 

Touray,  3  Camp.  158.  ^  See  §  48,  supra.     And  see  Canada 

5  Snowden  v.  Guion,  101  N.  Y.  458,  Sugar  Rej.  Co.  v.  Ins.  Co.,  175  U.  S. 
5  N.  E.  322.  609,  20  S.  Ct.  239. 

6  This  general  description  in  the  »  See  §  48.  And  see  Wyllie  v.  Povah 
printed  form  is  controlled  by  the  writ-  (1907),  12  Com.  Cas.  317. 


THE  SUBJECT  OF  INSURANCE — CARGO 


58- 


§  415.  Same  Subject — Ship. — The  terms  of  the  description  in  the 
policy  of  insurance  upon  a  ship  are  evidently  not  to  be  confined  to 
the  body  or  hull  of  the  vessel,  but  extend  to  her  boats,  tackle,  materi- 
als, outfit,  and  appurtenances.^ 

§416.  Same  Subject — Cargo. — "Goods,"  or  "merchandise,"  de- 
notes whatever  is  transported  on  board  ship  for  purposes  of  traffic, 
but  does  not  cover  articles  carried  for  other  reasons.^  The  term 
may  also  include  shifting  or  successive  cargoes  on  board  in  the 
course  of  the  same  continued  venture.^ 

But  in  the  absence  of  usage  to  the  contrary,''  goods  stowed  on 
deck,  especially  for  ocean  transit,^  and  live  stock  and  supplies  for 


1  But  if  the  custom  is  to  insure  sepa- 
rately the  movable  outfit  for  a  particular 
business,  for  instance,  whaling,  it  will 
not  be  covered  by  policy  on  ship,  Hos- 
kins  V.  Pickersgi'U,  3  Dougl.  222,  26  E. 
C.  L.  85;  Macy  v.  China  Mvt.  Ins.  Co., 
135  Mass.  328.'  "Ship  of  War"  covers 
what,  Manilla  Prize  Cases,  188  U.  S. 
254,  269,  23  S.  Ct.  415;  Infanta  Maria 
Teresa,  188  U.  S.  283,  289,  23  S.  Ct. 
412.  Naphtha  launch  usually  carried  on 
davits,  lost  on  .trip  to  shore  is  part  of 
the  furniture  or  appurtenances  of  the 
ship,  Dennis  v.  Home  Ins.  Co.,  136  Fed. 
481.  Compare  Hall  v.  Ocean  Ins.  Co., 
21  Pick.  472  (boat  on  stern  davits). 
Policy  may  be  written  as  a  floating  or 
shifting  risk  on  vessels  to  be  substitu- 
ted, N'ew  Haven  S.  Co.  v.  Prov.  Wash. 
Ins.  Co.,  159  N.  Y.  547,  54  N.  E.  1093. 
Building  materials  not  yet  incorpo- 
rated are  not  covered  by  usual  policy 
on  ship,  Mason  v.  7ns.  Co.,  12  Gill  & 
J.  (Md.)  468;  Hood  v.  Ins.  Co.,!!  N.  Y. 
532.  But  the  owner  may  insure  cost 
of  repairs  by  term  "disbursements," 
Cunard  v.  A^ova  Scotia  Mar.  Ins.  Co., 
29  Nova  Sco.  409.  The  Eng.  Mar.  Ins. 
Act,  1906,  c.  41,  defines  "ship"  as  fol- 
lows, "The  term  ship  includes  the  hull, 
materials  and  outfit,  stores  and  pro- 
visions for  the  officers  and  crew,  and, 
in  the  case  of  vessels  engaged  in  a  reg- 
ular trade,  the  permanent  fittings 
requisite  for  the  trade;  and  also,  in 
the  case  of  a  steamship,  the  machinery, 
boilers  and  coals."  Meaning  of  the 
word  "advances,"  Burnham  v.  Boston 
Mar.  Ins.  Co.,  139  Mass.  399,  1  N.  E. 
837.  The  phrase  "the  good  ship"  ap- 
pearing in  Lloyd's  policy  is  not  a  war- 
ranty, Small  V.  Gibson,  L.  R.  16  Q.  B. 
151. 


2  Ross  V.  Thiraites,  1  Park,  23,  24. 
Such  term  does  not  cover  provisions 
and  stores  for  use  on  board.  Brown  v. 
Stapyleton,  4  Bing.  122.  Nor  personal 
eft'ects  of  passengers,  Willinson  v. 
Hyde,  3  C.  B.  (N.  S.)  30;  Dvff  v.  Mac- 
Kcnzie,  3  C.  B.  (N.  S.)  16,91  E.  C.  L.  16. 
Nor  clothes  of  officers  and  crew,  Ross 
V.  Thu-aitcs,  1  Park,  23.  Nor  bills  of 
exchange  and  notes,  Thowas  v.  Royal, 
etc.,  Assur.  Co.,  1  Price,  195;  Palmer  v. 
Pratt,  2  Eing.  185,  9  E.  C.  L.  375. 
But  cash,  precious  metals  and  je\\els 
when  shipped  as  merchandise  may  be 
so  protected  by  the  usual  description 
of  the  policy,  American  Ins.  Co.  v. 
Grisuold,  14  Wend.  (N.  Y.)  399;  Seton 
V.  Ins.  Co.,  2  Wnsh.  C.  C.  178.  Ihe 
term  "goods"  or  "  merchandise"  covens 
the  wagon,  tent,  and  other  outfit  of  an 
emigrant,  Wilkinson  v.  Hide,  27  L.  J. 
C.  P.  116;  the  produce  and  results  of  a 
fishing  expedition.  Hill  v.  Patten,  8 
East,  373,  and  the  interest  or  liability 
of  a  carrier,  Crovley  v.  Cahen,  3  B.  & 
Ad.  478.  Eespor.dentia  and  bottomry 
must  be  specifically  described.  Glover 
v.  Black,  3  Burr.  1394. 

3  Hill  V.  Patten,  8  East,  373,  377. 
Cargo  need  not  be  laden  at  the  initial 
port  named,  Columbian  Ins.  Co.  v. 
Catlett,  12  Wheat.  383,  6  L.  Ed.  664; 
McCargo  v.  Merchants'  Ins.  Co.,  10 
Rob.  (La.)  334. 

4  Allen  V.  St.  Louis  Ins.  Co.,  85  N.  Y. 
473  (live  stock);  Orient  Mvt.  Ins.  Co.  v. 
Reymershoffer's  Sons,  56  Te.x.  234 
(deck  load). 

5  Taunton  Copper  Co.  v.  Merchants' 
Ins.  Co.,  22  Pick.  (Mass.)  108;  Ross  v. 
Thwaites,  1  Park,  23;  Backhouse  v.  Rip- 
ley, 1  Park,  24;  Blackett  v.  Royal  Exch. 
Assn.  Co.,  2  C.  &  J.  250.    Unless  the 


588  MEANING    AND    LEGAL    EFFECT    OF    MARINE    POLICY 

feeding  them,  and  bullion,  should  be  insured  specifically  and  not 
under  the  general  denomination  of  goods. ^ 

§417.  Same  Subject— Freight.— The  term  "freight"  as  used  in 
the  marine  policy,  may  mean  any  one  of  three  things:  (1)  the  price 
to  the  shipowner  for  carriage  of  goods  payable  on  arrival  at  destina- 
tion; 2  (2)  the  price  payable  to  the  shipowner  by  a  charterer  for  hire 
of  ship  under  charter  party  or  like  contract;  (3)  the  profit  or  in- 
creased value  of  his  own  goods  which  the  shipowner  expects  to  earn 
by  carrying  them  on  his  own  ship  to  port  of  destination.^ 

Freight  must  be  insured  eo  nomine,  and  is  not  included  as  an  in- 
cident in  the  usual  description  of  ship  or  cargo.''  Freight  does  not 
include  passage  money  of  passengers,  which  it  is  usual  to  insure 
under  a  distinct  name,  and  which  unlike  freight  is  by  usage  payable 
in  advance.^ 


§418.  Commencement  of  Risk— Ship— Freight.— The  words  "at 

and  from"  precede  the  blank  for  the  description  of  the  voyage. 

There  is  a  material  difference  between  insurance  "from,"  and  one 
"at  and  from,"  any  place.     The  first  form  of  description  does  not 


intent  is  to  cover  a  deckload  as  the 
usual  cargo,  Chesapeake  Ins.  Co.  v. 
Allegre's  Heirs,  2  Gill  &  J.  (Md.)  164. 
iAllegre's  Admrs.  v.  7ns.  Co.,  8 
Gill  &  J.  (Md.)  190,  29  Am.  Dec.  536; 
Wolcott  V.  Eagle  Ins.  Co.,  4  Pick. 
(Mass.)  429.  See  Gabay  v.  Lloyd,  3 
B.  &  Cr.  793. 

2  Freight  on  goods  usually  is  not 
payable  unless  earned  by  delivery, 
Asfarv.  Blundell  (1896),  1  Q.  B.  123. 

3  Forbes  v.  Aspinivall,  13  East,  323; 
Winter  v.  Haldiman,  2  B.  &  Ad.  649; 
De  Vaux  v.  J' Anson,  5  Bing.  N.  C.  519, 
35  E.  C.  L.  207.  " Freight"  here  has  a 
broader  meaning  than  as  used  in  the 
law  of  shipping  and  denotes  "the  bene- 
fit derived  by  the  shipowner  from  the 
employment  of  his  ship,"  Flint  v. 
Flemying,  1  B.  &  Ad.  48.  Freight  on 
cargo  contracted  for  but  not  loaded 
when  vessel  starts  is  covered  by  policy 
on  freight,  Stilwell  v.  Ins.  Co.,  2  Mo. 
App.  22. 

4  Riley  v.  Delafield,  7  Johns.  (N.  Y.) 
522;  Clark  v.  Ocean  his.  Co.,  16  Pick. 
289;  Etches  v.  Aldan,  1  Mann.  &  R.  157. 
Freight  may  be  insured  for  part  of  the 
voyage  or  time  only,  Michael  v.  Gil- 
lespy,  2  C.  B.  (N.  S.)  627,  26  L.  J.  C.  P. 
306.  The  charterer  may  insure  his 
advances  on  account  of  freight,  Rob- 


bins  V.  N.  Y.  Ins.  Co.,  1  Hall  (N.  Y.), 
325;  Allison  v.  Bristol  Mar.  Ins.  Co., 
1  App.  Gas.  229.  "Person  advancing 
the  freight  has  an  insurable  interest  in 
so  far  as  such  freight  is  not  repayable 
in  case  of  loss,"  Eng.  Mar.  Ins.  Act 
(1906),  §  12.  Where  the  interest  con- 
sists of  a  shipowner's  profit  from  carry- 
ing his  own  goods,  though  this  may 
be  insured  separately  as  freight,  yet 
generally  speaking  the  method  most 
advantageous  to  the  owner  is  to  insure 
it  in  the  same  policy  with  the  goods, 
and  to  value  both  together,  describing 
them  as  goods  including  freight.  As 
to  freight  of  successive  voyages  see 
Lincoln  v.  Boston  Mar.  Ins.  Co.,  159 
Mass.  337,  34  N.  E.  456. 

^Ogdcn  v.  N.  Y.  Mut.  Ins.  Co.,  21 
N.  Y.  Sup.  Ct.  248,  aff'd  35  N.  Y.  418; 
Denoon  v.  Home  &  C.  Assur.  Co.,  L.  R. 
7  C.  P.  341 ,  41  L.  J.  C.  P.  162,  20  W.  R. 
970,  126  L.  T.  628,  1  Asp.  N.  C.  309. 
There  is  usually  no  obligation  to  re- 
turn passage  money  when  the  voyage  is 
interrupted  or  not  completed,  Gillan  v. 
Simpkin,  4  Camp.  241;  Gibson  v.  Brad- 
ford, 4  El.  &  Bl.  586,  24  L.  J.  Q.  B.  159. 
Inchoate  profits  of  a  voyage  may  be 
insured  as  such,  McSwinev  v.  Royal 
Exch.  Ass.  Co.,  14  Q.  B.  634;  Eyre  v. 
Glover,  3   Camp.    276,    16   East,  218; 


COMMENCEMENT   OF    RISK — SHIP — FREIGHT 


589 


attach  to  the  subject-matter  until  the  ship  starts  on  the  voyage 
insured,  but  the  second  covers  also  the  risk  in  port.* 

Where  a  ship  is  insured  "at  and  from"  a  particular  place,  and 
she  is  at  that  place  in  good  safety  when  the  contract  is  concluded, 
the  risk  attaches  immediately.^  If  she  be  not  at  that  place  when 
the  contract  is  concluded,  the  risk  attaches  as  soon  as  she  arrives 
there  in  good  safety.^  But  there  is  an  implied  condition  that  the 
adventure  shall  be  commenced  within  a  reasonable  time."*  Where 
an  insurance  is  effected  "at  and  from"  an  island,  or  other  district 
comprising  several  places  of  trade,  then  the  risk  commences  on  the 
ship  as  soon  as  the  vessel  has  arrived  in  good  safety  at  any  port 
within  such  district,^  and  on  cargo  upon  its  loading.^ 


Patapsco  his.   Co.   v.    Coulter,   3   Pet. 
(U.  S.)  222,  7  L.  Ed.  659.    And  §  48. 

^  Motteux  V.  London  Assur.,  1  Atk. 
545.  But  risk  does  not  attach  until 
assured  acquires  his  insurable  interest, 
Seamans  v.  Loring,  21  Fed.  Cas.  920. 
As  to  what  is  breaking  ground  to  sail 
see  Pettigrew  v.  Pringle,  3  Barn.  & 
Adol.  514,  23  E.  C.  L.  136;  Bowen  v. 
Hope  Ins.  Co. ,  20  Pick.  (Mass. )  275.  See 
§419.  As  to  "port  risk,"  see  Nel- 
son V.  Svn  Mutual  Ins.  Co.,  71  N.  Y. 
453;  Slocovich  v.  Orient  Mut.  Ins.  Co., 
108  N.  Y.  56,  14  N.  E.  802.  As  to 
what  are  the  limits  of  a  "port,"  see 
De  Longuemere  v.  A'^.  Y.  Fire  Ins.  Co., 
10  Johns.  (N.  Y.)  120;  Same  v.  Fire- 
men's Ins.  Co.,  id.  126;  Murray  v. 
Columbian  Ins.  Co.,  4  Johns.  443;  St. 
Paul  F.  &  M.  Ins.  Co.  v.  Troop,  26 
Can.  Sup.  Ct.  5;  Sailing  Ship  Garston 
Co.  V.  Hiclie,  15  Q.  B.  D.  580;  Hun- 
ter V.  Northern  Mar.  Ins.  Co.,  13  App. 
Cas.  726;  Constable  v.  Noble,  2  Taunt. 
403;  Payne  v.  Hutchinson,  2  Taunt. 
405n.  "New  York  harbor"  includes 
what,  Fidton  v.  Ins.  Co.,  136  Fed.  182; 
Hastrof  v.  Greenuich  Ins.  Co.,  132  Fed. 
122;  Petrie  v.  Phcenix  Ins.  Co.,  132 
N.  Y.  137,  30  N.  E.  380. 

2  St.  Paul  F.  &  M.  his.  Co.  v.  Troop, 
26  Can.  Sup.  Ct.  5  (cases  cited);  Pal- 
mer V.  Marshall  (1831),  8  Bing.  79. 
But  it  is  held  in  New  York  that  risk 
does  not  attach  until  preparations  for 
voyage  are  begun,  Snyder  v.  Atlantic 
Mut.  Ins.  Co.,  95  N.  Y.  196,  47  Am. 
Rep.  29  (cases  <  ited). 

3  Parmeter  v.  Cousins,  2  Camp.  235. 
If  the  vessel,  though  damaged,  be  in  a 
condition  consistent  with  her  security 
in  port,  the  risk  will  commence  from 
the  first  moment  of  her  arrival  within 


the  port  specified,  Haughton  v.  Empire 
Marine  Ins.  Co.,  L.  R.  1  Ex.  206,  43 
Hurl.  &  C.  44,  12  Jur.  N.  S.  376.  Ar- 
rival in  safety  in  this  connection  means 
physical  not  political  safety.  Bell  v. 
Bell,  2  Camp.  475.  As  to  "safely 
moored"  clause  see  Ryan  v.  Proi\ 
Wash.  Ins.  Co.,  79  App.  Div.  320,  79 
N.  Y.  Supp.  460. 

4  Summer  turned  to  winter  risk. 
Maritime  Ins.  Co.  v.  Stearns  (1901), 
2  K.  B.  912  (policy  avoided);  De  Wolf 
V.  Ins.  Co.  (1874),  L.  R.  9  Q.  B.  451. 
Delay  of  six  months.  Grant  v.  Kinq 
(1802),  4  Esp.  175.  Delay  of  four 
months,  Palmer  v.  Penning  (1833),  9 
Bing.  460.  Abandonment  of  voyage 
for  war,  Parkin  v.  Tunno  (1809),  11 
East.  22. 

5  Warre  v.  Miller,  4  Barn.  &  C.  538, 
10  E.  C.  L.  405. 

6  Patrick  v.  Ludlow,  3  Johns.  Cas. 
(N.  Y.)  10,  2  Am.  Dec.  130.  As  matter 
of  construction  intermediate  ports  held 
covered  in,  Crocler  v.  Sturge  (1897),  1 
Q.  B.  330,  75  L.  T.  R.  549,  66  L.  J.  Q. 
B.  (N.  S.)  142.  Reasonable  time  must 
be  allowed  in  port  for  preparing  for 
voyage,  Thebaud  v.  Great  Western  Ins. 
Co.,  155  N.  Y.  516,  523,  50  N.  E.  284; 
Palmer  v.  Marshall,  8  Bing.  317.  Eng. 
Mar.  Ins.  Act  (1906),  1st  Schedule  pro- 
vides: "where  chartered  freight  is  in- 
sured 'at  and  from'  a  particular  place, 
and  the  ship  is  at  that  place  in  good 
safety  when  the  contract  is  concluded, 
the  risk  attaches  immediately.  If  she 
be  not  there  when  the  contract  is  con- 
cluded the  risk  attaches  as  soon  as 
she  arrives  there  in  good  safety  [see 
Foley  V.  Ins.  Co.  (1870),  L.  R.  5  C.  P. 
155].  Where  freight  other  than 
chartered   freight   is   insured   'at   and 


590 


MEANING   AND    LEGAL   EFFECT   OF   MARINE    POLICY 


If  the  ship  sail  from  any  place  of  departure,  or  to  any  place  of 
destination,  other  than  that  specified  by  the  policy,  the  risk  does  not 
attach,  since  such  an  act  constitutes  a  change  of  voyage.^ 

§  419.  Commencement  of  the  Risk— Cargo.— Beginning  the  ad- 
venture upon  the  said  goods  and  merchandises  from  and  immediately 
following  the  loading  thereof,  etc. 

Goods  are  not  insured  under  the  general  form  of  policy  until  they 
are  loaded  aboard  the  ship.^  If,  therefore,  the  merchant  desires  to 
cover  the  risk  in  boats  or  lighters  from  the  shore  to  the  ship,  he 
should  insert  the  clause,  "to  include  all  risk  of  craft  whilst  loading."  ^ 

If  property  in  the  goods  does  not  pass  to  the  insured  until  a  cer- 
tain point  in  the  process  of  shipment,  the  policy  will  not  attach  until 
that  point  is  reached;  as,  for  example,  where,  by  the  terms  of  a  con- 
tract for  the  purchase  of  a  cargo  of  rice,  no  interest  in  the  rice  passed 
to  the  buyers  until  the  shipment  of  the  cargo  was  completed,  it  was 
held  that  the  latter  had  no  insurable  interest  in  the  cargo  while  in 
course  of  shipment.^ 

If  the  purpose  is  to  cover  goods  shipped  at  some  place  other  than 
the  port  of  departure,  that  intention  ought  clearly  to  appear  by  the 
terms  used.'^ 


from'  a  particular  place,  the  risk  at- 
taches pro  rata  as  the  goods  or  mer- 
chandise are  shipped;  provided  that 
if  there  be  cargo  in  readiness  which 
belongs  to  the  shipowner,  or  which 
some  other  person  has  contracted  with 
him  to  ship,  the  risk  attaches  as  soon 
as  the  ship  is  ready  to  receive  such 
cargo."  See  Jones  v.  Neptune  Ins. 
Co.  (1872),  L.  R.  7  Q.  B.  706.  Policy 
on  freight  will  not  attach  before  the 
vessel  arrives  at  the  port  named, 
though  goods  are  then  ready  for  ship- 
ment. The  Copernicus  (1896),  P.  237, 
74  L.  T.  R.  757. 

1  See  §  186,  supra. 

^  Hicks  V.  Merchants'  Auto  &  Mfrs. 
Ins.  Co.,  1  Ohio  Dec.  374.  Goods  lying 
on  wharf  ready  to  be  loaded  are  not 
covered,  Cottam  v.  Merchants'  &  T.  Ins. 
Co.,  40  La.  An.  259,  4  So.  510.  Load- 
ing may  be  at  unnamed  port  sanc- 
tioned by  usage.  Wells  Fargo  &  Co.  v. 
Pac.  Ins.  Co.,  44  Cal.  397;  Moxon  v. 
Atkyns,  3  Camp.  200.  But  held  that 
risk  attached  where  both  parties  knew 
that  loading  could  not  be  made,  Hy- 
clarnes  S.  Co.  v.  Indemnity,  etc.,  Ins. 
Co.  (1895),  1  Q.  B.  500,  64  L.  J.  Q. 
B.  (N.  S.)  353. 


^  Hurry  V.  Royal  Exch.  Ass.  Co.,  2 
B.  &  P.  430.  But  see  as  to  usage, 
Coggeshall  v.  Am.  Ins.  Co.,  3  Wend. 
(N.  Y.)  283.  The  insurance  on  craft  is 
separate  from  the  insurance  on  ship. 
Stranding  of  the  lighter  is  not  a  strand- 
ing of  the  ship  within  the  meaning  of 
the  memorandum  clause,  Hoffman  v. 
Marshall,  2  Bing.  N.  C.  383.  And 
stranding  of  the  ship  is  not  stranding 
of  the  lighter,  Thames  &  M.  M.  Ins. 
Co.  v.  Pitts  (1893),  1  Q.  B.  476.  The 
implied  warranty  of  seaworthiness  of 
ship  does  not  include  the  lighter,  Larw 
V.  Nixon,  L.  R.  1  C.  P.  412.  The  craft 
risk  may  not  extend  beyond  the  usual 
purposes  of  loading  or  unloading. 
Thus  the  risk  of  waiting  in  lighters  for 
transshipment  into  another  vessel  was 
held  not  covered,  Houlder  v.  •  The 
Merchants'  Mar.  Ins.  Co.,  17  Q.  B.  D. 
354. 

4  Anderson  v.  Morice,  3  Asp.  M.  C. 
290,  46  L.  J.  Q.  B.  11,  35  L.  T.  566,  1 
App.  Cas.  713,  25  W.  R.  14.  And  see 
Seumans  v.  Loring,  21  Fed.  Cas.  920; 
Marine  Ins.  Co.  v.  Wahh-Upstill  Coal 
Co.,  68  Ohio  St.  469,  68  N.  E.  21. 

^Murray  v.  Columbian  Ins.  Co.,  11 
John.  302;  Robertson  v.  French,  4  East, 


THE   VOYAGE 


591 


§  420.  Same  Subject— Indorsements— Declarations.— Under  a  run- 
ning or  floating  policy  ^  the  risk  usually  attaches  to  each  shipment 
from  time  of  reporting  it  to  the  underwriters,^  or,  by  the  terms  of 
some  policies,  from  the  time  of  actual  indorsement.''  Whether  after 
knowledge  of  a  loss  the  underwriter  may  refuse  to  make  indorse- 
ment depends  upon  the  circumstances,  and  the  wording  of  the 
policy.^ 

Declarations  made  on  the  policy  are  always  subject  to  rectification 
in  case  it  shall  subsequently  appear  that  the  advices  have  come 
forward,  and  that  the  declarations  in  fact  have  therefore  been  made 
in  an  order  different  from  that  of  the  actual  shipment  of  the  goods. 
The  shipments  declare  themselves,  so  to  speak,  and  take  rank  under 
the  policy  in  the  order  in  which  they  occur;  so  that  the  declaration 
written  on  the  policy  is  merely  provisional,  and  must  be  set  right  in 
case  of  need.^ 

§  421.  The  Voyage.— The  voyage  should  be  described  in  the  policy 

Mfg.  Co.,  109  Fed.  334,  48  C.  C.  A.  382, 
65  L.  R.  A.  387  (actual  approval  and 
indorsement  held  essential);  Wass  v. 
Maine  Mid.  Mar.  Ins.  Co.,  61  Me.  537. 
But  indorsement  omitted  through  in- 
advertence may  be  rectified  in  equity. 
Phoenix  bis.  Co.  v.  Ryland.  69  Md.  437, 
16  Atl.  109,  1  L.  R.  A.  548. 

■1  Held,  refusal  was  not  justified  and 
underwriter  was  liable,  Wells  Fargo  & 
Co.  V.  Pacific  Ins.  Co.,  44  Cal.  397; 
E.  Carver  Co.  v.  Mfgrs.  his.  Co.,  6 
Gray  (Mass.),  214.  Held,  repudiation 
of  insurance  on  refusal  to  indorse  was 
justified,  Delaware  Ins.  Co.  v.  White 
Dental  Co.,  109  Fed.  334,  48  C.  C.  A. 
382,  65  L.  R.  A.  387;  Hartshorn  v. 
Shoe  &  L., etc., Ins.  Co.,  15  Gray  (Mass.), 
240;  Platho  v.  Merchants'  &  Mfrs.  Ins. 
Co.,  38  Mo.  248;  Neville  v.  Merchants' 
&  Mfrs.  Ins.  Co.,  19  Ohio  St.  452.  Held, 
no  physical  indorsement  necessary 
where  no  space  was  left  for  it,  Callaway 
V.  Orient  his.  Co.,  63  Fed.  830  and  com- 
pany may  waive  written  indorsement, 
Enierif  v.  Boston  Mar.  his.  Co.,  138 
Mass.  398.  What  constitute  a  suffi- 
cient indorsement,  Edwards  v.  Miss. 
Valley  Ins.  Co.,  1  Mo.  App.  192; 
Petrie  v.  Phoenix  Ins.  Co.,  132  N.  Y. 
137,  30  N.  E.  380;  Heilner  v.  China 
Mid.  Ins.  Co.,  60  N.  Y.  Super.  Ct.  362, 
18  N.  Y.  Supp.  177. 

^Stephens  v.  Australasian  Ins.  Co., 
L.  R.  8  C.  P.  18,  27  L.  T.  585,  1  Asp. 
M.  C.  458. 


130;  Spitta  v.  Woodman,  2  Taunt.  416; 
Riciiman  v.  Carstairs,  5  B.  &  Ad.  651. 
Commencement  of  risk  on  goods  may 
turn  on  time  of  starting  of  ship,  Sea 
Ins.  Co.  v.  Blogg  (1898).  2  Q.  B.  398, 
67  L.  J.  Q.  B.  (N.  S.)  757  (citing  Coch- 
rane V.  Fisher,  1  C.  M.  &  R.  809);  City 
of  Cambridge,  L.  R.  5  P.  C.  451,  see 
(1898),  1  Q.  B.  27,  67  L.  J.  Q.  B.  (N.  S.) 
22.  See  §  418.  As  to  the  necessity  of 
loading  the  insured  cargo  at  the  place 
designated  as  the  port  of  departure 
and  not  at  some  place  reached  prior 
thereto,  compare  Richards  v.  Mar.  Ins. 
Co.,  3  John.  CN.  Y.)  307,  and  Carr  v. 
Montefiore,  33  L.  J.  Q.  B.  256. 

i"(l)  A  floating  policy  is  a  policy 
which  describes  the  insurance  in  gen- 
eral terms,  and  leaves  either  the  name 
of  the  ship  or  ships  or  other  partic- 
ulars to  be  defined  by  subsequent  dec- 
laration. (2)  The  subsequent  declara- 
tion or  declarations  may  be  made  by 
indorsement  on  the  policy,  or  in  other 
customnrv  manner,"  Eng.  Mar.  Ins. 
Act  (1906),  §  29;  E.  Carver  Co.  v. 
Mfrs.    Ins.   Co.,  6  Gray  (Mass.),  214. 

2  Corvo.  of  London  Assur.  v.  Pater- 
son,  106  Ga.  538,  32  S.  E.  650;  Block  v. 
Columbian  Ins.  Co.,  42  N.  Y.  393. 
Prompt  reports  are  required,  Camors 
V.  Union  Mar.  Ins.  Co.,  104  La.  349, 
28  So.  926,  81  Am.  St.  R.  128.  No- 
tice to  local  agent  may  be  sufficient  by 
usage,  Ins.  Co.  of  N.  A.  v.  Bell,  25  Tex. 
Civ.  App.  129,  60  S.  W.  262. 

3  Delaware  Ins.  Co.  v.  White  Dental 


A92 


MEANING   AND   LEGAL  EFFECT   OF   MARINE   POLICY 


in  such  a  manner  that  a  mercantile  man  conversant  with  the  usages 
of  trade  can  clearly  understand  what  adventure  is  contemplated. 

There  are  three  ways  of  describing  a  voyage:  Either  every  port 
which  the  ship  is  to  visit  may  be  named,  or  general  words  may  be 
used  which  cover  a  certain  range,  and  leave  room  for  variations 
within  it;  ^  or,  lastly,  if  there  is  a  clearly  known  custom  as  to  the 
track,  and  that  custom  is  intended  to  be  followed,  it  may  suffice  to 
name  the  termini  only,  and  rely  on  the  custom.' 

As  regards  the  prosecution  of  the  voyage  which  is  described  in 
the  policy,  whether  it  be  a  voyage  or  a  time  policy,  the  fatal  results 
to  the  insured  of  a  change  of  voyage  or  of  a  deviation  by  the  ship 
from  the  proper  track  without  legal  excuse  have  already  been  pointed 
out  in  connection  with  the  discussion  of  general  principles  in  marine 
insurance  law.^ 

It  will  be  remembered,  also,  that  the  conduct  of  the  ship  is  a 
matter  of  concern  not  only  to  the  insurers  of  the  ship,  but  likewise 
to  the  insurers  of  freight  or  cargo,  or  other  interest,  insured  for  the 
same  voyage.  The  insurers,  to  whichever  class  they  belong,  have 
assumed  only  the  risks  of  a  certain  voyage  as  specified  or  contem- 
plated by  the  parties  to  the  insurance  contract.     Any  unjustifiable 


1  Uhde  V.  Walters,  3  Camp.  16. 

2  Commonwealth  Ins.  Co.  v.  Cropper, 
21  Md.  311;  Robertson  v.  Clarke,  1  Bing. 
445.  "The  termini  of  the  voyage  af- 
ford the  surest  criterion  by  which  to 
determine  its  identity,"  Murray  v.  Co- 
lumbian Ins.  Co.,  4  Johns.  (N.  Y.)  443, 
449.  See  Dickey  v.  Baltimore  Ins.  Co., 
7  Cranch,  327,  3L.  Ed.  360.  Sometimes 
a  deviation  clause  is  inserted,  providing 
that  the  property  is  covered  in  the 
event  of  a  deviation,  or  change  of  voy- 
age at  a  premium  to  be  agreed  upon, 
Hyderabad  Co.  v.  Willoughby,  L.  R.  2  Q. 
B.  D.  530.  Or  that  liability  shall  be 
suspended  during  deviation,  St.  Paul  F. 
(fc  M.  Ins.  Co.  V.  Knickerbocker  S.  Tow- 
age Co. ,  93  Fed.  931 ,  36  C.  C.  A.  19.  By 
English  law  a  determination  to  change 
a  voyage  as  soon  as  manifested  or  en- 
tered upon  discharges  the  miderwriters, 
even  before  actual  departure  from  the 
track,  Mar.  Ins.  Act  (1906),  §45;  Tas- 
ker  V.  Cunningham  (1819),  1  Bligh,  H. 
L.  87,  102  (to  like  effect).  But  com- 
pare Simpson  S.  Co.  v.  Premier,  etc., 
Assn.  (1905),  10  Com.  Cas.  198,  201 
(Bigham,  J.,  says,  "an  intention  to 
commit  a  breach  of  course  does  not  it- 
self constitute  a  breach");  Beams  v. 
Crtlumhion   Tn,'>.   Co.,  48  Barb.    (N.    Y.) 


445  (an  intent  to  deviate  is  not  devia- 
tion). The  "voyage"  may  cover  also 
a  subsidiary  or  incidental  overland 
transit,  Phetteplace  v.  Brit.  &  For. 
Mar.  Ins.  Co.,  23  R.  I.  26,  49  Atl.  33. 
And  see  Kratzenstein  v.  Western  Assur. 
Co.,  116  N.  Y.  54,  22  N.  E.  221,  5  L.  R. 
A.  799.  See  also  §  22.  The  voyage 
may  be  confined  to  inland  waters. 
"Voyage"  may  refer  to  the  enterprise 
rather  than  the  route.  Friend  v. 
Gloucester  Mut.  Fishing  Ins.  Co.,  113 
Mass.  326.  Gulf  of  Mexico  held  to  be 
part  of  Atlantic  Ocean,  Merchants' 
Mut.  Ins.  Co.  v.  Allen,  121  U.  S.  67, 
7  S.  Ct.  821,  30  L.  Ed.  858.  So  of 
Charleston  Bay,  St.  Paul  F.  &  M. 
Ins.  Co.  v.  Knickerbocker,  etc.,  Co.,  93 
Fed.  931,  36  C.  C.  A.  19.  Bayou  held 
"a  tributary"  of  the  Mississippi, 
Miller  v.  Citizens',  etc.,  Ins.  Co.,  12 
W.  Va.  116,  29  Am.  Rep.  452.  As  to 
what  are  the  limits  of  a  port  or  har- 
bor or  other  waters  see  Fulton  v.  Presi- 
dent, etc.,  of  Ins.  Co.,  127  Fed.  413; 
Cogswell  v.  Chubb,  1  App.  Div.  93,  36 
N.  Y.  Supp.  1076,  aff'd  157  N.  Y.  709, 
53  N.  E.  1124;  Kirk  v.  Home  Ins.  Co., 
92  App.  Div.  26,  86  N.  Y.  Supp.  980. 
See  §  418. 
3  §5  186-188. 


DURATION    AND   TERMINATION    OF  RISK  593 

departure  from  this  will  discharge  the  underwriters  as  from  the 
time  of  departure. 

The  defendants  insured  the  plaintiff's  coal  on  a  voyage  by  the 
bark  Coryphene  from  Seattle  to  Alaskan  ports.  The  final  port  of 
discharge  was  Teller,  on  Port  Clarence  Bay.  On  arriving  off  Tin 
City,  an  intermediate  port  of  discharge,  the  vessel  was  unable  to 
land  freight  on  account  of  a  strong  shoreward  wind  and  fog,  and  so 
she  continued  onward  to  and  anchored  in  the  bay  of  Port  Clarence. 
After  being  at  anchor  there  for  three  days  she  went  out  to  sea  again 
for  the  purpose  of  delivering  freight  at  Tin  City,  intending  to  return 
to  Teller,  but  before  she  reached  Tin  City  she  was  wrecked  and  the 
plaintiff's  cargo  aboard  was  lost.  The  court  held  that  the  voyage 
covered  by  the  insurance  terminated  when  the  vessel  reached  her 
port  of  final  destination  and  that  the  insurers  were  not  liable  for 
the  cargo  lost  after  she  had  voluntarily  left  the  bay  of  Port  Clarence.^ 

§  422.  Duration  and  Termination  of  Risk. — Until  the  ship  hath 
moored  anchor  twenty-four  hours  in  good  safety ;  until  the  goods  and 
merchandises  shall  be  safely  layided} 

Under  a  voyage  policy  the  subject  insured  is  protected  during  the 
voyage  between  the  termini  designated,  regardless  of  needful  or  acci- 
dental interruptions  and  delays  whether  on  sea  or  in  ports.^ 

It  is  important  to  understand  clearly  what  is  meant  by  mooring 
in  good  safety  or  mooring  in  good  safety  for  a  specified  time,  after 
which  the  ship  is  no  longer  covered  by  the  policy.  In  the  first  place, 
these  words  presuppose  the  arrival  of  the  vessel  at  the  terminal 

1  Alasl:a  B.  &  Safe  Deposit  Co.  v.  within  the  regular  course  of  the  voyage 
Maritime  Ins.  Co.,  156  Fed.  710.  a  marine  policy  does  not  cover  on  land, 

2  Or  as  in  Lloyd's  policy  "be  there  Broum  v.  Carstairs,  3  Camp.  161; 
discharged  and  safely  landed."  Australian  Agri.   Co.   v.   Sauncers,  L. 

3  Compare  §§418,  421.  Thus  to  R.  10  C.  P.  668;  Harrison  v.  Ellis,  7 
load  or  discharge  cargo,  Annen  v.  E.  &  B.  465,  3  Jur.  N.  S.  908,  26  L.  J. 
Woodman,  3  Taunt.  299.  Or  to  make  Q.  B.  239,  5  W.  R.  494;  Martin  v. 
necessary  repairs  to  ship,  Phillips  v.  Mar.  Ins.  Co.,  2  Mass.  420,  and  see 
Irving,  7  M.  &  G.  325,  13  L.  J.  C.  P.  §  421,  rotes.  Goods  may  be  covered 
145,  8  Scott  N.  R.  3;  Motteux  v.  Lon-  in  a  wuiehouse  or  substituted  vessel 
don  Assur.  Co.,  1  Atkyns,  545,  548;  if  landing  or  transshipment  becomes 
Smith  V.  Surridge,  4  Esp.  25.  Frozen  imperatively  necessary,  Malinckrodt 
in  by  ice,  Broum  v.  St.  Nicholas  /jw.  v.  Jefferson  Mut.  Ins.  Co.,  1  Mo.  App. 
Co.,  61  N.  Y.  332;  Delahunt  v.  Ins.  205;  Salisbury  v.  Ins.  Co.,  23  Mo.  553. 
Co.,  97  N.  Y.  537.  If  landing  and  66  Am.  Dec.  687;  Field  v.  Citizens' Ins. 
transshipment  of  cargo  fall  within  Co.,  11  'Mo.  50;  Plantamour  v.  Staples, 
regular  course  of  the  voyage  the  1  T.  R.  611n;  De  Cuadra  v.  Su am,  16 
policy  covers  goods  on  land,  Under-  C.  B.  (N.  S.)  772.  Or  if  landing  and 
writers  Agency  v.  Sutherlin,  55  Ga.  transshipment  are  expressly  permitted 
266;  Parsons  v.  Mass.,  etc.,  Ins.  Co.,  by  the  policy,  Tiemey  v.  Etherington,  1 
6  Mass.  197  (in  small  boat);  Petty  v.  Burr.  348;  Mna  Ins.  Co.  v.  Stivers,  47 
R.  E.   Ins.   Co..  1    Biu-r.   348.     Tf'not  Til.  86,  95  Am.  Dec.  467. 

38 


594  MEANING    AND    LEGAL    EFFECT   OF    MARINE    POLICY 

point  of  the  voyage,  which  is,  in  the  case  of  a  cargo-laden  ship,  the 
usual  place  of  discharge; '  and,  secondly,  they  provide  that  she  shall 
have  been  securely  anchored  at  that  spot  for  the  period  described. ^ 

The  term  "good  safety"  does  not  mean  absolute  immunity  from 
danger,  for  that  would  be  a  condition  impossible  of  attainment  at 
any  stage  of  a  marine  adventure,  but  such  a  measure  of  security  as 
will  suffice  to  enable  the  vessel  to  discharge  her  cargo  and  accom- 
plish the  other  ordinary  purposes  of  a  stay  in  port.  Two  kinds  of 
security  are  included  in  the  term  "good  safety";  namely,  physical 
and  political  safety.'^  Good  physical  safety  means  not  the  safety 
of  the  moorings,  but  of  the  ship;  not  absolute  freedom  from  damage, 
for  then  the  loss  of  a  rope  or  sail  or  spar  would  prevent  the  vessel 
from  being  considered  in  safety;  but,  on  the  other  hand,  she  must 
not  be  in  a  sinking  condition,  as  was  the  case  with  a  vessel  which 
arrived  at  her  j)ort  of  destination  a  complete  wreck,  and  after  being 
kept  afloat  for  a  few  days,  lashed  to  a  hulk,  sank  in  the  harbor.^ 
Good  political  safety  means  immunity  from  capture  or  arrest;  thus 
a  British  vessel,  which  the  day  after  her  arrival  at  a  French  port 
was  laid  under  an  embargo  then  existing  against  all  British  ships, 
was  held  to  have  never  moored  at  anchor  twenty-four  hours  in  good 
safety.^ 

A  cargo-laden  ship  must  be  moored  at  her  usual  place  of  dis- 
charge in  good  safety  during  the  whole  twenty-four  hours  or  other 
period  specified  in  the  policy,*^  and  accordingly  in  the  case  of  a 
vessel  which  arrived  at  her  moorings  in  the  Thames,  but  the  same 
day  received  an  order  to  go  into  quarantine,  and  was,  many  days 
after,  destroyed  by  fire  before  obtaining  her  release,  it  was  held 
that  the  policy  on  the  ship  was  still  running  at  the  time  of  loss  be- 
cause the  vessel  had  not  been  moored  at  anchor  twenty-four  hours 
in  good  safety.''' 

Where  the  insurance  is  on  a  vessel  to  a  place  generally  without 

1  Samuel  v.  Royal  Exchange  Assur.  hours  each,  beginning  from  the  time  of 
Co.,  8  B.  &  C.  119,  6  L.  J.  O.  S.  K.  B.  the  safe  mooring  of  the  ship,  Cornjoot 
315  (ship  lost  while  being  Avarped  v.  Royal  Exch.  Ass.  Corp.  (1904),  1  K. 
towards  the  doclv);  Sar/e  v.  Middle-  B.  40,  73  L.  J.  K.  B.  22,  89  L.  T. 
town  Ins.  Co.,  1  Conn.  239;  King  v.  490. 

Middletown   Ins.    Co.,    1    Conn.    184;  ^  Horneyer  v.  Lushington,   15  East, 

Upton  V.  Salem  Commercial  Ins.  Co.,  46,  3  Camp.  85. 

8  Mete.  605;  Bramhall  v.  Sun  Ins.  Co.,  *  Shaive  v.  Felton,  2  East,  109. 

104  Mass.  510,  6  Am.  Rep.  261.     As  5  Minett  v.  Anderson,  1  Peake's  N.  P. 

to  limits  of  "port"  see  §  418.  277.    And  see  Horneyer  v.  Lushington. 

2  Meigs   v.    Mvt.   Mar.   Ins.   Co.,   2  15  East.  46. 

Cush.    (Mass.)   439;  Dickeii  v.    United  «  Simpson  v.  Pacific  Mut.  Ins.  Co.. 

Ins.  Co.,  11  Johns.  (N.  Y.)  358.    Period  22  Fed.  Cas.  174;  Meigs  v.  Sun  Mid] 

in  port,  if  named  as  days,  is  reckoned  Ins.  Co.,  16  Fed.  Cas.  1323. 
as  <'onsecut.iv(>  periods  of  twonty-fonr  ^  Wriplr.<<  v.  Eoryirs,  2  Sir.  1243. 


DURATION    AND    TERMINATION    OF    RISK  ;j9o 

any  provision  as  to  her  safety  there,  the  risk  on  the  vessel  terminates 
when  she  is  safely  anchored  at  her  port  of  destination,  in  the  usual 
place  and  manner. 

By  special  endorsement  on  the  policy,  in  consideration  of  an 
additional  premium,  the  ship  Ravensworth  Castle  was  at  liberty  to 
go  to  Antwerp.  She  never  reached  the  inner  dt)ck  at  Antwerp, 
which  was  the  usual  place  for  discharging  cargo,  although  she  ar- 
rived at  the  outer  dock  of  that  port.  The  court  held  that  the  voyage 
was  not  at  an  end.^ 

Although  it  is  necessary  that  a  vessel  should  have  arrived  at  her 
place  of  discharge  to  terminate  the  insurance,^  it  is  not  necessary 
that  the  discharge  should  have  actually  commenced;  for  if  the  vessel 
has  arrived  at  her  moorings  dnd  remained  there  the  specified  period, 
awaiting  her  turn  to  unload,  the  risk  on  the  ship  is  ended. ^  Policies 
on  outward  bound  vessels  are  sometimes  so  framed  as  to  continue  in 
force  for  thirty  days  after  arrival  at  port  of  destination. 

The  ship  Afton  was  insured  for  a  voyage  to  any  port  of  discharge 
in  the  United  Kingdom  "and  whilst  in  port  during  thirty  days  after 
arrival."  She  arrived  at  Greenock  on  the  Clyde,  discharged  her 
cargo,  and  was  placed  in  a  dock  for  repairs.  Within  thirty  days  after 
arrival  at  this  port  of  discharge  she  proceeded  in  tow  on  a  new 
voyage  for  Glasgow.  She  had  reached  the  channel  of  the  Clyde, 
her  stern  being  about  500  feet  distant  from  the  Greenock  harbor 
works,  when  she  was  capsized  by  a  sudden  gust  of  wand.  It  was 
held  that  she  was  not  "in  port"  and  that  the  underwriters  were  not 
liable." 

With  regard  to  time  policies,  the  precise  dates  of  commencement 
and  termination  of  the  risk  are  named  in  the  policy.^  The  day,  un- 
less otherwise  expressed,  begins  and  ends  at  midnight.^ 

1  Stone  V.  The  Marine  Ins.  Co.,  etc.,  L.  R.  13  App.  Cas.  717  (port  is  a  place 

1    Exch.    D.    81.      If    it    is    doubtful  of  safety  or  shelter), 

whether  the  ship  in  a  given  situs  has  s  pm  y    Phoenix  Ins.  Co.,  10  Daly 

arrived  at  the  specified  harbor,  place,  (N.  Y.),  281.     Se6  Leeds  v.  Mechanics' 

or  anchorage,  the   question   is   one   of  Ins.  Co.,  8  N.  Y.  351.     Time  policies, 

fact  for  the  jury,  Lindsay  v.  Jansori,  4  however,    often    provide    that    if    the 

H.  &  N.  699.  vessel  is  at  sea  or  on  passage  the  risk 

^  Lajham  v.  Atlas  Ins.  Co.,  24  Pick.  shall  continue  until  she  arrives  at  port 

(Mass.)   1.  of  destination.    A  vessel  was  held  to  be 

3  Bill  V.  Mason,  6  Mass.  313;  Lidgett  at  sea  or  on  passage,  when  started  on  a 

v.  Secretan,  L.  R.  5  C.  P.  190.  river  twenty-five  miles  inland,   Union 

*  Hunter  v.  Northern  Mar.  Ins.  Co.,  Ins.  Co.  v.  Tysen,  3  Hill  (N.  Y.),  118 

6  Usually  noon   is   expressed   which  Reckoned   according   to   longitude   of 

means   solar   and   not   standard   time,  place  of  contract,  Walker  v.  Protection 

Jones  V.  German  Ins.  Co.,  110  Iowa,  Ins.  Co.,  29  Me.  317.     Compare  §  230, 

75,  81  N.  W.   188,  46  L.  R.  A.  860.  supra. 


595 


MEANING   AND   LEGAL   EFFECT  OF   MARINE   POLICY 


The  risk  on  cargo  continues  until  the  goods  have  been  deposited 
upon  the  wharf  or  their  customary  place  of  discharge.^  It  then 
ceases,  for  the  underwriter  is  not  liable  for  loss  arising  from  theft, 
fire,  or  any  other  perils  to  which  the  goods  may  be  subjected  while 
lying  on  the  wharf  or  in  dock,'  unless  an  express  clause  to  that  effect 
has  been  inserted  in  the  policy.  In  order  that  the  polic}^  may  con- 
tinue to  protect  the  goods  while  in  course  of  landing,  they  nmst  be 
taken  from  the  ship  to  the  shore  in  the  mode  which  is  usual  in  the 
trade  at  the  port  where  the  discharge  takes  place.  If  it  is  customary 
in  the  trade  to  convey  goods  from  the  ship  to  the  shore  in  lighters, 
launches,  or  other  small  craft,  they  are  protected  by  the  policy  dur- 
ing such  transport.^  Otherwise  the  insured  should  secure  the  bene- 
fit of  the  special  craft  clause,  as  in  the  case  of  loading.^ 

B}'  endorsement  on  an  open  canal  cargo  policy  Petrie's  shipment 
of  cement  was  insured  against  perils  of  the  seas,  canals,  rivers,  etc., 
"to  New  York  harbor."  The  cargo  in  fact  was  shipped  to  Tarry- 
town  from  the  Brooklyn  stores.  Evidence  of  custom,  however,  was 
received  on  the  trial  in  the  action  against  the  insurer  to  the  effect 
that  the  term  "harbor  of  New  York,"  as  used  in  the  business  of 


("sailing"  and  "departure"  distin- 
guished); driven  into  port  by  compul- 
sion of  capture  or  weather,  Hutton  v. 
Am.  Ins.  Co.,  7  Hill  (N.  Y.),  321. 
Vessel  held  to  be  at  sea  or  on  passage 
when  detained  in  foreign  port  by  com- 
pulsion, Wood  V.  New  England  Mar. 
Ins.  Co.,  14  Mass.  31,  7  Am.  Dec.  182. 
Held  otherwise  where  vessel  was  in 
port  to  obtain  necessary  clearance, 
water  and  crew,  Washington  Ins.  Co.  v. 
White,  103  Mass.  238.  So  also  where 
vessel  was  in  a  roadstead,  not  a  port, 
to  take  cargo,  Cole  v.  Union  Mut.  Ins. 
Co.,  12  Gray  (Mass.),  501,  74  Am.  Dec. 
609.  See  Wales  v.  China  Mut.  Ins. 
Co.,  8  Allen  (Mass.),  380;  American 
Ins.  Co.  V.  Hutton,  24  Wend.  (N.  Y.) 
330. 

1  Grade  v.  Marine  Ins.  Co.,  8  Cranch, 
75,  3  L.  Ed.  492;  Mobile,  etc.,  Ins.  Co. 
V.  McMillan,  31  Ala.  711,  27  Ala.  77. 
They  need  not  reach  consignee,  Gat- 
liffe  v.  Bourne,  4  Bing.  N.  C.  314,  7 
M.  &  Gr.  8.50.  The  risk  continued 
where  goods  were  detained  outside 
port  by  ice,  Samuel  v.  Ro'jal  Exch. 
A.5.9.  Co.   (1828),  8  B.  &  Cr."  119. 

2  Mansur  v.  New  England  Mut. 
Mar.  Ins.  Co..  12  Gray  (Mass.),  520; 
Beddall  v.  Brit.  &  For.  Mar.  Ins.  Co., 
143  N.  Y.  94,  37  N.  E.  613.  Compare 
Fletcher  v.  St.  Louis  Mar.  Ins.  Co.,  18 


Mo.  193;  Gardiner  v.  Smith,  1  Johns. 
Gas.  (N.  Y.)  141. 

3  Wadsworth  v  Pacific  Ins.  Co.,  4 
Wend.  (N.  Y.)  33;  StewaH  v.  Bell, 
5  B.  &  Aid.  238;  Matthie  v.  Potts,  3 
Bos.  &  P.  23  (cases  cited  in  note); 
Osacar  v.  Louisiana  Ins.  Co.,  5  Mart. 
(N.  S.)  574  (386).  If,  however,  the 
assured  depart  from  the  usual  course 
of  trade  by  taking  charge  of  the  goods 
at  an  earlier  period  than  they  would 
have  been  delivered  to  him  under  ordi- 
nary circumstances,  the  underwriters 
will  be  discharged  from  responsibility, 
Houlder  v.  Merchants'  Alar.  Ins.  Co., 
17  Q.  B.  D.  354  (goods  put  in  lighters, 
risk  ended);  Sparrow  v.  Caruthers,  2 
Str.  1236  (owner  put  goods  in  lighter). 
But  see  Paul  y.  Ins.  Co.,  15  T.  L.  R. 
535.  The  policy  covers  goods  only 
while  they  are  at  the  risk  of  the  as- 
sured; and  consequently,  if  cargo  be 
sold  afloat,  without  an  assignment  of 
the  policy,  and  the  buyers  take  de- 
livery of  the  cargo  in  lighters  sent 
alongside,  the  risk  of  lighterage  from 
ship  to  shore  will  not  be  covered,  as  the 
underwriters'  risk  would,  under  such 
circumstances,  cease  on  delivery,  North 
of  England,  etc.,  Co.  v.  Archangel  M. 
Lis.  Co.,  L.  R.  10  Q.  B.  249,  32  L.  T. 
561,  2  Asp.  M.  C.  571. 

*  See  §  419,  supra. 


DURATION    AND    TERMINATION    OF    RISK  597 

marine  insurance,  included  Tarrytown  and  other  points  within  the 
New  York  custom  house  district.  It  also  appeared  that  the  boat, 
which  was  seaworthy,  arrived  at  Tarrytown,  was  moored  alongside 
the  dock,  but  when  the  tide  went  out  it  grounded  and  was  so  broken 
or  strained  that  it  sank  and  the  cargo  was  destroyed.  The  jury 
found  for  the  plaintiff  and  the  judgment  was  affirmed,  the  court 
holding  that  a  loss  had  occurred  within  the  harbor  of  New  York 
by  a  peril  insured  against,  and  that  the  insurer  was  liable.' 

Cargo  should  be  landed  within  a  reasonable  time  after  the  ship's 
arrival  where  no  time  is  specified;  otherwise  it  will  cease  to  be  cov- 
ered by  the  policy.  What  is  a  reasonable  time  in  any  particular 
case  depends  upon  the  usages  of  the  trade. ^ 

When  goods  are  insured  b}^  vessel  bound  to  several  ports  in  suc- 
cession, the  risk  ends  at  the  final  port  of  discharge  named  in  the 
policy.  But  the  insurance  may  be  prolonged  by  the  addition  of 
the  words  "the  risk  to  continue  until  arrival  of  the  goods  at  a  market 
at  their  final  port  of  discharge."  ^ 

The  underwriters'  risk  upon  the  bill  of  lading  freight  may  be  con- 
sidered coincident  with  the  risk  on  goods,  since  it  does  not  com- 
mence until  the  cargo  is  shipped,  and  then  only  applies  to  such 
portion  of  it  as  may  be  actually  on  board,  unless  cargo  has  been 
contracted  for  under  a  valid  agreement,  and  is  lying  in  readiness 
to  be  placed  on  board,  the  ship  also  being  ready  to  receive  it."*  The 
termination  of  the  risk  on  cargo  and  freight,  respectiveh',  is  in  gen- 
eral simultaneous.  For  concurrently  with  the  landing  of  the  goods 
in  safet}^  the  shipowner  earns  the  freight  upon  them,  and  the  risk 
of  the  underwriter  on  freight  is  proportionately  reduced;^  so  that, 
in  the  event  of  the  ship  being  lost  after  a  part  of  her  cargo  has  been 
discharged,  the  loss  on  the  freight  policy  will  be  limited  to  the  freight 
on  the  cargo  remaining  on  board.^  In  the  case  of  chartered  freight, 
however — that  is,  money  payable  for  hire  of  a  ship  under  a  charter 
party  ''' — the  risk  commences  as  soon  as  there  is  an  inception  of  per- 
formance under  the  charter  party  (i.  e.,  when  the  owner  or  hirer  has 
incurred  expenses  and  taken  steps  toward  earning  freight)  irrespective 

^Petriev.Phxnix  Ins.  Co. ,\Z2^.Y.  '"The    Scottish    Mar.    Ins.     Co.    v. 

137,  30  N.  E.  380.  Turner,  17  Jur.  631;  Benson  v.  Chap- 

2  Parkinson  v.  Collier,  2  Park,  Ins.       man,  2  H.  L.  Cas.  696. 

653;    Xoble   v.    Kennoway,   2    Dougl.  «  Fa?/  v.  Alliance  Ins.  Co.,  16  Gray- 
Si  0.  (Mass.),  455. 

3  Richardson  v.  London  Assur.  Co.,  ^  U.  S.  Shippiyig  Co.  v.  The  Empress 
4  Camp.  94;  Deblois  v.  Ocean  Ins.  Co..  Ass.  Corp.  (1906),  12  Com.  Cas.  142; 
16  Pick.  (Mass.)  303;  Maxwell  v.  Rob-  Jackson  v.  The  Union  Mar.  Ins.  Co.. 
inson,  1  Johns.  (N.  Y.)  333.  L.  R.  10  C.  P.  125. 

*  See  §  418. 


598  MEANING    AND    LEGAL    EFFECT   OF    MARINE    POLICY 

of  the  question  whether  any  cargo  has  been  placed  on  board  or  is  in 
readiness  to  be  so  placed,  and  continues  until  the  vessel  has  per- 
formed her  contract.  But  the  words  "from  the  loading  thereof"  in 
a  freight  policy  exclude  the  goods  not  actually  loaded,  and  also  the 
freight  for  them.^ 

§  423.  Touch  and  Stay. — And  it  shall  be  lawful  for  said  vessel  in 
her  voyage  to  proceed  and  sail  to,  touch  and  stay  at,  any  ports  or  places 
if  thereunto  obliged  by  stress  of  weather,  etc.,  without  prejudice  to  this 
insurance. 

The  words  "if  obliged  by  stress  of  weather,  etc.,"  ^  practically 
nullify  the  important  privilege  which  would  otherwise  be  extended 
to  the  insured  by  this  clause.  If  such  a  privilege  is  given  to  touch 
and  stay  at  any  ports  or  at  certain  ports  named,  it  is  understood  in 
the  case  of  a  voyage  policy  that  the  ports  visited  must  lie  within 
the  ordinary  track  of  the  voyage,  and  that  they  must  be  visited 
for  some  purpose  connected  with  the  object  of  the  adventure.^ 

Whether  liberty  to  call  at  a  port  gives  liberty  to  land  or  load  cargo 
there,  must  depend  on  whether  such  an  intention  may  naturally 
be  inferred  from  the  description  of  the  voyage  in  the  policy  taken 
in  conjunction  with  the  customs  of  the  particular  trade;  ^  and 
wherever  a  ship  has  liberty  to  call  at  a  place,  she  may  always  land 
or  load  goods  there,  provided  this  can  be  done  without  additional 
delay.^ 

§  424.  Prohibited  Waters. — In  the  case  of  insurance  on  coasting 
or  inland  trade  it  is  customary  either  to  specifically  limit  the  course 
or  else  to  expressly  exclude  certain  waters,  regions,  or  ports.  Such 
limitations  are  warranties  and,  therefore,  must  be  strictly  observed.* 

1  Jones  V.  Neptune  Marine  Ins.  Co.,  form  without  the  addition  of  any 
L.  R.  7  Q.  B.  702,  41  L.  J.  Q.  B.  370,      special  clause. 

1  Asp.  M.  C.  416,  27  L.  T.  308.  *  Metcalfe   v.   Parry,  4  Camp.    123; 

2  These  words  are  sometimes  omit-  Urquhart  v.  Barnard,  1  Taunt.  450,  10 
ted  and  specific  ports  named.  Rev.  Rep.  574. 

^  Lavabre  v.   Wilso7i,   1    Dougl.   284;  ^Kingston   v.    Girard,   4'  Dall.    274; 

Hogg  V.  Horner,  2  Park,  626;  Bragg  v.  Hughes  v.    Union  Ins.   Co.,  3  Wheat. 

Anderson,  4  Taunt.   229;   Williams  v.  (U.  S.)   159;   Kane  v.   Columbian  Ins. 

Shee,  3  Camp.  469;  Hammond  v.  Ried,  Co.,  2  Johns.    (N.   Y.)  264;  Kaine  v. 

4  B.  &  Aid.  72;  Sollij  v.  Whitmore,  5  Bell.  9  East,  195;  Cormack  v.  Gladstone, 
B.  &  Aid.  45;  Laing  v.  Union  Mar.  Ins.  11  P^ast,  347. 

Co.,  1  Com.  Cas.  11;  Bottomley  v.  Bovill,  ^  Lovett  v.  China  Mid.  Ins.  Co.,  174 

5  B.  &  Cr.  210.  Where  steamers  or  Mass.  108,  54  N.  E.  338  (prohibited 
sailing  vessels  of  a  particular  line  or  in  from  Cape  Breton  waters,  Otc);  Parker 
a  particular  trade  Habitually  follow  a  v.  China  Mid.  Ins.  Co.,  164  Mass. 
specific  route  or  call  at  certain  ports,  237,41  N.  E.  267  (Gulf  of  Campeachy); 
the  usage  so  to  do  will  be  tacitly  in-  Odiorne  v.  New  Eng.  Mut.  Mar.  Ins 
I'orporated  in  a  policy  in  the  ordinary  Co.,  101   Mass.  551,  3  Am.  Rep.  401 


PROHIBITED    WATERS 


599 


The  limitation  or  exception  often  takes  the  form  of  an  express 
warranty.^ 

The  house  boat  Mon  Mon  was  insured  by  a  policy  which  "war- 
ranted confined  to  the  inland  waters  of  Xew  Jersey,  New  York  and 
Long  Island."  She  sank  under  tow  from  Gravesend  to  Sheepshead 
Bay  and  when  opposite  the  Oriental  Hotel  and  within  about  a 
quarter  of  a  mile  of  Coney  Island.  The  court  held  that  the  natural 
boundary  of  inland  waters  was  to  be  found  in  the  line  connecting 
the  extremity  of  Sandy  Hook  with  the  nearest  point  on  Rockaway 
Beach  and  that  the  insurers  were  liable.' 


(cannot  by  offer  of  usage  contradict 
a  plain  description  contained  in  the 
policy);  Cobb  v.  Lime  Fork  F.  &  M. 
Ins.  "Co.,  58  Me.  326;  Fulton  v.  Pre>ri- 
dent,  etc.,  of  Ins.  Co.,  127  Fed.  413 
("confined  to  inland  waters  of  New 
Jersey,  New  York,  and  Long  Island"); 
Kirk  V.  Home  Ins.  Co.,  92  App.  Div. 
26,  86  N.  Y.  Supp.  980  ("confined  to 
waters  of  New  Haven  Harbor,"  etc.). 
The  same  rule  applies  to  ocean  traffic, 
Birrell  v.  Dryer,  9  App.  Cas.  345; 
Colledge  v.  Hartij,  6  Exch.  205.  See 
§  186.  That  a  breach  in  no  wise  con- 
tributes to  the  loss  is  immaterial,  Co^.-j- 
u-ell  V.  Chvbb,  1  App.  Div.  93,  72  N.  Y. 
St.  R.  20,  36  N.  Y.  Supp.  1076,  aff'd 
157  N.  Y.  709,  53  N.  E.  1124.  But 
mere  intention  or  attempt,  for  instance, 
going  towards  prohibited  places,  con- 
stitutes no  breach,  Thames,  etc.,  Ins. 
Co.,  86  Fed.  150,  56  U.  S.  App.  676, 
29  C.  C.  A.  624;  Snoiv  v.  Columbian 
Ins.  Co.,  48  N.  Y.  624,  8  Am.  Rep. 
578;  Beams  v.  Columbian  Ins.  Co.,  48 
Barb.  445.  Whether  customary  or 
statutory  boundary  lines  control,  see 
FuUon  v.  Ins.  Co.,  136  Fed.  182. 


iSee  §455,  infra.  Cullen,  Ch.  J., 
says,  though  not  in  a  case  of  marine 
insurance,  "It  has  been  suggested 
that,  under  the  decision  we  are  about 
to  make,  insurance  companies,  to  avoid 
the  law  of  waiver,  will  change  the 
terms  of  their  policies  and,  instead  of 
inserting  conditions  the  breach  of 
which  render  a  policy  void,  provide 
that  in  case  of  such  a  breach  the  policy 
shall  not  cover  the  loss.  There  is  no 
such  danger.  A  provision  of  the  kind 
suggested  would  be  just  as  much  a 
forfeiture  as  if  expressed  in  the  form 
now  in  use,  that  the  policy  shall  be 
void,"  Draper  v.  Oswego  Co.  Fire  Re- 
lief Assn.,  190  N.  Y.  18,  82  N.  E. 
755. 

"i  Fulton  v.  Ins.  Co.  of  N.  A.,  136 
Fed.  182,  69  C.  C.  A.  198.  But  Rond- 
out  Creek,  two  and  one-half  miles  from 
the  North  River,  cannot  be  construed 
to  be  part  of  the  "North  River,"  Has- 
torf  V.  Greenvich  Ins.  Co.,  132  Fed. 
122;  Tarrytown  shown  to  be  within 
"New  York  harbor,"  Petrie  v.  Phoenix 
Ins.  Co.,  132  N.  Y.  137,  30  N.  E. 
380. 


CHAPTER  XX 


Marine  Policy — Concluded 


§  425.  Perils  of  the  Sea.^ — In  considering  the  scope  of  the  marine 
insurance  policy,  it  must  be  observed  that  the  term  "perils  of  the 
seas"  refers  only  to  fortuitous  casualties  of  the  seas,  and  does  not 
include  the  ordinary  action  of  the  winds  and  waves,  known  as  "wear 
and  tear,"  nor  incidental  delay;  ^  but  any  ordinary  occurrence  may 
become  extraordinary  if  qualified  by  unusual  conditions. 

Thus,  a  transport  in  government  service  was  ordered  into  Boulogne, 
where  there  is  a  dry  harbor,  and  was  moored  near  one  of  the  quays. 
The  vessel  took  the  ground  on  the  ebb  of  the  tide,  as  was  inevitable; 
but,  owing  to  the  presence  of  a  considerable  swell  in  the  harbor,  she 
struck  the  ground  with  unusual  violence,  and  subsequently  eighteen 
of  her  knees  were  found  to  be  broken.  The  court  held  that  this 
damage  was  the  result  of  a  peril  of  the  sea.* 


1  "Touching  the  adventures  and 
perils  which  the  said  insurance  com- 
pany is  contented  to  bear,  and  takes 
upon  itself  in  this  voyage,  they  are  of 
the  seas,  men-of-war,  fires,  enemies, 
pirates,  rovers,  thieves,  jettisons,  let- 
ters of  mart  and  countermart,  re- 
prisals, takings  at  sea,  arrests,  re- 
straints and  detainments  of  all  Kings, 
princes  or  people,  of  what  nation,  con- 
dition or  quality  soever,  barratry  of 
the  master  and  mariners,  and  all  other 
perils,  losses  and  misfortunes  that  have 
or  shall  come  to  the  hurt,  detriment  or 
damage  of  the  said  ....  or  any  part 
thereof." 

2  Dudgeon  v.  Pembroke,  L.  R.  9  Q. 
B.  596  (wreck).  Lord  Bramwell  sug- 
gests the  following  definition  of  "perils 
of  the  seas":  "Every  accidental  cir- 
cumstance, not  the  result  of  ordinary 
wear  and  tear,  delay,  or  the  act  of  the 
assured,  happening  in  the  course  of 
the  navigation  and  incidental  to  the 
navigation,  and  causing  loss  to  the 
subject-matter  of  the  insurance," 
Thames  F.  M.  Ins.  Co.  v.  Hamilton 
(1887),  12  App.  Cas.  492.  It  must  be 
a  peril  of  the  sea  and  not  merely  a 
peril  on  the  sea,  Cullen  v.   Butler,  5 


M.  &  Sel.  461  (another  ship  fired  upon 
and  sunk  the  ship  insured.  Held, 
however,  covered  under  the  later 
phrase  "all  other  perils"),  Laveroni  v. 
Drury,  8  Exch.  166,  22  L.  J.  (Exch.)  2 
(damage  to  cargo  of  cheese  by  rats  not 
covered).  But  striking  a  vessel  on 
sunken  rock  on  a  calm  day  and  foun- 
dering is  a  sea  peril.  The  Xantho,  12 
App.  Cas.  503;  Ajum  Goolam  v.  Union 
Mar.  Ins.  Co.,  17  T.  L.  R.  376.  So  also 
striking  an  iceberg,  Hamilton  v.  Pan- 
dorf,  12  App.  Cas.  527.  A  marine 
policy  may  be  worded  to  cover  nothing 
but  fire  loss,  Dwinnell  v.  Minneapolis 
F.  &  M.  Mut.  Ins.  Co.,  90  Minn.  383, 
97  N.  AV.  110.  May  even  follow  pro- 
visions of  standard  fire  policy,  Jack- 
son V.  British  Am.  A.ssnr.  Co.,  106 
Mich.  47,  63  N.  W.  899,  .30  L.  R.  A. 
636.  Ship  moored  as  hospital  is  a  fire 
rather  than  a  marine  risk,  City  of  De- 
troit V.  Grummond,  121  Fed.  963,  58 
C.  C.  A.  ,301.  But  held  that  insurance 
on  a  seagoing  vessel  against  fire  only  is 
a  marine  contract  coming  within  ad- 
miralty jurisdiction,  North  Germari 
Fire  Ins.  Co.  v.  Adams,  142  Fed.  439, 
73  C  C  A  555 

3  Fletcher  v.  Inglis,  2  B.  &  Aid.  315. 


[600] 


PERILS   OF   THE   SEA 


601 


In  another  case,  the  ship  proceeded  in  the  course  of  her  trading  to 
Sunderland,  where  she  was  moored  head  and  stern,  and  took  the 
ground  in  the  usual  way  at  the  ebb  of  the  tide.  The  beach  was  hard 
and  steep,  and  the  ship  lay  with  a  shght  Ust  toward  it.  She  appeared 
to  strain  in  this  position,  especially  when  taking  the  ground  and 
floating,  and  after  remaining  some  time  in  the  place  it  wns  found  that 
she  was  hogged.  The  court  held  that  the  damage  received  under  the 
above  circumstances  was  not  caused  by  perils  of  the  seas,  but  fell 
within  the  designation  of  wear  and  tear.  Here  the  vessel  in  conse- 
quence of  the  rising  and  falling  of  the  tide,  rested  upon  the  river's 
bed  and  received  damage.  There  was  nothing  fortuitous,  no  peril, 
no  accident.^ 

So  also  the  English  court  has  declared  that  difficulties  arising 
merely  from  the  ordinary  obstruction  or  closing  in  by  ice  of  a  port, 
which  is  subject  to  be  closed,  and  is  always  closed,  in  the  winter 
months,  do  not  amount  to  a  peril  of  the  seas  within  the  ordinary 
meaning  of  a  policy  of  marine  insurance,  but  that  when  the  obstruc- 
tion by  ice  is  accidental  and  unexpected,  due,  for  example,  to  the 


^Magnus  v.  Bvttemer,  11  C.  B.  876. 
Compare  Seaman  v.  Ins.  Co.,  21  Fed. 
778.  Held,  that  loss  was  by  peril  of 
the  sea  in  following  cases:  Where  live 
cattle  carried  between  decks  were 
thrown  violently  together  and  killed 
by  the  tremendous  rolling  of  the  sea, 
though  not  touched  by  water,  Snojc- 
den  V.  Guion,  101  N.  Y.  458,  5  N.  E. 
322.  And  see  Coit  v.  Smith,  3  Johns. 
Cas.  (N.  Y  )  16.  So  also  though  the 
cattle,  in  the  course  of  their  distur- 
bance, kicked  one  another  to  death, 
Gabarj  v.  Lloyd,  3  Barn.  &  C.  793,  10 
E.  C.  L.  229  (compare  Compania  de, 
etc.,\.  Brauer,  168  U.  S.  104).  Where 
a  cargo  was  thrown  into  the  river  by 
the  careening  of  the  vessel  though  due 
to  carelessness  of  those  unloading, 
Crescent  Ins.  Co.  v.  Vicksburgh,  etc., 
Packet  Co.,  69  Miss.  208,  13  So.  254. 
30  Am.  St.  R.  537.  Where  drums  of 
glycerine  were  displaced  and  injured 
on  board,  by  the  rolling,  The  Frcy,  106 
Fed.  319.  Contact  with  sea  water  in 
the  hold,  Neidlinger  v.  Ins.  Co.,  11 
Fed.  514.  Heavy  cross  seas  though 
not  uncommon.  BuUnrd  v.  Ins.  Co.,  1 
Curt.  (U.  S.)  148  (contra,  Gvlnare,  42 
Fed.  861).  Taking  ground  in  bad  po- 
sition, or  striking  hard  substance  on 
the  harbor  bottom  as  tide  ebbs,  Hnqnr 
v.  Ins.  Co.,  59  Me.  460  (cases  cited); 
McNally  v.  Ins.  Co..  63  N.  Y.  Supp. 
125,  31  Misc.  61;  Petrie  v.  Phrevix  Ins. 


Co.,  132  N.  Y.  137,  30  N.  E.  380.  Ac- 
tion of  wind  while  the  injured  boat 
was  being  hauled  to  a  railway,  Ellery  v. 
New  Eng.  Ins.  Co.,  8  Pick.  (Ma.ss.)'l4. 
Parting  of  a  raft  of  logs  caused  by  cur- 
rents in  a  river,  Moores  v.  Louisville 
Underwriters,  14  Fed.  226.  Water  en- 
tering a  dead  light  left  open,  The  Sil- 
via, 68  Fed.  236;  Starbitck  v.  Phcenix 
Ins.  Co.,  19  App.  Div.  139,  45  N.  Y. 
Supp.  995,  47  App.  Div.  621,  62  N.  Y. 
Supp.  264,  aff ;d  166  N.  Y.  593,  59  N.  E. 
1130.  Injuries  while  making  land- 
ings. Seaman  v.  Enterprise  F.  ct  ^1/.  Ins. 
Co.,  21  Fed.  778.  Accident  to  a  small 
boat  from  ordinary  swell  of  a  steamer, 
Washington  Mid.  Ins.  Co.  v.  Peed,  20 
Ohio,  199.  Damage  by  sea  water 
through  hole  in  the  vessel  eaten  by 
rats,  Garrigues  v.  Coxe,  1  Binn.  (Pa.) 
592;  Hamilton  v.  Pandorf,  12  App. 
Cas.  518.  An  escape  of  steam  injured 
eight  mules  under  a  river  policy. 
Union  Ins.  Co.  v.  Groom,  4  Bush. 
(Ky.)  289.  Burden  is  on  the  insured  to 
show  that  the  damage  was  from  perils 
of  sea.  Coles  v.  Mar.  Ins.  Co.,  6  Fed. 
Cas.  65;  Fleming  v.  Marine  Ins.  Co., 
3  Watts  &  S.  144,  38  Am.  Dec.  747. 
But  as  to  burden  of  proof  in  case  of 
unseaworthiness  see  §  183,  sitpra.  The 
term  "perils  of  the  seas"  as  occurring 
in  a  policy  and  in  a  bill  of  lading  com- 
pared, Wilson  V.  Xantho,  12  App.  Cas. 
503. 


()02  MEANING    AND    LEGAL    EFFECT    OF    MARLVE    POLICY 

prevalence  of  unexpected  winds  or  currents,  then  an  extraordinary 
difficulty  and  danger  is  created  and  such  obstruction  and  danger 
constitute  a  peril  of  the  seas.^ 

In  another  English  case  twenty-six  packages  of  dead  pigs  had 
been  shipped  at  Hamburgh  on  board  the  Leopard.  Thirty-two 
quarters  of  beef  had  been  shipped  at  a  later  date  for  the  same  voyage 
on  board  the  Ostrich.  Both  shipments  were  consigned  to  the  plain- 
tiff, the  insured.  All  the  meat  so  shipped  became  putrid  and  was 
necessarily  thrown  ovei'board,  not  because  of  any  direct  action  of 
storms  or  seas  affecting  it,  but  solely  on  account  of  the  unusual 
delay  in  the  voyage  which,  however,  was  occasioned  by  tempestuous 
weather.  The  English  court  held  that  this  was  not  a  loss  b}'  perils 
of  the  seas,  or  within  the  words  "all  other  perils,  losses,  and  mis- 
fortunes," etc.,  in  the  policy.- 

During  a  voyage  of  one  of  the  ocean  liners  from  New  York  to 
Liverpool  the  ship's  carpenter  and  the  deck  hands  erect  a  temporary 
structure  on  deck  to  protect  passengers  while  dancing.  The  job 
is  done  so  carelessly  that  the  shelter  with  its  heavy  supports  falls 
to  the  deck  in  calm  weather.  The  collapse  breaks  certain  cabin 
windows,  damages  the  temporary  structure  and  also  injures  one  of 
the  ladies  who  was  engaged  in  dancing  at  the  time.  The  injured 
passenger  recovers  compensation  for  her  hurt  and  her  fright  from 
the  steamship  company.  The  steamship  company,  however,  fails 
to  recover  from  its  underwriters  for  the  damage  sustained  by  the 
temporar}^  erection  and  the  ship;  since  the  loss  is  not  within  the 
scope  of  the  perils  clause  of  the  marine  policy  as  construed  by  the 
courts.^  Nor  can  the  steamship  company  look  to  that  policy  to 
recover  reimbursement  for  the  amount  of  the  judgment  paid  by  it 
to  the  injured  passenger;  since  the  usual  marine  policy  does  not 
cover  employers'  liability,  which  forms  the  subject  of  another  class 
of  insurance.^ 

^  Popham  V.  St.  Petersburg  Ins.  Co.,  sions,  whether  by  the  seamen  or  by 

10  Com.  Cas.   31    (ships  rammed  and  sentinels  placed  on  board  by  a  superior 

driven  aground  by  ice  in  Kara  Sea;  force,  and  loss  of  possible  earnings  of 

miderwriters  liable).  the  vessel,  prevented  by  embargo,  are 

2  Tat/lor  v.  Dunbar,  L.  R.   4  C.   P.  none  of  them  within  the  usual  policy, 

206,   approved   in    Thames    &    Mersey  Martin    v.    Salem    Mar.    Ins.    Co.,    2 

Mar.   Ins.   Co.   v.   Hamilton,   12   App.  Mass.  420. 

Cas.  484.     Damage  to  cargo  by  ordi-  3  Thames    &   Mersey  Mar.   Ins.  Co. 

nary    dampness    of    the    hold  "^is    not  v.  Hamilton,  L.  R.  12  App.  Cas.  493, 

covered  by  the  policy  though  aggra-  50  L.  J.  Q.  B.  626  (so  of  damage  to  the 

vated  by  the  length  of  the  voyage  due  ship's    chronometer,    if    tlie     master, 

to  stress  of   weather,  Balder  v.  Mjrs.  through  a  fit  of  giddiness,  should  drop 

Ins..  Co.,  12  Gray  (Mass.),  603.    Dam-  it  into  the  hold), 

age  to  cargo  by  worms  or  climate,  and  *  See  §  475,  infra. 
extraordinary    expenditure    of    provi- 


COLLISION 


603 


"Maritime  perils"  is  a  much  broader  phrase  than  "perils  of  the 


seas. 


§  426.  Foundering  at  Sea. — Foundering  at  sea  is  included  among 
the  perils  of  the  sea  if  caused  by  the  violence  of  the  winds  or  waves 
or  any  other  accidental  occurrence,  but  not  so  if  caused  by  overload- 
ing, original  defect,  or  inherent  weakness  in  the  ship.^ 

§  427.  Grounding. — Grounding,  whether  arising  from  stress  of 
w-eather,  ignorance  of  the  locality,  blunder  or  stupidity,  the  desire 
to  avoid  some  approaching  vessel  or  other  danger,  in  short,  for  any 
reason  out  of  the  ordinary  course  of  things  in  the  voyage,  is  con- 
sidered one  of  the  perils  of  the  sea.^ 


§  428.  Collision. — Collision  is  also  a  peril,'*  and  this  whether  the 
collision  be  the  result  of  inevitable  accident,  or  fault  on  the  part  of 
the  ship  insured,  or  of  fault  on  the  part  of  the  other  ship;  for,  on  the 
principle  of  causa  proxima,  the  underwriters  must  pay,  be  the  fault 
whose  it  may.^    The  courts  differ,  however,  as  to  whether  the  under- 


1  " '  Maritime  perils'  means  the  perils 
consequent  on,  or  incidental  to  the 
navigation  of  the  sea,  that  is  to  say, 
perils  of  the  seas,  fire,  war  perils, 
pirates,  rovers,  thieves,  captures,  seiz- 
ures, restraints,  and  detainments  of 
princes  and  peoples,  jettisons,  barratry, 
and  any  other  perils,  either  of  the  like 
kind  or  which  may  be  designated  by 
the  policy,"  Eng.  Mar.  Ins.  Act  (1906), 
§  3.  "The  policy  enumerates  many 
maritime  perils,  such  as  capture,  seiz- 
ure, fire,  etc.,  which  are  incidental  to 
marine  adventure,  but  which  are  not 
perils  of  the  seas,"  Chalmers  &  Owen 
Ins.  (1907),  145. 

2  Merchants'  Trad.  Co.  v.  Universal 
Mar.  Ins.  Co.,  L.  R.  9  Q.  B.  596;  Ham- 
ilton V.  Pander],  12  App.  Cas.  524; 
Gartside  v.  Orphans'  Ben.  Ins.  Co.,  62 
Mo.  322.  If  a  ship  has  not  been  heard 
of  for  so  long  a  time  after  sailing  that 
there  remains  no  reasonable  hope  of 
her  safety,  she  is  presumed  to  have 
foundered  at  sea.  There  is  neither  in 
this  country  nor  in  England  any  fixed 
rule  as  to  when  that  presumption 
arises,  Houstman  v.  Thornton,  Holt  N. 
P.  242  (nine  months);  Green  v.  Broivne, 
2  Strange,  1199  (four  years)  ;  Broum 
V.  Seilson,  I  Games,  525.  In  England, 
after  an  interval  of  time  supposed  to 
be  sufficient  to  cover  the  reasonable 


chances  of  arrival,  the  ship  is  posted 
at  Lloyd's  as  missing,  and  then  the  un- 
derwriters are  expected  to  pay.  As  to 
proving  loss  see  Tivemslow  v.  Osioin,  2 
Camp.  85;  Koster  v.  Reed,  6  B.  &  Cr.  19. 

3  Running  on  a  shoal.  Dent  v.  Smith, 
L.  R.  4  Q.  B.  414.  Malposition  on 
bottom  of  tidal  harbor,  McNaWi  v. 
Ins.  Co.,  63  N.  Y.  Supp.  125,  31  Misc. 
61.    And  §§425,  426,  428. 

*  Peters  v.  Warren  Ins.  Co.,  14  Pet. 
(U.  S.)  99,  10  L.  Ed.  371.  Compare 
under  bill  of  lading,  Woodlei/  v.  Mitch- 
ell, 11  Q.  B.  D.  47  (collision  without 
waves  or  wind,  not  a  peril  of  the  sea). 

5  Richelieu  Nav.  Co.  v.  Boston  Ins. 
Co.,  136  U.  S.  408,  421,  10  S.  Ct. 
934,  34  L.  Ed.  398;  Matthews  v. 
Howard  Ins.  Co.,  11  N.  Y.  9.  Compare 
as  to  clause  in  bill  of  lading.  The 
Xantho,  12  App.  Cas.  503  (a  sea  peril 
though  no  extraordinary  violence  of 
winds  and  waves).  Collision  is  de- 
fined in  England  to  be  the  contact  of 
two  objects  both  of  which  are  naviga- 
ble. Chandler  v.  Bloqg  (1898),  1  Q.  B. 
32,  67  L.  J.  Q.  B.  (N.  S.)  336,  77  L.  T. 
Rep.  524  (barge  was  previously  sunk 
but  held  navigable).  Striking  a  wreck 
is  not  collision  with  another  vessel, 
Burnham  v.  China  Mut.  Ins.  Co..  189 
Mass.  100  (1905),  75  N.  E.  74.  Held, 
in  Virginia,  that  collision  does  not  in- 


604 


MEANING  AND   LEGAL   EFFECT   OF   MARINE    POLICY 


writers'  liability  extends  to  cover  payments  made  by  the  insured  for 
damages  to  the  other  ship. 

The  English  and  federal  courts  hold  that  such  loss  is  too  remote 
to  be  covered  unless  expressly  insured.^  The  Massachusetts  court 
adopts  the  opposite  view  and  considers  the  loss  within  reach  of  the 
ordinary  marine  policy  without  specific  mention.^  It  is  usual,  how- 
ever, to  provide  for  this  liability  by  a  distinct  contract  called  the 
collision  or  running  down  clause.'"' 


elude  striking  a  sunken  vessel  or  other 
sunken  object,  Cline  v.  Western  Assur. 
Co.,  101  Va.  496,  44  S.  E.  700  (cases 
cited).  In  New  York  it  was  held,  re- 
vciiing  the  court  below  (23  App.  Div. 
152),  that  while  the  above  rule  is  per- 
haps too  narrow,  yet  collision  does 
not  include  an  intentional  forcing  of  a 
vessel  through  floating  ice,  though 
the  injuries  be  inifore.seen,  Newton 
Creek  Toning  Co.  v.  .Etna  Ins.  Co.,  163 
N.  Y.  114.  ,57  N.  E.  302.  But  the  court 
admitted  the  tendency  of  modern  de- 
cisions to  broaden  the  protective  effect 
of  the  policy,  and  perhaps  public  in- 
terests would  be  better,  and  ciuite  as 
logically,  served  in  such  cases  by 
holding,  as  many  courts  have  held 
under  the  accident  policy,  that  acci- 
dental and  unforeseen  results  of  a 
violent  and  destructive  character, 
though  due  to  intentional  acts  may 
be  covered  by  the  policy,  §  385.  This 
argument  gathers  force  in  construing 
the  ordinary  marine  policy  which  in- 
sures even  against  barratry  though  the 
policy  in  the  Newtown  Creek  Towing 
Co.  case  was  not  of  that  class.  If  the 
master  drives  the  vessel  into  the  ice 
floes  with  intent  to  scuttle  her,  the 
underwriters  must  pay,  §  434.  Why 
not  if  the  violent  impact  of  the  ice 
and  the  consequent  damage  are  un- 
expected and  unintentional?  Either- 
ship  in  collision  may  be  anchored  or 
moored,  London  Assur.  v.  Companhia 
de  Moagens,  167  U.  S.  150, 17  S.  Ct.  784. 
42  L.  Ed.  113;  The  Granite  State,  3 
Wall.  310.  And  an  anchor  though  far 
from  ship  is  part  of  ship.  In  re  Margetts 
(1901),  2  K.  B.  792,  70  L.  J.  K.  B.  762, 
85  L.  T.  94,  9  Asp.  217.  And  a  tug 
and  ship  may  be  regarded  as  one,  The 
Niobe  (1891),  App.  Cas.  401.  Some- 
times the  policy  clause  expressly  in- 
cludes risk  of  striking  wharves,  ice, 
wreckage,  etc..  The  Munroe  (1893), 
Prob.  248;  Reischer  v.  Borvrick  (1894), 
2  Q.  B.  548  (collision  witli  snag  held 


proximate  cause  of  loss);  Union  Mar, 
Ins.  Co.  V.  Borwick  (1895),  2  Q.  B. 
279.  As  to  what  amount  of  impact 
amounts  to  a  collision,  see  London 
Assur.  V.  Companhia  de  Moagens,  167 
U.  S.  150,  17  S.  Ct.  784.  By  English 
law  under  clause  "free  from  partic- 
ular average  un1e.ss"  vessel  be  "in 
collision,"  underwriters  are  not  re- 
lieved from  liability  for  subsequent 
partial  loss  though  not  due  to  the  col- 
lision itself.  As  to  damages  occasioned 
by  two  collisions,  dock  dues,  and  de- 
murrage, etc.,  during  repairs,  see  The 
Hnverham  Grange  (1905),  Prob.  307, 
74  L.  J.  P.  115. 

1  De  Vaux  v.  Salvador,  4  A.  &  E.  420; 
The  Barnstable,  181  U.  S.  464,  21  S.  Ct. 
684;  Gen.  Mid.  Ins.  Co.  v.  Sherwood,  14 
How.  (U.  S.)  3.52. 

2  Massachusetts;  Whorf  v.  Equitable 
Mar.  Ins.  Co.,  144  Mass.  68,  10  N.  E. 
513.  As  to  right  of  subrogation  in 
favor  of  insurer  after  paying  a  loss, 
.see  §§  52  e<  seq.;  and  N eiv  England  Mut. 
Mar.  Ins.  Co.  v.  Dunham,  18  Fed.  Cas. 
99;  Fox  V.  Blossom,  9  Fed.. Cas.  638; 
Newell  V.  Norton,  3  Wall.  257,  18  L. 
Ed.  271;  Atlantic  Ins.  Co.  v.  Storrow, 
I  Edw.  Ch.  (N.  Y.)  621. 

3  Tatham  v.  Burr  (1898),  App.  Cas. 
382;  London  Steamship  Owners'  Ins. 
Co.  V.  Grampian  S.  Co.,  L.  R.  24  Q. 
B.  D.  663,  59  L.  J.  Q.  B.  549,  38  W.  R. 
651,  62  L.  T.  784,  6  Asp.  M.  C.  506. 
See  Appendix  of  Forms,  ch.  II.  The 
principle  of  the  collision  clause  is  that 
the  underwriters  will  relieve  the  in- 
sured of  three-fourths  of  his  liability 
to  pay  damages  for  loss  of  property 
in  and  on  board  the  other  ship.  Scope 
of  the  clause.  Burger  v.  Indemnitif,  etc., 
Co.  (1900),  2  Q.  B.  348,  69  L.  J.  Q.  B. 
838,  82  L.  T.  (N.  S.)  831;  The  NoHh 
Britain  (1894),  P.  77.  Period  of  year 
for  bringing  suit  on  policy  runs  from 
date  of  fixing  liability  by  judicial  ac- 
tion, Rogers  v.  ^Etna'lns.  Co.,  95  Fed, 
103.    The  insured  is  to  take  one-£ourth 


STRESS   OF    WEATHER 


605 


In  New  York  the  term  "collision"  seems  not  to  be  limited  to 
an  impact  between  vessels  or  navigable  objects,  but  to  include  also 
an  accidental  striking  of  a  vessel  against  ice  or  other  foreign  object.^ 

§  429.  Stress  of  Weather.— Under  the  head  of  sea  perils  must  be 
classed,  also,  damages  suffered  through  stress  of  weather;  ^  as  by 
blows  of  the  seas  carrying  away  bulwarks,  boats,  deck  houses,  and 
the  like;  loss  of  masts  and  yards  in  a  gale;  springing  of  a  leak  through 
violent  straining;  shifting  or  wetting  of  the  cargo.  The  only  diffi- 
culty in  such  cases  consists  in  distinguishing  between  sea  peril  which 
is  covered  and  wear  and  tear  which  is  not  covered  by  the  policy.^ 

If  there  be  a  fortuitous  grounding  or  stranding  of  the  vessel,  the 
underwriter  will  be  liable  for  the  loss  thereby  occasioned,  although 
the  action  of  the  winds  and  waves  may  not  be  extraordinarily 
violent  or  tempestuous. 

The  steamer  Miles  H.  insured  by  the  defendant,  while  navigating 
Tug  Fork  of  the  Big  Sandy  river,  was  accidentally  stranded  on  a 
rocky  bar.    The  wind  is  frequently  heavy  in  that  bend  of  the  river. 


himself,  as  a  check  upon  carelessness 
in  the  choice  of  servants;  and  his  re- 
sponsibility in  respect  of  loss  of  life 
and  personal  injury,  as  well  as  for 
damage  to  the  cargo  in  his  own  ship, 
is  left  untouched.  There  is  a  difference 
to  the  insured  in  the  language  of  dif- 
ferent collision  clauses  in  respect  to 
the  matter  of  costs  of  litigation,  a  pro- 
vision for  which  is  sometimes  omitted 
from  the  clause,  in  which  case  the  un- 
derwriters are  not  responsible  for 
their  share  of  costs,  Fernald  v.  Prov. 
Washington  Ins.  Co.,  27  App.  Div.  1.37, 
50  N.  Y.  Supp.  83S;  McWilliams  v. 
Home  l7is.  Co.,  40  App.  Div.  400,  57 
N.  Y.  Supp.  1100;  Xenos  v.  Fox,  L.  R. 
3  C.  P.  630,  4  C.  P.  665,  38  L.  J.  C.  P. 
351,  but  the  federal  court  allowed  the 
expenses  of  successfully  defending  the 
suit  exclusive  of  counsel  fees,  Egbert  v. 
St.  Paul  F.  &  M.  Ins.  Co.,  92  Fed.  517. 
And  compare  West  field  v.  Mayo,  122 
Mass.  100.  But  see  Mxinson  v.  Stand- 
ard Mar.  Ins.  Co.,  156  Fed.  44.  The 
liability  under  the  collision  clause  is 
not  particular  average;  consequently  is 
not  subject  to  the  limitation  of  five  per 
cent  in  the  memorandum  clause.  A 
special  collision  clause  given  in  Wharf 
V.  Equitable  Mar.  Ins.  Co.,  144  Mass. 
68,  10  N.  E.  513.  The  collision  clause 
was  adopted  because  of  the  decisions  of 
the  courts,  De  Vaux  v.  Salvador,  4  A.  & 
E.  420;  Peters  v.  Warren  Ins.  Co.,  3 


Sumn.  389.  The  word  "ship"  as  em- 
ployed in  the  clause  is  given  a  very 
broad  meaning,  and  embraces  her 
launch,  boats,  etc.,  The  Devonian 
(1901),  Prob.  221;  M'Coiuan  v.  Baine 
(1891),  App.  Cas.  401;  and  anchor.  In 
re  Margetts  (1901),  2  K.  B.  792.  But 
does  not  include  a  tug  towing  her, 
Coastwise  S.  S.  Co.  v.  /Et7ia  Ins.  Co., 
161  Fed.  871;  and  see  Western  Transit 
Co.  V.  Brown,  161  Fed.  869.  If  both 
ships  in  collision  belong  to  the  same 
owner  he  cannot  recover  under  the 
collision  clause  since  he  cannot  sue 
himself,  Simpson  v.  Thomson,  3  App. 
Cas.  279.  As  to  removal  of  obstruc- 
tions provision  in  collision  clause,  .see 
Tatham  v.  Burr  (1898),  App.  Cas.  382; 
The  North  Britain  (1894),  Prob.  77; 
Burger  v.  Indemnity ,  etc.,  Co.  (1900),  2 
Q.  B.  348.  As  to  what  losses  are  re- 
coverable under  a  collision  clause,  see 
The  Kate  (1899),  Prob.  165;  The  Ar- 
gentino,  14  App.  Cas.  519;  The  Consett, 
5  Prob.  D.  229.  Damages  paid  for  loss 
of  life  are  not  recoverable,  Taylor  v. 
Deivar,  33  L.  J.  Q.  B.  141. 

1  Neivtown  Creek  Toiving  Co.  v. 
^tna  Ins.  Co.,  163  N.  Y.  114,  57  N.  E. 
302  (in  the  briefs  are  cited  many  au- 
thorities). 

^Murray  v.  Receivers,  eic.,58  Barb 
(N.  Y.)  9,'l7. 

3  §  444,  infra. 


606  MEANING    AND    LEGAL    EFFECT    OF    MARINE    POLICY 

On  the  day  of  the  accident  it  was  high  and  came  in  gusts  and  the 
accident  was  attributable  to  the  wind,  although  it  did  not  amount 
to  a  tornado,  nor  was  there  anything  extraordinary  about  it.  The 
policy  provided  that  no  claim  would  be  made  for  damage  resulting 
from  stranding  or  grounding  unless  caused  by  stress  of  weather. 
The  jury  was  allowed  to  find  for  the  plaintiff  and  on  appeal  the 
judgment  was  sustained.^ 

§  430.  Fire. — Fire  ^  may  arise  from  a  variety  of  causes — from 
lightning,  the  spontaneous  combustion  of  the  cargo,  the  negligence 
of  the  master  or  crew,^  the  acts  of  enemies,  or  the  precautionary 
measures  of  rulers  (as  in  case  of  a  vessel  burned  by  the  municipal 
authorities  for  fear  of  being  infected).'* 

Under  the  ordinary  marine  policy  the  underwriter  is  liable  for  loss 
occasioned  b}^  fire,  whether  its  origin  is  inexplicable  or  Avhether  it 
can  be  assigned  to  one  of  the  causes  mentioned  above  or  some  other 
kindred  cause,  with  the  exception  of  combustion  generated  through 
the  inherent  defect  of  the  subject  insured,  or  because  the  goods  were 
shipped  in  a  damaged  state.^  But  if  the  combustion  is  originated  by 
sea  damage  sustained  by  the  goods  after  shipment,  it  is  covered  by 
the  policy;  and  however  the  fire  may  have  been  occasioned,  if  it 
extend  to  other  goods  which  are  unconnected  with  the  cause  of  the 
disaster,  or  to  the  ship  herself,  the  insurance  on  such  other  goods  is 
responsible  for  the  fire  loss  to  them,  and  the  insurance  on  ship  is  re- 
sponsible for  the  damage  so  sustained  by  it.^ 

The  risk  of  fire  is  covered  during  the  whole  of  the  transit  of  goods, 

^Huntington,    etc.,    Transp.    Co.    v.  Knight  of  St.  Michael  (189S),  Froh.  ^0, 

Western  Ass.  Co.   (W.  Va.,  1907),  57  67  L.  J.  P.  D.  &  A.  (N.  S.)  19,  78  L.  T. 

S.  E.  140.     Usual  freezing  of  water  in  R.    90.      Slacking   of   lime    is    a   fire, 

pipes  is  not  by  "stress  of  weather"  Singleton  v.  Phoenix  Ins.  Co.,  132  N.  Y. 

under  an  exception  in  a  bill  of  lading,  298,  30  N.  E.  839.    Damage  to  the  in- 

C,  C,  C.  <&  St.  L.  R.  Co.  V.  Heath,  22  terior  of  a  boiler  from  lack  of  water  is 

Ind.  App.  47,  53  N.  E.  198.  not   a   loss   by   hostile   fire,   American 

2  As  to  what  is  a  hostile  fire,  see  Towing  Co.  v.  German  F.  Ins.  Co.,  74 
§  231,    supra.  Md.  2.5,  21  Atl.  553.    An  insurance  was 

3  Busk  V.  Royal  Exch.  Assur.  Co.,  against  fire  only  by  valued  policy. 
2  B.  &  Aid.  73;  Waters  v.  Merchants'  Previous  to  the  fire,  the  ship  stranded 
Ins.  Co.,  11  Pet.  (U.  S.)  213.  with  loss  so  great  that  repairing  would 

^McArthur,  115, 116.    Voluntary  fire  have    been    unprofitable.     Held,    that 

to  avoid  capture  is  covered,  Gordon  v.  the  insured  was  entitled  to  recover  for 

Rimmington  (1807),  1  Camp.  123.  total  loss  on  shin,  Wood.nde  v.   Globe 

'''Bond    V.    Dubbois,    3    Camp.    133;  Mar.  Ins.  Co.  (1896),  1  Q.  B.  105,  73 

Prov.  Wash.  Ins.  Co.  v.  Adler,  65  Md.  L.   T.   R.   626,   65  L.  J.  Q.  B.  (N.  S.) 

162,  4  Atl.  121.  117.    Under  policy  "free  from  average 

^  Monto-a  v.  London  Assur.  Co.,  6  unless  general  or  the  ship  be  iaurnt," 

Exch.  451.     Imminent  danger  of  fire  ship  must  be  substantially  destroyed 

disturbing  the  voyage  may  amount  to  to  give  rigjit  of  recovery,  The  Glenlivet 

a  fire  loss  under  a  freight  policy,  The  (1894),  Prob.  48. 


PERILS   OF   WAR,   ETC.  607 

on  shore  as  well  as  on  shipboard,  provided  the  transit  is  for  one  en- 
tire or  unbroken  voyage.^ 

It  was  held  in  one  case  that  an  explosion  of  steam  caused  by  the 
bursting  of  a  marine  boiler,  though  not  identical  with  fire,  is  a  peril 
of  a  sufficiently  like  kind  to  be  covered  by  the  clause  of  the  policy 
specifying  "all  other  perils,  losses,  and  misfortunes."^  But  that 
case  was  subsequently  criticised  by  the  House  of  Lords  and  sub- 
stantially overruled.^ 

If  the  word  "fire"  is  omitted  from  the  list  of  enumerated  perils 
which  the  underwriters  declare  themselves  "contented  to  bear," 
apparently  the  usual  clause,  with  this  omission,  will  not  include 
losses  by  fire  unless  the  fire  be  caused  by  some  sea  peril  or  other 
peril  specified,  as,  for  example,  barratry,  or  the  action  of  the  winds 
or  waves. ^ 

§  431.  Perils  of  War,  etc. — Men  of  war,  enemies,  pirates,  rovers, 
thieves,  letters  of  mart  and  countermart,  reprisals,  takings  at  sea,  ar- 
rests, restraints,  and  detainments,  etc. 

The  common  feature  in  this  list  of  perils  is  violence  at  the  hands 
of  man.  The  underwriter  takes  upon  himself  the  burden  of  all  loss 
or  damage  thus  occasioned,^  whether  it  consist  of  injury  to  the  ves- 
sel's hull,  spars,  and  rigging  by  an  enemy's  shot  or  shell,  or  by  other 
hostile  acts,  or  the  total  destruction  of  the  property  insured  by  the 
operation  of  the  same  causes,  and  whether  the  insured  is  a  belligerent 
or  a  neutral.  As,  however,  merchant  vessels  are  not,  in  general,  able 
to  offer  a  successful  resistance  to  the  attack  of  an  armed  ship,  the 
casualty  which  most  frequently  results  from  hostilities  is  capture. 

Capture,  in  the  proper  signification  of  the  term,  is  the  forcible 
appropriation  of  property  by  an  enemy  or  belligerent  with  intent  to 
keep  it.^    "Takings  at  sea"  or  "seizure"  is  a  broader  term  ^  and  in- 

^  Pelhj  V.  Royal  Exch.  Assur.  Co.,  expressly  limited,  Straas  v.  Mar.  Ins. 
1  Burr.  341.     And  see  §  22,  supra.  Co.,  23  Fed.  Cas.  210,  1  Cr.  C.  C.  343; 

2  Wed  India  &  P.  Tel.  Co.  v.  Home,       Elting  v.  Scott,  2  Johns.  *  157. 

etc..  Marine  Ins.  Co.,  4  Asp.  Mar.  L.  C.  ^  Suinnerton  v.  Columbian  Ins.  Co., 

341,  L.  R.  6  Q.  B.  D.  51,  50  L.  J.  Q.  B.  37  N.  Y.  174,  93  Am.  Dec.  560,  6  L.  R. 

41.  A.  248  {held,  that  the  seizure  and  sink- 

3  Thames  &  Merseu  Marine  Ins.  Co.  ing  of  a  vessel,  if  the  act  of  the  South- 
V.  Hamilton,  L.  R.  12  App.  Cas.  484,  em  Confederacy  and  not  the  act  of  a 
6  Asp.  M.  C.  200,  56  L.  J.  Q.  B.  626,  mob,  were  within  the  F.  C.  S.  war- 
36  W.  R.  337,  57  L.  T.  695.  And  sec  ranty);  Lovering  v.  Mercantile  Mar. 
Louisville  Undenvriters  v.  Durland,  Ins.  Co.,  12  Pick.  (Mass.)  348;  Dale  v. 
123  Ind.  544,  24  N.  E.  221,  7  L.  R.  A.  New  Eng.  Mut.  Mar.  Ins.  Co.,  G  Allen 
399.  (Mass.),  373;  Mauran  v.  Alliance  Ins. 

4  Thames  &  M.  Ins.  Co.  v.  Hamilton,  Co.,  6  Allen  (Mass.),  384,  notj. 

12  App.  Cas.  484;  Cullen  v.  Butler,  5  '  Cory   v.    Burr,   8   App.    Cas.    393; 

M.  &  Sel.  461.  Rodocanachi  v.  Elliott,  L.  R.  8  C.  P. 

*  Levy  V.  Merrill,  4  Me.  180.    Unless      649. 


608  MEANING    AND    LEGAL    EFFECT   OF   MARINE    POLICY 

eludes  every  forcible  proceeding  whereby  the  insured  is  deprived  of 
the  control  or  possession  of  his  property,  whether  permanently  or 
only  temporarily/  whether  the  act  be  legal,^  or  illegal,^  whether  com- 
mitted by  regularly  commissioned  vessels  of  war,  privateers,  pirates,^ 
or  by  a  friendly  power  in  consequence  of  mistake,^  or  by  mutinous 
passengers  or  slaves.^ 

The  phrase  "capture,  seizure,  and  detention"  in  its  entirety  as 
employed  in  a  policy,  is  not  to  be  confined  to  acts  of  an  enemy  or 
to  acts  of  warfare/  For  example,  the  taking  may  be  by  the  gov- 
ernment of  the  insured,  and  yet  come  within  the  clause.*  This 
phrase,  or  one  of  modified  import,  is  used  on  occasions  to  describe 
the  sole  risk  insured  against.^  On  the  other  hand  it  frequently 
follows  the  words  "free  from"  or  "free  of"  to  denote  not  a  liability, 
but  an  exception  to  the  underwriters'  liability  which  would  other- 
wise be  imposed  upon  them  by  the  words  of  the  general  perils  clause 
set  forth  at  the  head  of  this  section.^" 

The  words  "men-of-war"  and  "enemies"  obviously  refer  to  those 
who,  authorized  by  a  prince  or  sovereign  state,  make  war  in  the  mode 
sanctioned  by  the  law  of  nations  as  distinguished  from  "pirates," 
"rovers,"  and  "thieves,"  who  are  unauthorized  depredators.^^ 

"Letters  of  mart"  are  commissions  granted  by  the  sovereign 
power  to  those  persons  whose  property  has  been  seized  by  subjects 
of  other  states,  authorizing  the  former  to  indemnify  themselves  for 
the  loss  sustained  by  making  reprisals.  "Letters  of  countermart" 
are  letters  issued  in  favor  of  those  threatened  by  such  reprisals, 

^Savage  v.  Pleasants,  5  Binn.   (Pa.)  ^Fowler  v.  English  &  Scot.  Ins.  Co., 

403,  6  Am.  Dec.  424;  Johnston  v.  Hogg,  34  L.  J.  C.  P.  253. 

5  Asp.  Mar.  I..  C.  51,  10  Q.  B.  D.  432.  lo  See  §  453,  infra:  Black  v.  Marine 

2  Goss  V.  Withers,  2  Burr.  683.  Ins.  Co.,!!  John.  (N.  Y.)  286. 

3  Powell  V.  Hyde,  5  E.  &  B.  607.  As  n  Emerigon,  413;  Eldridge,  Ins.,  110; 
to  exception  of  seizure  for  illicit  trade,  Ritssell  v.  Niemann,  34  L.  J.  C.  P.  14 
see  Carrington  V.  Merchants'  Ins.  Co.,  ("the 'king's  enemies' means  the  ene- 
8  Pet.  (U.  S.)  495.  mies  of  the  carrier's  sovereign,  whatever 

*  Dean  v.  Hornby,  3  E.  &  B.  180.  title   he   may   enjoy — whether   queen, 

5  Powell  V.  Hyde,  supra;  Lozano  v.  emperor,    president,    duke,    doge    or 

Janson,  2  E.  &  E.  160,  28  L.  J.  Q.  B.  aristocratic     assembly");     Fowler     v 

337.  Eng.,  etc..  Ins.  Co.,  34  L.  J.  C.  P.  25. 

^  Kleinwort  v.  Shepard,   1   E.   &  E.  A  mutinous  crew  who  make  off  Avith 

447,   28   L.   J.   Q.    B.    147;   Naylor  v.  the  ship  are  pirates,  Brown  v.  Smith,  1 

Palmer,  8  Exch.   739,   10  Exch.   382.  Dow  P.   C.   349.      So   also  a   body  of 

But  compare  Greene  v.  Pac.  Mut.  Ins.  mutinous  emigrants,  Na'>ior  v.  Palmer, 

Co.,  9  Allen  (Mass.),  217.  8  Exch.  739, lo  Exch.  382;  KleimvoH 

T  Miller  v.  Law  Ace.  Ins.  Co.  (1903),  v.  Shepard,  28  L.  J.  Q.  B.  147.    So  also 

1  K.  B.  712,  722;  Cory  v.  Burr,  8  App.  a  plundering  mob,  Nesbitt  v.  Liishing- 

Cas.  393.  ton,  4  T.  R.  783.     "The  term  'pirates' 

^  Robinson  Gold  M in.  Co.  V.  Alliance  includes  passengers  who  mutiny  and 

Ins.  Co.  (1902),  2  K.  B.  489;  Green  v.  rioters  who  attack  the  ship  from  the 

Young,  2  Ld.  Raym.  840;  Hagedorn  v.  shore,"  Eng.  Mar.  Ins.  Act  (1906),  1 

Whitmore,  1  Stark.  157.  Sch.  8. 


PERILS   OF   WAR,    ETC, 


609 


authorizing  them  to  resist  the  privateers  furnished  with  letters  of 
mart.^ 

Captured  property  is  not  considered  to  have  been  divested  from 
its  original  owner  until  it  has  undergone  sentence  of  condemnation 
in  a  legally  constituted  court  of  the  enemy .^  But  the  assured  may 
abandon  to  the  underwriter,  and  claim  for  a  total  loss,  on  first  hear- 
ing of  the  capture.  If  the  abandonment  is  accepted  by  the  under- 
writer, the  matter  is  settled.  If  it  is  declined,  the  assured  may  take 
legal  proceedings  on  the  policy,  and  will  recover  by  the  English 
rule,  provided  the  property  is  not  restored  before  action  is  brought.^ 
By  the  American  rule,  it  is  said  that  the  right  to  recover  is  made 
absolute  by  the  state  of  facts  on  which  the  abandonment  is  founded 
at  the  date  of  abandonment,  and  does  not  depend  on  subsequent 
events.^ 

Necessary  expenses  incurred  in  the  redemption  or  recovery  of 
captured  property  are,  in  general,  recoverable  under  the  policy.^ 


lEldridge  (1907),  116. 
"^Barney   v.    Maryland   Ins.    Co.,    5 
Har.  &  J.(Md.)  139. 

3  Rriys  V.  London  Assur.  Corp.  (1897), 
2  Q.  B.  135,  77  L.  T.  R.  23,  66  L.  J. 
Q.  B.  (N.  S.)  534  (recovery  allowed 
in  full  though  ship  was  returned  pend- 
ing action). 

4  Man/land  &  Phoenix  Ins.  Co.  v. 
Balhursi,  5  Gill  &  J.  159;  Lee  v. 
Boardman,  3  Mass.  238,  3  Am.  Dec. 
134;  and  see  Lovering  v.  Mercantile 
Ins.  Co.,  12  Pick.  (Mass.)  348;  §  194, 
supra. 

5  Havelock  v.  Rockivood,  8  T.  R.  268; 
Parsons  v.  Scott,  2  Taunt.  363.  But 
not  wages,  provisions,  or  demurrage 
during  capture,  Barney  v.  Maryland 
Ins.  Co.,  5  Har.  &  J.  (Md.)  139.  Also 
the  following  are  held  to  be  captures 
or  seizures  either  within  the  general 
perils  clause  in  favor  of  the  insured 
or  within  the  meaning  of  the  excep- 
tion "free  from  capture,  seizure,"  etc., 
in  favor  of  the  underwriters,  Mauran 
V.  Alliance  In.9.  Co.,  6  Wall.  1 ,  18  L.  Ed. 
836  (by  southern  confederacy);  Dole 
V.  Merchants'  Mid.  M.  Ins.  Co.,  51 
Me.  465;  Baltimore  Ins.  Co.  v.  Mc- 
Fadon,  4  Har.  &  J.  (Md.)  31  (capture, 
sale,  and  return  of  proceeds  to  insured); 
Dole  v.  New  Eng.  Mut.  M.  Ins.  Co., 
6  Allen  (Mass.),  373;  Swinnerton  v. 
Columbian  Ins.  Co.,  37  N.  Y.  174,  93 
Am.  Dec.  560;  Duval  v.  Commercial 
Ins.  Co.,  10  Johns.  (N.  Y.)  278;  Fi- 
field  V.  Ins.  Co.,  47  Pa.  St.  166,  86  Am. 

b9 


Dec.  523  (capture  by  confederacy); 
Savage  v.  Pleasants,  5  Binn.  (Pa.)  403, 
6  Am.  Dec.  424  (voyage  broken  and 
delayed);  Merchants'  Ins.  Co.  v.  Ed- 
moTbd,  17  Grat.  (Va.)  138,  citing  many 
authorities;  St.  Paid  F.  &  M.  Ins.  Co. 
V.  Morice  (1906),  11  Com.  Cas.  153 
(cattle  disease  on  board.  Bull  seized 
and  slaughtered  by  local  authority); 
Cory  V.  Burr,  5  Asp.  Mar.  L.  C.  109 
(warranty  covers  seizure  though  the 
result  of  barratrous  smuggling,  and 
imderwriters  discharged)'  Johnston 
V.  Hogg,  5  Asp.  Mar.  L.  6.  51  (so  of 
forcible  detention  by  natives  with  in- 
tent to  plunder);  Powell  v.  Hyde,  5 
E.  &  B.  607  (so  of  seizure  by  mistake 
supposing  vessel  Turkish);  Green  v. 
Elmslie,  Peake  N.  P.  C.  212;  Livie  v. 
Janson,  12  East,  648.  Actual  con- 
demnation need  not  be  proved,  Dorr  v. 
Pope,  8  Pick.  (Mass.)  232.  The  master 
need  not  abandon  the  voyage  because 
of  a  threat  of  illegal  capture,  Williams 
v.  Suffolk  Ins.  Co.,  13  Pet.  (IT.  S.)  415. 
The  following  are  held  not  to  be  cap- 
tures or  seizures,  Patterson  v.  Mar. 
Ins.  Co.,  5  Har.  &  J.  (Md.)  417  (ship 
stopped  by  blockade  and  sent  back). 
So  where  master  abandoned  voyage 
because  of  hostilities,  NicHls  v.  Lon- 
don &  P.  Mar.  Ins.  Co.,  70  L.  J.  K.  B. 
23,  G  Com.  Cas.  15;  Greene  v.  Pac.  Mut. 
Ins.  Co.,  9  Allen  (Mass.),  217  (mutinous 
possession  by  the  crew  not  a  capture 
or  seizure  under  the  warranty).  Muti- 
nous possession  by  the  crew  may  be 


GiO 


MEANING    AND    LEGAL    EFFECT   OF    iMARINE    POLICY 


§  432.  Arrests,  Restraints  of  Kings,  Princes,  or  People,  etc. — This 
clause  refers  only  to  acts  of  state,  or  acts  authorized  by  the  sovereign 
autliority  in  the  country.^  An  unauthorized  seizure  or  detention, 
as  by  a  mob  in  a  meal  riot,  does  not  come  within  the  clause,  though 
the  underwriter  would  be  liable  for  it  as  a  loss  by  pirates  or  thieves.^ 
Nor  does  the  peril  specified  embrace  an  arrest  or  detention  occurring 
by  virtue  of  ordinary  legal  process,  as,  for  instance,  where  a  vessel  is 
libeled  for  non-payment  of  her  debts. ^ 

While  capture,  the  peril  described  in  the  last  section,  is  taking 
possession  with  intent  to  keep,  arrest  may  be  defined  as  a  taking  with 
intent  ultimately  to  restore  to  the  owner,  and  restraint,  a  prevention 
of  the  goods  from  going.^  Restraints  of  princes  comprehends  every 
case  of  interruption  by  lawful  authority.^ 


piracy,  Brown  v.  Smith,  1  Dow.  349; 
or  barratry,  Dixon  v.  Reid,  5  B.  & 
Aid.  597.  Taking  of  vessel  just  out- 
side port  is  not  a  seizure  within  port, 
Watso7i  V.  Marine  his.  Co.,  7  Johns. 
(N.  Y.)  .57  Duval  v.  Commercial  Ins. 
Co.,  10  Johns.  (N.  Y.)  278,  Brown  v. 
Tierney,  1  Taunt.  517;  Mellish  v. 
Staniforih,  3  Taunt.  499.  As  to  what 
is  requisite  to  make  condemnation 
valid,  see  The  Flad  Oyen,  6  C.  Rob.  135; 
Havelock  v.  Rockwood,  8  T.  R.  268; 
Oddy  V.  Bovill,  2  East,  475;  Smart  v. 
Woif,  3  T.  R.  283;  Schooner  Sophie,  6 
C.  Rob.  138. 

1  Simpson  v.  Charleston  F.  &  M. 
Ins.  Co.,  Dudley  (S.  C),  239;  Miller  v. 
Law,  etc.,  Ins.  Co.  (1902),  2  K.  B.  694, 
aff'd  (1903)  1  K.  B.  712.  As  where  by 
order  of  Transvaal  government,  cer- 
tain shipments  of  gold  were  seized  on 
the  eve  of  hostilities,  Janson  v.  Con- 
solidated Mines  (1902),  App.  Cas.  484, 
71  L.  J.  K.  B.  857,  87  L.  T.  372,  51 
W.  R.  142;  Robinson  Gold  M.  Co.  v. 
Alliance  Assur.  Co.  (1904),  App.  Cas. 
359.  Arrest  and  detention  by  a  Brit- 
ish privateer.  Grade  v.  A^.  Y.  Ins.  Co., 
13  Johns.  161.  And  see  Hurtin  v. 
Phcenix  Ins.  Co.,  12  Fed.  Cas.  1047; 
Shapley  v.  Tappan,  9  Mass.  20.  "  The 
term  'arrests,  etc.,  of  Kings,  princes 
and  people'  refers  to  political  or  execu- 
tive acts,  and  does  not  include  a  loss 
caused  by  riot  or  by  ordinary  judicial 
process,"  Eng.  Mar.  Ins.  Act  (1906), 
1  Sch.  10. 

2  Neshitt  V.  Lushin/jton,  4  T.  R.  783. 
Restraints  and  detainments  of  princes 
are  synonymous  in  meaning,  Richard- 
son V.  Maine  Ins.  Co.,  6  Mass.  102, 
4  Am.   Dec.  92.     Loss  by  arrest  bv 


the  government  of  an  alien  insured 
may  be  recovered  against  under- 
writers in  this  country  if  the  arrest  was 
not  committed  with  hostile  intent 
towards  this  country,  Aubert  v.  Gray, 
3  B.  &  S.  163.  An  unfounded  fear  of 
capture  does  not  amount  to  res-traint. 
King  v.  Delaware  Ins.  Co.,  6  Cr.  71,  3 
L.  FA.  155;  Corp.  v.  United  Ins.  Co., 
8  Johns.  (N.  Y.)  277.  As  to  meaning  of 
"unlawful  restraint,"  see  McCall  v. 
Marine  Ins.  Co.,  8  Cr.  59,  3  I..  Ed.  487; 
Olivera  v.  Union  Ins.  Co.,  3  Wheat. 
183,  4  L.  Ed.  365;  Thompson  v.  Read, 
12  Serg.  &  R.  (Pa.)  440.  Loss  by 
danger  of  capture  may  be  recoverable. 
Knight  of  St:  Michael  (1898) ,  P.  30.  And 
see  The  San  Roma,  L.  R.  5  P.  C.  301; 
Nobel's  Explosives  Co.  v.  Jenkins 
(1896),  2  Q.  B.  326.  Wages,  provi- 
sions, demurrage  during  detention  are 
not  recoverable,  Barney  v.  Maryland 
Ins.  Co.,  5  Har.  &  J.  (Md.)  139;  Field 
S.  S.  Co.  V.  Bnrr  (1899),  1  Q.  B.  590. 

^  Finlag  v.  Liverpool,  etc.,  Co.,  23  L. 
T.  (N.  S.)  251.  There  must  be  some 
violent  departure  from  the  ordinary 
course  of  things.  Miller  v.  Land,  etc., 
Ins.  Co.  (1902),  2  K.  B.  694,  aff'd 
(1903)  1  K.  B.  712  (diseased  cattle 
were  prohibited  by  municipal  law 
from  admission  into  port  of  destina- 
tion; held,  no  arrest  or  detention). 

*  Rodocanachi  v.  Elliott,  28  L.  T.  Rep. 
840. 

5  Russell  v.  Niemann,  34  L.  J.  C.  P. 
14.  As  where  the  government  of 
which  the  assured  was  subject,  being 
in  need  of  transports  laid  an  embargo 
on  all  ships  in  port,  Aiibert  v.  Gray,  32 
L.  J.  Q.  B.  50.  And  see  Smith  v. 
Rosario  Nitrate  Co.  (1894),  1  Q.  B.  174 


BARRATRY  611 

The  species  of  arrest  to  which  shipping  has  been  most  frequently 
subject  is  an  embargo,  which  is  a  decree  issued  by  the  government 
of  a  state  to  prohibit  the  departure  of  vessels  lying  within  its  juris- 
diction.^ An  embargo  laid  upon  any  vessel  entitles  the  assured,  in 
general,  to  give  notice  of  abandonment  as  for  a  total  loss;^  but  a 
mere  rumor  of  a  hostile  embargo  would  not  justify  an  abandon- 
ment to  the  underwriters;  ^  nor  an  embargo  which  the  insured 
knew  would  involve  only  a  temporary  and  unimportant  detention.'' 

A  blockade  operates  as  a  restraint  of  princes  with  respect  to  prop- 
erty detained  within  its  compass;  ^  and  if  a  blockade  breaks  up  and 
terminates  a  voyage  the  insured  may  abandon  to  the  underwriters, 
and  claim  a  total  loss.^ 

§433.  Thieves. — The  word  "thieves,"  associated  as  it  is  with 
"enemies,  pirates,  rovers,"  has  in  England  been  held  applicable  only 
to  persons  outside  the  ship  who  enter  and  commit  robbery,  this  con- 
clusion being  put  upon  the  ground  that  the  ship  or  master  is  liable 
in  tort  for  goods  stolen  or  embezzled  by  anyone  on  board.'''  But  in 
America  the  clause  is  held  applicable  as  well  to  a  larceny  or  theft 
committed  by  passengers  or  those  in  the  service  of  the  ship.* 

§434.  Barratry. — The  term  "barratry"  includes  every  wrongful 
act  willfully  committed  by  the  master  or  crew  to  the  prejudice  of  the 

1  Walden  v.  Phoenix  Ins.  Co.,  5  Dec.  222;  Hadkinson  v.  Robinson,  3 
Johns.  *  310.  B.  &  P.  388.     As  to  warranty  not  to 

2  Odlin  V.  Ins.  Co.,  18  Fed.  Cas.  583;  abandon  in  case  of  blockade,  see  §  462, 
Lorent  v.  South  Car.  Ins.  Co.,  1  Nott.  &  infra. 

McC.  (S.  C.)  505  (cases  cited).  t  Steinman   v.    Angier  Line    (1891), 

3  Atkinson  v.  Ritchie,  10  East,  534.  1  Q.  B.  619  (and  cases  cited).  So  also 
So  also  where  government  official  gave  Tennessee,  Marshall  v.  Nashville  M.  & 
erroneous  information  regarding  the  F.  Ins.  Co.,  1  Humph.  99.  Same  ri:I° 
law  of  the  port,  Brunner  v.  Webster,  5  ing  as  to  bill  of  lading,  Steinman  case, 
Com.  Cas.  167.  supra,  and  Taylorv.  Liverpool, etc.,  Co., 

i  Rotch  V.  Edie,  6  T.  R.  413;  Foster  L.  R.  9  Q.  B.  546,  2  Asp.  Mar.  L.  C.  277. 
V.  Christie,  11  East,  205.  «  Spinetti  v.  Atlas  S.  Co.,  80  N.  Y. 

5  Rodocanachi  V.  Elliott,  28  L.T.(N.  71,   36   Am.    Rep.    579    (cases   cited); 

S.)  845.  Atlantic   Ins.    Co.  v.  Storrow,  5  Paige 

^ Simonds    v.    Union    Ins.    Co.,    22  (N.  Y.),  285;    American   Ins.    Co.    v 

Fed.  Cas.   165,  1  Wash.  C.  C.  382,  4  Brijan,  26  Wend.  563,  37  Am.  Dec.  278. 

Dall.  417;  Vvjers  v.  Ocean  Ins.  Co.,  12  As  to  whether  a  destructive  mob  can 

La.    (O.  S.)  *  362,  32  Am.  Dec.    118;  be    regarded    as    "assailing    thieves," 

Schmidt  v.  United   Ins.   Co.,  1  Johns.  see  Babbitt  v.  Sun  Mut.  Ins.  Co.,  23 

(N.  Y.)  249,  3  Am.  Dec.  319;  Wilson  v.  La  Ann.   314.      A    seizure    by   consul 

United  Ins.  Co.,  14  Johns.  (N.  Y.)  227.  without  proof  of  felonious  intent,  Pad- 

The  mere  fear  or  warning  of  blockade  dock  v.  Commercial  Ins.   Co.,  2  Allen 

or  of  interdiction  of  trade  is  not  suffi-  (Mass.),  93.     Seizure  by  sovereign  of 

cient   to    come    within   the    terms    of  island  Labonaga  of   goods  purchased 

the  policy,  Richardson  v.  Maine  Ins.  without  paying  or  intending  to   pay 

Co.,  6  Mass.  102,  4  Am.  Dec.  92;  Craig  for  them.  Parsons  v.  Mass.  F.  &  M. 

V.  United  Tns.  Co.,  6  .Tohns.  226,  ■>  Am.  Tni^.   Co.,  6  Mass.   *  197.      "The  term 


612 


MEANING   AND    LEGAL   EFFECT  OF   MARINE    POLICY 


owner,  or,  as  the  case  may  be,  the  charterer  of  the  ship.'     But  mere 
negUgence  or  error  of  judgment  does  not  constitute  barratry.^ 

Though  acts  to  be  barratrous  must  be  prejudicial  to  the  owner, 
they  need  not  be  so  intended,  if  intentionally  committed.^  Accord- 
ingly, any  unauthorized  breach  of  law  exposing  the  owner  to  penal- 
ties is  barratry,  even  though  intended  for  his  advantage;  "*  nor  need 
the  barratrous  act,  if  unlawful,  be  intended  to  enure  to  the  self-bene- 
fit of  the  master  or  mariners  committing  it.'' 


'thieves'  does  not  cover  clandestine 
theft  or  a  theft  committed  by  anyone 
of  the  ship's  company,  whether  crew 
or  passengers,"  Eng.  Mar.  Ins.  Act 
(1906),  1  Seh.  9. 

1  Many  definitions  and  authorities 
given  by  Chalmers  &  Owen  (1907), 
p.  163.  Lawton  v.  Sun  Mid.  Ins.  Co., 
2  Cush.  (Mass.)  500,  511,  512;  Atkin- 
son V.  Gi-eat  Westein  Ins.  Co.,  65  N.  Y. 
531  (citing  many  cases).  Any  fraudu- 
lent or  criminal  conduct  against  the 
owner  of  ship  or  goods,  Earl  v.  Row- 
crojt,  8  East,  126  (though  same  man 
own  both  ship  and  cargo);  Cook  v. 
Commercial  Ins.  Co.,  11  Johns.  (N.  Y.) 
40.  It  is  said  that  the  intent  must  be 
to  defraud  either  the  general  owners  or 
the  charterer  of  the  ship,  2  Arn.  (7th 
ed.),  p.  1501;  Messonier  v.  Union  Ins. 
Co.,  1  Nott  &  McC.  (S.  C.)  *  155,  *  165; 
Nnitt  V.  Bourdieu,  1  T.  R.  323.  Barra- 
try is  a  Crime  at  common  law,  Mes- 
sonier V.  Union  Ins.  Co.,  supra.  And 
by  statute,  for  instance,  N.  Y.  Penal 
Code  §§  575,  576.  There  must  be  an 
intent  to  commit  a  wrongful  act, 
whether  criminal  or  only  fraudulent, 
Wiggin  v.  Amory,  14  Mass.  1,  7  Am. 
Dec.  175  (stopping  and  recapturing 
a  vessel,  no  barratry).  "The  term 
'barratry'  includes  every  wrongful  act 
wilfully  committed  by  the  master  or 
crew  to  the  prejudice  of  the  owner,  or, 
as  the  case  may  be,  the  charterer," 
Eng.  xMar.  Ins.  Act  (1906),  1  Sch.  11. 

2  There  was  no  barratry  where  the 
captain,  with  bad  judgment  only, 
broke  up  a  sea  damaged  ship  before 
she  was  surveyed,  Todd  v.  Ritchie,  1 
Stark,  240.  Likewise  where  a  captain 
mistook  the  meaning  of  his  sailing  in- 
structions, Bottomley  v.  Bovill,  5  B. 
&  Cr.  210.  There  was  no  barratry 
where  the  mate  neglected  to  assume 
command  nv>o\\  incapacity  of  the  cap- 
tain, Hvtchins  v.  Ford,  82  Me.  363,  19 
Atl.  832.  Negligence,  however,  may 
be  so  gross  as  to  afford  almost  conclu- 
siveevidence  of  awillful  breach  of  duty: 


as  when  a  captain  neglects  to  rise  from 
his  berth,  though  seeing  another  per- 
son about  to  fire  the  ship,  Patapsco  Ins. 
Co.  v.  Coulter,  3  Pet.  (U.  S.)  222,  7 
L.  Ed.  659.  Or  where  a  captain,  dis- 
regarding the  pilot's  instructions,  cuts 
the  cable  and  drifts  on  rocks,  Heyman 
V.  Parish,  2  Camp.  149. 

3  Earle  v.  Rowcrojl,  8  East,  126  (going 
into  enemy's  settlement  to  trade  more 
advantageously  without  instructions). 
So  also  an  unlawful  capture  by  a  neu- 
tral vessel,  Wilcocks  v.  Union  Ins.  Co., 
2  Binn.  (Pa.)  579,  4  Am.  Dec.  480.  But 
mere  deviation  from  the  course,  if 
not  fraudulent,  is  not  barratry,  Ph/n 
V.  Royal  Exch.  Ass.  Co.,  7  T.  R.  505. 
Honest  mistake  as  to  sailing  instruc- 
tions is  not  barratry,  Bottomley  v.  Bo- 
vill, 2  B.  &  Cr.  210. 

•*  Grill  V.  General  Iron  Screw  Col- 
liery Co.,  L.  R.  3  C.  P.  476,  18  L.  T. 
485,  37  L.  J.  C.  P.  205.  10  W.  R.  796. 
Omission  to  pay  port  dues  incurring 
forfeiture  is  barratry,  Stamma  v. 
Brown,  2  Strange,  1174.  And  so  is 
breach  of  embargo,  Robertson  v.  Ewer, 

1  T.  R.  127.  Willful  breach  of  blockade, 
though  intended  to  benefit  owner,  is 
barratry,  Goldschmidt  v.  Whitmore,  3 
Taunt.  508.  Likewise  a  willful  resist- 
ance to  right  of  search,  or  unlawful 
attempt  to  rescue  vessel  rightfully  de- 
tained, Dederer  v.   Delaware  Ins.   Co., 

2  Wash.  (C.  C.)  61  Fed.  Cas.  No.  3,  733; 
Wilcocks  v.  Union  Ins.  Co.,  4  Binn.  (Pa.) 
579.  A  willful  violation  of  statute  by 
carrying  Polynesian  laborers  without 
license,  Australasian  Ins.  Co.  v.  Jack- 
son, 3.3  L.  T.  R.  (N.  S.)  286.  Cruising 
in  deliberate  violation  of  instructions, 
Moss  V.  Byrom,  6  T.  R.  379. 

5  Dederer  v.  Delaware  Ins.  Co. ,  2 
Wash.  (C.  C.)  61,  Fed.  Cas.  No.  3,733. 
Other  instances  of  barratry  are  srut- 
tling,  Voisin  v.  Commercial  Mid.  Ins. 
Co.,  62  Hun,  4,  16  N.  Y.  Supp.  410. 
Stranding  the  ship,  Soares  v.  Thorn- 
ton, 7  Taunt.  627.  Burning  the  ship, 
Pntn.pscn    Ins.    Co.    v.    Coulter.   3    Pet. 


BARRATRY 


613 


But  it  should  be  clearly  understood  that  any  complicity  between 
the  owner  and  the  master  in  the  commission  of  the  fraudulent  or 
unlawful  act  will  exclude  it  from  the  category  of  barratry.'  Nor  can 
the  owner  of  goods  recover,  under  the  term  barratry,  for  any  act 
sanctioned  by  the  shipowner;  ^  nor  the  owner  of  the  ship,  for  any 
act  done  by  the  charterer's  agent. ^ 

By  the  law  of  insurance  the  insured  is  not  to  take  advantage  of 
his  own  wrong,  nor  can  one  commit  barratry  against  himself;  there- 
fore a  master,  who  is  also  sole  owner  of  the  ship,  cannot  commit 
barratry;  ■*  but,  if  only  part  owner,  he  may  commit  barratry  as 
against  his  innocent  coowners  and  their  underwriters.^ 


(U.  S.)  222,  7  L.  Ed.  659;  Phoe7iix  Ins. 
Co.  V.  Moog,  78  Ala.  284,  56  Am.  Rep. 
31.  Selling  the  ship  or  any  part  of  it, 
Lawton  v.  Sun  Mid.  Ins.  Co.,  2  Cush. 
(Mass.)  500;  Hibbert  v.  Martin,  1  Camp. 
538.  Running  away  with  the  ship, 
Falkner  v.  Ritchie,  2  Maule  &  S.  290; 
Dixon  V.  Reid,  5  B.  &  Aid.  597,  7  E. 
C.  L.  201.  No  barratry,  if  the  owner 
knew  of  the  proposed  deviation, 
Thurston  v.  Columbian  Ins.  Co.,  3 
Caines  (N.  Y.),  89.  Deviating  from  the 
course  for  a  private  adventure  of  the 
captain  is  barratry,  Ross  v.  Hunter, 
4  T.  R.  33.  Criminal  delay  is  barratry, 
Roscoiv  v.  Corson,  8  Taunt.  684.  Like- 
wise a  stowage  of  cargo  on  deck,  in- 
stead of  under  deck  in  violation  of 
known  duty,  Atldnson  v.  Great  West. 
Ins.  Co.,  65  N.  Y.  531,  overruling,  4 
Daly,  1  (many  cases  cited).  So  also 
stealing  cargo,  Stone  v.  National  Ins. 
Co.,  19  Pick.  (Mass.)  34.  Unlawfully 
selling  cargo  though  with  the  belief 
that  the  owners'  pecuniary  interests 
would  be  enhanced  thereby,  Meyer  v. 
Great  West.  Ins.  Co.,  104  Cal.  382,  38 
Pac.  82;  New  Orleans  Ins.  Co.  v.  Albro 
Co.,  112  U.  S.  506,  5  S.  Ct.  289,  28 
L.  Ed.  809.  Plundering  or  making 
away  with  proceeds  of  cargo,  Falkner 
V.  Ritchie,  2  Maule  &  S.  290.  Any 
mischief  done  to  ship  or  cargo  by 
mutineers,  EUon  v.  Brogden,  2  Str. 
1264;  Vallejo  v.  Wheeler,  1  Cowp.  154. 
Or  like  mischief  done  by  mariners  in 
conspiracy  with  prisoners,  Toulmin  v. 
Anderson,  1  Taunt.  227.  Examples 
of  barratry  through  mere  illegality 
are  smuggling,  Havelock  v.  Hancill,  3 
T.  R.  277.  Illegal  trading,  American 
Iris.  Co.  V.  Dunham.,  15  Wend.  (N.  Y.) 
9;  Earle  v.  Roucroft,  8  East,  126.  See 
Carrington  v.  Merchants'  Ins.  Co.,  8 
Pet.    (l^.    S.)    495.      Resistance    by    a 


neutral  to  a  belligerent's  lawful  right  of 
search.  Brown  v.  Union  Ins.  Co.,  5 
Day  (Conn.),  1,  5  Am.  Dec.  123. 
Breach  of  port  regulations,  exposing 
the  ship  to  seizure  or  penalties,  Knijht 
v.  Cambridge,  referred  to  in  8  East,  136. 

1  Ward  V.  Wood,  13  Mass.  539.  Com- 
plicity may  be  inferred  from  a  want  of 
reasonable  vigilance,  as  where  a  cap- 
tain had  gone  on  smuggling  for  three 
successive  voyages  without  interfer- 
ence on  the  part  of  the  owner,  Pipon 
v.  Cope,  1  Camp.  434. 

-  Stamma  v.  Brown,  2  Strange,  1173; 
Nutt  V.  Bourdieu,  1  T.  R.  323. 

3  Hobbs    V.    Hannam,   3   Camp.    94. 

i  Marcardier  v.  Ins.  Co.,  8  Cr.  39, 
3  L.  Ed.  481.  Nor  can  owTier  of  ship 
commit  barratry  as  to  cargo. 

5  Pha;nix  Ins.  Co.  v.  Moog,  78  Ala. 
284,  56  Am.  Rep.  31;  Hutchins  v. 
Ford,  82  Me.  363,  19  Atl.  832;  West- 
port  Coal  Co.  v.  McPhail  (1898),  2 
Q.  B.  132;  Jones  v.  Nicholson,  10  Exch. 
28,  23  L.  J.  Exch.  330;  Contra,  Wilson 
V.  Ins.  Co.,  12  Cush.  (Mass.)  360,  59 
Am.  Dec.  188.  And  such  part  owner 
may  commit  barratry  as  against  the 
mortgagee  of  his  interest  in  the  ship, 
Small  V.  United  Kingdom,  etc.,  Assoc. 
(1897),  2  Q.  B.  311,  76  L.  T.  R.  828,  66 
L.  J.  Q.  B.  (N.  S.)  736.  As  to  when 
charterers  are  to  be  regarded  as  owners 
in  relation  to  masters  and  mariners, 
see  Marcardier  v.  Chesapeake  Ins.  Co., 
8  Cr.  39,  3  L.  Ed.  481;  Taggard  v. 
Loring,  16  Mass.  336,  8  Am.  Dec.  140; 
Hallet  V.  Columbian  Ins.  Co., 8  Johns. 
(N.  Y.)  272;  Trinitij  House  v.  Clark,  4 
M.  &  S.  288;  Vallejo  v.  Wheeler,  1  Cowp. 
143;  Soares  v.  Thornton,  7  Taunt.  627. 
Mariners  may  commit  barratry  against 
mate  who  is  a  freighter  of  goods, 
Stone  V.  National  his.  Co.,  19  Pick. 
(Mass.)  34.     Barratry  is  not  included 


614  MEANING    AND    LEGAL    EFFECT   OF    MARINE    POLICY 

§  435.  Jettison.— This  is  the  intentional  throwing  overboard  of 
a  part  of  the  cargo,  or  any  article  on  board  of  a  ship,  or  the  cutting  or 
casting  away  of  masts,  spars,  rigging,  sails,  or  other  furniture,  usually 
for  the  purpose  of  lightening  or  relieving  the  ship  in  case  of  necessity 
or  emergency.^  For  such  losses,  the  underwriter  of  the  goods  jet- 
tisoned is  in  the  first  instance  directly  liable,  but,  having  paid,  he 
is  subrogated  to  the  claim  of  the  insured  in  general  average  against 
that  part  of  the  venture,  if  any,  saved  by  such  a  sacrifice  for  the  com- 
mon safety.^ 

A  jettison,  however,  is  not  always  made  with  the  purpose  of  pro- 
moting the  common  safety,  as,  for  instance,  where  the  ship  being 
in  imminent  danger  of  capture,  the  master  dropped  a  bag  of  specie 
into  the  sea  lest  it  should  fall  into  the  hands  of  the  enemy,  for  which 
the  underwriter  was  held  liable  under  the  head  of  jettison;^  but 
where  goods  are  thrown  overboard  on  account  of  their  inherent  vice, 
the  underwriters  are  not  liable.^ 

§  436.  All  Other  Perils,  Losses,  or  Misfortunes. — The  terms  of 
this  clause  are  so  comprehensive  as  at  first  sight  to  convey  the  im- 
pression that  the}^  embrace  every  kind  of  mishap,  not  already  enu- 
merated, to  which  property  at  sea  can  be  subjected.  Such,  however, 
is  not  the  case;  for  here  the  rule  of  construction  applies  that  general 
terms  following  particular  terms  apply  only  to  matters  which  are 
of  the  same  kind  with  those  specified.^  Accordingly,  the  effect  of 
the  general  undertaking,  expressed  as  above,  is  to  bring  within  the 

as    a    "sea    peril"    unless    specifically  Burton  v.  English,  10  Q.  B.  D.  426,  12 

mentioned,  Waters  v.  Merchants'  Ins.  Q.  B.  D.  218;  Johnson  v.  Chapman,  35 

Co.,  11  Pet.  (U.  S.)  213,  9  L.  Ed.  69;  L.  J.  C.  P.  23;  Wright  v.  Mancood,  7 

Mathews  v.  Hoicord  Ins.  Co.,  U  N.  Y.  Q.  B.  D.  62. 

11.  16;  Gazzam  V.Ohio  Ins.  Co.,  Wright  '■'Dickenson  v.  Jardine.  L.  R.   3  C. 

(Ohio),  202;  Citizens'  Ins.  Co.  v.  Marsh.  P.  639,  37  L.  J.  C.  P.  321,  16  W.  R. 

41  Pa.  St.  386;  Contra  dictum,  Atkinson  1169,  18  L.  T.  717.     As  to  jettison  in 

v.GieatWest.  Ins.  Co., 65N.Y. 531,552.  its    relation    to   general    average   see, 

But  barratry  is  included  in  the  clause  §  216,  supra. 

"usual    marine    risks,"    Parkhurst    v.  ^  Butler  v.  Wildman,  3  B.  &  A\d.  S9S 

Gloucester  Mut.  Fishing  Ins.  Co.,  100  (not  a  general  average  act,  see  §  216). 
Mass.  301.  4  Taylor  v.  Dunbar,  L.  R.  4.  C  P.  206, 

iThe     Portsmouth,     9     Wall.     682;  38  L.  J.  C.  P.  178,  17  W.  R.  382. 
Merchants'  S-  Mfrs.  Ins.  Co.  v.  Shillito,  5  Thames  dc  M.  Ins.  Co.  v.  Hamilton 

15  Ohio  St.  559,  86  Am.  Dec.  491  (jet-  12  App.  Gas.  484,    17  Q.  B.  D.   195* 

tison   of   goods   on   deck   where   such  56  L.  J.  Q.  B.  626,  57  L.  T.  695,  6  Asp! 

stowage  was  proper).     A  jettison   of  M.  C.  200  (reviewing  many  cases*  in- 

goods  carried  on  deck  is  not  covered  by  jury    to    donkey    engine    in    ordinary 

the  ordinary  policy,   unless  it  is  the  use  not  included);  Cullen  v.  Butler,  5 

custom  so  to  carry  them,  Da  Costa  v.  M.  &  Sel.  461,  465.    And  see  discussion 

Edmunds,  4  Camp.  142;  as  usually  is  of  this  clause,  §  446,  infra.    "The  term 

the    case    of    inland    river    voyages,  'all  other  perils'  includes  only  perils 

Apollinaris  Co.  v.  Nord  Deutsche  Ins.  similar  in  kind  to  the  perils  specifically 

Co.  (1904),   1  K.  B.  252.     See  Royal  mentioned  in  the  policy,"  Eng    Mar 

Exch.  S.  Co.  v.  Dixon,  12  App.  Cas.  11 ;  Ins.  Act  (1906),  1  Srh.  12. 


ri;OXi.\lATE    CAUrSt  615 

.scope  of  the  contract  all  casualties  which,  though  not  identical  with, 
are  similar  to,  the  risks  enumerated.  Thus,  the  expression  of  "all 
other  perils,  losses,  and  misfortunes,"  has  been  held  to  include  damage 
to  a  ship  which  had  been  heeled  over  by  the  wind  in  a  graving  dock;  ' 
the  loss  of  dollars  thrown  overboard  from  a  vessel  on  the  point  of 
capture,  in  order  that  they  might  not  be  taken  possession  of  by  the 
enemy;  -  the  wrecking  of  a  steamer  through  the  bursting  of  the 
boiler,  etc.,  if  from  the  unusual  action  of  the  sea.*'' 

§  437.  Proximate  Cause. — Every  event  is  the  culmination  of  a 
series  of  numerous  antecedent  causes  or  influences  "^  more  or  less 
intimately  associated  together,  some  operating  successively,  others 
in  combination.  Where  a  chain  of  causative  forces  or  circumstances 
terminates  in  a  loss,  and  only  one  of  the  causative  links  is  a  peril 
insured  against,  while  the  others  are  either  without  mention  in  the 
policy,  or  else  are  expressly  warranted  by  the  insured  to  be  excluded 
from  its  operation,^  the  liability  or  exoneration  of  the  underwriter 
may  easily  turn  upon  the  correct  answer  to  this  inquiry,  namely,  in 
accounting  for  the  effect,  which  cause  ought  to  be  selected  as  the 
significant  or  controlling  cause?  ^ 

Difficult  problems  under  the  topic  "proximate  cause"  are  pre- 
sented for  solution,  more  frequently,  perhaps,  in  connection  with 
insurance  than  with  any  other  class  of  contracts,  and  can  only  be 
mastered  by  a  careful  examination  of  many  decisions.  It  will  be 
profitable  to  consider  this  subject  as  related  to  the  marine  policy  for 
two  reasons,  first,  because  that  policy  has  to  do  wdth  many  perils, 
including  fire,  and,  second,  because  the  subject  of  proximate  cause 
has  been  developed  with  marked  thoroughness  in  this  branch  of 
insurance  law. 

As  already  shown  in  prior  chapters  the  dominant,  efficient  cause  is 
termed  the  proximate  cause,  though  not  always  nearest  to  the  loss 
either  in  time  or  place,^  and  it  has  often  been  declared  generally  that 

^  Phillips  V.  Barber,  5  B.  &  Aid.  161.  contenteth  itself  with  the  immediate 

^  Butler  v.Wildman,  3  B.  &A\d.  398.  cause,"  Bac.  Max.  Reg.  1;  Devaux  v. 

3  West  India  &  P.  Tel.  Co.  v.  Home  cfe,  Salvador  (1835),  4  A.  &  E.  431. 

C.  Mar.  Ins.  Co.,  4  Asp.  M.  C.  341,  L.  5  Thus,  "free  from  capture  and  all 

R.  6  Q.  B.  D.  51,  50  L.  J.  Q.  B.  41;  consequences,  of   hostilities,"  etc.;    or 

but  questioned  in   Thames  &   Mersey  "excepting  want  of  ordinary  care  and 

Mar.  Ins.  Co.  v.  Hamilton,  supra.    Loss  skill  in  navigation,"  etc. 

of  freight  from  imminent  danger  of  fire  6"Apt    to    lead    into    philosophical 

is  covered,  The  Knight  of  St.  Michael  mazes,"    Inman    S.    Co.    v.    Bischoff 

(1898),  P.  30, 67  L.  J.  P.  D.  &  A.  (N.  S.)  (1882),  7  App.  Cas.  683. 

19,  78  L.  T.  Rep.  TO.  '  The  United  States  Supreme  Court 

*"It  were  infinite  for  the  law  to  has  repeatedly  approved  the  rule,  "The 

consider  the  causes  or  causes  and  their  question  is  not  what  cause  was  nearest 

impulsions  one  on  another,  therefore  it  in  time  or  place  to  the  catastrophe. 


OIG  MEANING  AND    LEGAL    EFFECT   OF    MARINE    POLICY 

the  underwriter  is  liable  for  no  loss  which  is  not  proximately  caused 
by  the  perils  insured  against.' 

§  438.  When  Nearest   Antecedent   Cause   held    Responsible. — In 

examining  this  subject,  it  will  be  convenient  first  to  consider  the  case 
where  no  operative  cause  is  expressly  excluded  by  the  terms  of  the 
policy.  Here  if  the  peril  insured  against  is  to  be  found  in  the  chain 
of  cause  and  effect  the  law  will  not  look  back  further  for  antecedent 
contributing  causes,  though  without  them  the  disaster  would  not 
have  occurred.^ 

For  example,  in  an  English  case  a  vessel  insured  "against  capture 
only"  was  driven  by  a  storm  upon  a  hostile  coast  where,  having  re- 
ceived little  damage  from  the  stranding,  she  was  captured  by  the 
enemy.  This  was  held  to  be  a  loss,  not  by  perils  of  the  sea,  but  by 
capture  and  as  such  recoverable  under  the  policy.^  By  like  reasoning 
where  rats  gnawed  a  hole  in  a  pipe  communicating  with  the  plaintiff's 
cargo  of  rice,  which  was  damaged  by  sea  water  flowing  in  through 
the  hole,  sea  damage,  not  the  action  of  the  rats,  was  held  to  be  the 
proximate  cause  of  the  loss.^  And  so  also  in  the  case  of  an  English 
time  policy,  which,  under  English  decisions,  carries  no  implied  war- 
ranty of  seaworthiness,  though  it  was  conceded  that  the  ship's  lack 
of  seaworthiness  prevented  her  from  successfully  battling  with  the 
perils  of  the  sea,  nevertheless  stress  of  weather  was  held  to  be  the 
sole  proximate  cause  of  her  wreck.'^ 

That  is  not  the  meaning  of  the  maxim  ranty,  for  instance  of  seaworthiness  of 

causa    proxima    non    remota    spectalur.  the    ship,  will    discharge    the    insurer 

The  proximate   cause   is  the  efficient  though    the    proximate    cause   of   the 

cause,   the   one    that    necessarily   .sets  loss  be  a  sea  peril,  T/iwm/json  v. //o/>per, 

the  other  causes   in   operation.     The  6  E.  &  B.  172,  191.    The  loss  must  be 

causes  that  are  merely  incidental,  or  the  direct  not  th<^  remote  consequence 

instruments  of  a  superior  or  controlling  of  the  peril,  Shelbourne  v.  Law  I.  &  I. 

agency  are  not  the  proximate  causes  Corp.  (1898),  2  Q.  B.  626. 
and  the  responsible  ones,  though  they  ^Louisville    Underwriters    v.    Pence, 

may  be  nearer  in  time  to  the  result.    It  93  Ky.  96,  102,  19  S.  W.  10,  40  Am. 

is  only  when  the  causes  are  independ-  St.  R.  176.     The  Massachusetts  court 

ent  of  each  other  that  the  nearest  is,  of  says:  "The  law  will  not  go  farther  back 

course,  to  be  charged  with  the  disaster,"  in  the  line  of  causation  than  to  find  the 

The  G.  R.  Booth,  171   U.  S.  450,  457,  active,   efficient,    procuring   cause,   of 

19  S.  Ct.  9,  4.3  L.  Ed.  234;  Lynn  Gas  &  which  the   event   vmder  consideration 

Electric  Co.  v.  Meriden  F.  Ins.  Co.,  158  is  a  natural  and  probable  consequence, 

Mass.  570,  575,  33  N.  E.  690,  20  L.  R.  in  view  of  the  existing  circumstances 

A.  297,  35  Am.  St.  R.  540.    See  Mono-  and  conditions,"  Freeman  v.  Mercan- 

han  V.  Eidlitz,  59  App.   Div.    (N.  Y.)  tile  Ace.  A.s.soc,  156  Mass.  351,  3.53,  30 

224,  227.  N.  E.  1013, 17  L.  R.  A.  753. 

1  2  Arn.  §  783;    Eng.  Mar.  Ins.  Act  3  Green  v.  Elmslie,  1  Peake's  N.  P. 

(1906),  §.55;  Pink  v.  Fleming  (1890),  Cas.  278. 

25  Q.  B.  D.  396;  Clinc  v.  We.Hern  Assur.  *  Hamilton    v.    Pandorf    (1887),    12 

Co.,  101  Va.  496,  498,  44  S.  E.  700.    Of  App.  Cas.  518  (bill  of  lading  case). 
course  any  fraud  on  the  part  of  the  in-  s  Dudgeon  v.  Pembroke,  2  App.  Cas. 

sured  himself  or  breach  of  any  war-  284,  297,  3  Asp.    Mar.    L.   C.    393,    in 


PROXIMATE    CAUSE,    HOW    FAR   FOLLOWED    IN    ITS    RESULTS    617 

The  Bawnmore  was  insured  by  a  valued  time  policy  against  losa 
or  damage  by  fire  or  explosion  only.  She  stranded  on  the  coast  of 
Oregon  and  sustained  such  injuries  by  sea  perils  that  the  cost  of 
repairing  her  would  have  been  greater  than  her  value  when  repaired. 
Thirty-six  hours  afterwards  she  was  completely  destroyed  by  fire. 
The  English  court  held  that  the  insurer  was  liable  for  the  full  amount 
underwritten.^ 

In  the  light  of  the  same  doctrine  are  to  be  explained  those  many 
decisions,  both  English  and  American,  by  which  the  rule,  formerly 
denied  or  questioned,^  is  now  firmly  established,  that  when  the  loss 
is  caused  directly  by  a  peril  insured  against  the  underwriter  will 
not  be  exonerated,  though  it  appear  that  the  disaster  would  not  have 
occurred  except  for  the  neglect,  or  careless  navigation,  of  the  master, 
including  the  insured  himself,^  or  the  seamen  or  other  agents  of  the 
insured.'* 

§  439.  Proximate  Cause,  how  far   Followed   in  its  Results. — A 

peril  insured  against  having  been  fastened  upon  as  the  proximate 
or  responsible  cause  of  loss,  a  secondary  inquiry  sometimes  remains 
by  which  to  determine  how  far  it  is  legitimate,  in  estimating  the 
liability  of  an  underwriter,  to  follow  the  results  occasioned  by  the 
cause. ^ 
For  example,  as  already  shown,  damage  by  smoke,  by  water  from 

which  Lord  Penzance  says:    "A  long  land,  5  B.  &  Aid.  171,  174  (sloop  on 

course  of  decisions  in  the  courts  of  this  rocks  because  seamen  in  charge  were 

country    has    established    that    cmisa  asleep);  Busk  v.  Royal  Exch.  Ass.  Co., 

proxima  et  non  remota  spectatur  is  the  2  B.  &  Aid.  73  (careless  mate  lighted 

maxim   by   which   these   contracts   of  a  fire  and  left  ship  without  watchman); 

insurance  are  to  be  construed,  and  that  Bishop  v.  Pentland,  7  B.  &  C.  219  (ship 

any  loss  caused   immediately  by  the  fell   over  on  her  side  in   harbor  and 

perils  of  the  sea  is  within  the  policy,  bilged  because  a  rope  was  not  strong 

though  it  would  not  have  occurred  but  enough  to  hold  her  to  the  pier);  Smith 

for  the  concurrent  action  of  some  other  v.  Scott,  4  Taunt.  126  (coUison  in  calm 

cause  which  is  not  within  it."  weather  through  fault  of  lookout  or 

1  Woodside  v.   Globe  Mar.   Ins.   Co.  helmsman).     See  list  of  instances  in 

(1896),  1  Q.  B.  D.  105.     And  see  A'.  F.  which   negligence  or  misconduct  was 

etc.  Exp.  Co.  V.  Ins.  Co. ,132  Mass.  377.  regarded  the  proximate  cause  of  the 

"^  Pntapsco  Ins.  Co.  v.  Coulter,  3  Vei.  loss,  Matthews  v.  Howard  Ins.  Co.,  11 

222,  7    L.  £d.  6.59;  Grim  v.    Phoenix  N.  Y.  15. 

Ins.  Co.,  13  Johns.  (N.  Y.)451;   Lod-  5  The  Massachusetts  court  in  a  lead- 

wicks  V.    Ohio    Ins.  Co.,  5  Ohio,  434  ing  case,  after  referring  to  "the  effi- 

and  cases  cited.  cient,   predominant   cause,"   says,   by 

3  Trinder  v.  North  Queensland  Ins.  way  of  guidance  on  this  point,  "fol- 
Co.,  66  T..  J.  Q.  B.  (N.  S.)  802,  77  L.  T.  lowing  it  no  farther  than  those  con- 
Rep.   80,   part  owner  himself  master.  sequences   that  might   have   been   an- 

*  List  of  cases,  3  Cooley,  Ins.  p.  2904;  ticipated  as  not  unlikely  to  result  from 

Phoenix  Ins.  Co.  v.  Erie  Transp.  Co.,  it,"  Freeman  v.  Mercantile  Ace.  Assoc, 

117  U.  S.  312,  323,  6  S.  Ct.  750  (fire  156  Mass.  351,  353,  30  N.  E.  1013,  17 

negligently  caused);   Walker  v.  Mail-  L.  R.  A.  753.     And  see  164  Fed.  404 


618  MEANING    AM)    LEGAL    EFFE{;T   OE    MARINE    POLICY 

fire  engines,  by  falling  walls,  by  incidental  explosions,  even  by  dep- 
redations of  thieves  attributable  to  tlie  conflagration,  may  be  con- 
sidered the  natural  and  proximate  results  of  fire  as  the  moving  and 
efficient  cause;  ^  while  loss  of  profits  or  of  use  and  occupancy  and 
various  other  consequences,  in  the  absence  of  stipulation  to  the 
contrary,  are  held  to  be  too  remote  to  fall  within  the  probable  con- 
templation of  the  parties.^ 

Loss  of  cargo  by  fire  may  include  loss  of  goods  by  the  sinking 
of  the  vessel  containing  them  and  though  no  fire  touch  them,  pro- 
vided the  fire  is  the  cause  of  the  sinking.^ 

Apparently  it  is  only  on  the  ground  of  the  remote  and  improbable 
character  of  the  results  of  the  fire,  as  matter  of  fact,  that  the  much 
criticized  decision  in  the  Tarrant  case,  under  the  standard  fire 
policy  of  New  York,  might  possibly  find  justification.  That  case 
was  tried  on  an  agreed  statement  of  facts.  A  conflagration,  originat- 
ing in  the  Tarrant  building  in  New  York  City,  in  course  of  the  burn- 
ing, and  within  less  than  half  an  hour  after  starting,  reached  a 
large  stock  of  explosive  drugs  and  chemicals  stored  in  the  building. 
In  consequence  of  their  ignition  a  terrific  explosion  ensued,  which 
wrecked  neighboring  buildings,  including  the  building  belonging  to 
Hustace,  the  plaintiff,  and  insured  by  the  defendant.  This  building 
was  distant  fifty-six  feet,  eleven  inches  from  the  Tarrant  building, 
and  was  separated  from  it  by  two  buildings  and  an  alleyway,  about 
eight  feet  wide.  These  two  intervening  buildings  were  also  wrecked 
by  the  explosion,  but  the  conflagration  from  the  Tarrant  building 
subsequently  swept  over  this  space  and  consumed  the  ruins  of  the 
plaintiff's  building.  Five  judges  below  found  for  the  plaintiff,  but 
the  majority  of  the  Court  of  Appeals,  in  an  opinion  which  fails  to 
recognize  the  real  object  of  the  explosion  clause  contained  in  the 
standard  policy,  reversed,  and  held  that  the  loss  was  not  by  fire 
but  by  explosion,  and  that  the  insurance  company  was  not  liable.'* 

1  §§  231,  276,  supra.  So  where  in-  2  gee  further  instances  of  remote 
surance  was  against  collision  only,  and  losses,  §  443,  infra. 
after  a  collision  the  motion  of  the  ves-  3  A^.  }'.  &  B.  Despatch  Exp.  Co.  v. 
sel,  while  being  towed  away,  opened  Traders'  &  M.  his.  Co.,  135  Mass.  221. 
leaks  in  her  and  she  sank,  collision  was  ■*  Hustace  v.  Phoemx  Ins.  Co.,  175 
held  to  be  the  proximate  cause  of  the  N.  Y.  292,  67  N.  E.  592.  See  §  278, 
loss  by  sinking,  Reischer  v.  Borwick  supra.  Hustace  should  not  have 
(1894),  2  Q.  B.  548.  A  policy  insured  agreed  to  the  facts,  but  should  have 
hides  and  tobacco.  The  hides  were  claimed  that  at  the  very  least  he  was 
soaked  as  the  result  of  a  storm,  and  entitled  to  go  to  the  jury.  It  was  a 
became  putrid.  Fumes  from  them  in-  question  of  the  natural  spread  of  fire 
jured  the  tobacco.  The  damage  to  the  and  its  natural  physical  results.  Ex- 
tobacco  was  proximately  caused  by  plosives  burn  by  exploding.  In  an 
sea  peril,  Montoya  v.  London  Assur.  unimproved  meadow  lot,  the  physical 
(1851),  6  Exch.  451.  laws  of  nature  operate  precisely  the 


AN  INDEPENDENT  INTERVENING  CAUSE  619 

If  the  results  of  the  peril  specified  are  so  indirect  and  improbable 
as  to  make  it  doubtful  whether  they  should  fairly  be  considered 
within  the  contemplation  of  the  parties  to  the  policy,  the  issue  in 
general  should  be  regarded  as  one  of  fact  to  be  determined  by  the 
jury.^  But  especially  in  marine  insurance  the  courts  have  shown  a 
disposition  to  settle  such  issues  as  matter  of  law,  in  order  to  give 
greater  uniformity  to  the  meaning  and  effect  of  the  contract. 

§  440.  An  Independent  Intervening  Cause. — Analogous  with  the 
last  rule  is  another,  which  may  be  stated  in  connection  with  it.  A 
new  and  wholly  independent  cause  intervening  between  the  peril 
insured  against  and  the  loss  may  break  the  chain  of  natural  causation, 
in  which  event  the  damage  is  held  to  be  remote  and  the  underwriter 
is  exonerated.^ 

This  principle  is  illustrated  by  an  English  case  in  which  a  ship- 
owner, owing  to  embargo,  properly  abandoned  ship  and  freight  to  the 
underwriters.  Contrary  to  expectation  the  voyage  was  completed 
and  the  underwriters  who  had  accepted  the  abandonment  received 
the  freight.  It  was  held  that  any  loss  of  freight  sustained  by  the 
insured  was  not  by  the  peril  insured  against,  but  by  the  voluntary 
intervention  of  the  assured  himself.^ 

same,  whether  the  lot  happens  to  be  nant.  .  .  .  One  of  the  most  valuable 
owned  by  one  man,  or  whether,  by  of  the  criteria  furnished  us  by  these 
impalpable  boundary  lines  of  owner-  authorities  is  to  ascertain  whether 
ship,  it  is  divided  up  into  fifty  lots.  any  new  cause  has  intervened  between 
Likewise  in  the  case  of  a  block  of  city  the  fact  accomplished  and  the  alleged 
houses,  whether  they  are  all  owned  and  cause.  If  a  new  force  or  power  has 
insured  by  one  man  and  one  policy,  or  intervened  of  itself  sufficient  to  stand 
whether  they  are  separately  owned  and  as  the  cause  of  the  misfortune,  the 
separately  insured,  it  matters  not,  so  other  must  be  considered  as  too  re- 
far  as  the  spread  of  any  conflagration  mote,"  The  G.  R.  Booth,  supra.  And 
among  them  and  its  physical  effects  see  Niver  Coal  Co.  \.  Chironea  S.S. 
are  concerned.  Co.,  142  Fed.  402,  410.    "Did  the  facts 

1  Milwaukee,  etc.,  R.  Co.  v.  Kellogg,  constitute  a  continuous  succession  of 
94  U.  S.  469;  Russell  v.  German  Fire  events,  so  linked  together  as  to  make 
/?i.s.  Co.,  100  Minn.  528,  111  N.  W.  400.  a  natural  whole,  or  was  there  some 

2  The  United  States  Supreme  court  new  and  independent  cause  interven- 
has  repeatedly  declared,  "The  inquiry  ing  between  the  wrong  and  the  in- 
must  always  be  whether  there  was  any  jury?"  Milwaulee,  etc.,  R.  Co.  v.  Kel- 
intermediate  cause  disconnected  from  logg,  94  U.  S.  409,  475  (holding  also 
the  primary  fault,  and  self-operating,  that  the  question  is  often  for  the  jury), 
which  produced  the  injury,"  The  G.  R.  A  cause  is  proximate  when  the  effects 
Booth,  171  U.  S.  450,  458,  19  S.  Ct.  follow  "by  mere  physical  necessity," 
9,  43  L.  Ed.  234  (quoting  with  ap-  Bailey's  definition,  MacArthur,  Ins. 
proval  from  7ns.  Co.  v.  Boon,  95  U.  S.  (2d  ed.),  108,  note.  Thus  where  a  ves- 
117  and  Milwaukee  &  St.  P.  R.  v.  Kel-  sel  is  lost  by  an  explosion  of  gunpowder 
logg,  94  U.  S.  469).  Again  the  same  occurring  after  the  ship  is  on  fire,  fire 
court  says:  "That  cause  which  set  is  the  proximate  and  sole  cause,  Tf'o/cra 
the  other  in  motion  and  gave  to  it  v.  Merchants'  Ins.  Co.,  11  Pet.  (U.  S.) 
its  efficiency  for  harm  at  the  time  of  213,  9  L.  Ed.  69. 

the  disaster   must   rank    as  predomi-  3  McCarthy  v.  Abel,  5  East,  3S8.  And 


620  MEANING   AND    LEGAL   EFFECT   OF   MARINE    POLICY 

In  another  English  cuse  goods  were  insured  against  damage 
consequent  on  colUsion.  The  ship  on  which  the  goods  were  shipped 
came  into  colUsion  with  another  vessel  and  had  to  go  into  port  for 
repair.  For  the  purpose  of  such  repairs  the  goods,  which  were  of  a 
perishable  nature,  had  to  be  discharged,  and  they  were  damaged 
by  the  handling  necessary  for  their  discharge  and  reshipment.  It 
was  held  that  the  collision  was  not  the  proximate  cause  of  the  loss 
and  that  the  underwriters  were  not  liable.^ 

At  this  point,  as  in  other  respects,  we  find  the  courts  somewhat 
more  liberally  disposed  towards  the  insured  in  construing  the  fire 
policy,  for  instance,  in  the  ruling  that  in  the  absence  of  an  express 
exemption  the  insurer  against  fire  is  liable  also  for  loss  by  conse- 
quential theft. 2 

§  441.  Joint  Action  of  Peril  Insured  Against  and  Peril  Excepted. — 

Where  different  causes  commingle  or  combine  to  produce  the  loss, 
one  a  peril  insured  against,  and  the  other  a  peril  expressly  excepted, 
the  question  arises,  which  is  the  significant  or  proximate  cause. ^ 

The  rules  adverted  to  in  the  last  sections  have  an  important  bear- 
ing; but,  in  classifying  perils  or  causes  in  this  connection,  a  useful 
rule  for  guidance,  recognized  in  most  jurisdictions,  is  found  in  the 
proposition  that  an  inevitable,  or  natural,  physical  incident  or  con- 
comitant of  the  primar}^  peril  or  cause  should  not  be  accounted  in 
any  respect  a  separate  peril  or  cause,  though  separately  mentioned 
in  the  policy,  but  merely  one  of  the  subordinate  phenomena  or  re- 
sults of  the  proximate  and  controlling  force  which  will  stand  as  the 
sole  cause.  Instances  from  several  branches  of  insurance  law  may 
serve  to  illuminate  this  subject. 

An  English  marine  policy  on  living  animals  contained  a  warranty 
"free  from  mortality  and  jettison."  The  violence  of  a  storm  which 
was  a  peril  insured  against  so  injured  some  of  the  animals  as  to  cause 

see  himan  S.S.  Co.  v.  Bischoff,  7  App.  mental  disorder,  Scheffer  v.   Railroad 

Cas.    670.      Similarly,  in    considering  Co.,  105  U.  S.  249,  26  L.  Ed.   1070. 

proximate   cause   for  general   average  Compare  7ns.  Co.  v.  Seaver,  19  Wall. 

purposes  where  a  steamer  struck  on  a  (U.  S.)  531,  542;  Daniels  v.  R.  R.  Co., 

rock     and     was     then     intentionally  183  Mass.  393. 

stranded  as  an  attempted  salvage  i^t  ^  Pink  v.  Fleming  (1890),  25  Q.B.D. 

was  held  that  stranding  was  the  pro.x-  396,  59  L.  J.  Q.  B.  559  (American  law 

imate  cause  of  loss  because  of  the  vol-  said  to  differ  from  English  on  this  sub- 

untary  act  intervening,  Nor'rich,  etc.,  ject). 

Tramp.  Co.  v.  Ins.  Co.,  118  Fed.  307.  2  See  §  231,  supra. 

So  also  in  an  action  for  neglisrence  an  3  "Always    a    difficult    question    to 

act  of  suicide  and  not  the  accident  was  determine  in  the  case  of  a  conjunction 

held    the    proximate    cause    of    death  of  causes,"  Brovm  v.  St.  Nicholas  In& 

though  occasioned  by  a  preceding  ac-  Co.,  61  N.  Y.  332,  337. 

cident  with  ensuing  sickness  involving 


JOINT  ACTION   OF    PERIL   INSURED   AGAINST  621 

their  death.  The  insurer  was  held  liable  notwithstanding  the  ex- 
ception embodied  in  the  warrant}-.^ 

In  another  English  case,  under  a  bill  of  lading  which  excepted 
"accidents  of  the  seas,"  the  question  arose  whether  an  accident 
of  the  sea,  or  the  resulting  heat  from  the  engine-room,  which  dam- 
aged the  plaintiffs'  cargo  of  grain,  was  to  be  regarded  as  the  proxi- 
mate or  significant  cause  of  the  loss.  During  the  voyage  from  Balti- 
more to  Avonmouth,  owing  to  exceptionally  heavy  weather,  and 
for  the  safety  of  the  ship,  the  ventilators  of  the  steamship  were 
closed  for  about  a  week,  with  the  result  that  the  air  in  the  hold 
nearest  the  engine-room  space  became  heated,  and,  not  being  able 
to  escape  through  the  ventilators,  damaged  a  portion  of  the  plain- 
tiffs' grain.  The  court  held  that  an  accident  of  the  sea  was  the 
proximate  cause  of  the  loss,  and  that,  therefore,  the  exception  in 
the  bill  of  lading  applied  in  favor  of  the  defendants,  the  shipowners.^ 

In  a  New  York  case  a  marine  policy  upon  the  cargo  of  a  canal  boat 
contained  an  "ice  clause"  providing  that  if  the  boat  "was  prevented 
or  detained  by  ice,  or  the  closing  of  navigation,  from  terminating 
the  trip,"  the  policy  should  cease.  The  canal  boat  with  others  in  a 
tow,  was  proceeding  down  the  Delaware  River,  when,  in  consequence 
of  a  gale,  the  towing  tugs  were  separated  from  the  boats  which  were 
driven  ashore  and  stranded.  During  the  night,  ice  formed  about 
them  so  that  the  tugs  could  not  get  at  them.  The  boat  remained 
thus  frozen  in  until  a  thaw,  when  the  wind  and  ice  forcing  her  upon 
another  boat,  she  broke  in  two,  sank,  and  the  cargo  was  injured. 
The  court  held  that  the  primary,  predominating,  all-embracing 
cause  to  which  all  the  ensuing  loss  must  be  attributed  was  the  storm 
and  not  the  ice,  and  that,  therefore,  the  defendant  was  liable.^ 

In  like  manner,  before  the  United  States  Supreme  Court,  the 
question  arose  whether  a  loss  to  part  of  a  cargo  was  by  explosion, 

^Lawrence    v.    Aberdein    (1821),    5  a  boat  is  lost  after  a  storm  has  ceased 

B.  &  Aid.  107.  in  consequence  of  damage  done  during 

2  The  Thrunscoe  (1897),  Prob.   301.  a  storm."     So   also   where  there  was 

3  Brown  v.  St.  A^icholas  Ins.  Co.,  61  prospectively  a  total  loss  to  owner  of 
N.  Y.  332  (Dwight,  C,  reviewing  his  cargo  by  stranding  of  ship,  though 
many  cases).  In  referring  to  another  goods  were  warranted  free  from  cap- 
case  the  court  said  at  p.  340:  "The  ves-  ture,  the  underwriters  were  in  no 
sel  was  never  delivered  from  that  wise  relieved  because  of  a  subsequent 
peril  until  she  was  virtually  destroyed  chance  rescue  and  appropriation  of  a 
and  unable  to  perform  the  voyage.  portion  by  an  enemy,  Hahn  v.  Corbett, 
In  such  a  case  the  insurers  are  liable  2  Bing,  205.  Compare  where  carrier 
though  the  loss  is  followed  by  the  op-  was  responsible  for  negligence  but 
eration  of  a  peril  excepted  from  the  exempt  from  fire  loss,  negligence  was 
policy."  And  at  p.  338:  "It  is  well  held  to  be  proximate  cause,  Deming  v. 
settled  that  an  insurer  is  liable  for  all  Merchants' ,  etc.,  Co.,  90  Tenn.  306,  17 
the    consequences    directly    resulting  S.  W.  89, 13  L.  R.  A.  518. 

from  a  peril  insured  against,  as  where 


62.2  MEANING    AND    LEGAL    EFFECT    OF    MARINE    POLICY 

for  which  the  defendant  was  responsible,  or  by  a  peril  of  the  sea 
which  was  expressly  excepted  in  the  bill  of  lading.  While  the  de- 
fendant's vessel  was  at  the  pier  unloading  detonating  caps  intended 
for  blasting  operations,  one  of  them  burst,  though  without  negligence 
or  fault  on  the  part  of  the  ship's  hands,  and  the  explosion  blew  a 
large  hole  in  the  ship's  side,  through  which  the  sea  water  flowed  to 
the  injury  of  the  plaintiff's  cargo  of  sugar.  The  court  held  that  the 
explosion  alone  was  to  be  regarded  the  efficient  and  responsible 
cause  of  the  loss.  The  influx  of  sea  water  was  but  an  incidental 
result.^ 

By  parity  of  reasoning  the  peril  insured  against  may  intervene 
and  become  the  proximate  and  responsible  cause.  A  policy  excepted 
"consequences  resulting  from  derangement  of  machinery."  The 
mud  valve  needing  repairs,  steam  was  blown  off.  The  captain,  not 
knowing  that  steam  was  off,  deliberately  gave  orders  to  start  the 
boat,  which,  without  steam  to  propel,  was  carried  over  the  falls 
and  sunk.  Held,  that  the  sea  peril  was  proximate  and  the  excepted 
cause  remote,  since  the  captain's  act  of  volition  intervened.^ 

The  doctrine  of  proximate  cause  is  frequently  involved  where  a 
loss  is  occasioned  by  the  joint  operation  of  fire  and  explosion,  the 
one  agency  being  named  in  the  policy  as  a  peril  insured  against  and 
the  other  as  an  exception.  A  conflagration  is  usually  if  not  always 
attended  by  a  series  of  explosions  of  greater  or  less  violence  as  nec- 
essary physical  results  or  concomitants  of  fire  when  in  hostile  action. 
Such  incidental  explosions,  whether  of  dry  wood,  or  gas,  or  gunpow- 
der or  other  material,  are  to  be  regarded  merely  as  effects  and  not 
as  causes.  So  also  an  explosion,  often  though  not  always,  results  in 
a  fire. 

1  The  G.  R.  Booth,  171  U.  S.  450,  19  2  Camp.  149,  Arcangelo  v.  Thompson,  2 
S.  Ct.  9,  43  L.  Ed.  234  (on  bill  of  lading.  Camp.  620);  Hutchins  v.  Ford,  82  Me. 
but  court  treated  it  as  though  it  were  363,  19  Atl.  832.  If  negligence  is  ex- 
an  insurance  case).  Compare  proxi-  pressly  excepted  and  a  negligent  de- 
mate  cau.se  under  fire  policy,  §  231 ,  and  feet  in  the  compass  causes  the  vessel 
accident  policy,  §  387.  Unlawful  speed  to  succumb  to  the  perils  of  the  sea, 
of  ship  was  the  sole  cause  of  the  loss,  the  underwriter  is  relieved  under  the 
not  the  stranding,  Flint  v.  Marine  Ins.  exception,  Richelieu  &  O.  Nav.  Co.  v. 
Co.,  71  Fed.  210.  And  see  Bensande  v.  Boaton  M.  Ins.  Co  136  TT  S  408  10 
Thames  &  M.  his.  Co.  (1897),  App.  S.  Ct.  934,  34  L.  Ed.  398. 
Cas.  609  ("free  from  any  claim  con-  "^  Orient  Ins.  Co.  \.  Adams  123  IT  S. 
sequent  on  lo.ss  of  time,  whether  aris-  67,  8  S.  Ct.  68,  31  L.  Ed.  63.  Policy 
ing  from  a  peril  of  the  sea  or  otherwise).  on  plate  glass  windows.  During  fire 
Similarly  if  master  barratrously  bore  mob  broke  glass.  Mob  violence,  not  fire, 
holes  in  the  ship  causing  her  to  fill  held  proximate  cause,  Afar.sr/en  v.  C%[ 
and  sink,  barratry  and  not  .sea  peril  is  etc.,  Ins.  Co.,  L.  R.  1  C  P  232  12  Jur. 
the  proximate  cause.  Waters  v.  Mer-  N.  S.  76,  35  L.  J  C  P  60  13  L  T  (N 
chants'  Ins.  Co.,  11  Pet.  (U.  S.)  213,  S.)  465;  Ins.  Co.  v.  Wrllard,  164  Fed' 
9  L.  Ed.  69  (but  see  Heyman  v.  Parish,  404  (fire,  not  eajthquake,  the  cause). 


INDEPENDENT   CAUSES  623 

By  virtue  of  the  doctrine  here  presented  the  law  holds  that  the 
hostile  agency  first  in  operation  gives  character  to  the  whole  con- 
nected catastrophe,  unless  otherwise  expressly  defined  by  the  terms  of 
the  policy.  For  example,  if  an  explosion  named  as  an  excepted 
peril,  causes  a  destructive  fire,  as  well  as  breakage  or  displacement, 
explosion  is  taken  as  the  predominant  and  exclusive  cause  of  the 
entire  loss.^  And  by  the  same  logic  if  in  the  natural  course  of  a  con- 
flagration insured  against,  incidental  explosions  occur,  no  matter 
how  violent,  the  effects  of  combustion  and  explosion  alike  if  not 
too  remote  and  improbable  are  attributed  to  fire  as  the  sole  primary 
and  all-embracing  cause. - 

The  same  doctrine  finds  copious  and  striking  illustration  in  many 
court  decisions,  already  adverted  to,  relating  to  the  construction 
of  the  accident  policy;  for  example,  where  the  accidental  injury, 
insured  against,  in  turn  results  in  blood  poisoning,  pneumonia,  or 
some  other  form  of  disease,  disease  being  expressly  designated  in 
the  policy  as  an  excepted  risk.^ 

§  442.  Independent  Causes,  Producing  Distinguishable  Dam- 
ages.— Where  two  perils,  the  one  insured  against,  the  other  excepted, 
are  in  their  nature  really  independent,  for  instance,  shipwreck  and 
capture  by  an  enemy,  and  the  losses  produced  by  both  are  not  so 
commingled  as  to  be  indistinguishable,  it  has  been  held  that  such 
losses  will  be  apportioned  between  the  perils  producing  them. 

During  the  American  civil  war  the  light  on  Cape  Hatteras  having 
been  extinguished  by  the  Confederate  troops  for  military  reasons, 
the  captain  of  a  ship  missed  his  reckoning,  struck  on  a  reef  of  rocks, 
and  the  ship  became  a  wreck.  The  cargo  consisted  of  6,500  bags  of 
coffee,  of  which  150  bags  were  saved  and  1,000  more  would  have  been 

1  Ins.    Co.    V.    Tweed,    7    Wall.    44.  (insurrection  and  not  the  resulting  fire 

Explosion     started     a     conflagration  held  to  be  the  sole  cause), 
which  spread  to  an  intermediate  build-  ^Mitchell  v.  Potomac  his.  Co.,  183 

ing  thence  to  building  containing  cot-  U.  S.  42,52,22  S.  Ct.  22,  46  L.  Ed.  74 

ton  of    the    insured.     Held,  explosion  ("a  loss  occurring  solely  from  an  ex- 

to  be  proximate  cause  (approved,  171  plosion  not  resulting  from  a  preceding 

IT.  S.  450);  Montgomery  v.  Firemen's  fire    is    covered    by    the   exception"); 

Ins.  Co.,  16  B.  Mon.  (Ky.)  427;  Roe  v.  Hall  v.  National  F.  his.  Co.,  115  Tenn. 

Columbus  Ins.   Co.,   17  Mo.   301,  305  513,  92  S.  W.  402;  The  G.  R.  Booth, 

("it  is  a  single  and  continuous  event");  171  U.  S.  450,  19  S.  Ct.  9,  43  L.  Ed. 

Strong  V.  Sun  Mut.  Ins.  Co.,  31  N.  Y.  234;   Contra,   Hustace  v.  PhoenLz  Ins. 

103,  109;  St.  John  v.  American  Mut.  Co.,  175  N.  Y.  292,  67  N.  E.  592  (a 

F.  &  M.  Ins.  Co.,  11  N.  Y.  516,  519  heavy  explosion,  a  mere  incident  to 

(a  "ver^/  usual  concomitant  of  the  ex-  a  preexisting  conflagration,  was   held 

plosion  of  a  steam  boiler  is  that  the  to   be   the   proximate   cause   and   the 

place  is  set  on  fire").    And  see  Insur-  insurer  was  exonerated).    See  that  and 

ance  Co.  v.  Boon,  95  U.  S.  117,  131  many  other  cases,  §  278,  supra. 

3  See  §§  387,  396,  supra. 


624  MEANING    AND    LEGAL    EFFECT    OF    MARINE    POLICY 

saved  if  Federal  salvors  had  not  been  interrupted  by  Confederate 
troops.  This  coffee  was  insured  "free  from  all  consequences  of  hos- 
tilities." On  these  facts  the  English  court  held  that  the  underwriters 
were  liable  for  the  loss  of  the  5,350  bags  left  on  the  ship.  The  case 
was  to  be  dealt  with,  the  court  said,  as  if  there  were  two  policies, 
one  on  the  war  risk  and  the  other  on  the  sea  risk,  and  the  question 
here  was,  which  of  the  two  was  the  proximate  cause  of  each  loss? 
One  hundred  and  fifty  bags  were  actually  recovered.  As  to  the 
1,000  bags  remaining  aboard,  it  was  the  Confederate  forces  which 
directly  prevented  the  rescue,  and  hence  caused  the  loss.  But  the 
extinguishing  of  the  light  was  only  the  remote  cause  of  the  loss  of 
the  remainder,  the  proximate  cause  being  the  striking  on  the  reef, 
which  could  not  be  said  to  follow  as  a  natural  or  ordinary,  still  less 
as  a  necessary,  consequence  of  the  extinguishing  of  the  light. ^ 

§  443.  Proximate    Cause   as   Limiting    Insurers'    Liability. — The 

rule  looking  only  to  the  proximate  cause  of  loss  sometimes,  it  will 
be  observed,  operates  in  favor  of  the  insurers. 

For  example,  when  a  ship  is  damaged  by  sea  peril  the  insurer  is 
liable  for  the  cost  of  repairing  but  not  for  the  shipowner's  loss  be- 
cause the  ship  is  laid  up  and  unable  to  earn  freight  while  being 
repaired.^  Nor,  again,  supposing  that  during  that  period  it  is  nec- 
essary to  retain  the  ship's  crew,  or  any  portion  of  them,  is  he  liable 
for  the  owner's  loss  in  having  to  pay  and  feed  them  while  the  ship 
is  so  unemployed,^  unless,  indeed,  the  crew  actually  worked  on 
the  repairs,  having  been  kept  for  that  purpose  after  they  would 
otherwise  have  been  discharged.^  These  losses  result  not  from 
the  damage,  but  from  the  delay  incidental  to  the  damage,  so  that 
the  damage  suffered  by  the  ship,  it  may  be  argued,  is  only  the  re- 
mote cause  of  them.  So  if  fruit,  meat,  or  any  other  article  of  like 
perishable  nature  putrifies  by  reason  of  delay  springing  out  of  sea 
peril,  the  insurer  of  these  articles  is  not  liable.^     In  like  manner, 

1  lonides  v.  Universal  Marine  Ins.  B.  821  (1899),  1  Q.  B.  579  (cost  of 
Co.,  14  C.  B.  (N.  S.)  259,  10  Jur.  (N.S.)  dealing  with  cargo  after  collision); 
18,  32  L.  J.  C.  P.  170,  8  L.  T.  705.  So  DeVaux  v.  Salvador,  4  Ad.  &  Ell.  420, 
also  the  damages  by  fire  and  collision  1  H.  &  W.  751,  6  N.  &  M.  713,  5  L.  J. 
were  held  apportionable  in  Howard  K.B.  134;  Martin  v.  Salem  M.  Ins.  Co., 
Fire  Ins.  Co.  v.  Norwich,  etc.,  Transp.  2  Mnss.  420. 

Co.,  12  Wall.  194.  20  L.  Ed.  379.    But  *  Hcill  v.   Ocean  Ins.   Co.,  21   Pick, 

see  comment  in  later  case  in  the  line  (Mass.)   472.     Comriare   the  different 

of  restriction  and  reaffirming  principal  rule  applicable  in  the  United  States  in 

rule  as  to  sole  proximate  cause  (171  case  of  genernl  average,  ^221,  svpra. 

U.  S.  456).     Damages  held  apportion-  5  Pinl-  v.  Fleming  (1890),  25  Q.  B. 

able  in  Rice  v.  Homer,  12  Mass.  230.  D.  396  (fruit);  Tai/lor  v.  Dvvhar,  L.  R, 

2  See  I  439.  4  C.  P.  206,  38  L.J.  C.  P.  178  (meat). 

3  Field.  S.S.  Co.  v.  Burr  (1898),  1  Q.  Death  of  slaves  from  failure  of  pro- 


ORIGINAL   DEFECT 


625 


as  already  shown,  the  insurer  of  goods,  in  the  absence  of  specific 
agreement  to  the  contrary,  is  not  liable  for  loss  of  prospective  profits;  * 
in  other  words,  the  anticipated  selling  price  of  the  goods  is  in  no 
sense  the  criterion  for  estimating  the  loss  under  the  policy. ^ 

§  444.  Wear  and  Tear. — No  ship  can  engage  in  navigation  for  any 
length  of  time  without  suffering  a  certain  amount  of  injury  and  de- 
preciation from  the  ordinary  action  of  wind  and  wave,  called  wear  and 
tear.    For  this  the  underwriter  is  never  liable.^ 


§  445.  Original  Defect. — Underwriters  are  not  liable  for  any  loss 
which  is  the  immediate  result  of  an  original  defect  in  any  part  of  the 
hull  or  materials.^ 


visions  because  of  delay  in  stormy 
weather,  Tatham  v.  Hodgson,  6  D.  & 
E.  656.  So  sale  or  consumption  of 
cargo  for  repair  of  ship  or  preserving 
Hves  of  passengers  is  not  within  terms 
of  poHcy,  Z)?/er  V.  Piscataqua,  etc.,  Ins. 
Co.,  53  Me.  118;  Rvckman  v.  Ins.  Co., 
12  N.  Y.  Super.  Ct.  342;  Powell  v. 
Gudgeon,  5  M.  &  S.  431.  See  §  209, 
notes.  Loss  of  voyage  because  of 
blockade  at  port  of  destination  not 
covered,  Hadkinson  v.  Robinson,  3 
B.  &  P.  388;  Nickels  v.  London  &  P. 
Ins.  Co.,  6  Com.  Cas.  15.  Nor  loss  by 
fall  of  market  during  unexpected  de- 
lay in  voyage,  Cator  v.  Great  West. 
Ins.  Co.,  L.  R.  8  C.  P.  552,  2  Asp.  Mar. 
L.  C.  90,  42  L.  J.  C.  P.  266,  29  L.  T. 
136,  21  W.  R.  850.  Nor  loss  by  bot- 
tomry on  cargo  for  benefit  of  ship, 
Greer  v.  Poole,  5  Q.  B.  D.  272.  49  L.  J. 
Q.  B.  463, 42  L.  T.  R.  687, 28  W.  R.  582. 
Nor  statutory  salvage  or  reward  for 
saving  life  from  wreck,  Nourse  v. 
Liverpool,  etc.,  Assoc.  (1896),  2  Q.  B. 
16,  74  L.  T.  R.  543,  65  L.  J.  Q.  B.  (N.  S.) 
507.  Nor  forfeiture  of  freight,  arising 
from  the  exercise  of  a  power  of  mulct 
or  canceling  option  by  the  charterer, 
etc.,  Inman  S.S.  Co.  v.  Bischnff,  5  Asp. 
Mar.  L.  C.  6,  52  L.  J.  Q.  B.  169,  31 
W.  R.  141,  7  ^  pp.  Cas.  670,  47  L.  T. 
581;  Mercantile  S.S.  Co.  v.  Tyser,  5 
Asn.  Mar.  T-.  C.  6,  note,  7  Q.  B.  D.  73, 
29  W.  R.  790.  See  instances  of  remote 
damage  in  Mathews  v.  Howard  Ins. 
Co.,  11  N.  Y.  p.  15. 

1  See  §  439,  svrrra. 

2  See  §§  201,  202,  205.  su-pra. 

3  Soelherq  v.  Western  Assur.  Co.,  119 
Fed.  23,  32,  55  C.  C.  A.  601;  Dupeyre  v. 
Western  Mar.  &  F.  Ins.  Co.,  2  Rob. 
(La.)    457,    38    Am.    Deo.    218;    The 

40 


Xanthn,  12  App.  Cas.  509;  Magnus  v. 
Buttemar,  11  C.  B.  875.  Thus  a  policy 
does  not  cover  the  chemical  action  of 
the  sea  on  the  Atlantic  cable  coiled  in 
a.  ship,  there  being  no  influx  of  sea 
water,  Paterson  v.  Harris,  1  Best.  &  S. 
336,  101  E.  C.  L.  336.  Nor  damage  to 
the  subject  insured  caused  by  climate, 
Martin  v.  Salem  Mar.  Ins.  Co. ,  2  Mass. 
420.  Nor  injuries  to  boilers  or  ma- 
chinery on  ship  board  occasioned  by 
their  ordinary  operation,  unaffected  by 
sea  peril,  Thames  &  M.  Ins.  Co.  v. 
Hamilton,  L.  R.  12  App.  Cas.  484.  56 
L.  J.  Q.  B.  626,  6  Asp.  M.  C.  200,  57  L. 
T.  R.  695.  Nor  the  explosion  of  boiler, 
unless  specifically  mentioned  in  the 
policv,  Miller  v.  Cal.  Ins.  Co.,  76  Cal. 
145,^18  Pac.  155,  9  Am.  St.  R.  184. 
But  as  to  explosion  of  boilers,  see 
Citizens'  his.  Co.  v.  Glasgow,  9  Mo. 
411;  Perrin  v.  Protection  Ins.  Co.,  11 
Ohio  St.  147,  38  Am.  Dec.  728.  Bilging 
of  ship  by  the  rising  tide  during  re- 
pairs was  held  not  covered  by  the 
policy,  Thompson  v.  Whitmore,  3  Taunt. 
227.  But  compare  The  Natchez,  42  Fed. 
16  J. 

4  Fawcus  V.  Sarsfield,  6  E.  &  B.  192. 
For  instance,  where  a  chain  parts  owing 
to  a  defective  link,  the  consequent  loss 
of  the  anchor  and  chain  is  not  re- 
coverable under  the  policy.  Again, 
there  may  be  an  original  flaw  in  the 
welding  of  a  sternpost,  shaft,  or  other 
part  of  the  hull  or  machinery,  which, 
though  at  first  so  slight  as  to  be  im- 
perceptible, gradually  reveals  itself  and 
becomes  enhanced  by  the  working  of 
the  vessel  at  sea,  imtil  it  culminates  in 
a  breakdown  of  the  part  affected.  In 
such  a  case  the  cost  of  making  good 
the  injury  will  not  form  the  subject  of 


626  MEANING    AND    LEGAL    EFFECT    OF    MARINE    POLICY 

Thus  the  court  said  that  the  question  for  the  jury's  determina- 
tion was  as  follows:  Was  the  leak  from  which  the  vessel  foundered 
attributable  to  inju;*}^  or  violence  from  without  or  to  weakness 
from  within?  For  if  it  was  not  attributable  to  perils  of  the  seas — 
that  is,  to  the  violent  action  of  the  elements  from  without,  or  any- 
other  casualty  involved  in  perils  of  the  seas, — the  jury  could  come 
to  no  other  conclusion  than  that  it  was  due  to  an  inherent  in- 
firmity in  the  ship  itself.^ 

§  446.  Inherent  Vice. — A  loss  occasioned  by  an  inherent  defect  or 
vice  in  the  insured  article  is  not  within  the  terms  of  the  policy,^  al- 
though it  may  be  aggravated  by  the  prolongation  of  the  voyage  oc- 
curring because  of  sea  perils.^ 

Loss  by  inherent  vice  includes,  for  example,  natural  and  ordi- 
nary diminution  by  leakage  or  evaporation,  natural  and  ordinary 
disease,  decay,  fermentation  or  other  deterioration  in  the  subject 
insured.^  Thus  if  an  insured  cargo  of  hemp  effervesced  because 
put  on  board  in  a  damp  state  and  generated  fire  which  consumed 
it,  Lord  Ellenborough  said  that  the  underwriters  would  not  be 
liable.^  But  on  the  other  hand,  if  leakage  from  casks  is  occasioned 
by  the  shifting  of  the  casks  in  the  ship's  hold  caused  by  a  gale  of 
wind  the  loss  must  be  attributed  to  a  peril  of  the  seas.^ 

a  claim  under  the  policy,  Thames  &  Nor  loss  of  a  slave  leaping  overboard, 

Mersey  Marine  Ins.  Co.  v.  Hamilton,  Jones  v.  Schmole,  cited  1  T.  R.   130. 

L.  R.  12  App.  Cas.  484,  .56  L.  J.  Q.  B.  Nor  injury  to  ship  directly  or  proxi- 

626,  6  Asp.  M.  C.  200,  57  L.  T.  695,  36  mately  occasioned  by  rats.  Hunter  v. 

W.  R.  337.  Potts,  4  Camp.  203.     Or  by  worms  or 

i  Dudgeo7i    v.    Pembroke,    L.    R.    9  vermin,  i/asarr?  v.  /ns.  Co.,  8  Pet.  557, 

Q.  B.  D.  596;  Swift  v.  Union  Mut.  Mar.  8  L.  Ed.  1043;  Rohl  v.  Parr,  1  Esp.  444. 

Ins.  Co.,  122  Mass.  573.  But  otherwise  if,  as  a  consequence  of 

2  Providence  Wash.  his.  Co.  v.  Adler,  the  action  of  rats,  sea  water  enters  and 
65  Md.  162,  4  Atl.  121,  57  Am.  Rep.  proximately  causes  the  damage,  Gar- 
314;  Botjd  v.  Dubois,  3  Camp.  133.  riques  v.  Core,  1  Binn.  (Pa.)  592;  Ham- 

3  Thus  where  fish  and  m3at  becomes  ilton  v.  Pandorf,  12  App.  Cas.  518. 
putrid,  rice  or  flour  heated,  fruit  rotten,  *  Cory  v.  Bo^'lston  F.  &  M.  Ins.  Co., 
wine  sour,  or  hides  tainted,  not  by  con-  107  Alass.  140,  9  Am.  Ren.  14;  Eldridge 
tact  with  sea  water,  but  by  natural  (1907),  pp.  94,  95.  Willes,'j.,  says: 
decomposition,  Ta?/Zorv.  DMn6ar,L.  R.  "By  the  expression  'vice'  is  meant 
4  C.  P.  206,  38  L.  J.  C.  P.  178,  17  W.  R.  only  that  sort  of  vice  which  by  its 
382;  Koebel V.Saunders,  17 C.B.  (N.S.)  internal  develoDment  tends  to  the 
71;  Baker  v.  Mfrs.  Ins.  Co.,  12  Gray,  destruction  or  the  injury  of  the  animal 
603;  Perry  v.  Cobb,  88  Me.  435,  34  Atl.  or  thing  to  be  carried,  and  which  is 
278,  49  L.  R.  A.  389  ("the  policy  does  likely  to  lead  to  such  a  res^ult,"  Blower 
not  secure  against  a  protracted  voy-  v.  Gt.  W.  R.  Co.,  L.  R.  7  C.  P.  662. 
age.  .  .  .  Insurance  is  not  on  the  voy-  5  Bo^'d  v.  Dvbois,  3  Camn.  13. 

age  but  for  the  voyage.")     Death  of  «  Crofts  v.  Marshall,  7  C.  &  P.  597. 

slaves  insured  caused  by  lack  of  provi-  So   also    in    case   of   injury   to   cattle 

sions  owing  to  prolongation  of  voyage  caused  by  rolling  of  the  vessel,  La^o- 

due    to    sea    perils    is    not    covered,  rence  v.   Aberdein,  5  B.   &  Aid    107 

Tathnm  v.    Hodgson,  6  D.   ct  E.   656.  T.eakage    by    stranding    may    be    ex- 


INHERENT   VICE  627 

Accordingly,  it  will  be  clearly  seen  by  a  perusal  of  this  and  the 
preceding  sections  of  this  chapter  that,  to  fasten  liability  upon  a 
marine  underwriter,  it  is  not  enough  merely  to  show  a  loss  to  the 
insured  occasioned  by  a  misfortune  or  casualty  happening  on  the 
sea,  or  aboard  a  ship.  The  insured  must  go  further  than  this,  and 
prove  that  the  loss  to  his  insured  interest  was  caused  by  a  peril  of 
the  sea,  or  by  some  agency  or  force  for  the  action  of  which,  under 
the  decisions  of  the  courts,  the  underwriter  is  held  responsible. 
And  some  of  these  decisions  are  technical. 

.  In  a  famous  case  tried  in  England,  the  steamer  Inchmaree  with 
her  machinery,  including  a  donkey-engine,  was  insured  by  the  de- 
fendant. For  purposes  of  navigation  the  donkey-engine  was  being 
used  in  pumping  water  into  the  main  boilers,  when,  owing  to  a 
valve  having  been  inadvertently  closed,  water  was  forced  into  and 
split  open  the  air-chamber  of  the  donkey-pump,  damaging  it  to  the 
extent  of  about  £72,  10s.  The  closing  of  the  valve  was  not  due  to 
ordinary  wear  and  tear,  nor  had  the  action  of  the  sea,  waves,  or 
winds  anything  to  do  with  it.  The  House  of  Lords,  reversing  the 
court  below,  held  that  whether  the  injury  occurred  through  negli- 
gence, or  accidentally  without  negligence,  the  loss  was  not  covered 
by  the  policy,  either  under  the  words  "perils  of  the  seas,"  or  under 
the  general  words  "all  other  perils,  losses,  and  misfortunes  that 
have  or  shall  come  to  the  hurt,  detriment  or  damage  of  the  subject- 
matter  of  insurance."  ^ 

According  to  the  doctrine  of  this  and  other  cases,  if  the  crew, 
during  an  adventure  insured,  intentionally  and  maliciously  smash 
a  donkey-pump  in  the  ship,  their  act  is  barratrous  and  the  loss  is 
covered  by  the  ordinary  marine  policy,-  but  if  in  connection  with 
the  navigation  of  the  ship  they  inadvertently  cause  the  same  dam- 
age, the  loss  is  not  covered.  Such  a  narrow  interpretation  of  the 
general  words  "all  other  perils,  losses,"  etc.,  though  in  accord  with 
other  decisions  relating  to  marine  insurance,  seems  somewhat  in 
contrast  with  the  inclusive  rule  of  construction  usually  applied  to 
the  fire  policy,^  and  materially  diminishes  the  commercial  value 
of  the  instrument  containing  them.     It  is  not  improbable  that  the 

pressly  covered,  De  Farconnet  v.  West-  pendix,  ch.  II.     As  to  construction  of 

em  Ins.  Co.,  110  Fed.  405.  Inchmaree  clause  see  Oceanic.  S.  Co.  v. 

1  Thames  &  Mersey  Mar.  Ins.  Co.  v.  Faber,   11   Com.   Cas.    179    (latent  de- 

Hamilton,  12  App.  Cas.  484  (reviewing  feet,  breakage  of  shafts);  Cleveland  & 

manv  cases;    itself  cited  in  171  U.  S.  B.  Transit  Co.  v.  Ins.  Co.  of  N.  A.,  115 

461 ,202  V.  S.  397.)    In  consequence  of  Fed.  431. 
this    decision    the   Inchmaree   or   ma-  -  See  §  434,  supra. 

chinery  clause  was  devised,   see  Ap-  3  gee  §  90,  supra. 


628  MEANING    AND    LEGAL    EFFECT    OF    MARINE    POLICY 

original  framers  of  the  marine  policy  intended  that  it  should  carry 
with  it  a  broader  scope  than  has  been  given  to  it  by  the  established 
views  of  the  courts  of  England  and  of  this  country.  The  ancient 
Florentine  policy  in  the  perils  clause,  after  the  words  "robbery  by 
friend  or  foe,"  contains  the  sweeping  expression  "and  every  other 
chance,  peril,  misfortune,  disaster,  hindrance,  misadventure,  though 
such  as  could  not  be  imagined  or  supposed  to  have  occurred,  or  be 
likely  to  occur,"  etc.  So  far  as  the  intention  of  the  insuring  public 
is  concerned,  when  they  pay  their  premiums  for  marine  insurance, 
their  aim  and  purpose  are,  in  general,  to  procure  full  protection  tp 
the  insured  interest  during  the  specified  adventure.  They  do  not 
have  in  mind  philosophical  distinctions  relating  to  causes  and  effects 
b}'  means  of  which  certain  classes  of  accidental  injuries  occurring 
in  connection  with  the  adventure  are  to  be  excluded  from  the  opera- 
tion of  the  usual  policy. 

With  the  Inchmaree  case  may  be  compared  another  English  case 
in  which  the  policy  words  "all  risks  by  land  and  by  water,"  though 
used  in  conjunction  with  an  enumeration  of  certain  risks  by  many 
special  clauses,  were  held  not  to  be  limited  in  meaning  by  associa- 
tion with  the  special  clauses,  but  to  signify  "all  risks  whatsoever," 
and  "to  cover  all  losses  by  any  accidental  cause  of  any  kind."  ^ 

§  447.  Application  of  Principles  to  Particular  Average. — The  prac- 
tical application  of  the  foregoing  principles  to  the  adjustment  of 
particular  average,  that  is  of  partial  loss,  under  the  usual  policy  of 
marine  insurance,  is  a  matter  of  delicacy  and  gives  employment  to 
professional  adjusters. ^ 

§  448.  The  Sue  and  Labor  Clause. — The  sue  and  labor  clause,^ 

^  Schloss  Bros.  v.  Stevens  (1906),  11  safeguard,   and   recovery  of  the  said 

Com.    Cas.    270;    and    see    Jacob    v.  vessel    [or    goods    and  "merchandises, 

Gaviller  (1902),  7  Com.  Cas.  116.  etc.]    or    any    part    thereof,    without 

2  MacArthur,  Mar.  Ins.  (2ded.),2r2-  prejudice  to  this  insurance;  nor  shall 
273;  Arnould,  Mar.  Ins.  (7th  ed.),  the  acts  of  the  insured  or  insurers  in 
§§  1008-42.  To  distinguish  what  is  saving,  recovering,  and  preserving  the 
wear  and  tear  or  ordinary  deterioration  property  insured,  in  case  of  disaster, 
from  sea  damage  in  particular  cases  be  considered  a  waiver  or  an  accept- 
is  often  a  complicated  matter,  Phillips  ance  of  an  abandonment;  to  the  charges 
V.  Xairne.  4  C.  B.  343.  11  Jur.  45.5,  16  whereof  the  said  insurance  company 
L.  J.  C.  P.  194;  and  must,  to  a  great  will  contribute  according  to  the  rate 
extent,  be  left  to  the  trained  judgment  and  Quantity  of  the  sum  herein  in- 
of  experts  in  such  matters.  sured."     Although   the  sue  and  labor 

3  "And,  in  case  of  any  loss  or  mis-  clause  has  been  part  of  the  conven- 
fortune,  it  shall  be  lawful  and  neces-  tional  English  and  American  marine 
sary  to  and  for  the  assured,  his  factors,  policy  from  time  immemorial,  Phill., 
servants,  and  assigns,  to  sue,  labor,  and  Ins.,  §43,  Munson  v.  Standard  Mar. 
travel  for,  in,  and  about  the  defense,  Ins.   Co.,   156   Fed.   44,  the  decisions 


THE   SUE   AND    LABOR   CLAUSE 


629 


though  part  of  the  poHcy,  is  to  be  treated  as  wholly  distinct  from  the 
engagement  to  indemnify  for  losses  caused  by  the  perils  insured 
against,^  and,  therefore,  in  exceptional  cases  this  collateral  agreement 
may  impose  upon  the  underwriter  an  obligation  to  make  payment  to 
the  insured  even  in  excess  of  the  entire  amount  for  which  the  policy 
is  underwritten. 2  For  example,  in  case  of  expenses  paid  by  the 
master  in  an  unsuccessful  attempt  to  recover  captured  property, 
in  addition  to  a  total  loss  of  the  property  by  the  capture. 

For  the  same  reason  liability  under  the  sue  and  labor  clause  is  not  a 
liability  for  particular  average,  and  is  not  subject  to  the  percentage 

under  it  in  this  country  have  not  been 
very  numerous,  due  in  a  measure,  per- 
haps, to  the  presence  in  the  usual 
American  poUcy  of  the  warranty  "free 
from  any  expense  in  consequence  of 
capture,  seizure,  detention,  or  block- 
ade."   See  §  462,  infra. 

1  Lohre  v.  Aitchison,  2  Q.  B.  D.  509. 
The  English  codification  provides  as 
follows:  "(1)  Where  the  policy  con- 
tains a  suing  and  labouring  clause,  the 
engagement  thereby  entered  into  is 
deemed  to  be  supplementary  to  the 
contract  of  insurance,  and  the  assured 
may  recover  from  the  insurer  any  ex- 
penses properly  incurred  pursuant  to 
the  clause,  notwithstanding  that  the 
insurer  may  have  paid  for  a  total  loss, 
or  that  the  subject-matter  may  have 
been  warranted  free  from  particular 
average,  either  wholly  or  under  a  cer- 
tain percentage.  (2)  General  average 
losses  and  contributions  and  salvage 
charges,  as  defined  by  this  Act,  are  not 
recoverable  under  the  suing  and  labour- 
ing clause.  (3)  Expenses  incurred  for 
the  purpose  of  averting  or  diminishing 
any  loss  not  covered  by  the  policy  are 
not  recoverable  under  the  suing  and 
labouring  clause.  (4)  It  is  the  duty  of 
the  assured  and  his  agents,  in  all  cases, 
to  take  such  measures  as  may  be  rea- 
sonable for  the  purpose  of  averting  or 
minimizing  a  loss,"  Eng.  Mar.  Ins.  Act 
(1906),  §  78.  The  last  subdivision  is 
supposed  to  be  based  upon  Benson  v. 
Chapman  (1849),  2  H.  L.  C.  496; 
Notara  v.  Henderson  (1872),  L.  R, 
7  Q.  B.  225;  see  Chr.lmers  &  Owen,  Ins. 
(1907),  118.  But  it  hns  been  said,  "If 
this  subsection  means  that  the  right  to 
recover  is  to  be  conditional  on  the  per- 
formance of  this  duty,  it  seems  to  be 
new  law,  imposing  a  most  serious  obli- 
gation on  the  assured,  and  inconsistent 
with  Trinder  &  Co.  v.  Thames  and 
Mersey  Mar,  Ins.  Co.  (1898),  2  Q,  B. 


114;  67  L.  J.  Q.  B.  666;  and  with 
§  55  (2)  (a),  which  gives  effect  to  the 
decision  in  that  case,"  De  Hart  & 
Simey,  Ins.  (1907),  87. 

2  Aitchison  V.  Lohre,  2  Q.  B.  D.  502, 
3  Q.  B.  D.  553,  566,  4  App.  Cas.  755; 
Gilchrist  v.  Chicago  Ins.  Co.,  104  Fed. 
566,  44  C.  C.  A.  43.  Temporary^  re- 
pairs to  vessel  safe  in  port  to  make  her 
seaworthy  are  not  covered  by  the  sue 
and  labor  clause,  Alexander  v.  Sun 
Mvt.  Ins.  Co.,  51  N.  Y.  253,  262. 
In  the  last  case,  Lott,  Ch.  J.,  says 
at  p.  257:  "That  provision  has  ref- 
erence to  charges  not  covered  by  the 
insurance  and  does  not  embrace  losses 
caused  by  damage  to  the  property  in- 
sured. Its  object  was  to  secure  dili- 
gence in  its  preservation  and  protec- 
tion, and  thereby  prevent  a  loss  or 
reduce  its  amount  and  to  provide  com- 
pensation for  the  labor  done  and  e.x- 
penses  incurred  in  accomplishing  that 
end."  And  see  Providence  &  S.  S.S. 
Co.  V.  Phoenix  Ins.  Co.,  89  N.  Y.  559; 
Francis  v.  Boullon,  73  L.  T.  R.  578,  65 
L.  J.  Q.  B.  (N.  S.)  153;  Meyer  v.  Ralli,  1 
C.  P.  D.  358.  Such  expenses,  however, 
must  be  reasonable,  Lee  v.  Southern 
Ins.  Co.,  L.  R.  5  C.  P.  397.  The  United 
States  Supreme  Court  uses  these 
words:  "The  public  interest  requires 
both  the  assured  and  assurer  to  labor 
for  the  preservation  of  the  property, 
and  to  that  end  this  provision  is  made 
so  that  it  may  be  done  without  preju- 
dice," Washburn  &  M.  Mfg.  Co.  v. 
Reliance  Mar.  Ins.  Co.,  179  U.  S.  1,  18, 
'21  S.  Ct.  1,  45  L.  Ed.  49.  Inde- 
pendent of  this  clause  it  has  been  held 
that  where  a  partial  loss  of  a  vessel  has 
been  repaired  and  a  subsequent  total 
loss  happens  the  underwriter  must  pay 
both,  though  exceeding  amount  of 
policy,  Matheson  v.  Equitable  Mar. 
Ins.  Co.,  118  Mass.  209.  See  §208. 
■■^upra. 


630  MEANING    AND    LEGAL    EFFECT    OF    MARINE    POLICY 

restrictions  contained  in  tlie  memorandum  clause/  but  is  to  be  met 
in  due  proportion  Avhatever  the  amount.^  Ihis  provision  of  tiie 
policy  has  reference  to  expenditures  not  covered  by  the  general 
perils  clause;  ^  and  in  England  general  average  losses  including 
contributions  are  not  recoverable  under  the  sue  and  labor  clause;  "* 
nor  in  England  does  the  clause  include  the  reward  payable  by 
maritime  law  to  voluntary  salvors;  but  if  compensation  is  payable 
to  salvors  under  contract  with  the  insured  the  rule  is  otherwise.-^ 
In  the  latter  event  the  expense  becomes  recoverable  either  under 
the  sue  and  labor  clause,  or  as  general  average  according  to  cir- 
cumstances.^ 

Two  reasons  are  offered  by  the  English  court  to  explain  why 
the  words  of  the  sue  and  labor  clause  should  not  be  held  to  include 
the  extraordinary  recompense  paid  to  voluntary  salvors.  In  the 
first  place  voluntary  salvors  cannot  be  regarded  as  the  agents  of  the 
insured/  since  they  intervene  of  their  own  accord  to  save  ship  and 
cargo  from  impending  disaster  and  act  independently  of  contract. 
In  the  second  place  their  compensation  is  not  based  upon  a  quantum 
meruit,  but  in  case  of  success  they  receive  a  large  reward  and  in 
case  of  failure  they  get  nothing.* 

In  the  United  States  the  view  seems  to  prevail  that  where  an 
expense  has  been  properly  incurred  in  order  to  avert  a  loss  insured 
against  and  the  measure  for  relief  has  been  rendered  by  direction  of 
the  master  of  the  ship  or  other  agent  of  the  insured,  the  expenditure 
is  recoverable  under  the  sue  and  labor  clause  regardless  of  whether 
it  belongs  to  general  average  or  not.^    But  in  case  of  the  salvage  or 

1  See  §  456,  infra.  ject  of  the  suing  and  laboring  clause, 

2  Kidston  v.  Empire  Marine  Ins.  Co.,  and  that  there  is  no  authority  for  say- 
L.  R.  1  C.  P.  535.     In  estimating  the       ing  that  they  do." 

proportionate    Habihty    for    such    ex-  '"'  Peters  v.  Warren  Ins.  Co.,  14  Pet. 

penses    under    a    valued    policy,    the  (U.  S.)  99;  International  Nav.  Co.  v. 

policy  valuation  and   not  the  actual  Atlantic  Mid.  Ins.  Co.,  100  Fed.  304; 

value    controls,    though    the    sum    so  Eng.  Mar.   Ins.   Act    (1906),   §65;  De 

computed  equal  the  entire  amount  in-  Hart  &  Simey.  Ins.  (1907),  76. 

sured.  Standard  Mar.  Ins.  Co.  v.  Nome,  7  The  English  law  does  not  recognize 

etc.,  Co.,  133  Fed.  636.  the  doctrine  of  "agents  of  necessity," 

3  Alexander  v.  Sun  Mnt.  Ins.  Co.,  51  Chalmers  &  Owen,  Ins.  (1907),  96 

N.  Y.  253.  8  Aitchison  v.  Lohn,  4  App.  Cas.  755, 

4  Mar.  Ins.  Act  (1906),  §78  (2);^  49  L.  J.  Q.  B.  123,  criticized  by  Mr. 
Montgomenj  v.  Indemnity  Mvt.  Mar.  Maclachlan  in  Amould  (6th  ed.),  793. 
Ins.  Co.  (1901),  1  Q.  B.  147;  Aitchison  The  reward  to  volunteer  salvors  is 
V.  Lohre,  4  App.  Cas.  755,  49  L.  J.  Q.  B.  often  very  large,  The  Glengvle  (1898), 
123.  App.  Cas.  519;  r;te/??ca,  ]2Moo.  P.  C. 

6  Aitchison  v.  Lohre,  4  App.  Cas.  755,  189.     For  thorough  discussion  of  rules 

in  which  Lord  Blackburn,  with  the  ap-  relating  to  salvage  contracts  see  The 

proval  of  other  judges,  says,  "I  think  Elfrida,  \T2  U.  S.  186,  19  S.  Ct.  146, 

that  general  average  and  salvage  do  not  43  L.  Ed.  413. 

come  within  either  the  words  or  the  ob-  » International  Nav.  Co.  v.  Atlantic 


THE  SUE  .\ND  LABOR  CLAUSE  631 

remuneration  payable  to  volunteer  salvors  by  maritime  law  inde- 
pendent of  contract,  the  English  rule  has  been  applied  by  a  federal 
court  as  the  law  of  this  country. 

The  bark  Samuel  Welsh,  owned  and  insured  by  Buzby,  was  driven 
ashore  on  the  rocks  on  the  coast  of  Nova  Scotia.  The  master  and 
crew  left  the  vessel  to  save  their  lives.  Wreckers  got  possession  of 
her  afloat,  brought  her  into  the  port  of  Yarmouth  and  libeled  both 
vessel  and  cargo  for  their  salvage  reward.  To  release  the  lien  of  the 
salvors  Buzby  sent  an  agent  to  Yarmouth  at  considerable  expense, 
and  contended  in  his  suit  on  his  policy  that  the  defendant,  one  of 
the  insurers,  was  liable  for  its  share  of  the  salvage  charges  and 
expenses  of  the  agent  connected  therewith,  by  virtue  of  the  usual 
sue  and  labor  engagement  of  the  underwriters.  A  federal  district 
judge,  however,  decided  that  these  charges  and  expenses  were  not 
recoverable  under  that  clause,  and  hence  under  the  w^arranty  of 
that  particular  policy  the}^  w^ere  not  recoverable  at  all.^ 

The  object  of  the  clause  is  to  furnish  compensatory  encourage- 
ment to  the  insured,  to  put  forth  diligent  and  prudent  effort  towards 
a  prevention  or  diminution  of  the  underwriters'  loss,  without  preju- 
dice to  the  rights  of  either  party  under  the  policy  of  insurance.^ 

Two  conditions  are  requisite  to  constitute  a  valid  claim  under  the 
sue  and  labor  clause:  the  apprehended  loss  must  be  something  for 
which  the  underwriters  would  have  been  liable,  and  the  measure  for 
safety  which  gives  rise  to  the  expense  claimed  must  be  the  act  of 
the  assured  himself  or  of  his  agent  or  servant.^  If,  for  example,  goods 
are  insured  "free  of  capture,"  it  is  clear  that  an  expense  incurred  to 
prevent  a  capture  could  not  be  claimed  under  this  clause;  nor,  if 
"against  total  loss  only,""*  an  expense  incurred  merely  to  diminish 
damage  or  avert  a  loss  other  than  total.^ 

Mut.    Ins.    Co.,    100    Fed.    313,    322  '^  Munroe  v.  Ins.  Co.,  52  Fed.  777, 

(Brown,  J.);  Alexander  v.  Sun  Mut.  3  C.  C.  A.  280  (encouragement);  Soel- 

Ins.    Co.,    51    N.    Y.    253;    Jumel    v.  berg  v.  Western  Assur.  Co.,  119  Fed.  23 

Marine  Ins.  Co.,  7  John.  (N.  Y.)  412;  (without  prejudice). 

Phill.,  Ins.,  §  1742.    If  no  other  agent  3  Aitchison  v.  Lohre,  4  App.  Cas.  755; 

is  appointed  the  master  of  the  ship  is  Uzielli   v.    Boston   Mar.   Ins.    Co.,   15 

the  agent  to  represent  all  interests  un-  Q.  B.  D.  11. 

der  the  sue  and  labor  clause,  Hume  v.  <  Or  "free  from  average  unless  gen- 

Frenz,  1.50  Fed.  502.     An  original  in-  eral,"  etc. 

surer  is  not  the  agent  or  factor  of  his  ^  Kidston  v.  Empire  Ins.   Co.,  L.  R. 

reinsurer  within  the  meaning  of  this  1  C.  P.  543,  Exch.  L.  R.  2  C.  P.  357; 

clause,  Uzielli  v.  Bo.^ton  Mar   Ins.  Co.  Booth  v.  Gair,  15  C.  B.  (N.  S.)  291,  33 

(1884),  15  Q.  B.  D.  1 1 ,  54  L.  J.  Q.  B.  142.  L.  J.  C.  P.  99.    Where  salvors  pick  up  a 

1  Buzby  V.  Phcenuv  Ins.  Co.,  31  Fed.  ship  derelict  at  sea,  or  as  volunteers, 

422  (on  the  authority  of  Aitchison  v.  and  bring  the  property  to  port  in  safety, 

Lohre,  4  App.  Cas.  755).     And  see  In-  without  being  in  any  sense  hired  by  an 

ternational  Nav.  Co.  v.  Atlantic  Mut.  agent  of  the  assured,  the  payment  for 

Ins.  Co.,  100  Fed.  313.  salvage  is  not  a  claim  under  the  sue  and 


632 


MEANING    AND    LEGAL   EFFECT   OF   MARINE    POLICY 


The  advantage  to  the  insured  in  being  able  to  assign  expenditures 
to  the  sue  and  labor  clause  lies  in  the  circumstance,  already  men- 
tioned, that  it  contains  a  promise  of  payment  by  the  underwriters 
which  is  supplementary  to  their  contract  of  insurance.  Therefore 
recovery  under  this  special  promise  is  not  limited  to  the  face  amount 
of  the  policy,  and  the  supplementary  engagement  is  still  operative 
although  the  insurer  may  have  paid  for  a  total  loss,^  and  although 
the  subject-matter  may  have  been  warranted  free  from  particular 
average,  either  wholly  or  under  a  certain  percentage.^  In  the 
majority  of  cases,  however,  it  is  wholly  immaterial  to  the  parties 
whether  expenses  incurred  for  the  purpose  of  averting  or  diminishing 
a  loss  insured  against  are  or  are  not  assignable  to  the  sue  and  labor 
clause;  ^  but  there  cannot  be  more  than  one  recovery  on  the  same 
item  of  loss  by  its  repetition  under  different  heads  or  counts.'* 


labor  clause,  Aitchison  v.  Lohre,  4  App. 
Cas.  755.  An  award  to  salvors  for  sav- 
ing Egyptian  obelisk  on  way  to  London 
not  covered,  Dixon  v.  Whitworth,  4 
Asp.  Mar.  L.  C.  327.  The  cost  of  re- 
pairs to  ship  in  safety  is  not  a  claim 
under  that  clause,  Alexander  v.  Sun 
Mut.  Ins.  Co.,  51  N.  Y.  253;  while  the 
cost  of  becoming  entitled  to  charter 
freight  by  a  justifiable  transshipment 
into  another's  vessel  is;  because  in  the 
latter  case  there  is  a  worse  evil  averted, 
while  in  the  former  case  there  is  not, 
Kidston  v.  Empire  Mar.  Ins.  Co.,  L.  R. 
1  C.  P.  535,  Exch.  Ch.,  2  C.  P.  357. 
The  expense  of  sending  out  a  tug  to 
look  up  insured  scows,  erroneously 
supposed  to  be  adrift,  is  not  recover- 
able under  the  sue  and  labor  clause, 
Barney  Dumping  Boat  Co.  v.  Niagara 
F.  Ins.  Co.,  67  Fed.  341,  14  C.  C.  A. 
408,  35  U.  S.  App.  100.  This  clause  did 
not  justify  insured  in  moving  a  vessel 
warranted  to  be  safely  moored  in  the 
harbor,  Riian  v.  Prov.  Wash.  Ins.  Co., 
79  App.  Div.  316,  79  N.  Y.  Supp.  460. 
Nor  has  the  sue  and  labor  clause  any- 
thing to  do  with  the  collision  clause  so 
as  to  include  costs  of  defending  a  colli- 
sion suit,  Xeiios  V.  Fox,  L.  R  3  C  P 
630,  4  C.  P.  665.  And  see  Fernald  v. 
Ins.  Co.,  27  App.  Div.  (N.  Y.)  137. 
Compare  §  428.  Where  the  carrier's 
insurance  was  not  on  a  cargo  of  mules 
but  only  on  his  liability  as  carrier  it 
was  held  that  his  expenses  for  saving 
some  of  them  after  a  stranding  of  the 
ship  were  not  recoverable,  since  the  sue 
and  labor  clause  has  no  application  to 
such  an  insurance,  though  not  erased 


in  the  policv,  CUnard  S.  Co.  v.  Marten 
(1903),  2  K.  B.  511.  Policy  was  for 
total  loss  only.  The  loss  turned  out 
not  to  be  total.  Held,  that  the  under- 
writers, thus  relieved  from  liability, 
could  not  get  back  salvage  expenses 
voluntarily  paid  by  them,  though  re- 
sulting in  benefit  to  the  assured, 
Crouan  v.  Stanier  (1904),  1  K.  B.  87. 
The  costs  of  an  unsuccessful  suit 
against  a  lighterman  for  negligence 
were  apportioned  between  the  insurer 
and  assured  where  the  suit  was  brought 
by  consent  and  for  joint  benefit  of  both, 
Brown  v.  Binning  (1906),  11  Com.  Cas. 
190. 

1  Alexander  v.  Sun  Mut.  Ins.  Co.,  51 
N.  Y.  253  (many  cases  cited  by  court 
and  counsel).  And  see  Buzby  v. 
Phoenix  Ins.  Co.,  31  Fed.  422. 

2  The  Indianapolis  Ins.  Co.  v.  Mason, 
11  Ind.  171 ;  Shidtz  v.  Ohio  Ins.  Co.,  1  B. 
Mon.  (Ky.)  336.  And  see  Biays  v.  Chesa- 
peake Ins.  Co.,  7  Cranch  (U.  S.),  415. 

3Arn.,  Mar.  Ins.  §864.  Such  ex- 
penses are  recoverable  either  on  the 
theory  of  the  express  agreements  con- 
tained in  the  policy  or  on  the  theory 
of  an  implied  obligation  of  the  under- 
writers analogous  to  the  case  of  general 
average.  Am.'  §  863;  International  Nav. 
Co.  v.  Atlantic  Mut.  Ins.  Co.,  100  Fed. 
304;  Seicall  v.  United  States  Ins.  Co., 
11  Pick.  (Mass.)  90.  In  the  case  of 
certain  expenditures  the  insured  may 
have  the  option  of  pleatling  on  either 
the  general  perils  clause  or  the  sue  and 
labor  clause,  Arn.  §  869;  Levie  v.  Jari- 
son  (1810),  12  East,  648. 

*  Alexander  v.  Sun  Mut.  Ins.  Co.,  51 


THE    SUE    AND    LABOR    CLAUSE 


633 


Familiar  instances  of  the  operation  of  the  sue  and  labor  clause 
are  found  in  the  case  of  expenditures  for  the  rescue  and  removal  of 
a  wrecked  or  submerged  vessel  from  the  strand  or  other  position 
of  danger  to  a  place  of  safety;^  expenses  for  unloading,  dr}ing, 
warehousing,  packing  and  forwarding  required  for  the  preservation 
of  the  cargo  from  injury  or  destruction;  -  charges  for  expense  of 
litigation  or  otherwise  incurred,  usually  in  a  foreign  land,  in  the 
endeavor  to  recover  back  property  seized  or  captured/''  As  to  the 
form  that  the  expenditure  may  take,  it  is  said  that  there  is  no  re- 
striction so  long  as  it  is  directed  to  saving  interests  in  peril  at  the 
time  the  expense  is  incurred.'* 

Thus  it  will  be  observed  that  this  clause  is  strictly  confined  to 
the  cost  of  efforts  made  to  save  the  thing  insured  from  damage 
by  the  perils  insured  against  in  the  policy.^ 


N.  Y.  253  ^''the  two  provisions,  as  I 
have  stated,  relate  to  different  sub- 
jects, and  the  right  to  compensation  and 
payment  under  one  of  them  necessarily 
excludes  a  right  to  a  claim  or  demand 
under  the  other,"  by  Lott,  Ch.  C). 

1  Soclberg  v.  Western  Assur.  Co.,  119 
Fed.  2.3;  EUicott  v.  Alliance  Ins.  Co.,  14 
Gray  (Mass.),  318;  Perry  v.  Ohio  7ns. 
Co.,  5  Ohio,  305. 

2  Con/  V.  Bo'iston  Ins.  Co.,  107 
Mass.  140,  9  Am.  Rep.  14. 

^Jvmel  V.  Mar.  Ins.  Co.,  7  Johns. 
(N.  Y.)  412;  Watson  v.  Mar.  Ins.  Co.,  7 
Johns.  (N.  Y.)  57;  McBride  v.  Mar. 
Ins.  Co.,  7  Johns.  (N.  Y.)  431 ;  Lawrence 
V.  Van  Home,  1  Caines  (N.  Y.),  276; 
Bordcs  V.  Hallett,  1  Caines  (N.  Y.),  444. 

i  Eldridge  (1907),  129.  But  the  ex- 
pense to  fall  within  this  particular 
clause  must  have  been  incurred  to  pre- 
vent impending  loss  when  the  subject 
insured  is  actually  in  peril.  Great  Indian 
Peninsular  R.  Co.  v.  Saunders,  31 
L.  J.  Q.  B.  206  (iron  rails  not  in  peril). 
And  see  Frichette  v.  State,  etc.,  Ins.  Co., 
3  Bosw.  (N.  Y.)  190  (ship  being 
launched). 

5  Eldridge  (1907),  127.  If  the  goods 
are  in  no  d.anger  at  the  time,  the  ex- 
pense of  forwarding  them  by  other 
ships,  the  original  ship  being  a  con- 
structive total  loss,  is  not  recoverable 
under  the  sue  and  labor  clause.  Great 
Indian  Pen.  Ry.  v.  Saunders.  2  B.  &  S. 
266,  31  L.  J.  Q.  B.  206;  Booth  v.  Gair, 
33  L.  J.  C.  P.  99.  But  particular 
charges  for  drying,  warehousing,  and 
packing,  incurred  to  save  the  insured 
goods     are     recoverable     under     this 


clause,  Francis  v.  Boidton,  73  L.  T.  R. 
578.  The  insured,  however,  is  only 
bound  to  pay  salvage  expenses  reason- 
ably incurred,  see  Anderson  v.  Ocean 
S.  S.  Co.,  10  App.  Cas.  107.  For  such 
reasonable  charges  the  insured  is  en- 
titled to  be  reimbursed  in  proper  pro- 
portion by  his  underwriters  though 
exceeding  tlie  whole  amount  under- 
written, Watson  V.  Mar.  Ins.  Co.,  7 
Johns.  (N.  Y.)  57;  Lohre  v.  Aitchison 
(1878),  3  Q.  B.  D.  .558;  Dixon  v.  Whit- 
worth,  L.  R.  4  C.  P.  D.  371,  reversed 
4  Asp.  M.  L.  C.  327.  An  English 
policy  insured  live  cattle  against  all 
risks,  including  mortality  from  any 
cause  whatsoever.  While  the  vessel  in 
which  they  were  shipped  was  detained 
in  a  port  of  refuge  for  necessary  repairs 
due  to  perils  of  the  sea,  extra  cost  for 
fodder  supplied  to  the  cattle  was  in- 
curred. For  this  expense,  incurred  to 
avert  danger  of  loss  of  the  cattle,  the 
underwriters  were  held  liable  under  the 
sue  and  laboring  clause.  The  Pomera- 
nian (1895),  Prob.  349.  The  N^w 
York  court  says,  but  without  express 
reference  to  the  sue  and  labor  clause: 
"That  all  losses,  charges  and  expenses 
necessarily,  prudently  or  reasonably 
incurred  in  respect  to  the  property 
saved,  from  the  time  of  the  shipwreck 
to  the  time  when  the  property  could 
be  directly  transported  to  its  ultimate 
destination,  are  proper  charges  upon 
the  property  so  transported,  and  ought 
to  be  borne  by  the  assurers.  That  the 
sums  paid  for  transporting  the  master 
and  crew,  for  their  support,  board,  and 
lodging  and  passages  during  the  same 


634  MEANING    AND    LEGAL    EFFECT   OF   MARINE    POLICY 

A  case  in  the  federal  court  furnishes  a  good  illustration  of  the 
reasonable  application  of  the  sue  and  labor  clause.  There  the  in- 
sured, a  storage  company,  was  engaged  in  the  business  of  selling,  in 
Alaska,  certain  refrigerated  supplies.  Its  policy  covered  a  cargo  of 
refrigerated  meats,  canned  goods,  etc.,  on  a  voyage  from  Tacoma 
Wash.,  to  Dawson,  Yukon  Territory.  Owing  to  the  very  low  watei 
there  was  a  stranding  of  the  refrigerating  vessel  on  the  Yukon  river 
causing  a  delay  of  several  days.  Part  of  the  cargo  was  thereupon 
transferred  to  a  lighter  steamer  without  refrigerating  plant.  Both 
vessels  reached  Circle  City  in  October.  The  river  above  had  become 
partially  closed  by  ice  and  navigation  was  dangerous.  The  re- 
frigerating vessel  was  then  laid  up  and  the  lighter  steamer  proceeded 
until  frozen  in  seventy  miles  from  Dawson.  Both  vessels  were  in 
danger  of  being  crushed  or  disabled  by  the  ice  and  their  cargoes 
lost  by  the  spring  freshets.  To  avert  this  peril,  both  cargoes  were 
transported  to  Dawson  by  land  during  the  winter.  The  court  held 
that  the  expense  of  this  transportation  was  within  the  sue  and 
labor  clause  of  the  policy.^ 

The  plaintiff  Munson  had  a  liability  policy  attaching  on  his  steam- 
tug  Carbonero  and  indemnifying  against  liability  to  her  tows  or 
other  vessels  by  collision  or  stranding.  A  barge  in  her  tow  was  lost 
and  to  recover  damages  the  plaintiff's  tug  was  libeled,  but  the  libel 
was  ultimately  dismissed.  In  obtaining  this  successful  result  of  the 
litigation  against  him  Munson  of  course  was  put  to  the  expense  of 
counsel  fees  and  other  disbursements.  He  brought  action  against 
his  insurer  to  reclaim  his  expenses  under  the  sue  and  labor  clause. 
The  court  held  that  there  was  no  liability  on  the  part  of  the  insurer 
when  there  was  no  liability  on  the  part  of  the  tiig  or  its  owner,  and 
that  there  could  be  no  recovery  under  the  sue  and  labor  clause  for 
the  expense  of  determining  judicially  that  the  tug  was  free  from 
liability  to  the  tow.^ 

It  will  also  be  remembered  that  if  the  total  amount  of  insurance, 
except  in  case  of  a  liability  policy,^  is  short  of  the  value  of  the  prop- 
period  ,  are  also  proper  charges  upon  i  St.  Paul  Fire  &  Mar.  Ins.  Co.  v. 
the  property,  and  ought  to  be  borne  by  Pacific  Cold  Storage  Co.,  157  Fed. 
the  assurers.    That  the  master  and  sea-       625. 

men  also,  after  becoming  disconnected  2  Munson  v.  Standard  Mar.  Ins.  Co., 

from  the  vessel  by  the  shipwreck,  are  156  Fed.  44.  For  libel  suit  see  122  Fed. 
entitled  to  coniDensation  as  laborers,  753,  58  C.  C.  A.  .553,  106  Fed.  329,  45 
or  salvors  for  theii    services  in  trans-       C.  C.  A.  314. 

porting  and  in  saving  the  cargo;  to  be  3  Ursula  Briaht  v.  Am.<iincl<-,  115  Fed. 

allowed  according  to  the  nature  of  the      243.    The  possible  extent  of  future  lia« 
services,"  Lewis  v.   Williams,   1   Hall       bility  cannot  be  estimated. 
(N.  \.),429. 


EXEMPTION     UNDER   PUVE    PER   CENT  635 

erty  insured,^  the  assured  is  himself  a  coinsurer  for  the  deficiency.^ 
The  assured  in  such  a  case  will  have  to  bear  his  proportion  of  the 
expenses  under  the  sue  and  labor  clause.^  And  by  virtue  of  the 
same  doctrine,  if  anything  is  realized  by  way  of  net  salvage,  the 
insured  is  entitled  to  receive  his  proper  share,  as  a  coinsurer,  unless 
he  has  assigned  away  his  rights,  for  example,  by  instrument  of 
cession  to  the  underwriters. 

The  plaintiffs  Duffield  and  others  were  owners  of  the  steamboat 
Sam  Cloon.  The  value  of  the  vessel  as  agreed  upon  in  the  policies 
was  $20,000,  the  total  insurance  $15,000,  leaving  the  owners  in- 
surers to  one-fourth  the  value.  The  steamboat  was  sunk  in  the 
Mississippi  river,  and  abandoned  to  the  insurers,  w^ho  accepted  the 
abandonment  and  proceeded  to  raise  the  wreck.  The  net  amount 
of  salvage  recovered  by  the  underwriters  as  a  result  of  their  opera- 
tions was  -$3,000.  Under  the  phraseology  of  the  sue  and  labor 
clause  of  the  policy  the  insurers  contended  that  they  were  entitled 
to  keep  the  whole  of  the  proceeds,  but  the  court  held  that  the  plain- 
tiffs were  entitled  to  recover  from  them  one-fourth  of  the  net  amount 
of  salvage  realized.'' 

§  449.  Exemption  under  Five  Per  Cent. — No  partial  loss  or  par- 
ticular average  shall  in  any  case  be  paid  unless  amounting  to  five  per 
cent. 

The  purpose  of  this  restriction  is  to  relieve  the  insurers  from  such 
small  injuries  as  may  very  probably  be  caused  by  the  natural  de- 
terioration of  perishable  articles,  and  to  exempt  them  from  trifling 
losses  often  arising  more  from  wear  and  tear  than  from  perils  insured 
against.^ 

1  If  the  policy  is  valued,  that  value  v.  St.  Louis  P.  Ins.  Co.,  11  La.  Ann. 
controls,  Standard  Mar.  Ins.  Co.  v.  459;  Cunard  S.  Co.  v.  Marten  (1902), 
No77ie  Beach,  etc.,  Co.,  133  Fed.  636;  2  K.  B.  629  (criticising  The  Livinqston, 
The  Potomac  V.Cannon,  105  V.  S.  630,  130  Fed.  746);  Lohre  v.  Aitchison 
26  L.  Ed.  1194.  The  rule  applies  like-  (1878),  3  Q.  B.  D.  558;  Chalmers  & 
wise  to  unvalued  policies,  Chicago  Ins.  Owen  (1907),  p.  117.  And  see  The 
Co.  V.  Graham,  etc.,  Trans.  Co.,  108  Commonwealth  (1907),  Prob.  216; 
Fed.  271;  Soelberg  v.  Western  Assnr.  Brown  v.  Binniru)  (1906),  11  Com. 
Co.,  119  Fed.  33;  2  Phill.,  Ins.,  §  1435;  Cas.  190. 

and  cases  below.                             '  *  Cincinnati  Ins.   Co.   v.  Duffield,  6 

2  See  §  50,  supra;  Hood  Rubber  Co.  v.  Ohio  St.  200.  And  see  Gilchrist  v.  Chi. 
Atlantic  Mvt.  Ins.  Co.,  161  Fed.  788;  7ns.  Co.,  104  Fed.  566.  But  if  the 
Fay  V.  Alliance  Ins.  Co.,  16  Gray  insured  had  made  no  claim  to  a  share 
(Mass.),  455,  Whiting  v.  Independent  of  the  salvace  the  salvage  expenses  of 
Mut.  Ins.  Co.,  15  Md.  297;  Eng.  Mar.  the  underwriters  vould  have  been  of  no 
Ins.  Act  (1906),  §81;  The  Common-  concern  to  him,  nor  would  he  have  been 
wealth  (1907),  Prob.  216.  obligated     to     reimburse    the    under- 

3  Egan  v.  Brit.  &  For.  Mar.  Ins.  Co.,  writers  for  any  part  of  such  expenses. 
88  111.  App.  552,  aff'd  193  111.  295,  61  s  See  §  444.  By  the  English  view 
N.  E.  1081,86  Am.  St.  R.  342;  P/iiVZips  successive   losses   may    be    added    to- 


636  MEANING   AND    LEGAL    EFFECT   OF   MARINE   POLICY 

§  450.  Other  Assurance  Clause. — If  the  assured  shall  have  made 
other  assurance  prior  in  date  to  this  policy,  this  company  shall  be  answer- 
able only  for  so  much  as  the  amount  of  such  prior  assurance  may  be 
deficient  towards  fully  covering  the  premises  hereby  assured,  and  this 
company  shall  return  the  premium  upon  so  much  of  the  sum  by  them  as- 
sured as  they  shall  be  by  such  prior  assurance  exonerated  from;  and  in 
case  of  any  assurance  upon  said  premises  subsequent  in  date  to  this 
policy,  this  company  shall  nevertheless  be  answerable  for  the  full  extent 
of  the  sum  by  them  subscribed  without  right  to  claim  contribution  from 
such  subsequent  assurers,  and  shall  accordingly  be  entitled  to  retain  the 
premium  by  them  received  in  the  same  manner  as  if  no  such  subsequent 
assurance  had  been  made. 

This  is  the  American  clause  ^  which  differs  from  the  ordinary  pro- 
vision of  the  EngHsh  marine  pohcy  under  which  subsisting  pohcies 
are  Uable  for  loss  irrespective  of  the  dates  of  subscription.^  Under 
the  clause  priority  is  determined  by  reference  to  the  time  of  effecting 
the  insurance,  not  to  the  time  of  the  inception  of  the  risk,^  and  for 
this  purpose  the  written  date  of  the  policy  is  not  conclusive.'' 

If  the  property  is  fully  covered  by  the  prior  insurance,  the  subse- 
quent insurance  does  not  attach;  but  it  has  been  held  that  if  the 
prior  insurance  terminates  during  the  term  of  the  subsequent  in- 
surance, the  latter  will  then  attach,^  but  not  if  the  prior  insurance 
becomes  unavailing  because  of  the  insolvency  of  the  underwriter,*^ 
or  because  of  cancellation  by  agreement  of  the  parties.'^ 

gether  to  make  up  the  required  per-  limit  of  their  subscription,  leaving  it  to 

centage,    Blackett    v.    Royal    Exchange  the   underwriters   to  secure  equitable 

Ass.  Co.,  2  Cr.  &  J.  244,  1  L.  J.  Ex.  101,  contribution  among  themselves,  Ryder 

2  Tyr.  266.     And  in  this  country  as  to  v.  Phoenix  Ins.  Co.,  98  Mass.  185,  190 

Q&Tgo,  Donnellv.  Columbian  Ins.  Co.,  7  (cases  cited).     Fractions  of  a  day  in 

Fed.   Cas.   889.      But  not  as  to  ship,  general    are    not    regarded,    Isaacs    v. 

Luma   V.    Atlantic  Mut.   Ins.    Co.,   15  Roi/al  Ins.  Co.   (1870),  L.  R.  5  Exch. 

Fed.  Cas.   1109;  Hagar  v.  Eng.  Mut.  296,  39  L.  J.  Exch.  189.    But  if  two  or 

Mar.  Ins.  Co.,  59  Me.  460;  Brooks  v.  more  policies  are  made  on  the  same 

Oriental  Ins.  Co.,  7  Pick.  (Mass.)  259;  day,     insuring     the     same     property 

(question  left  open  as  to  cargo);  Pad-  against  the  same  risks,  and  the  ques- 

dock  V.  Commercial  Ins.  Co.,  104  Mass.  tion  of  priority  is  material,  this  priority 

521.     If  hull  and  machinery  are  sepa-  will  be  determined  by  ascertaining  at 

rately  valued  they  are  to  be  regarded  what  time  on  that  day  the  first  was 

as  separate  insurances,  American  S.S.  made.   Potter   v.    Marine   Ins.    Co.,   2 

Co.  V.  Indem.  Mut.  Mar.  Ins.  Co.,  108  Mason  (U.  S.  C.  C  ),  475 

Fed.  421,  118  Fed.  1014,  56  C.  C.  A.  56.  3  Carleton  v.  China  Mut.  Ins.  Co.,  174 

1  History  and  object  of  this  clause  Mass.  28,  54  N.  E.  559,  46  L.  R.  A.  166. 
set  forth  in  Ryder  v.  Phoenix  Ins.  Co.,  *  Lee  v.  Mass.  Ins.  Co.,  6  Mass.  208. 
98  Mass.  185.  s  Kent  v.  Manufacturers'  Ins.  Co.,  18 

2  American  Ins.  Co.  v.  Griswold,  14  Pick.  (Mass.)  19. 

Wend.  (N.  Y.)  399.    Under  the  English  e  Ryder  v.  Phoenix  Ins.  Co.,  98  Mass. 

rule  in  case  of  overinsurance,  the  in-  185. 

sured  might  enforce  indemnity  against  7  Searnans  v.  Loring,  21   Fed.  Caa 

one  or  more  underwriters  within   the  920,  1  Mason,  127. 


WARRANTED    FREE   OF    CAPTURE,  ETC.  637 

If  all  the  policies,  or  several  of  them,  of  different  dates  do  once 
attach,  and  the  property  is  diminished  below  their  aggregate  amount 
during  their  hfe,  it  has  been  held  that  the  insurance  abates  first  on 
the  latest  policies.^ 

§451.  Warranted  Uninsured. — A  warranty  of  "uninsured"  or  of 
no  other  insurance  is  not  broken  if  the  other  insurance  is  void  by 
statute.-  This  warranty  is  analogous  to  the  clause  of  the  fire  policy 
prohibiting  other  insurance  without  written  consent  from  the  in- 
surer.^ 

§  452.  Warranted  Uninsured  beyond  a  Specified  Amount. — The 

purpose  of  such  a  warranty  is  to  compel  the  insured  to  retain  a  per- 
sonal interest  in  the  preservation  of  the  subject  and  thus  to  encourage 
the  exercise  of  care  on  his  part. 

The  amount  named  is  construed  to  refer  to  effective  insurance,  not 
to  that  which  is  unavailable  because  of  its  invalidity  or  because  the 
underwriter  is  irresponsible.'* 

§  453.  Warranted  Free  of  Capture,  etc. — The  phrase  "warranted 
free  of,"  etc.,  as  sometimes  employed  in  the  marine  policy  means 
that  the  underwriter  is  relieved  of  responsibility  for  any  loss  caused 
by  the  peril  thus  excepted.^ 

The  ordinary  free  of  capture,  seizure  and  detention  clause,  known 
as  the  F.  C.  S.  warranty,  materially  curtails  the  general  liability  of 
the  underwriter.^ 

1  American  Ins.  Co.  v.  Griswold,  14  As  to  what  is  other  insurance,  see 
Wend.  (N.  Y.)  399.  As  to  what  is  Merchants'  Mid.  his.  Co.  v.  Allen,  122 
other  or  double  insurance,  see  Ryder  v.  U.  S.  376,  7  S.  Ct.  1248,  30  L.  Ed.  1209; 
Phoenix  Ins.  Co.,  98  Mass.  185;  Kent  v.  St.  Paul  F.  &  M.  Ins.  Co.  v.  Knicker- 
Mjrs.  Ins.  Co.,  18  Pick.  (Mass.)  19;  bocker,  etc.,  Co.,93  Fed.  931,  mC.C.  A. 
Columbian  Ins.  Co.  v.  Lynch,  11  Johns.  19;  Perkins  v.  New  Eng.  Mar.  Ins.  Co., 
(N.  Y.)  233  (same  person  subject  and  12  Mass.  214;  Davis  \.  Boardman,  12 
risk  essential);  Wells  V.  Phila.  Ins.  Co.,  Mass.  80;  Mussey  v.  Atlas  Mut.  Ins. 
9  Serg.  &  R.  (Pa.)  103;  Peters  v.  Dela-  Co.,  14  N.  Y.  79;  Van  Alstyne  v.  Mtna 
u-are  Ins.  Co.,  5  Serg.  &  R.  (Pa.)  473.  Ins.  Co.,  14  Hun  (N.  Y.),  360.  And 
And  see  §  252,  supra.     But  the  other  see  §  252,  supra. 

poHcy  must  be  taken  out  by  one  hav-  5  As  to  what  is  capture,  arrest,  seiz- 
ing authority  to  act.  Palmer  v.  Great  ure,  detention,  etc.,  see  §§  431,  432. 
Western  Ins.  Co.,  10  Misc.  167,  aff'd  ^  Miller  v.  Law  Ace.  Ins.  Co.  (1903), 
153  N.  Y.  660.  The  American  clause  1  K.  B.  712;  Tuill  v.  Robson  (1908),  1 
construed  in  Gnoss  v.  N.  Y.  &  T.  S.S.  K.  B.  270.  Sometimes  it  is  worded, 
Co.,  107  Fed.  516.  "  warranted  not  to  abandon  in  ca.se  of 

2  Roddick  v.  Indemnity  Mut.  M.  Ins.  capture,  seizure  or  detention  until 
To.  (1895),2Q.  B.  380,  72L.  T.  R.  860,  after  condemnation  of  the  property 
8  Asp.  M.  C.  24.  insured;   nor  until   ninety  days  after 

3  See  §  252,  supra.  notice  of  said  condemnation  is  given  to 
*  General  Ins.  Co.  v.  Cory  (1897),  1       the  assurers." 

Q.  B.  .335,  66  L.  J.  Q.  B.  (N.  S.)  313. 


638  MEANING   AND    LEGAL   EFFECT   OF   MARINE    i'OLICY 

The  policy  issued  by  the  defendant  insured  the  EngUsh  steamship 
Romulus  against  perils  of  the  sea,  but  in  case  of  total  loss  only,  and 
contained  a  warranty  "free  from  capture,  seizure  and  detention 
and  the  consequences  of  hostilities,  piracy  and  barratry  excepted." 
During  the  Russo-Japanese  war  the  ship  sailed  for  Vladivostock 
with  a  cargo  of  coal,  which  had  been  declared  contraband  of  war. 
She  was  captured  by  the  Japanese,  and  while  being  navigated 
towards  a  Court  of  Prize  was  wrecked  and  became  a  total  loss,  but 
afterwards,  however,  she  was  condemned  in  the  Prize  Court.  The 
House  of  Lords  held  that,  while  the  loss  was  total,  the  proximate 
cause  of  the  whole  loss  was  not  the  wreck  but  the  capture,  and, 
therefore,  that  the  owner  could  not  recover  on  the  policy.^ 

In  another  English  case  the  policy  contained  a  warranty  against 
"capture,  seizure,  and  detention,  and  the  consequences  thereof,  or 
any  attempt  thereat,  piracy  excepted,  and  also  from  all  conse- 
quences of  riots,  civil  commotions,  hostilities,  or  warlike  operations, 
whether  before  or  after  declaration  of  war."  A  few  days  before 
declaration  of  war  between  the  United  Kingdom  and  the  Transvaal 
Government,  the  insured  gold  was  seized  by  a  Boer  official,  during 
land  transit,  because  of  the  anticipation  of  war.  The  underwriters 
were  relieved  from  liability.^ 

On  the  other  hand,  where  for  lack  of  a  pilot  the  ship  was  stranded 
and  wrecked,  the  court  held  that,  in  spite  of  the  F.  C.  S.  warranty, 
the  underwriters  were  liable,  since  the  proximate  cause  of  the  loss 
was  a  sea  peril  and  not  a  confiscation  of  the  wreck  subsequently 
made  by  the  commander  seizing  it.^ 

A  seizure  of  a  vessel  by  the  mutinous  acts  of  the  crew  is  not  within 
the  warranty,  but  constitutes  an  act  of  barratry,^ 

§  454.  Want  of  Ordinary  Care  and  Skill. — An  exception  not  in- 
frequently found  in  marine  policies  relates  to  losses  occasioned  by 
want  of  ordinary  care  and  skill  in  navigation.  Such  an  act  of  neg- 
ligence, if  the  cause  of  the  loss,  will  relieve  the  underwriter  whose 
policy   contains   this   restriction;^   thus,   for   exan  pie,   wdiere   the 

^Anr^ersm  v.  Marten   (1908).  App.  Mvt.  Mar.  Ass.   Co.    (1908),  2  K.   B. 

Cas.  334   (insurance  was  on  disburse-  504. 

ments,  but  the  case  was  flotermined  as  2  Robinson  Gold  Min.  Co.  v.  Alliance 

ihowrM  it  had  been  on  hull   and  ma-  Ins.  Co.  (1904),  App.  Cas.  S.W.     Com- 

chinery;     held    that   rliane-e   of    prop-  pare  Niclels  v.  London,  cfc,  Ins.  Co.,  6 

erty  related  bnck  to  time  of  rnr>ture);  Com.  Cas.  1,5. 

Goss    V.     Withers,    2    Burr.    683    (by  » Hahn  v.  Corheft.  2  Bin<r.  205. 

Lord  Mansfield).     Persons  do  not  come  ■*  Greene  v.  Pacific  Mut.  Ins.  Co.,  9 

within    the    phrase    "contraband    of  Allen  (Mass.),  217. 

war,"  Yangtsze  Ins.  Ass.  v.  Indemnity  ^Richelieu  &  O.  Nav   Co.  v.  Boston 


OTHER   PERILS   SOMETIMES   EXCEPTED 

engineer  of  the  steamship  intending  to  open  the  valve  of  a  ballast 
tank,  neghgently  and  by  mistake  opened  the  valve  of  a  tank  in 
which  the  insured  goods  were  being  carried.^ 

In  another  case  the  policy  excepted  losses  caused  by  the  wilful 
act  of  the  master.  In  spite  of  the  exception  the  master  deliberately 
forced  his  tug  through  the  ice  floes  and  thereby  caused  the  loss. 
The  court  held  that  the  insurers  were  exonerated. ^ 

§  455.  Other  Perils  Sometimes  Excepted. — Various  other  perils 
are  sometimes  expressly  excepted  from  the  scope  of  the  insurance; 
for  example,  losses  and  misfortunes  caused  by  ice  ^  or  all  claims  con- 
sequent upon  loss  of  time.'* 

Some  policies  contain  the  cattle  clause  "free  of  mortality  and 
jettison."  The  word  "mortality,"  as  so  used,  refers  to  death  from 
natural  causes  as  distinguished  from  death  occasioned  by  the  perils 
insured  against.  Thus  if  a  horse  were  injured  by  the  pitching  of 
the  vessel  during  a  storm,  the  underwriter  would  be  liable  notwith- 
standing the  cattle  clause  in  the  policy;  but  if  the  storm  drove  the 
ship  far  out  of  her  course,  so  that  the  supply  of  fodder  was  ex- 
hausted and  the  horse  died  for  lack  of  food  the  exception  would 
apply  in  favor  of  the  underwriter.^ 

Very  frequently  a  warranty  is  inserted  in  the  policy  not  to  go 
to  certain  ports,  or  regions  or  waters,  or  not  to  visit  them  at  certain 

Mar.  Ins.  Co.,  136  U.  S.  408,  10  S.  Ct.  save  the  vessel).     And  see  Roaers  v. 

934,  34  L.  Ed.  398;  Flint,  etc.,  Co.  v.  ^tna  Ins.  Co.,  95  Fed.  103,  35  C.  C.  A. 

Mar.  Ins.  Co.,  71  Fed.  210  (excessive  396.      Any   question   of   negligence   is 

speed  in  fog  and  no  lookout);  Empire,  usually  one  of  fact,  Jones  v.   Western 

etc.,  Co.  v.  Union  his.  Co.,  32  La.  Ann.  Assur.  Co.,  198  Pa.  St.  206,  47  Atl.  948. 

1081  (pumps  not  ready  to  work);  Levi  i  Blackburn  v.  Liverpool,  etc.,  Navi- 

v.    New  Orleans  Mid.   Ins.   Assn.,   15  gation  Co.  (1902),  1  K.  B.  290. 

Fed.  Cas.  418  (negligent  collision).    In  2  Standard  Mar.   Ins.   Co.   v.   Nome 

the    following    the    underwriters    were  Beach,  etc.,  Co.,  133  Fed.  636. 

held  liable  in  spite  of  the  exception,  3  Schuvler  v.   Phoenix  Ins.   Co.,   134 

Northwest  Trans  p.  Co.  v.  Boston  Mar.  N.  Y.  345,  48  N.  Y.  St.  R.  213,  32 

Ins.  Co.,  41  Fed'.  793  (negligent  speed,  N.  E.  25;  Brovn  v.  St.  Nicholas  Ins. 

but  not  the  proximate  cause  of  loss);  Co.,  61  N.  Y.  332  (ice  clause).    Or.  on 

The  Natchez,  42  Fed.  169  (running  on  the  other  hand,  liability  may  be  lim- 

the  bar  was  justifiable);  Penn.  R.  Co.  v.  ited  to  damage  in  consequence  of  ice, 

Manheim  Ins.  Co.,  56  Fed.  301  (strik-  Huntle^iv.    Prov.  Wash.    Ins.    Co.,   77 

ing  unknown  obstruction);   Savaqe  v.  App.    Div.    196,   79   N.   Y.    Supp.   35. 

Corn  Exch.,  etc.,  Ins.   Co.,   17   N.   Y.  *  Turnbxdl,   Martin    &    Co.    v.   Hull 

Super.  Ct.  1  (method  of  towing  vessel);  Undervriters,  L.  R.  (1900)  2  Q.  B.  D. 

Havs  v.   Phoenix  Ins.    Co.,  57   N.   Y.  402;    Bensaude   v.    Thanies   &   M.   M. 

Suner.  Ct.  199,  6  N.  Y.  Supp.  3,  aff'd  Ins.  Co.  (H.  L.),  66  L.  J.  Q.  B.  (N.  S.) 

127  N.  Y.  656,  28  N.  E.  254  (conduct  of  666,  77  L.  T.  R.  282,  (1897)  A.  C.  609. 

mate  when  master    became  incompe-  ^  Lairrence  v.  Aberdein,  5  B.  &  Aid. 

tent);  Lauion  v.  Ror/al  Canadian  Ins.  107;  and  see  Gabay  v.  Llovd,  3  B.  &  C. 

Co.,  50  Wis.  103,6  N.  W.  505  (whether  793;   St.   Paid  F.   d-   M.   Ins.   Co.   v. 

master  is  bound  to  imperil  the  crew  to  Morice  (1906),  11  Cora.  Cas.  153. 


640  MEANING   AND   LEGAL   EFFECT   OF   MARINE   POLICY 

seasons  of  the  year.  A  violation  of  such  a  warranty,  though  un- 
connected with  the  loss,  forfeits  the  insurance.^ 

A  mere  intention,  however,  to  commit  a  breach  of  warranty  does 
not  itself  constitute  a  breach.  Thus,  for  example,  in  an  English  case 
the  insured  "warranted  not  to  proceed  east  of  Singapore."  The 
insured  vessel  started  on  a  voyage  from  Cardiff  to  Kiao-chau,  a 
place  east  of  Singapore.  It  never  navigated  east  of  Singapore  be- 
cause it  went  aground  off  the  coast  of  Tunis  and  was  totally  lost 
there  by  perils  of  the  sea.  The  court  held  that  there  was  no  breach 
of  warranty  and  that  the  underwriters  were  liable.^ 

Likewise  the  policy  often  contains  a  warranty  that  the  vessel 
shall  not  be  loaded  beyond  her  registered  capacity,'''  or  w'ith  certain 
cargo  beyond  a  percentage  of  her  registered  capacity  under  tonnage 
deck,  or  shall  not  be  loaded  with  lime  under  deck,  or  shall  not  be 
allowed  to  carry  grain  in  bulk.^  And  a  certificate  of  proper  loading 
from  an  inspector  may  also  be  required. 

§  456.  Memorandum  Clause. — Warranted  free  from  average  unless 
general:  warranted  free  from  average  under  a  certain  percentage  unless 
general. 

Certain  articles  are  in  their  nature  perishable,  or  peculiarly  sus- 
ceptible to  change.  A  list  of  such  articles  is  made  subject  to  the 
restrictions  of  the  modern  memorandum  clause.^ 

The  phrase  "free  from  average  unless  general,"  as  here  used, 
though  obscure,  has  a  well-established  signification.  It  means  that 
the  underwriter  is  exempt  on  memorandum  articles  from  liabilit}' 
for  anything  less  than  a  total  loss,  except  where  the  loss  is  of  the 
nature  of  general  average.^  But  if  the  loss  belongs  to  general  aver- 
age he  is  liable  for  it  however  small  it  may  be.'''     "Free  of  particular 

1  P.    143,    note,    and    §  424,    supra;  *  Sawyer  v.  Coasters  Mut.  Ins.  Co.,  6 

Whiton  V.   Albany  City  Ins.   Co.,   109  Gray  (Mass.),  221. 

Mass.  24;  Odiorne  v.  NewEng.  Mut.  M.  5  'Washburn  &  M    MJg.  Co.  v.  Reli- 

Ins.  Co.,  101  Mass.  551,3  Am.  Rep.  401.  ance  bis.  Co.,  179  V.  S.  1,  21  S.  Ct.  1, 

^Simpson  S.    Co.    v.    Premier,   etc.,  45   L.   Ed.   49;   Devitt   v.   Prov.  Wash. 

Association  (1905),  10  Com.  Cas.  198.  Ins.  Co.,  173  N.  Y.  17,  65  N.  E.  777. 

Compare  cases  where  the  underwriters  The    function    of    the    memorandum 

were  exonerated  because  of  change  of  clause  is  to  limit  not  to  extend  the  lia- 

voyage,  Colledge  v.  Harty,  6  Exch.  205,  bility    of    the    underwriter,    Potter    v. 

20  L.  J.  Exch.  146;  Simon  Israel  &  Co.  Suffolk  Ins.  Co.,  19  Fed.  Cas.  1186,  2 

V.   Sedgwick    (1893),    1  Q.   B.   303,  62  Sumn.  197. 

L.  J.  Q.  B.  163.  6  "The  term  'average  unless  general' 

3  Howard  v.  Great  Western  Co.,  109  means  a  partial  loss  of  the  subject- 
Mass.  384.  The  warranty  applies  only  matter  insured  other  than  a  general 
to  cargo  and  not  to  cannel  coal  taken  average  loss,  and  does  not  include 
for  dunnage,  Thning  v.  Great  Western  'particular  charges,'  "  Eng.  Mar.  Ins. 
Ins.  Co.,  103  Mass.  401,  4  Am.  Rep.  Act  (1906),  1  Sch.  13. 
567.  7  Wadsworth  v.   Pacific  Ins.   Co. ,  4 


MEMORANDUM   CLAUSE 


641 


average"  has  the  same  meaning.^  Accordingly,  it  will  be  observed 
that  the  restrictions  of  this  clause  are  not  applicable  to  total  losses 
nor  to  partial  losses  if  exceeding  the  restrictive  percentages,^  nor  to 
any  losses,  no  matter  how  small,^  if  the  subject  of  general  average 
contribution.  For  general  average  losses,  in  spite  of  the  clause,  the 
underwriters  are  liable.'* 


Wend.  (N.  Y.)  33.  For  general  average 
losses  the  unclenvriter  is  liable  notwith- 
standing the  restriction,  Wilson  v. 
Sfnith,  3  Eurr.  15.50,  1  W.  Elackstone, 
507.  Different  meanings  of  word 
"average"  defined  in  last  case  and  in 
Coster  V.  Phoenix  Ins.  Co.,  6  Fed.  Cas. 
611,  2  Wash.  C.  C.  51.  As  to  general 
average  contribution,  see  §  212.  Lord 
Esher  says:  "  'Average'  as  used  in  this 
connection  is  clearly  a  technical  ex- 
pression, and  it  has  a  M-ell-established 
mercantile  signification.  It  means  a 
partial  as  distinguished  from  a  total 
loss.  If  there  is  a  total  loss  of  the 
whole  of  the  things  mentioned,  or  of 
the  whole  of  any  one  of  them,  or  a  total 
loss  of  any  part  which  is  so  put  on 
board  as  that  there  can  be  a  total  loss 
of  that  part,  the  clause  will  not  apply 
to  that  loss.  Taking  'average'  then  to 
mean  average  or  partial  loss,  the  mean- 
ing is  that  certain  articles  mentioned 
are  warranted  free  from  partial  loss,  or 
partial  loss  under  a  certain  percentage, 
unless  it  be  a  general  average  loss,  that 
is  to  say,  a  loss  voluntarily  occasioned 
for  the  safety  and  benefit  of  the  com- 
mon enterprise,"  Price  v.  A  1  Ships, 
etc.,  Assoc,  22  Q.  B.  D.  580,  584. 

1  Firemen's  Ins.  Co.  v.  Fitzhuqh,  4 
B.  Mon.  (Ky.)  160,  164;  Riley  v.  Ocean 
Ins.  Co.,  11  Rob.  (La.)  2.55.  '^ The  New 
York  court  says:  "There  is  no  dispute 
that  free  from  particular  average 
exempts  the  insurer  from  liability  for 
partial  damage  or  for  anything  else 
than  a  total  loss,"  Devitt  v.  Prov. 
Wash.  Ins.  Co.,  173  N.  Y.  17,  21,  05 
N.  E.  777;  Booth  v.  Cfair,  15  C.  B. 
(N.  S.)  291;  Francis  v.  Boulton,  73 
L.  T.  R.  578,  65  L.  J.  Q.  B.  (N.  S.)  153. 
But  the  phrase  "free  from  average," 
or  "of  all  average"  means  free  from  all 
partial  losses  whether  particular  aver- 
age or  general  average,  and  limits  the 
liability  to  a  total  loss  of  the  subject- 
matter,  Woodside  v.  Canton  Ins.  Office, 
84  Fed.  283;  Coster  v.  Phwnix  Ins.  Co., 
6  Fed.  Cas.  611,  2  Wash.  C.  C.  51; 
Price  v.  Maritime  Ins.  Co.  (1901),  2 
K.  B.  412.  The  memorandum  clause 
was  introduced   into   policies   for   the 

41 


protection  of  the  insurer  from  liability 
for  any  partial  loss  whatever  on  certain 
enumerated  articles  regarded  as  perish- 
able in  their  nature  and  on  certain 
others,  none  under  a  giv'en  rate  per 
cent.  This  was  about  1749,  and  since 
then,  in  the  growth  of  commerce,  the 
list  of  articles  freed  by  the  stipulation 
from  particular  average  has  been  en- 
larged so  as  to  embrace  many  which, 
though  they  may  not  be  inherently 
perishable,  are  in  their  nature  pe- 
culiarly susceptible  to  change,  Wash- 
burn &  M.  Mfg.  Co.  V.  Reliance  Ins. 
Co.,  179  U.  S.  1,  21  S.  Ct.  535,  45  L. 
Ed.  49.  The  House  of  Lords,  overrul- 
ing Angel  V.  Merchants'  Mar.  Ins.  Co. 
(1903),  IK.  B.  811,  has  decided  that  in 
determining  whether  a  ship  is  a  con- 
structive total  loss  by  English  law,  the 
test  is  whether  a  prudent  uninsured 
owner  would  repair  her  having  regard 
to  all  the  circumstances,  and  that  in 
this  calculation  the  assured  is  entitled 
to  add  the  break-up  value  of  the  ship 
to  the  estimated  cost  of  repairs,  Mac- 
beth v.  Maritime  Ins.  Co.  (1908),  App. 
Cas.  144.  The  Macbeth  policy  wae 
issued  prior  to  the  codification  of  Eng- 
lish law,  which  seems  to  follow  the 
Angel  case,  Mar.  Ins.  Act  (1906),  §  60. 
And  see  §  192,  supra. 

2  The  damage  may  be  sustained  at 
different  times;  the  sum  total  at  time 
of  arrival  determines  whether  the 
given  percentage  is  reached,  Stewart  v. 
Merchants'  Mar.  Ins.  Co.,  16  Q.  B.  D. 
619;  Blaclett  v.  Royal  Exch.  Assur., 
2  Cr.  &  J.  244.  Dock  dues  are  part  of 
the  cost  of  repairing  a  ship.  The  Acan- 
thus (1902),  Prob.  17;  The  Mar.  Ins. 
Co.  V.  China  T.  Co.,  L.  R.  11  App.  Cas. 
573.  Wages  and  provisions  of  crew 
during  repairs  to  ship  are  not  included, 
The  Leetrim  (1902),  Prob.  256.  Gen- 
eral average  contribution  and  par- 
ticular average  loss  cannot  be  added 
together  to  make  up  the  given  per- 
centage, Price  V.  A  1  Ships,  etc., 
Assoc,  22  Q.  B.  D.  580. 

3  Firemen's  Ins.  Co.  v.  Fitzhujh,  4 
B.  Mon.  (Ky.)  160,  163. 

*  The  term  "  particular  average  "  is 


642  MEANING   AND    LEGAL   EFP^ECT   OF   MARINE   POLICY 

The  English  marine  insurance  code  contains  the  following  pro- 
visions: "Where  the  subject-nuitter  insured  is  warranted  free  from 
particular  average,  either  wholly  or  under  a  certain  percentage, 
the  insurer  is  nevertheless  liable  for  salvage  charges,  and  for  particu- 
lar charges  and  other  expenses  properly  incurred  pursuant  to  the 
provisions  of  the  suing  and  labouring  clause  in  order  to  avert  a  loss 
insured  against.^  Unless  the  policy  otherwise  provides,  where  the 
subject-matter  insured  is  warranted  free  from  particular  average 
under  a  specified  percentage,  a  general  average  loss  cannot  be  added 
to  a  particular  average  loss  to  make  up  the  specified  percentage.^ 
For  the  purpose  of  ascertaining  whether  the  specified  percentage 
has  been  reached,  regard  shall  be  had  only  to  the  actual  loss  suffered 
by  the  subject-matter  insured.  Particular  charges  and  the  ex- 
penses of  and  incidental  to  ascertaining  and  proving  the  loss  must 
be  excluded."  ^ 

§  457.  Whether  Constructive  or  only  Actual  Total  Loss  will 
Satisfy  the  Warranty. — As  shown  in  the  last  section,  on  certain 
memorandum  articles,  the  underwriters  are  relieved  from  liability 
unless  the  loss  is  total.  The  question  remains  whether  a  constructive 
total  loss,^  or  only  an  actual  or  absolute  total  loss  will  satisfy  the 
warranty  of  the  memorandum  clause.  On  this  point  the  authorities 
differ. 

The  United  States  Supreme  and  other  courts  hold  that  to  satisfy 
this  warranty  the  loss  must  be  actually  total.  The  courts  of  New 
York,  Massachusetts,  and  other  jurisdictions  have  adopted  the  more 
liberal  rule  that  a  constructive,  as  well  as  an  actual,  total  loss  is 
covered  by  a  policy  containing  such  a  warranty.^ 

confined  to  the  deterioration  or  actual  charges.    Particular  charges  are  not  in- 

loss   of   part   of   the   subject   insured,  eluded    in    particular    average,"    Mar. 

Kidstonv.  Empire  Mar.  Ins.  Co.,  L.R.  Ins.    Act    (1906),    §64    (2).      But  see 

1  C.  P.  535,  2  Mar.  L.  C.  (0.  S.)  400;  Hall  v.  Rising  Sun  Ins.  Co.,  1  Disn. 

Price  V.  7ns.  Ass.,  L.  R.  22  Q.  B.  D.  (Ohio)  308. 

580  (1889).     But  in  Ohio  it  has  been  2  The    same    rule    adopted    in    this 

held   that  expenses   for   unloading,  or  country,    Padeljord    v.    Boardman,    4 

loading,    rescuing    and    reconditioning  Mass.  548. 

the  property  are  included.  Hall  v.  Ris-  3  Mar.  Ins.  Act  (1906),  §  76  (2)  (3) 

mg  Sun  Ins.  Co.,  1  Disn.  308,  12  Ohio  (4);  BrooH  v  Oriental  Ins.  Co.,  7  Pick. 

Dec.  639.    As  to  expense  for  unloading  (Mass.)  258. 

cargo  for  examination  of  damage,  see  <  See  §  193,  supra 

Lysajht  v.  Coleman  (1895),  1  Q.  B.  49,  s  Certain  courts  still  adhere  to  the 

64  L.  J.  Q.  B.  (N.  S.)  175.  severe    rule    that    the    loss    must    be 

J     Expenses  incurred   hy  or  on  be-  actually  total  to  be  recoverable  under 

half  of  the  assured  for  the  safety  or  the    warranty    of    the    memorandum 

preservation  of  the  subject-matter  in-  clause.     Thus  the  United  States  Su- 

sured,  other  than  general  average  and  preme  Court  says:  "The  general  rule  is 

salvage  charges,  are  called  particular  firmly  established  in  this  court  that  the 


TOTAL   LOSS   OF   PART 


643 


§  458.  Total  Loss  of  Part. — Where  the  subject-matter  insured  is 
warranted  free  from  particular  average  the  assured  cannot  recover 
for  a  loss  of  part,  other  than  a  loss  incurred  by  a  general  average 
sacrifice,  unless  the  contract  contained  in  the  pohcy  be  apportionable; 
but  if  the  contract  be  apportionable,  the  assured  may  recover  for  a 
total  loss  of  any  apportionable  part.' 

Accordingly,  under  the  exemption,  "free  from  average  unless 
general,"  or  liable  "for  total  loss  only,"  there  can  be  no  recovery  for 
a  partial  loss  of  any  one  species  of  goods,  except  for  general  average, 


insurers  are  not  liable  on  memorandum 
articles  except  in  case  of  actual  total 
loss,  and  that  there  can  be  no  actual 
total  loss  where  a  cargo  of  such  articles 
has  arrived  in  whole  or  in  part  in 
specie,  at  the  port  of  destination,  but 
only  when  it  is  physically  destroyed, 
or  its  value  extinguished  by  a  loss  of 
identity,"  Washburn  &  M.  Mfg.  Co.  v. 
Reliance  Mar.  Ins.  Co.,  179  U.  S.  1,  9, 
21  S.  Ct.  535,  45  L.  Ed.  49  (citing  many 
authorities,  English  and  American). 
Such  also  appears  to  be  the  rule 
adopted  in  other  jurisdictions,  Louisi- 
ana, Skinner  v.  Western  Ins.  Co.,  19 
La.  *  273;  Gould  v.  Louisiana  Mid.  his. 
Co.,  20  La.  Ann.  2.59;  Maine,  Williams 
V.  Kennebec  Mut.  Ins.  Co.,  31  Maine, 
455;  Missouri,  Willard  v.  Mfrs.  Ins. 
Co.,  24  Mo.  561;  Pennsylvania,  Wain 
v.  Thompson,  9  Serg.  &  R.  115,  at  all 
events  as  applied  to  articles  inherently 
perishable.  On  the  other  hand,  in 
Massachusetts  and  New  York  while  the 
decisions  in  the  past  have  not  been 
uniform  the  latest  views  of  the  courts 
would  seem  to  hold  the  underwriter 
liable  for  a  constructive  as  well  as  an 
actual  total  loss  of  articles  warranted 
free  from  particular  average.  Thus 
the  New  York  court  says:  "Much  as 
we  hesitate  to  place  our  view  of  the 
law  even  in  apparent  opposition  to  that 
of  the  Supreme  Court  of  the  United 
States,  we  feel  constrained  to  adhere  to 
the  doctrine  in  Chadsey  v.  Guion,  97 
N.  Y.  333,  that  for  a  constructive  loss 
on  the  whole  of  the  articles  insured 
the  underwriter  is  liable,"  Devitt  v. 
Prov.  Wash.  Ins.  Co.,  173  N.  Y.  17,  24, 
65  N.  E.  777,  aff'g  61  App.  Div.  390, 
70  N.  Y.  Supp.  654  (important  line  of 
authorities  cited  in  lower  court).  This 
view  seems  in  harmony  with  Waller- 
stein  v.  Columbian  Ins.  Co.,  44  N.  Y. 
204,  4  Am.  Rep.  664,  in  which  it  was 
held  thfit  a   total  physical  loss  is  not 


necessary  to  constitute  an  actual  total 
loss,  a  total  loss  of  value  to  the  owner 
being  enough  to  satisfy  the  require- 
ment. And  see  Poole  v.  Protection  Ins. 
Co.,  14  Conn.  47;  Adams  v.  M'Kcnzie, 
32  L.  J.  C.  P.  92,  94  ("a  constructive 
loss  is  as  much  a  total  loss  as  if  the 
ship  went  to  the  bottom");  Phillips, 
Ins.,  §  1769.  A  dictum  in  Carr  v. 
Security  Ins.  Co.,  109  N.  Y.  504,  509, 
17  N.  E.  369,  looks  the  other  way  aa 
follows:  "The  cases  in  this  state,  in 
respect  to  memorandum  articles,  where 
the  insurer  is  only  liable  for  an  actual 
total  loss,  in  the  main  sustain  the  view 
that  total  loss  in  value  of  memorandum 
articles,  so  long  as  they  remain  in  specie, 
is  not  an  actual  total  loss  of  such 
articles  within  a  policy  of  marine  in- 
surance." This  view  was  sustained  by 
the  early  New  York  case.  Salt  us  v. 
Ocean  Ins.  Co.,  14  Johns.  138.  Massa- 
chusetts has  held  that  a  policy  "free 
of  partial  loss"  on  fertilizers  covers  a 
constructive  total  loss,  but  the  court 
refused  to  decide  whether  the  same 
indulgence  would  be  extended  in  the 
case  of  articles  named  in  the  memo- 
randum, if  inherently  perishable.  Mayo 
V.  India  Mut.  Ins.  Co.,  152  Mass.  172, 
25  N.  E.  80,  9  L.  R.  A.  831,  23  Am.  St. 
R.  814.  And  see  Heebner  v.  Eagle  Ins. 
Co.,  10  Gray  (Mass.),  131,  69  Am. 
Dec.  308;  Kettell  v.  Alliance  Ins.  Co.,  10 
Gray,  144. 

^  Sillouay  v.  Neptune  Ins.  Co.,  12 
Gray  (Mass.),  73;  Kettel  v.  Alliance 
Ins.  Co.,  10  Gray  (Mass.),  144;  Hills  v. 
London  Assur.,  5  M.  &  W.  569.  But 
see  contrary  ruling  where  part  was 
transshipped  into  one  vessel  and  part 
into  another,  Pierce  v.  Columbian  Ins. 
Co.,  14  Allen  (Mass.),  320.  So  also 
where  each  craft  was  a  separate  risk, 
The  Gen.  Ins.  Co.  v.  Royal  Erch.  Assur., 
2  Com.  Cas.  144.  The  text  follows  the 
English  codification,  §  76  (1). 


644 


MEANING    AND    LEGAL    EFFECT   OF   MARINE    POLICY 


although  separate  boxes  or  packages  of  such  species  may  be  totally 
lost.i 

§  459.  Unless  Ship  be  Stranded. — Often  a  memorandum  clause 
qualifies  the  restriction  by  the  phrase  "unless  the  ship  be  stranded." 

"Free  of  average  unless  general  or  the  ship  be  stranded,"  is  an 
obscure  and  awkward  expression  meaning  "Free  of  partial  losses  ex- 
cept general  average  losses,  or  unless  the  ship  be  stranded;"  that 
is  to  say,  under  this  frequent  form  of  exemption  the  underwriter  is 
relieved  from  liability  for  a  loss  less  than  total  on  the  articles  named, 
unless  it  be  a  general  average  loss  or  unless  the  ship  has  stranded. 
But  if  the  ship  has  stranded,  or  if  the  loss  is  general  average,  in 
either  event  the  liability  of  the  underwriter  is  established.^ 

The  courts  have  been  disposed  to  interpret  these  phrases  with 
liberality  towards  the  insured.  Thus  it  is  decided  in  England  that  a 
stranding  at  any  time  during  the  term  insured  has  the  effect  of  effac- 
ing the  exception  of  the  memorandum  and  making  operative  the 
words  of  general  liabihty,  regardless  of  whether  the  stranding  has 
contributed  to  the  loss.^     The  damage  may  even  have  been  dis- 


^  Biays  v.  Chesapea^:e  Ins.  Co.,  11 
U.  S.  415,  3  L.  Ed.  389;  Hernandez  v. 
N.  Y.  Mut.  Ins.  Co.,  12  Fed.  Cas.  34; 
Chadsey  v.  Guion,  97  N.  Y.  333;  Ralli  v. 
Janson,  6  E.  &  B.  422.  Rules  to  gov- 
ern liability  of  underwriters  are  laid 
dowTi  in  Mowat  v.  Boston  Mar.  Ins. 
Co..  26  Can.  S.  C.  47.  But  see  Canton 
Ins.  Office  v.  Woodside,  90  Fed.  302, 
33  C.  C.  A.  63,  61  U.  S.  App.  214 
(where  the  clause  was  applied  dis- 
tributively  to  personal  effects).  Simi- 
larly in  Duffv.  Mackenzie,  3  C.  B.  (N.  S.) 
16,  29;  Wilki7ison  v.  Hyde,  3  C.  B. 
(N.  S.)  30,  44.  And  the  percentage  re- 
striction was  applied  separately  where 
cargo  was  divided  at  intermediate  port 
and  transshipped  in  two  vessels,  Pierce 
V.  Columbian  Ins.  Co.,  14  Allen  (Mass.), 
320.  In  order  to  mitigate  the  severity 
of  the  rule,  it  is  usual  to  insert  what  are 
called  "average  clauses,"  the  effect  of 
which  is  to  subdivide  the  sulDJect- 
matter  insured,  whether  ship  or  cargo, 
into  smaller  parcels,  so  as  to  give  the 
assured  a  chance  of  recovery  in  case 
this  or  that  portion  be  seriously  dam- 
aged while  the  bulk  is  uninjured.  For 
example,  with  cotton  a  clause  may  be 
inserted,  "average  payable  on  every 
ten  bales  running  landing  numbers." 
This  means  that  if  in  any  parrel  of  ten 


bales,  as  they  are  entered  in  the  dock 
landing  book,  there  is  a  damage  above 
the  memorandum  restriction,  the  in- 
sured may  recover,  although  the  dam- 
age on  the  entire  bulk  of  that  species  of 
goods  named  in  the  policy  would  fall 
below  the  memorandum  percentage  of 
its  value.  And  see  Chicago  Ins.  Co.  v. 
Graham,  etc.,  Transp.  Co.,  108  Fed.  271, 
109  Fed.  352.  As  to  the  application  of 
the  general  rule  to  separate  species  of 
property,  see  Humphreys  v.  Union  Ins. 
Co.,  12  Fed.  Cas.  876  (cargo  of  lemons 
and  oranges);  Silloway  v.  Neptune  Ins. 
Co.,  12  Gray  (Mass.),  73;  Wadsworth  v. 
Pacific  Ins.  Co.,  4  Wend.  (N.  Y.) 
33. 

2  Burnett  v.  Kensington,  7  T.  R.  210. 

3  London  Assur.  Co.  v.  Companhia 
De,  etc.,  167  U.  S.  149,  17  S.  Ct.  785, 
42  L.  Ed.  113  (the  court  reviews  the 
many  English  decisions,  but  refuses  to 
determine  Avhether  the  American  rule 
is  the  same).  "Where  the  ship  has 
stranded,  the  insurer  is  liable  for  the 
excepted  losses,  although  the  loss  is 
not  attributable  to  the  stranding,  pro- 
vided that  when  the  strandmg  takes 
place  the  risk  has  attached  and,  if  the 
pohcy  be  on  goods,  that  the  damaged 
goods  be  on  board,"  Eng.  Mar.  Ins. 
Art  0906),  1  Sch.  14. 


"WHAT    CONSTITUTES    STRANDING  645 

covered  and  repaired  before  the  stranding  takes  place,  nevertheless 
the  underwriters  will  not  be  relieved  from  liability  by  the  memo- 
randum clause  if  there  has  been  a  stranding.^  The  law  and  the 
practice  in  the  United  States  appear  to  be  the  same/  although,  on 
this  point,  the  Federal  Supreme  Court  declined  to  commit  itself;  ^ 
and  the  question  in  this  country  is  not  so  pressing,  because  in  the 
usual  American  policy  either  the  words  "or  the  ship  be  stranded" 
are  omitted,  or  else  it  is  expressly  provided  that  the  loss  in  such  a 
case  must  be  by  stranding.^ 

It  obviously  becomes  important,  however,  under  the  English 
form  of  policy  and  policies  resembling  it  to  determine  what  is  strand- 
ing.5 

§  460.  What  Constitutes  Stranding. — A  vessel  is  stranded  within 
the  meaning  of  the  memorandum  clause,  "free  of  average  unless 
the  ship  be  stranded,"  when,  in  consequence  of  some  unusual  or  ac- 
cidental occurrence,  she  comes  in  contact  wdth  the  ground  or  other 
obstruction,  and  remains  hard  and  fast  upon  it.  If  "she  touches 
and  goes,"  she  is  not  stranded,  but  if  "she  touches  and  sticks"  in 
places  in  which,  in  the  ordinary  course  of  her  navigation,  she  is  not 
suffered  to  touch,  or  in  a  manner  fortuitous,  she  is  stranded.^ 

A  voluntary  stranding  bona  fide,  however,  may  be  a  stranding 
within  the  memorandum,  under  certain  circumstances  J  But  the 
vessel  must  be  on  the  strand  under  extraordinary  circumstances, 

i"The    policy    after   the   stranding  Kemp  v.  Halliday,  L.  R.  1  Q.  B.  520. 

must  be  construed  as  if  no  such  war-  As  to  when  a  ship  is  "burnt"  see  Lon- 

ranty  had  been  written  on  the  face  of  don   Assur.    v.    Companhia,   etc.,    167 

it,"  Roux  V.  Salvador,  1   Bing.  N.  C.  U.  S.  149;  The  Glenlivet  (1894),  Prob. 

526,  536.     Stranding  of  a  lighter  con-  48.     Collision  with  another  ship,  Lon- 

veying  the  goods,  however,  is  not  a  don   Assur.    v.    Companhia,   etc.,    167 

stranding    of    the    ship,    Hoffman    v.  U.  S.  149;  The  Niobe  (1891),  App.  Cas. 

Marshall,  2  Bing.  N.  C.  383.  401  (a  launch  of  the  ship);  Chandler  v. 

2  The  Liscard,  56  Fed.  44,  1  Pars.  Blogg   (1898),   1   Q.   B.   32   (a  sunken 

Mar.  Ins.,  630.  barge);  The  Munroe  (1893),  Prob.  248 

^London  Assur.   Co.   v.   Companhia  (projecting  wreck). 

De,  etc.,  167  U.  S.  149,  17  S.  Ct.  785,  42  e  London  Assur.   v.   Companhia  De, 

L.  Ed.  113.  etc.,  167  U.  S.  149,  158,  17  S.  Ct.  785, 

i  Lake  V.  Columbus  Ins.  Co.,  13  Ohio,  42  L.  Ed.  113;  McDougle  v.  Rojial  Ex- 

48,  42  Am.  Dec.  188.  chane     Assurance,    4    Camp.    283,    4 

6  See  next  section.     After  the  word  Maule  &  S.  503,  1  Stark.  130  (a  minute 

"stranded  "  in  the  memorandum  clause,  and  a  half  on  a  rock  not  enough  to  con- 

the  words  "sunk  or  burnt"  are  often  stitute  stranding);  Baker  v.  Towry,  1 

added  and  sometimes  the  words  "or  Stark.  436  (fifteen  to  twenty  minutes 

the  damage  caused  by  collision,"  Lon-  on  a  rock  held  sufficient). 

don  Assur.  V.  Companhia,  etc.,  1671].  S.  T  Bowring  v.  Elmslie,  7  T.  R.  216, 

149,  17  S.Ct.  785,  42  L.Ed.  113.    As  to  note.    A  mere  collision,  however,  with 

what  constitutes  a  sinking  see  Bri/ant  a  pier  or  similar  structure  is  not  strand- 


V.  London  Assur.,  2  Times  L.  R.  591 
Anderson  v.  Royal  Exch.,  7  East,  38 
DoyU  V.    Dalla.o,  1    Moo.   <fe  Rob.   48 


ing.  Union  Mar.  Ins.  Co.  v.  Borwick 
(1895),  2  Q.  B.  279. 


646  MEANING   AND   LEGAL   EFFECT   OF   MARINE   POLICY 

whether  put  there  voluntarily  or  otherwise.^  Accordingly,  it  will  be 
observed  that  two  factors  must  combine,  to  constitute  a  stranding, 
(1)  Something  unusual  mui^t  happen  to  the  ship,  and  (2)  she  must 
remain  fast  for  some  considerable  or  appreciable  time.^  And  it  will 
also  be  observed  that  the  amount  of  damage  sustained  is  no  sure 
criterion  for  determining  whether,  on  the  one  hand,  there  is  a  strand- 
ing, or,  on  the  other,  a  grounding  in  usual  course  or  a  collision  in  un- 
usual course.'"* 

The  voluntary  stranding  of  a  ship  in  the  presence  of  an  extreme 
peril  is  not,  by  the  practice  prevailing  in  England,  a  general  average 
act  which  calls  for  general  contribution  from  the  other  interests; 
but,  as  before  shown,  the  rule  is  otherwise  in  the  United  States.^ 

§  461.  Cargo  on  Deck. — Cargo  on  deck  is  not  covered  by  this  policy 
unless  specially  indorsed  hereon;  in  all  cases  to  be  free  from  loss  by  wet, 
breakage,  leakage,  or  exposure. 

The  general  rule  in  regard  to  deck  load,  and  the  effect  of  custom 
upon  it,  have  been  already  considered.^  A  learned  English  judge 
says,  "goods  on  deck  are  always  assumed  to  be  at  more  than  ordi- 
nary risk."  ^ 

Of  course,  damage  by  damp,  wet,  worms,  insects,  abnormal  delay, 
robbery  or  any  other  accidental  injury  may  be  covered  by  special 
clauses  added  to  the  policy  in  return  for  an  additional  premium.''' 

§  462.  Blocka.de,— Warranted  not  to  abandon  in  the  case  of  blockade, 
and  free  from  any  expense  in  consequence  of  capture,  seizure,  detention, 

^Potter  V.  Suffolk  Ins.  Co.,  19  Fed.  Q.  B.  D.  538.     But  taking  the  ground 

Cas.  1186,  2  Sumn.  197.     As  where  a  in  the  ordinary  manner  at  ebb  of  tide 

ship  at  low  tide  took  the  ground  vio-  is  not  stranding,  Kingsjord  v.  Marshall, 

lently,  breaking  timbers,  Carruthers  v.  8  Bing.  458;  Hearn  v.  Edmunds,  1  B. 

Sydebotham,  4    Maule    &    S.    77.      Or  &B.  mS;  Magnus  v.  Buttetner,!!  C.B. 

grounded  on  unknown  piles,  Rayner  v.  876. 

Godmond,   5    Barn.    &   Aid.    225.      Or  ^  Lake  w  Columbus  Ins.  Co.,  13  Ohio 

grounded  after  striking  the  fluke  of  an  48,  42  Am.  Dee.  188. 

anchor,  Barroui  x.  Bell.  4  Barn.  &  Cr.  ^London  Assur.   v.   Companhia  De, 

736,  7  Dowl.  &  Ryl.  244.     Or  fell  oyer  etc.,  167  U.  S.  149,  supra,  17  S.  Ct.  785; 

by  parting  of  a  rope  fastened  to  a  pier,  Harman  v.  Vaux,  3  Camp.  429;  Hearne 

Bishop  V.  Pentland.,  7  Barn.  &  Cr.  219,  v.  Edmunds,  1  Brod.  &  Bing.  388. 

1  Man.  &  Rye,  49.    Or  rested  on  a  bank  *  See  §  220,  supra. 

of  stones  and  rubbish   becau.se  of  an  ^  ^^ee  §§  416,  435,  supra. 

accidental  stretching  of  a  rope.  Wells  ^  Daniels  v.  Harris,  L.  R.  10  C.  P.  1 

V.  Hopwood,  3  Barn.   &  Ad.  20.     Or  (loss   by  jettison   of  wine   loaded   on 

took  the  ground  at  low  water  being  deck  after  the  ship's  hold  had   been 

driven  into  harbor  by  stress  of  weather,  filled  up  with  other  cargo). 

Corcoran  v.  Gurney,  1  Ell.  &  B.  456,  16  7  Schlo.ss  Bros.  v.  Stevens  (1906),  11 

Eng.  L.  &  Eq.  461.     Or  on  grounding  Com.    Cas.    270.      And    see    Cory    v. 

pitched  into  an  unknown  hole  caused  Boylston  F.  &  M.  Ins.  Co.,  107  Masa 

by   the   paddles   of   steamers   at   low  140,  9  Am.  Rep.  14.                   j^ 

tide,    Letchford    v.    Oldham,    T..    R.    5  #• 


WARRANTY  OF  NEUTKALITV  647 

or  blockade,  but  in  the  event  of  blockade,  to  be  at  liberty  to  proceed  to  an 
open  port  and  there  end  the  voyage. 

This  expressly  limits  a  liability  which  would  otherwise  be  imposed 
upon  the  insurers  by  the  general  terms  of  the  body  of  the  policy.' 
When  the  master  of  the  ship  finds  the  port  of  destination  blockaded, 
it  is  often  difficult  to  determine  what  course  of  action  is  most  ex- 
pedient for  him  to  adopt.  A  ship  attempting  to  run  a  blockade 
exposes  itself  to  the  penalty  of  capture  and  confiscation  by  the 
power  establishing  the  blockade.-  Without  this  special  warranty 
it  has  been  held  that  if,  on  arrival  at  a  port,  the  captain  finds  it 
blockaded,  he  may  not  on  that  account  abandon  his  voyage,  but 
is  at  liberty,  so  far  as  insurance  is  concerned,  to  sail  to  a  near  port 
and  await  the  raising  of  the  blockade.^  But  it  has  also  been  held 
that  where  a  ship  has  been  ordered  off  by  a  blockading  force  and 
compelled  to  give  up  the  voyage  and  return  to  the  home  port,  the 
loss  is  covered  by  the  policy. ** 

By  the  warranty  the  insured  agrees  not  to  abandon  to  the  under- 
writer, as  for  a  total  loss,  on  the  ground  that  the  voyage  has  been 
interrupted  by  a  blockade.^ 

The  warranty  free  from  capture,  seizure,  or  detention,  etc.,  has 
already  been  considered.'' 

§  463.  Warranty  of  Neutrality. — Where  ship  or  merchandise  is 
expressly  warranted  neutral,  there  is  an  implied  condition  that  the 
property  shall  have  a  neutral  character  at  the  commencement  of  the 
risk,  and  that,  so  far  as  the  assured  can  control  the  matter,  its  neu- 
tral character  shall  be  preserved  during  the  risk.'' 

Where  a  ship  is  expressly  warranted  "neutral"  there  is  also  an 
implied  condition  that,  so  far  as  the  assured  can  control  the  matter, 

^  Radcliff    V.     United    Ins.     Co.,    7  ^  Blackenhagen  v.  London  Assur.,  1 

Johns.  (N.  Y.)  38,  9  Johns.  (N.  Y.)  277.  Camp.  454. 

In  general  if  blockade,  etc.,  breaks  up  '^  Viqers  v.  Ocean  Ins.  Co.,   12  La. 

the  voyage  the  insured  may  abandon  362,  32  Am.  Dec.   118;   Thompson  v. 

and  claim  total  loss,  §§  432,  193.     As  Read,  12  Serg.  &  R.  (Pa.)  440.     And 

to  privilege  to  go  to  a  "neighboring  see    Wilson    v.    United    Ins.    Co.,    14 

port,"  see  Ferguson  v.  Phoenix  Ins.  Co.,  Johns.  (N.  Y.)  227.    An  unauthorized 

5  Binn.  (Pa.)  544.  warning   to   the   ship   not   to   proceed 

2  The  Cohnnhia,  1  C.  Rob.  154;  The  does  not  render  the  insurer  liable  for  :i 

Panaqhia  Phomha,  12  Moo.  P.  C.  168.  breaking  up  of  the   voyage,   King  v. 

If  a  blockade  is  by  sea  only,  goods  may  Delaware  Ins.  Co.,  6  Cranch,  71,  3  L. 

be  sent  around  by  land  to  the  block-  Ed.  155.     And  see  §  432,  supra. 

aded  port  without  violating  the  block-  »  Radcliffe    v.     United    Ins.    Co.,    7 

ade,   The  Ocean,  3  C.  Rob.  297.     In  Johns.  (N.  Y.)  38,  9  Johns.  277. 

case  of  extreme  necessity,  from  mo-  «  See  §  453. 

tives  of  humanity,  a  ship  may  enter  a  ^  Cleveland    v.     Union    Ins.    Co.,    8 

blockaded    port,    The    Fortuna,    6    C.  Mass.  308. 
Rob.  27. 


648 


MEANING   AND    LEGAL    EFFECT   OF   MARINE    I'OUCY 


she  shall  be  properly  documented;  that  is  to  say,  that  she  shall  carry 
the  necessary  papers  to  establish  her  neutrality,  and  that  she  shall 
not  falsify  or  suppress  her  papers,  or  use  simulated  papers.  If  any 
loss  occurs  through  breach  of  this  condition  the  insurer  may  avoid 
the  contract.^  But  it  is  said  that  the  application  of  this  implied 
condition  is  limited  to  the  insurance  of  vessels.^ 
Akin  to  the  warranty  of  neutrality  is  the  warranty  of  nationality.^ 


§  464.  Riders. — A  variety  of  forms  of  policies  are  in  use  both  in 
ocean  marine  and  inland  marine  insurance,  and  a  great  number  of 
special  clauses  have  been  framed  to  be  attached  to  the  policy  in  the 
form  of  riders  or  indorsements,  sometimes  for  the  purpose  of  restrict- 
ing, and  sometimes  for  the  purpose  of  extending,  the  liability  of  the 
underwriters  for  special  purposes.^ 

Many  of  these  special  clauses  have  already  been  considered  in 
this  chapter.  Others  are  the  warranty  to  sail  on  or  before  a  cer- 
tain date,^  and  the  warranty  of  the  condition  or  location  of  the 
vessel  on  the  date  specified.^ 

the  general  form,  Washburn  &  M.  Mfg. 
Co.  V.  Reliance  Ins.  Co.,  179  U.  S.  1,  21 
S.  Ct.  1,  45  L.  Ed.  49;  Chicago  Ins.  Co. 
V.  Graham,  etc.,  Co.,  108  Fed.  271,  47 
C.  C.  A.  320.    And  see  §  87,  supra. 

5  "Sailing"  is  thus  defined:  "That 
period  of  time  when  the  vessel  breaks 
ground,  being  at  that  time  fully  fit  for 
sea,  having  the  cargo  on  board  which 
she  intends  to  carry,  with  a  competent 
crew,  and  having  permission  to  leave 
by  having  the  Custom  House  clear- 
ances on  board,"  Roelandts  v.  Harri- 
son, 23  J.  L.  Exch.  173.  To  comply 
with  the  warranty  (Eldridge,  147), 
first,  the  ship  must  be  ready  and  prop- 
erly equipped,  Ridsdale  v.  Newham, 
4  Camp.  Ill;  Bouillon  v.  Lupton,  23 
L.  J.  C.  P.  37;  second,  the  ship  must 
actually  break  ground  and  proceed  on 
her  voyage,  Nelson  v.  Salvador,  1  M.  & 
M.  309;  Wood  v.  Smith,  L.  R.  5  P.  C. 
451;  Tk".  Cachapool,  7  P.  D.  217; 
third,  when  the  captain  unmoors,  or 
weighs  anchor  and  leaves  port  he  must 
intend  to  proceed  on  the  contemolated 
voyage,  Sea  Ins.  Co.  v.  Blogg  (1898),  1 
Q.  B.  27,  31.  A  warranty  "to  depart 
from,"  means  to  be  out  of  port  on  or 
before  the  day  named,  Moir  v.  Roval 
Exch.  Assiir.,  3  M.  &  S.  461.  So  also 
"to  sail  from,"  Lang  v.  Anderdon,  3 
B.  &  C.  495. 

6  Blackhurst  v.  Cockell,  3  T.  R.  360; 
Colby  V.  Hunter,  1  M.  &  M.  81. 


1  Trinder  v.  Thames,  etc.,  Ins.  Co. 
(1898),  2  Q.  B.  128;  Stacker  v.  Mer- 
rimack M.  &  F.  Ins.  Co.,  6  Mass. 
220. 

2  Carruthers  v.  Gray,  3  Camp.  142; 
Hobbs  v.  Henning,  34  L.  J.  C.  P. 
117. 

^Geijer  v.  Aguilar,  7  T.  R.  681 
("warranted  American  property"); 
Kindersley  v.  Chase,  Marsh.  426  ("war- 
ranted Swedish  property");  Tabbs  v. 
Bendelac\-,  4  Esp.  108  ("warranted  to 
be  American  property");  Atherton  v. 
Brown,  14  Mass.  152;  Lewis  v.  Thatcher, 
15  Mass.  431;  Coolidge  v.  Brigham,  1 
Mete.  (Mass.)  552. 

■*  Warranted  no  iron  or  ore  in  excess 
of  registered  tonnage,  Hart  v.  Standard 
Mar.  Ins.  Co.  (188^),  22  Q.  B.  D.  499. 
Warranty  of  watchman  on  a  canal 
boat,  Snijder  v.  Home  Ins.  Co.,  133 
Fed.  848.  Insurance  general  average 
and  salvage  loss  only,  Munich  Assxir. 
Co.  V.  Dodwell,  128  Fed.  410,  63  C.  C.  A. 
152.  Lighterman's  or  Tower's  liability, 
Munson  v.  Stand.  Mar.  Ins.  Co.,  145 
Fed.  957,  92  Fed.  517;  Joyce  v.  Ken- 
nard  (1871),  L.  R.  7  Q.  B.  78.  See 
English  clauses  and  warranties,  Ar- 
nould,  Ins.  (7th  ed.),  1505-15.  All 
parts  of  the  policy  including  a  rider 
are  to  be  harmonized  if  possible,  Jack- 
son V.  Brit.-Arn.  Assur.  Co.,  106  Mich 
47,  63  N.  W.  899,  30  L.  R.  A.  636.  If 
irreconcilable  the  special  rider  controls 


ADJUSTMENT  649 

The  brig  Helen  was  insured  "at  and  from  Calais,  Maine,  on  the 
16th  day  of  July,  at  noon,  to,  at  and  from  all  ports  and  places,  in 
the  coasting  business,  for  six  months."  Neither  party  knew  that 
the  vessel  had  already  sailed  from  Calais.  It  was  the  intention  of 
both  parties  to  insure  on  time  without  regard  to  the  place  where 
the  vessel  might  be.  The  court  held  that  the  policy  attached  and 
that  the  underwriters  were  liable.^ 

Yet  other  special  provisions  are  the  warranty,  in  time  of  war,  to 
sail  under  the  protection  of  an  armed  convoy;  ^  the  cancellation  of 
charter  clause  in  policies  on  freight;  ^  the  negligence  clause  in  favor 
of  the  insured;  "*  the  privilege  to  deviate  from  the  voyage  named 
either  for  a  premium  to  be  agreed  upon  or  at  tariff  rates,^  and  honor 
clauses,  sometimes  called  P.  P.  I.  clauses,  meaning  in  substance 
that  the  mere  production  of  the  policy  is  proof  of  an  insurable  in- 
terest.*' 

§  465.  Adjustment. — Adjustments  of  marine  losses  between  the 
insurers  and  the  insured  are  frequently  a  matter  of  great  complication 
and  usually  the  task  of  working  out  such  an  adjustment  is  put  into 
the  hands  of  professional  experts  called  average  adjusters. 

The  adjusters  make  up  an  account,  apportioning  the  loss  according 
to  the  respective  rights  of  the  different  interests.^  If  there  are  gen- 
eral average  losses,  these  must  be  included;  but  if  there  has  been  a 
general  average  adjustment  in  the  proper  foreign  port  between  the 
parties  primarily  interested  in  it,  to  wit,  the  owners  of  ship,  cargo, 

1  Martin  v.  Fishing  Ins.  Co.,  20  L.  R.  2  A.  &  E.  393.  Instances  of 
Pick.  (Mass.)  389,  32  Am.  Dec.  220.  errors    of    navigation:    port    hole    or 

2  Sanderson  v.  Busher,  4  Camp.  54  hatches  open,  Carmichael  v.  Liverpool 
(stress  of  weather,  no  excuse  for  Sailing  S.  Owners,  19  Q.  B.  D.  242; 
breach);  Anderson  v.  Pitcher,  3  Esp.  sea  cock  open.  Good  v.  London,  etc., 
124.  The  vessel  may  sail  without  Assoc,  L.  R.  6C.  P.  fC3;  pin  of  stearing 
convoy  to  place  of  rendezvous  to  meet  gear  out  of  place,  The  Warkuorth,  9 
convoy,  Waruick  v.  Scott,  4  Camp.  62.  P.  D.  20. 

3  Jackson  v.  The  Union  Mar.  Ins.  ^ Hrderabad  Co.  v.  Willovghbv  (1S99), 
Co.,  L.  R.  10  C.  P.  125;  The  Alps  2  Q.  B.  530;  Lincoln  v.  Boston  Mar. 
(1893),  Prob.  109;  In  re  Jamison,  etc.,  Ins.  Co.,  159  Mass.  337,  34  N.  E.  456. 
Assoc.  (1895),  2  Q.  B.  90.  But  this  privilege  dees  not  permit  an 

4  The  object  of  the  clause  primarily  absolute  change  of  voyage,  since  devia- 
is  to  hold  the  underwriter  where  the  tion  means  departure  from  a  voyage 
proximate  cause  of  the  loss  is  negli-  begun,  Simon  Israel  &  Co.  v.  Sedguick 
gence  and  not  one  of  the  perils  speci-  (1893),  1  Q.  B.  303. 

fied,  Price  &  Co.  v.  Union  Lighterage  ^  An  honor  clause  renders  the  insur- 

Co.  (1903),  1  K.  B.  750.    For  instance,  ance  illegal.    Payment  is  discretionary 

where  the  ship's  spars  had  to  be  used  with  the  insurer,  Berridge  v.  Ma?i.  On. 

as   fuel    because,   through   negligence,  Ins.  Co.,   18  Q.   B.  D.  346;  Gedge  v. 

the   supply   of   coal   was    insufficient,  Royal  Exch.  Assur.  (1900),  2  Q.B.  214. 

Greenock  S.  S.  Co.  v.  Maritime  Ins.  Co.  "^  International  Nav.  Co.  v.  Sea  Ins. 

(1903),  1  K.  B.  367.    The  stowage  of  Co.,    129    Fed.    13;    De    Farconnet    v. 

cargo  may  be  negligent,   The  Duero,  Western  Ins.  Co.,  110  Fed.  405. 


050 


MEANING    AM)    i.ECJAL    EFFECT    OF    MARINE    FOLICY 


and  freight,  or  other  insured  interest,  respectively,  then,  it  has  been 
held,  the  results  arrived  at  in  that  adjustment  should  be  taken  as 
conclusive  and  incorporated  into  the  adjustment  between  the  in- 
surers and  the  insured.^ 

The  professional  adjuster  is  supposed  to  act  in  a  judicial  rather 
than  in  a  partisan  capacity,  but  his  adjustment  is  not  binding  upon 
any  of  the  parties  unless  by  special  agreement.'  In  practice  the 
adjustment  is  generally  made  the  basis  of  an  amicable  settlement 
among  the  different  interests.^ 

If  a  settlement  is  not  fraudulent,  defenses  under  the  policy  be- 
come merged  in  the  settlement.^  But  in  certain  jurisdictions,  by 
virtue  of  the  doctrine  of  indemnity,  the  insured  may  be  called  upon, 
after  a  settlement,  to  account  to  the  underwriters  for  any  receipts 


1  Strong  v.  .V.  Y.  Firemen's  Ins.  Co., 
11  Johns.  323;  Mavro  v.  Ocean  Mar. 
Ins.  Co.,  L.  R.  9  C.  P.  595;  Depan  v. 
Ocean  Ins.  Co.,  5  Cowen  (N.  Y.),  63; 
The  Mary  Thomas  (1894),  Prob.  108. 
Sometimes  eeneral  average  is  ex- 
pressly payable  as  per  foreign  state- 
ment, The  Mary  Thomas  (1894),  Prob. 
108;  Harris  v.  Scaramanga,  L.  R.  7 
C.  P.  481;  The  Brigalla  (1893),  Prob. 
201;  International  Nav.  Co.  v.  Sea  Ins. 
Co.,  129  Fed.  13. 

^  Bordes  v.  Hallet,  1  Caines  (N.  Y.), 
444. 

3  On  the  arrival  of  the  ship  partially 
damaged,  the  master  or  owner  of  the 
ship  advertises  for  bids  for  repairs. 
Bids  are  accepted,  the  survey  of  dam- 
age is  made,  and  contracts  for  rebuild- 
ing executed,  Johnston  v.  Columbian 
Ins.  Co.,  7  Johns.  (X.  Y.)  315.  These, 
with  the  protest,  bills  of  lading,  invoices, 
Allegre  v.  Man/land  Ins.  Co. ,  6  Har.  &  J. 
(Md.)  408, 14  Am.  Dec.  289,  the  freight 
manifest,  the  charter  party,  the  policies 
of  insurance,  and  any  other  proofs  of 
loss,  furnish  the  adjusters  with  material 
for  making  up  the  accounts.  Insured 
must  furnish  the  underwriter  with  rea- 
sonable notice  and  proof  of  their  loss, 
Walsh  V.  Washington  Mar.  Ins.  Co. ,  32 
N.  Y.  427;  Rodee  v.  Detroit  F.  &  M. 
Ins.  Co.,  74  Hun,  146,  26  N.  Y.  Supp. 
242;  Savage  v.  Corn  Exch.,  etc.,  Ins.  Co., 
4  Bosw.  (N.  Y.)  1,  aff'd  36  N.  Y.  655; 
Lawrence  v.  Ocean  Ins.  Co.,  11  Johns. 
(N.  Y  )  241.  Need  not  in  proof  of  loss 
apportion  loss  among  different  in- 
surers, Fuller  V.  Detroit  &  M.  Ins.  Co  , 
36  Fed.  469.  1  L.  R.  A.  801.  Some- 
times policy  provides  how  claims  shall 
be  adjusted  as  "according  to  usages  of 


Lloyd's,"  London  Assur.  v.  Companhia 
De,  etc.,  167  U.  S.  149,  17  S.  Ct.  785.  A 
cancellation  of  a  policy  made  in 
ignorance  of  a  loss  already  sustained  is 
not  binding,  Duncan  v.  N.  Y.  Mid.  Ins. 
Co.,  138  N.  Y.  88,  33  N.  E.  730,  20 
L.  R.  A.  386. 

*  Smith  V.  Glens  Falls  Ins.  Co.,  62 
N.  Y.  85;  Stache  v.  St.  Paid  F.  &  M. 
Ins.  Co.,  49    Wis.  89,  5    N.  W.  36,  35 
Am.  Rep.  772.    Until  actual  payment 
there  is  no  merger  of  defenses.      But 
settlement  will  be  opened  for  fraud  or 
misrepresentation,  Faugier  v.   Hallett, 
2  Johns.  Cas.   (N.  Y.)  233.     Thus  if 
proofs  of  loss  are  fraudulent,  McConnel 
V.  Delaware  M.  S.  Ins.  Co.,  18  111.  228; 
Hartford  L.  S.  Ins.   Co.   v.  Matthews, 
102  Mass.  221.    Compromise  and  pay- 
ment  of   the   compromise   amount  in 
life  insurance  on  the  mistaken  supposi- 
tion that  the  insured  has  been  dead 
more  than  seven  years,  when  in  fact  he 
has  not  died,  are  binding,  and  will  not 
be  disturbed,  .V.   Y.  Life  Ins.  Co.  v. 
Chittenden  (la.,  1907),  112  N,  W.  96; 
Sears  v.  Grand  Lodge,  163  N.  Y.  374, 
57  N.  E.  618.    If  the  insured  has  given 
a  release,  it  constitutes  a  complete  de- 
fense, unless  impeached  for  fraud  or 
mistake,  and  the  proof  must  be  clear 
and     convincing     beyond     reasonable 
controversy  before  it  will  be  opened, 
Steffen    v.    Supreme    Assembly    (Wis., 
1907),  110  N.  W.  401    (citing  cases). 
So  also  in  marine  insurance  a  settle- 
ment as  of  partial  losses  and  cancella- 
tion of  policy  were  hold  binding  where 
both  parties  were  ignorant  of  the  fact 
that  the  loss  was  total,  Soper  v.  At. 
Mut.   F.   &  M.   Ins.   Co.,  120  Mass 
267. 


ADJUSTMENT 


651 


subsequently  obtained  from  extraneous  sources  tending  to  diminish 
the  loss  under  the  policies.^ 


1  See  §  54.  Limitation  of  time  for 
suit,  Rogers  v.  /Etna.  Ins.  Co.,  95  Fed. 
103,  35  C.  C.  A.  396;  Harveij  v.  Detroit 
F.  &  M.  Ins.  Co.,  120  Mich.  601,  79 
N.  W.  898;  McWilliams  v.  Home  Ins. 
Co.,  40  App.  Div.  400,  57  N.  Y.  Supp. 
1100.  If  upon  the  adjustment  it  ap- 
pears that  the  insured  interest  is  short, 
for  instance,  where  only  one-half  of  the 
insured  cargo  was  in  fact  shipped,  the 
insured  is  entitled  to  a  return  of  pre- 
mium proportionate  to  the  shortage, 
§  62,  supra;  Forbes  v.  Aspinall,  13 
East,  323;  Rickman  v.  Carstairs,  5  B. 
&  Aid.  651;  The  Main  (1894),  Prob. 
320;  Fisk  v.  Masterman,  8  M.  &  W.  105 
(over-insurance).  As  already  shown, 
if  the  risk  does  not  attach ,  the  premium 
is  returnable,  §  61,  supra;  Tyrie  v. 
Fletcher,  2  Cowp.  666;  Stevenson  v. 
Snow,  3  Burr.  1240.  For  example, 
where  by  mistake  goods  were  insured 
on  the  wrong  ship,  Martin  v.  Situell,  1 
Shower,  156.  So  also  if  for  misrep- 
resentation of  the  insured  without  his 
fraud  the  contract  is  rendered  void 
ab  initio,  the  premium  is  returnable 
provided  no  clause  of  the  policy  pre- 
vents, Tyler  v.  Home,  1  Park,  455; 
Colby  V.  Hunter,  3  C.  &  P.  7.  The 
same  rule  obtains  in  other  branches  of 
insurance,  Jones  v.  Ins.  Co.,  90  Tenn. 
604,  18  S.  W.  260,  25  Am.  St.  R.  706; 
Joel  v.  Law  Union,  etc.,  Ins.  Co.  (1908), 
2  K.  B.  431.  But  if  the  policy  is 
avoided  for  fraud  on  the  part  of  the 
insured  he  cannot  recover  back  the 
premium,  Blasser  v.  Ins.  Co.,  37  Wis. 
31,  19  Am.  Rep.  747;  Feise  v.  Parkin- 
son, 4  Taunt.  640;  Anderson  v.  Thorn' 


ton,  8  Exch.  425.  If  the  underwriter  is 
guilty  of  fraud  the  insured  may  rescind 
the  contract  and  recover  the  premium, 
Duff  ell  v.  Wilson,  1  Camp.  401,  §61, 
supra.  In  general,  if  the  risk  attaches 
even  for  a  short  time  the  premium  is 
not  apportionable  or  returnable  in  the 
absence  of  express  provision  to  that 
effect,  §  61 ,  supra;  Mailhoit  v.  Met. 
Life  Ins.  Co.,  87  Me.  374,  32  Atl.  989, 
47  Am.  St.  R.  336;  Stone  v.  Mar.  Ins. 
Co.,  1  Exch.  81;  Bradford  v.  Symond- 
son,  7  Q.  B.  D.  456.  Even  though  by 
early  deviation  followed  by  a  loss,  the 
insurance  becomes  of  no  value  to  the 
insured,  Bermon  v.  Woodbridge,  2 
Doug.  781.  If  the  premium  for  a  por- 
tion of  the  time  is  returned  pursuant 
to  special  clause  in  a  time  policy  the 
insurance  is  canceled  for  that  period, 
Baines  v.  Wood  fall,  6  C.  B.  (N.  S.)  657. 
If  the  contract  is  void  for  illegality  and 
both  parties  are  in  pari  aelicto  the 
court  will  assist  neither,  'Andree  v. 
Fletcher,  3  T.  R.  266;  Loury  v.  Bour- 
dien,  2  Doug.  468;  Wheeler  v.  Associa- 
tion, 102  111.  App.  48.  But  the  insured 
if  innocent  may  recover  his  premiums, 
Am.  Mut.  L.  Ins.  Co.  v.  Bertram,  163 
Ind.  51,  70  N.  E.  258,  64  L.  R.  A.  935; 
Oom  V.  Bruce,  12  East,  225.  In  prac- 
tice, any  common-law  question  relat- 
ing to  the  return  of  unearned  premium 
arises  more  frequently  in  connection 
w-ith  the  marine  policy  than  in  connec- 
tion with  any  other.  The  fire  policy 
contains  a  special  provision  on  this 
subject,  and  the  claimant  under  the 
life  policy  is  usually  striving  to  collect 
his  insurance  money. 


CHAPTER  XXI 


Title,  Guarantee,  and  Liability  Insurance 


§  466.  Introductory. — Besides  the  leading  branches  of  insur- 
ance, constituting  the  subject  of  the  preceding  chapters,  contracts 
in  the  form  of  insurance  have  been  employed,  both  in  earlier  times 
and  in  modern  times,  for  many  and  varied  purposes  of  a  more 
special  character.^     Some  of  these  special  kinds  of  insurance  have 


1  Among  the  familiar  modern  in- 
stances may  be  mentioned  insurance 
against  loss  by  hail,  Barrett  v.  Des 
Moines,  etc.,  Assn.,  120  Iowa,  184,  94 
N.  W.  473;  loss  by  tornado  or  storm, 
Mvt.  F.  Ins.  Co.  V.  Dehaven  (Pa.,  1886), 
5  Atl.  65;  Kennedy  v.  Aqricultural  Ins. 
Co.  (So.  Dak.),  110  N.  W.  116;  break- 
ing of  plate  glass  windows,  doors,  etc., 
Vorse  V.  Jersey  Plate  Glass  Ins.  Co., 
119  Iowa,  555,  93  N.  W.  569,  60  L.  R. 
A.  838,  97  Am.  St.  R.  330;  Munk  v. 
Maryland  Casiialty  Co.,  122  App.  Div. 
(N.  Y.)  487;  Munk  v.  Maruland  Cas- 
ualty Co.,  116  App.  Div.  756;  damage  to 
property  from  steam  boiler  explosions, 
Chicago  Sugar  R.  Co.  v.  Am.  Steam 
Boiler  Co.,  48  Fed.  198,  aff'd  57  Fed. 
294,  6  C.  C.  A.  336;  Emhlcr  v.  Hartford 
Steam  B.,  etc.,  Co.,  158  N.  Y.  431,  53 
N.  E.  212;  loss  of  packages  in  the  mail. 
Banco  de  Sonora  v.  Bankers'  Mut.  Cas. 
Co.  (Iowa),  95  N.  W.  232;  accident  to, 
or  death  of,  live  stock,  State  v.  Vigilant 
Ins.  Co.,  30  Kan.  585,  2  Pac.  840; 
State  V.  Northwestern  Mut.  Live  Stock 
Assn.,  16  Neb.  549,  20  N.  W.  852; 
Kells  V.  Ins.  Co.,  64  Minn.  390,  67 
N.  W.  215,  58  Am.  St.  R.  541;  Lathers 
V.  Mut.  Fire  Ins.  Co.  (Wis.,  1908),  116 
N.  W.  1;  burglaries,  Bankers'  Mut.  Cas. 
Co.  V.  State  Bank,  150  Fed.  78  (insurer 
had  no  right  to  replace  damaged  safe 
as  part  payment);  U.  S.  Fidelity  &  G. 
Co.  V.  Linehan  (N.  H.),  58  Atl.  956; 
Bankers'  Mut.  Cas.  Co.  v.  First  Nat. 
Bank,  131  la.  456,  108  N.  W.  1046; 
Mt.  Eden  Bank  v.  Ocean  Ace.  &  Guar. 
Co.  (Ky.,  1906),  96  S.  W.  450  (loss  by 
fire,  not  by  burglary);  Pearlman  v. 
Metropolitan  Surety  Co.,  127  App.  Div. 
(N.  Y.)  539;  Reich  v.  Maryland  Cos. 


Co.,  54  Misc.  (N.  Y.)  585;  Schindler  v. 
U.  S.  Fidelity  &  Guar.  Co.,  58  Misc. 
(N.  Y.)  532  (sufficiency  of  evidence 
to  prove  burglary);  thefts,  People  v. 
Fidelity  &  Cas.  Co.,  153  111.  25,  38 
N.  E.  752;  State  v.  Vigilant  Ins.  Co., 
30  Kan.  585,  2  Pac.  840;  Re  George  & 
Burglary  Ins.  Assn.  (1898),  2  Q.  B. 
136;  insurance  guaranteeing  crop  re- 
turns. In  re  Hogan,  8  N.  D.  301;  78 
N.  W.  1051,  45  L.  R.  A.  166,  73  Am. 
St.  R.  759.  Prior  to  the  passage  of  the 
statutes,  19  Geo.  II,  c.  37,  and  14 
Geo.  Ill,  c.  48,  requiring  an  insurable 
interest  to  support  the  contract  of 
marine  and  life  insurance,  transactions 
at  English  IJoyd's  and  elsewhere  had 
often  degenerated  into  the  rankest 
kind  of  gambling.  The  climax  was 
reached  by  the  organization  of  a 
scheme  to  insure  female  chastity  and 
another  against  divorces.  It  is  re- 
ported that,  upon  the  successful  ter- 
mination of  a  certain  venture,  large 
sums  of  money  were  paid  out  by  some 
of  the  underwriters  at  Lloyd's,  who 
had  wagered  that  a  young  man  could 
not  go  to  Lapland  and  bring  back 
within  a  specified  time  two  reindeer 
and  two  Lapland  women.  An  issue 
of  the  London  Chronicle  in  1768  con- 
tains the  following  statements:  "The 
introduction  and  amazing  progress  of 
illicit  gaming  at  Lloyd's  Coffee-house 
is,  among  others,  a  powerful  and  very 
melancholy  proof  of  the  degeneracy  of 
the  time.  Though  gaming  in  any  de- 
gree is  perverting  the  original  and  use- 
ful design  of  that  Coffee-house,  it  may 
in  some  measure  be  excusable  to  specu- 
late on  the  following  subjects:  Mr. 
Wilkes  being  elected  member  for  Lon 


TITLE   INSURANCE  653 

assumed  a  commercial  importance  so  great  that  they  must  receive 
more  than  passing  notice. 

§  467.  Title  Insurance. — In  the  larger  cities,  corporations  are 
now  organized  to  search  real  estate  titles  and,  if  desired,  to  issue  a 
policy  insuring  the  title,  at  the  instance  most  frequently  of  a  would-be 
purchaser  or  mortgagee. 

The  facilities  of  such  permanent  organizations  for  utilizing,  ar- 
ranging, and  recording  the  past  results  of  their  extensive  and  multi- 
plied examinations  of  titles  are  so  great  that  it  is  becoming  more 
and  more  difficult  for  individual  attorneys  to  compete  with  their 
prices  in  this  branch  of  legal  work.  Indeed,  the  title  company,  either 
by  taking  every  block  or  every  lot  in  the  city  as  a  separate  unit, 
keeps  a  book  account  showing  every  title  to  date.^ 

Under  the  contract  for  merely  searching  the  title,  the  title  com- 
pany may  be  held  liable  for  any  damages  which  its  negligence  may 
have  imposed  upon  its  customer.^  But  where  the  company  issues 
its  policy  of  insurance  guaranteeing  that  the  title  is  not  unmarket- 
able or  defective,  no  question  of  negligence  in  searching  can  arise. 
The  guarantee  is  absolute,  subject  onl}'  to  the  conditions  of  the 
policy.^ 

The  Title  Guarantee  &  Trust  Co.  of  New  York  by  its  policy  obli- 
gates the  insurer,  in  substance,  to  do  three  things  for  the  protection 
of  the  insured:  (1)  to  defend  suits  against  the  title  at  the  expense 

don;   which  was  done  from  5   to  50  surance,  instead  of  protecting  the  in- 

guineas   per   cent;    Mr.   Wilkes   being  sured  against  matters  that  may  arise 

elected   member  for  Middlesex,   from  during  a  stated   period   after  the  is- 

20  to  70  guineas  per  cent;  Alderman  suance  of  the  policy,  is  designed  to 

Bond's  life  for  one  year,  now  doing  at  save    him    harmless    from    any    loss 

7  per  cent;  on  Sir  J.   H.    (mark  the  through  defects,  liens  or  incumbrances 

modesty!)    being    turned    out    in    one  that   may   affect  or   burden   his   title 

year,  now  doing  at  12  guineas  per  cent;  when  he  takes  it.    It  must  follow  as  a 

on  John  Wilkes'  life  for  one  year,  now  general  rule,  therefore,  that  when  the 

doing  at  five  per  cent.     (N.  B.    War-  insured  get  a  good  title  the  covenant 

ranted   to  remain  in   prison   for  that  of  the  insurer  has  been  fulfilled  and 

period);  on  a  declaration  of  war  with  there  is  no  liability,"  Trenton  Potteries 

France  or  Spain  in  one  year,  8  guineas  Co.  v.   Title  Guar.   &   Trust  Co.,  176 

per  cent.     But,  when  policies  come  to  N.  Y.  65,  68  N.  E.  132. 

be  opened  on  two  of  the  first  peers  in  2  Ehmer  v.  Title  Guar.  <k  Trust  Co., 

Britain  losing  their  heads  at  IDs.  6d.  156  N.  Y.  10,  50  N.  E.  420. 

per  cent,  or  on  the  dissolution  of  the  3  Trenton  Potteries  Co.  v.  Title  Guar. 

present    parliament   within   one  year  (fe  Trus<  Co.,  176  N.  Y.  65,  68  N.  E.  132. 

at    5    guineas    per    cent,     which    are  And  see  Purcell  v.  Land  Title  Guar- 

now  actually  doing,  and  underwritten  antee  Co.,  94  Mo.  App.  5,  67  S.  W.  726; 

chiefly    by    Scotsmen,    at    the    above  Wheeler   v.    Equitable    Trust   Co.,   206 

Coffee-house,  it  is  surely  high  time  to  Pa.  St.  428,  55  Atl.  1065.     Deeds  and 

interfere."  incumbrances  not   of  record   are   not 

1  The  New  York  court  says:  "The  covered,  Bothin  v.  California  Title  his. 

risks  of  title  insurance  end  where  the  &  T.  Co.  (Cal.,  1908),  96  Pac.  500. 
risks  of  other  kinds  begin.     Title  in- 


654  t^lDELlTY    BONDS 

of  the  insurer;  (2)  to  pay  adverse  judgments  therein  rendered; 
(3)  and,  if  the  insured  contracts  to  sell  or  if  he  negotiates  a  loan  and 
the  title  is  refused,  to  test  its  validity  in  court  at  the  expense  of  the 
insurer,  and,  if  defeated,  either  to  pay  damages,  or  else  to  take  the 
property  at  the  contract  price  where  the  insured  has  contracted  to 
sell  it,  or  to  make  the  loan  where  he  has  negotiated  a  loan. 

The  contract,  however,  is  one  of  indemnity.*  It  is  not  enough  in 
order  to  establish  a  right  of  recovery  on  the  policy  that  the  insured 
is  able  to  prove  the  title  to  be  defective  or  unmarketable;  he  must 
go  further  and  show  that  he  has  actually  suffered  loss  thereby.^ 

§  468.  Fidelity  and  Guarantee  Insurance. — Persons  acting  in  a 
fiduciary  character,  or  occupying  positions  of  public  or  private  trust, 
are  often  obliged  to  give  bonds  or  undertakings  with  sureties,  con- 
ditioned on  the  faithful  performance  of  their  official  duty.  Familiar 
instances  are  testamentary  trustees,  when  not  expressly  relieved 
by  the  terms  of  the  instrument  appointing  them,  administrators, 
guardians,  receivers,  government  and  court  officials,  contractors 
engaged  in  public  works,  cashiers,  treasurers,  and  other  agents  em- 
ployed in  handling  considerable  sums  of  money  for  which  they 
must  give  account.^ 

So  also  in  certain  court  proceedings  bonds  or  undertakings  are 
required,  for  example,  in  prosecuting  appeals  from  judgments,  and 
in  procuring  injunctions  or  attachments. 

Individual  sureties  generally  act  gratuitously  and  as  matter  of 
favor  to  the  party  concerned,  but  usually  are  extremely  reluctant 
to  do  so,  especiall}^  if  the  amount  of  the  undertaking  is  large  or  its 
term  long  or  of  indefinite  duration.     Not  infrequentl}^  in  order  to 

1  Banes  v.  N.  J.  Title  Guarantee  &  Am.  Title  &  Trust  Co.  (Pa.,  1907), 
T.  Co.,  142  Fed.  957.  74  C.  C.  A.  127,  66  Atl.  561.     Also  the  rule  of  liberal 

2  Wheeler  v.  Equitable  Trust  Co.  construction  in  favor  of  the  insured 
(Pa.,  1908),  70  Atl.  750.  The  doc-  applies.  Minn.  Title  Ins.  &  Trust  Co.  v. 
trine  of  warranty  applies  to  title  in-  Drexel.  70  Fed.  194,  17  C.  C.  A.  56; 
surance,  Stensgaard  v.  St.  Paul  Real  Place  v.  St.  Paid  Title  Ins.  &  Trust 
Est.  Title  Ins.  Co.,  50  Minn.  429,  52  Co.,  67  Minn.  126,69  N.  W.  706,64  Am. 
N.  W.  910,  17  L.  R.  A.  575.  Also  the  St.  R.  404  ("tenancy  of  present  oc- 
doctrine  of  waiver,  Quigleif  v.  St.  Paul  cupants"  as  an  exception  to  liability 
Title  Ins.  &  Trust  Co..  60  Minn.  275,  construed,  also  the  existence  of  a  con- 
62  N.  W.  2S7.  Also  the  doctrine  of  tract  to  sell  as  a  condition  precedent 
subrogation,  St.  Paul  Title  Ins.  &  to  recovery  construed).  And  see 
Trust  Co.  V.  Johnson,  64  Minn.  492,  Wheeler  v.  Real  Est.  Title  Ins.  &  Trust 
67  N.  W.  543.  As  to  doctrine  of  rep-  Co.,  160  Pa.  St.  408,  28  Atl.  849  (fu- 
resentations,   see   case  where   the   in-  ture  liens  not  covered). 

sured  represented,  in  good  faith,  that  3  A  guardian  mingled  the  trust  funds 

he  held  the  fee,  but  the  court  subse-  with  his  own  and  the  surety  was  held 

quently  found  that  he  had  only  one-  liable,  U.  S.  Fidelity  &  Guar.  Co.  \. 

half   interest,    Folhrenbach  v.  German  State  (Ind.  App.,  1907),  81  N.  E.  226. 


CONTRACT   ONE   OF   INSURANCE   RATHER  THAN   SURETYSHIP     655 

qualify,  the  individual  surety  has  to  make  a  disclosure  regarding 
his  assets  and  obligations,  which  it  is  not  agreeable  to  render.  In- 
deed, in  former  times,  such  an  appointee  was  often  compelled  to 
refuse  the  coveted  position  because  unable  to  induce  his  friends 
to  execute  the  requisite  undertaking  as  his  sureties. 

Modern  fidelity  or  surety  companies  are  now  of  indispensable 
convenience  to  the  business  world,  and  have  largely  superseded 
individual  sureties  in  connection  with  bonds  and  undertakings; 
not  because  the  guaranty  of  such  a  corporation,  with  its  extensive 
and  uncertain  obligations,  is  of  necessity  more  reliable  than  an 
individual  guaranty,  but  because  it  is  more  easily  obtained. 

In  its  scope  the  usual  fidelity  bond  is  aimed  only  at  dishonest 
acts  of  the  employee.  Losses  due  merely  to  his  carelessness,  in- 
competence, or  bad  judgment  are  not  covered  by  its  terms. ^  But 
sometimes  fidelity  bonds  are  framed  to  insure  the  employer  against 
loss  sustained  through  the  negligence  of  the  employee  as  well  as 
through  his  dishonesty.^ 

The  plaintiffs,  Matthews  &  Co.,  held  a  fidelity  bond  to  indemnify 
them  for  pecuniary  loss  sustained  by  reason  of  any  "fraud  or  dis- 
honesty" on  the  part  of  their  travelling  salesman,  Connolly,  which 
should  amount  "to  embezzlement  or  larceny."  Of  the  sum  of 
$960.31  collected  in  Connecticut  for  goods  sold  by  him,  Connolly 
remitted  to  his  employers  only  $457.86,  claiming  that  they  owed 
him  the  balance  for  arrears  of  salary  and  expenses.  On  the  trial 
the  referee  found  that  Connolly's  claim  and  his  retention  of  collec- 
tions, excepting  the  amount  of  $95.05,  were  characterized  by  bad 
faith  on  his  part.  On  appeal  it  was  held  that  under  the  New  York 
Penal  Code  the  employee  was  guilty  of  larceny  and  the  judgment 
against  the  surety  company  was  affirmed.^ 

§  469.  Contract  One   of  Insurance  Rather  Than  Suretyship. — 

The  bond  of  the  surety  company  differs  in  two  important  particulars 
from  the  usual  simple  obligation  of  the  individual  surety:  First,  it 
is  issued  not  gratuitously  or  as  a  friendly  act,  but  for  full  compen- 
sation received  by  the  surety,  the  premium,  moreover,  being  fixed 
by  the  company.     Second,  prepared  by  the  company  and  in  its 

^  Reed  v.  Fidelity  &  Cas.  Co.,  189  3  Matthews  v.  Employers'  L.  Assur. 

Pa.  St.  596,  42  All.  294.  Corp.,  127  App.  Div.  195,  111  N.  Y. 

2  U.  S.  Fidelity  &  G.   Co.  v.   Des  Supp.  76;  N.  Y.  Penal  Code,  §§  528, 

Moines  Nat.  Bank,  145  Fed.  273,  74  548. 
C.  C.  A.  553;  In  re  Citizens'  Ins.  Co., 
WV.C:  L.1W.T.  331. 


656  FIDELITY    BONDS 

interest,  the  contract  contains  numerous  clauses  restrictive  of  the 
company's  liability.^ 

These  conspicuous  differences  have  induced  the  courts  to  con- 
strue the  contract  of  the  suret}'^  company  as  one  of  insurance  rather 
than  as  one  of  suretyship,  and  to  estabUsh  the  rule  that  all  am- 
biguities in  the  language  employed  must  be  resolved  in  favor  of  the 
insured  and  against  the  insurer. ' 

The  written  statements  accompanying  the  application  for  a  guar- 
anty bond  usually  amount  to  warranties,  and  the  doctrine  of  war- 
ranty then  applies.^ 

The  defendant  issued  to  the  plaintiff,  an  investment  company, 
a  fidelity  bond  to  indemnify  the  plaintiff  against  loss  occasioned  by 
the  larceny  or  embezzlement  of  its  general  manager,  Miller.  In 
procuring  the  bond,  Burke,  the  plaintiff's  president,  erroneously 
warranted  the  truth  of  the  following  answers  in  the  application 
regarding  Miller:  "  When  were  his  accounts  last  examined?  A.  April. 
Were  they  at  that  time  in  every  respect  correct,  and  proper  securities, 
funds  and  values  on  hand  to  balance?  A.  Yes.  Is  there  now  to 
your  knowledge,  any  shortage  due  you  by  the  applicant?  A.  No. 
Has  he  ever  been  short  with  you?  A.  No."  As  matter  of  fact 
Miller  was  at  that  time  indebted  to  the  plaintiff  and  had  been  in 
default  for  several  w^eeks.  On  appeal  the  judgment  obtained  by 
the  plaintiff  was  reversed.^ 

The  American  Bonding  Company  executed  in  favor  of  the  Bank 

1  The  law  of  insurance  is  very  dif-  delity  &  Guar.  Co.,  32  Wash.  120.  A 
ferent  from  that  of  individual  surety-  federal  court  says:  "It  would  be  con- 
ship,  Munson  v.  Standard  Mar.  Ins.  trary  to  public  policy  to  inconsider- 
Co.,  156  Fed.  44,  46.  As  to  law  of  ately  allow  the  protection  afforded  by 
fidelity  insurance,  see  notes  to  Ameri-  this  new  insurance  to  the  vast  business 
can  Credit  Ind.  Co.  v.  Wood,  19  C.  C.  A.  interests  of  the  country,  in  public  ad- 
273;  American  Credit  Indemnity  Co.  v.  ministration  as  elsewhere,  to  be  en- 
Athens  Woolen  Mills,  92  Fed.  581,  34  dangered  by  any  lesser  indemnity  than 
C.  C.  A.  165.  that  of  the  old  form  by  bond,  which 

2  American  Surety  Co.  v.  Pauly,  170  is  being  so  rapidly  displaced,  the  new 
U.  S.  144,  18  S.  Ct.  552,  42  L.  Ed.  977;  contracts  being  offered  by  the  com- 
Mechanics'  Savings  Bank  &  Tr.  Co.  v.  panies  as  superior  to  the  old  in  safety," 
Guarantee  Co.,  68  Fed.  459;  Bryant  v.  Guarantee  Co.  of  N.  A.  v.  Trust  Co., 
American  Bonding  Co.  (Ohio  St.,  1907),  80  Fed.  766,  26  C.  C.  A.  146  But  see 
82  N.  E.  960;  Bank  of  Tarboro  v.  Fi-  Howard  County  v.  Hill,  88  Md  111 
deliPf  &  Deposit  Co.,  126  N.  C.  320,  35  41  Atl.  61;  Harrisburq  S.  &  L  Assn  v 
S.  E.  588,  83  Am.  St.  R.  682,  S.  C,  U.  S.  Fidelity  &  Cas.  Co.,  197  Pa  St'. 
128  N.  C.  366,  38  S.  E.  908,  83  Am.  St.  177.  The  ordinary  surety  is  protected 
R.  682  ("the  object  of  an  indemnify-  by  the  principle  strictissimi  juris,  Ulster 
ing  bond  is  to  indemnify;  and  if  it  Co.  Savin/js  Inst.  v.  Young,  161  N.  Y. 
fails  to  do  this,  either  directly  or  in-  23,  55  N.  E.  483. 

directly,    it    fails    to    accomplish    its  3  Livin/jston  v.  Fidelity  &  Deposit  Co. 

primary  purpose,  and  becomes  worse  (Ohio,  19l07),  81  N.  E.  330. 

than   useless.      It   is   worthless  as  an  *  American  Bonding  &  Trust  Co.  v. 

actual  security,  and  misleading  as.  a  Burke  (Colo.,  1906),  85  Pac.  692  (cit- 

pretendfid  one"),  CoviUs  v.  TJ.  ,S    Fi-  ing  many  cases). 


CONTRACT   ONE   OF   INSURANCE   RATHER  THAN   SURETYSHIP     657 

of  Devall's  Bluff  a  surety  bond  in  the  sum  of  $5,000,  undertaking 
to  indemnify  the  bank  against  any  loss  sustained  on  account  of 
larceny  or  embezzlement  committed  by  its  cashier,  Strong,  during 
a  term  of  one  year.  The  bond  provided,  "That  all  the  representa- 
tions made  by  the  employer,  his  or  its  officers,  to  the  surety  are 
warranted  by  the  employer  to  be  true."  Among  the  warranties  of 
the  application  were  the  following:  "Is  the  applicant  now  or  about 
to  be  engaged  or  intrusted  in  any  other  business  or  employment 
than  the  bank's  service?  A.  No.  In  case  of  applicant  handling 
cash  or  securities,  how  often  will  the  same  be  examined  and  com- 
pared with  the  books,  accounts  and  vouchers,  and  by  whom?  A.  The 
auditing  committee,  monthly."  During  a  period  of  three  years, 
covered  by  the  bond  and  its  noncumulative  renewals.  Strong's 
defalcations  amounted  to  over  S10,000.  Besides  his  regular  occupa- 
tion at  the  bank,  he  acted  as  secretar}-  of  a  building  and  loan  associa- 
tion and  wrote  a  little  fire  insurance,  but  without  interfering  with 
his  duties  as  cashier.  Sometime  in  each  calendar  month,  the  com- 
mittee made  examinations  and  audits,  but  these  were  not  always 
on  the  same  date  in  the  month.  On  these  facts  the  court  held  that 
there  was  no  breach  of  warranty,  and  that,  since  the  renewals  were 
noncumulative,  the  liability  of  the  surety  company  was  limited  to 
$5,000  in  the  aggregate.^ 

A  contract  of  fidelity  or  guaranty  is  not  to  be  regarded  as  invalid 
on  grounds  of  public  policy  because  tending  to  encourage  careless- 
ness in  the  selection  of  faithful  and  honest  employees. ^ 

1  American  Bonding  Co.  v.  Morroiv,  Ky.  384.    The  liberal  statutes  making 

80  Ark.  49,  96  S.  W.  613,  citing  as  to  warranties  in  effect   mere   representa- 

the  non-cumulative  feature,  First  S'at.  tions  apply  to  this  class  of  insurance, 

Bank  v.    U.  S.  Fidelity  &  Guar.  Co.  but  under  them  the  employer  in  an- 

(Tenn.),   75    S.   W.    1076,   and   as   to  swering  the  questions  as  to  the  hon- 

sufficiency  of  audits,  though  the  com-  esty  of  his  employee  in  his  services  in 

mittee  were  not  expert  accountants,  the  past  must  not  only  state  what  he 

Guarantee  Co.  v.  Mechanics'  Bank,  26  honestly  believes,  but  before  answer- 

C.  C.A.I  46.    In  the  following  case  the  ing  must  have  taken  reasonable  pre- 

examination  of  accounts  was  held  in-  caution    and    used    at   least   ordinary 

sufficient   and   the  policy  avoided  for  care  to  have  acquainted  himself  with 

breach  of  the  warranty,  t/.  S.  i^ideZii;/  the    facts,    Fidelity    &    Guar.    Co.  v. 

&  Guar.  Co.  v.  Downey  (Colo.,  1907),  Western  Bank  (Ky.,  1906),  94  S.  W.  3. 

88   Pac.   451.     As  to  occupation,  see  Evidence    held    insufficient    to    prove 

§  390,  supra.  larceny  of  the  employee,  Williams  v. 

The  doctrine  of  subrogation  applies  U.  S.  Fidelity  &  Guar.  Co.  (Md.,  1907), 

in  favor  of  the  insurer  who  has  paid  66  Atl.  495. 

on  its  guaranty  bond,  London  Guar.  &  2  Fidelity  &  Cas.  Co.  v.  EicVhoff,  63 

Ace.  Co.  V.  Geddes,  22  Fed.  639;  City  Minn.  170,  65  N.  W.  351,  30  L.  R.  A. 

Trust,  Safe  Dep.  &  Suretu  Co.  v.  Haas-  586,  56  Am.  St.  R.  464;  Rovle  Min.  Co. 

tocher,  101   App.  Div.  415,  91   N.  Y.  v.    Fidelity    &    Cas.    Co.    (Mo.    App., 

Supp.  1022  (an  appeal  bond);  Farmers'  1907),  103  S.  W.  1098. 
dk  T   Bank  v.  Fidelity  <Sr  Dep.  Co.,  108 

42 


658 


FIDELITY    BONDS 


§  470.  A  Contract  of  Highest  Good  Faith. — As  in  the  case  of 

other  insurance  contracts,  the  utmost  good  faith  must  be  observed 
by  the  parties  towards  each  other. ^  Therefore  it  would  be  fatal 
concealment  for  the  insured  employer,  when  procuring  a  surety 
bond,  to  omit  to  disclose  the  fact,  if  known  to  him,  that  his  em- 
ployee had  previously  been  guilty  of  dishonesty. ^  But  mere  sus- 
picion need  not  be  disclosed,^  nor  a  knowledge  of  mere  irregularities 
not  amounting  to  dishonesty  or  bad  faith  on  the  part  of  the  em- 
ployee.'' 


§  471.  Period  of  Risk. — Defalcations  often  are  not  discovered 
until  long  after  they  are  committed;  nevertheless,  surety  bonds 
usualFy  provide  that  the  company  will  be  liable  only  when  claim  is 
made  upon  it  during  the  stated  term  of  the  bond  or  within  ninety 
days  or  other  specified  period  thereafter.  Some  bonds  allow  a  period 
of  six  months  after  termination  of  the  bond,  for  discovery  and  giving 
notice  to  the  insurer.^ 


1  See  §  94,  supra. 

2  Capital  Fire  Ins.  Co.  v.  Watson,  76 
Minn.  387,  79  N.  W.  601,  77  Am.  St. 
R.  657;  Railton  v.  Mathews,  10  Clark  & 
F.  934.  But  sometimes  only  "wilful 
misstatements  or  suppressions"  are 
prohibited,  Fidelity  &  Cas.  Co.  v. 
Bank  of  Timmonsville,  139  Fed.  101, 
71  C.  C.  A.  299.  If  a  statement  is 
known  to  be  false  an  intent  to  deceive 
is  inferred,  Claflin  v.  Assur.  Co.,  110 
U.  S.  81,  95,  3  S.  Ct.  507,  28  L.  Ed.  76. 

3  American  Surety  Co.  v.  Pauly,  170 
U.  S.  144,  18  S.  Ct.'552,  42  L.  Ed.  977. 

i  Atlantic  &  P.  Tel.  Co.  v.  Barnes, 
64  N.  Y.  385,  21  Am.  Rep.  621;  Su- 
preme Council  V.  Fidelit>i  &  Cas.  Co., 
63Fed.  48,  11  C.  C.  A.  96.  In  the  case 
of  individual  suretyship,  usually  gra- 
tuitous, the  employer,  it  has  been 
said,  must  on  discovery  promptly  dis- 
close to  the  surety  any  dishonest  acts 
of  the  employee  committed  during  the 
term  of  suretyship.  Saint  v.  Wfieeler 
&  W.  Mfg.  Co.,  95  Ala.  362,  10  So. 
539,  36  Am.  St.  R.  210;  Lancashire  Ins. 
Co.  v.  Callahan,  68  Minn.  277,  71  N 
W.  261,  64  Am.  St.  R.  475;  Sanderson 
V.  Astoji,  L.  R.  8  Exch.  73;  Phillips  v. 
Foxall,  L.  R.  7  Q.  B.  666.  How  far 
such  an  obligation,  if  not  expressed, 
would  be  read  into  the  voluminous 
bond  of  the  surety  company  prepared 
by  it  and  issued  for  a  premium  (see 
Watertown  Fire  Ins.  Co.  v.  Simmons, 
131     Mass.     85,     41     Am.    Rep.    196; 


McKecknie  v.  Ward,  58  N.  Y.  541)  is 
doubtful  and  is  perhaps  largely  an 
academic  question,  since  the  corpora- 
tion bond  almost  always  contains  one 
or  more  stipulations  on  this  subject, 
§  472,  infra.  The  corporate  surety, 
except  as  controlled  by  statute,  is 
wont  to  insert  in  its  bond  whatever 
clauses  it  deems  desirable.  If,  in  com- 
petition with  other  companies  and 
for  purposes  of  advertisement,  a  com- 
pany should  omit  the  clause  requiring 
an  immediate  disclosure  of  known  acts 
of  dishonesty  committed  by  the  em- 
ployee during  the  term  of  the  bond,  for 
a  court  to  infer  that  the  obligation 
still  remained  in  the  contract  and 
that  its  violation  would  still  produce 
forfeiture  would  seem  to  be  a  con- 
struction unusually  indulgent  towards 
the  insurer.  If  the  act  of  the  employee 
fell  short  of  a  defalcation  insured 
against,  the  insurer  might  deem  its 
disclosure  unnecessary.  If,  on  the 
other  hand,  the  act  was  within  the 
scope  of  the  policy  and  damnified  the 
insured,  the  insured  would  be  likely 
in  his  own  interest  to  present  his 
claim_  without  delay.  The  general 
rule  in  insurance  law  relating  to  the 
doctrine  of  concealments  is  that  the 
duty  of  disclosing  material  facts  ter- 
minates with  the  closing  of  the  con- 
tract, §  100,  supra. 

s  A  bond  by  its  provision  terminated 
if  the  insured   cashier  quitted   fiervirc 


STIPULATION   TO   GIVE   IMMEDIATE   NOTICE   OF  MISCONDUCT    659 

If  a  bond  procured  by  a  state  officer  guaranteeing  the  faithful 
performance  of  his  duties,  is  indefinite  as  to  the  period  of  risk,  the 
court  will  infer  that  it  is  to  continue  during  his  present  term  of 
office.^ 

§  472.  Stipulation  to  Give  Immediate  Notice  of  Misconduct. — 

On  the  discovery  of  any  fraudulent  or  dishonest  act  on  the  part  of  the 
employee,  the  employer  shall  give  immediate  loritten  notice  thereof, 
with  the  fullest  information  obtainable  at  the  time,  to  the  company} 

Immediate  notice  means  with  reasonable  promptness  under  the 
circumstances  of  the  case.^  With  the  aid  of  prompt  notice  the 
insurer  might  be  enabled  to  recover  embezzled  property  which 
otherwise  would  be  squandered  or  dissipated;  or  to  anticipate  the 
flight  of  an  absconding  defaulter  and,  by  his  arrest,  to  enhance  the 
chances  of  pecuniary  restitution. 

The  insured  employer  is  not  under  obligation,  however,  to  watch 
or  investigate  the  conduct  of  the  employee  or  to  use  due  diligence 
to  detect  dishonesty  in  the  absence  of  express  agreement  to  do  so, 
but  only  to  disclose  the  pertinent  facts,  when  discovered  and  know^n.'* 
Apparently  the  doctrine  that  "when  a  person  has  sufficient  informa- 
tion to  lead  him  to  a  fact  he  shall  be  deemed  conversant  with  it," 
applied  at  times  against  insurers,^  is  not  in  this  connection,  at  least, 
to  be  applied  in  their  favor.^  And  a  federal  court  has  decided  that 
where  loss  by  embezzlement  or  larceny  is  insured  against,  the  em- 

of  the  bank.    The  bank  suspended,  but  notice  is  given  with  due  diHgence  under 

the   cashier  continued    to   do   certain  the    circumstances    of   the    case,    and 

acts  of  service  for  it.     Held,  that  the  without  unnecessary  and  unreasonable 

suspension  did  not  set  the  period  of  delay,  it  will  answer  the  requirements 

six  months  running,  American  Surety  of  the   contract,"   Fidelity   tfe   Deposit 

Co.  V.  Pavhi,  170  U.  S.  144,  18  S.  Ct.  Co.   v.    Courtney,    186    U."   S.    342,   22 

552,  42  L.  Ed.  977.  S.  Ct.  833,  46  L.  Ed.  1193. 

1  Brrant  v.  American  Bonding  Co.  •*  Guarantee  Co.  v.  Trust  Co.,  80  Fed. 
(Ohio  St.,  1907),  82  N.  E.  960.  766,  26  C.  C.  A.  146;  Fidelity  &  Cas. 

2  The  provision  is  varied  in  its  word-  Co.  v.  Bank,  97  Ga.  634,  25  S.  E.  392, 
ing  in  different  bonds,  for  instance.  33  L.  R.  A.  821,  54  Am.  St.  R.  440: 
"If  at  any  time  during  the  term  of  Irregularities  on  the  part  of  the  em- 
this  bond  the  employer  learn  or  be  ployee  falling  short  of  the  contract 
informed  that  the  employee  is  unre-  requirement  of  course,  need  not  be 
liable,  dishonest,  intemperate,  gam-  disclosed,  Atlantic  &  P.  Tel.  Co.  v. 
bling  or  indulging  in  other  vices,  the  Barnes,  64  N.  Y.  385,  21  Am.  Rep.  621. 
employer  shall  immediately  notify  ^Skinner  v.  Norman,  165  N.  Y.  565, 
the  surety."    In  other  bonds  immediate  571. 

disclosure  of  any  act  causing  loss  un-  ^  But    it    has   also   been    held    that 

der  the  policy  is  called  for  with  right  of  the  employer  must  use  reasonable  dili- 

cancellation  to  the  company  as  to  fu-  gence  to  ascertain  the  facts.  Fidelity  it 

ture  acts.  Cluar.  Co.  v.  Western  Bank  (Ky.,  1906), 

3  See  §  479,  injra;  Remington  v.  Fi-  94  S.  W.  3;  U.  S.  Fidelity  &  Guar.  Co. 
delity  &  Dep.  Co.,  27  Wash.  429  (de-  v.  BlacUey,  25  Ky.  Law.  Rep.  1271 
lay  of  45  days,  issue  for  jury).     "If  a  77  S.  W.  709. 


660  FIDELITY    BONDS 

ployer  is  not  bound  to  give  the  notice  until  hie  has  acquired  knowl- 
edge sufficient  to  justify  a  reasonable  man  in  making  a  charge  of 
felony  against  his  employee.^ 

In  construing  a  somewhat  similar  clause  the  United  States  Su- 
preme Court  drew  a  distinction  between  "becoming  aware"  of 
gambling  operations  and  "knowing"  of  them,  and,  under  the  former 
phraseology,  held  that  the  insurance  was  avoided  because  the  presi- 
dent of  the  insured  bank  omitted  to  notify  the  insurer  of  informa- 
tion regarding  the  teller's  speculations,  though  the  president  hon- 
estly believed  that  the  teller  had  discontinued  such  practices.^ 

§  473.  Knowledge  of  What  Agents  Is  Imputed  to  the  Employer. 
— In  construing  the  meaning  of  the  clause  obligating  the  employer 
to  give  immediate  notice  of  misconduct  on  the  part  of  the  employee, 
as  soon  as  the  employer  has  knowledge  of  it,  the  question  at  once 
arises,  knowledge  by  what  agents  is  to  be  counted  as  knowledge 
of  the  employer.  A  corporation  can  possess  knowledge  only  through 
its  agents,  and  indeed  many  individual  employers,  also,  transact 
their  business  through  agents. 

The  rule  is  clear  that  the  knowledge  of  the  guilty  employee  is  not 
to  be  imputed  to  the  employer,  since  a  defaulter  is  not  likely  to 
publish  information  regarding  his  own  misdeeds.^  Nor  is  the  prin- 
cipal charged  with  the  knowledge  of  any  employee  who  is  in  collu- 
sion with  the  wrongdoer,^  nor  with  the  knowledge  of  a  coemployee 
of  the  same  rank  as  that  of  the  wrongdoer,^  but  by  the  better  au- 
thority the  employer  is  chargeable  with  the  knowledge  of  those 
superior  officers  or  agents  whose  duty  it  is  to  become  acquainted 
with  such  facts  in  the  usual  conduct  of  the  business.^ 

In  the  case  of  fidelity  bonds  issued  to  trust  companies,  banks 
and  other  institutions  of  a  fiduciary  character,  so  far  as  the  phrase- 

•     1  ^tna  Indemnity  Co.  v.  J.  R.  Crowe  U.  S.  144,  18  S.  Ct.  552,  42   L.   Ed 

Coal  &  M.  Co.,  154  Fed.  545,  83  C.  C.  977. 

A.  431.    Compare  U.  S.  Fidelity  Co.  v.  *  Fidelitu  &  Deposit  Co.  v.  Courtney, 

Rice,  148  Fed.  206,  78  C.  C.  A.  164;  186  U.  S.  342,  360,  22  S.  Ct.  833,  46  L. 

National  Surely  Co.  v.  Long,  125  Fed.  Ed.  1193  (cases  cited);  Pittsburg ,  Ft.  W. 

887,  60  C.  C.  A.  623.    And  see  28  Cent.  &  C.  Ry.  Co.  v.  Shaeffer,  59  Pa.  St.  350. 
Dig.    §§196,    198.      A    bond    insuring  ^  See  ^  479,  infra. 

against   lo.ss   through    "fraud    or   die-  «  See  §  479,  in/ra.    The  surety  bonds 

honesty"  is  broader  in  its  scope,  U.  S.  provide    that    proofs  of  loss  must  be 

Fidelitu  &  (j.  Co.  v.  Eag  Shippers',  etc.,  served  on  the  company  within  a  speci- 

Co.,  148  Fed.  353.  78  C.  C.  A.  345.  fied   time   after  discovery  of  the  dis- 

2  Guarantee  Co.  v.  Mechanics'  Sav.  honesty,  in  some  bonds,  thirty  days, 
Bk.,  183  IT.  S.  402,  22  S.  Ct.  124,  46  in  others,  three  months.  Fidelity  dk 
L.  Ed.  253.  Cas.    Co.    v.    Bank,   71    Fed.    116,   17 

3  American  Surety  Co.  v.  Pauly,  170  C.  C.  A.  641. 


KNOWLEDGE    OF   WHAT   AGENTS   IS   IMPUTED  661 

ology  of  the  instruments  is  susceptible  of  such  a  result,  powerful 
reasons  exist  in  favor  of  an  interpretation  which  will  hold  the  surety 
to  the  full  measure  of  its  responsibility,  undisturbed  and  undi- 
minished by  acts  of  omission  or  commission,  whether  fraudulent 
or  merely  inadvertent,  on  the  part  of  any  of  the  representatives  of 
the  insured. 

This  subject  has  received  consideration  by  the  United  States 
Supreme  Court  in  connection  with  the  alleged  embezzlement  of 
nearly  $20,000  of  the  bank  funds  for  purposes  of  personal  specula- 
tion by  one  McKnight,  during  his  incumbency  in  the  offices  of  vice- 
president  and  president.  The  bond,  with  renewals,  insuring  his 
fidelity  contained  a  provision  "that  the  employer  shall  observe, 
or  cause  to  be  observed,  due  and  customary  supervision  over  the 
employee  for  the  prevention  of  default,  and  if  the  employer  shall 
at  any  time  during  the  currency  of  this  bond  condone  any  act  or 
default  upon  the  part  of  the  employee  which  would  give  the  em- 
ployer the  right  to  claim  hereunder,  and  shall  continue  the  emploj'ee 
in  his  service  without  written  notice  to  the  company,  the  company 
shall  not  be  responsible  hereunder  for  any  default  of  the  employee 
which  may  occur  subsequent  to  such  act  or  default  so  condoned." 
The  court  said  "manifestly,  this  stipulation  is  not  fairly  subject  to 
the  construction  that  it  was  the  intention  that  the  neglect  or  omis- 
sion of  a  minority  in  number  of  the  board  of  directors  or  the  neglect 
or  omission  of  subordinate  officers  or  agents  of  the  bank  should  be 
treated  as  the  neglect  or  omission  of  the  bank."  And  the  court  con- 
cluded that  the  things  forbidden  to  be  done  or  agreed  to  be  done 
by  the  stipulation  were  to  be  either  done  or  left  undone  by  the 
bank  in  its  corporate  capacity,  speaking  and  acting  through  the 
representative  agents  empowered  by  the  charter  to  do  or  not  to  do 
the  things  pointed  out.  Such  a  representative  the  court  suggested 
might  be  the  governing  body,  the  board  of  directors,  or  a  superior 
officer,  for  instance,  the  president,  having  a  general  power  of  super- 
vision over  the  business  of  the  corporation,  and  vested  with  the 
authority  to  condone  the  wrongdoing  or  to  discharge  a  faithless 
employee.^ 

On  the  strength  of  the  case  last  cited,  the  Circuit  Court  of  Appeals 
has  gone  further  and  has  held  that  under  a  state  code  vesting  cor- 
porate management  in  the  trustees,  knowledge  on  the  part  of  a 
single  officer,  trustee  or  even  the  president  will  not  be  imputed  to 

1  Fidelity  &  Deposit  Co.  v.  Courtney.  the  vice-president  of  a  bank  of  the 
186  U.  S.  342,  22  S.  Ct.  833,  46  L.  Ed!  president's  default  is  not  imputable 
1193  (knowledge  by  a  director  and  by      to  the  bank). 


062  CKEDIT    LXSURANCE 

the  corporation  to  effect  a  breach  of  warranty  based  upon  misstate- 
ments in  the  tippUcation.^ 

§  474,  Credit  Insurance. — It  is  difficult  to  bring  mercantile  fail- 
ures within  exact  laws  of  average.  For  this  reason  and  because  the 
terms  and  conditions  of  an  insurance  against  loss,  accruing  from 
giving  credit  to  customers,  elude  precise  definition,  this  class  of 
insurance  is  apt  to  be  unsatisfactory  either  to  the  insurer  or  to  the 
insured,  and  is  not  very  extensivel}"  practiced.^  Such  a  contract 
is  to  be  construed  as  one  of  insurance  rather  than  of  guaranty.^ 

The  policy  in  usual  form  covers  only  mercantile  accounts  of  the 
insured  with  persons  having  satisfactory  ratings  by  specified  mer- 
cantile agencies  at  the  time  of  its  issuance,^  and  a  limit  of  credit 
to  each  debtor  of  the  insured  is  imposed,  usually  in  terms  of  a  per- 
centage of  the  mercantile  rating  of  his  capital.  If  credit  is  given 
by  the  insured  to  a  customer  in  excess  of  this  stipulated  percentage 
or  amount,  only  the  excess  will  be  excluded  from  the  operation  of 
the  policy.  The  stipulated  amount  will  be  covered.^  But  usually, 
in  order  to  stimulate  the  exercise  of  prudence  on  the  part  of  the 
insured,  it  is  provided  that  the  insured  shall  himself  be  a  coinsurer 
and  shall  sustain  a  certain  percentage  or  amount  of  initial  loss  be- 
fore the  insurer's  liability  attaches.^  A  specified  percentage  of  such 
initial  loss  is  to  be  computed  as  of  the  date  of  the  expiration  of 
the  bond  and  not  as  of  the  date  of  the  failure  first  occurring." 

1  American  Bonding  Co.  v.  Spokane  Co.,  57  N.  J.  L.  12,29  Atl.  421;  Shak- 
Bldg.,  etc.,  Soc,  130  Fed.  737,  65  man  v.  Credit  Systeyn  Co.,  92  Wis.  366, 
C.  C.  A.  121.  The  court  made  no  refer-  66  N.  W.  528,  32  L.  R.  A.  383,  53  Am. 
ence  to  the  case  of  Guarantee  Co.  v.  St.  R.  920.  A  bond  given  in  full  and 
Mechanics'  Sav.  Bk.,  183  U.  S.  402,  22  construed  in  Talcott  v.  Gray,  59  N.  J. 
S.  Ct.  124,  46  L.  Ed.  253.  Eq.  595,  42  Atl.  603. 

2  Tebbets  v.  Mercantile  Credit  G.  Co.,  ^ Shakman  v.  Credit  System  Co.,  92 
73  Fed.  95,  19  C.  C.  A.  281.    A  patent  Wis.  366,  supra. 

was  refused  on  a  plan  for  insurance  ^Jacket   v.  Am.  Credit  Ind.  Co.,  54 

against  losses  from  bad  debts,   U.  S.  N.  Y.  Supp.  .505.  34  App.  Div.  565, 

Credit  S.   Co.   v.   American  Ind.  Co.,  aff'd  164  N.  Y.  598;  Rice  v.  National 

51  Fed.  751.  Credit  Ins.  Co.,  164  Mass.  285,  41  N.  E. 

3  Am.  Credit  Ind.  Co.  v.  Athens  W.  276.  The  court  construing  the  75% 
Mills,  92  Fed.  581,  34  C.  C.  A.  161;  limit  in  favor  of  the  insured  held  that 
State  V.  Phelan,  66  Mo.  App.  548;  it  did  not  applj'  to  the  face  amount  of 
People  V.  Rose,  174  111.  310,  51  N.  E.  the  policy  but  only  to  the  amount  pay- 
246,  44  L.  R.  A.  124.  A  contract  to  able  on  account  of  any  one  debtor, 
purchase  for  a  fixed  price,  accounts  Peden  Iron  &  Steel  Co.  v.  Ocean  Ace. 
against  insolvent  debtors,  is  a  contract  &  G.  Co.,  151  Fed.  992,  81  C.  C.  A.  178. 
of  insurance,  Claflin  v.  U.  S.  Credit  ^  Strouse  v.  Am.  Credit  Ind  Co.,  91 
System  Co.,  165  Mass.  501,  43  N.  E.  Md.  244,  46  Atl.  328.  The  doctrine  of 
293,  52  Am.  St.  R.  528  (contract  void,  misrepresentations  and  concealment  of 
insurer  not  being  authorized  to  do  material  facts,  in  general,  applies  to 
business).  this  class  of  insurance.  Am.  Credit  Iml. 

*  Robertson  v.    U.  S.   Credit  System      Co.    v.    Wimpfheimer,    14    App.    Div. 


CREDIT    INSURANCE 


668 


It  is  not  necessary  that  a  debtor  of  the  insured  should  be  ad- 
judicated a  bankrupt  in  order  to  be  "insolvent"  within  the  meaning 
of  the  policy;  nor  that  his  assets  in  fact  should  be  less  than  his  lia- 
bilities. It  is  enough  if  he  is  shown  to  be  unable  to  meet  his  obliga- 
tions in  the  usual  course  of  business.^ 

Insolvency  of  the  insurer,  evidenced  by  an  assignment  for  the 
benefit  of  creditors  under  an  insolvency  law,  operates  to  terminate 
the  policy  as  to  future  losses,  and  the  insured  is  then  entitled  to 
recover  back  the  unearned  portion  of  the  premium.^ 

Although  the  legal  status  of  insolvency  on  the  part  of  the  insurer, 
evidenced,  for  example,  by  the  appointment  of  a  receiver  and  the 
sequestration  of  the  assets  of  the  company,  cancels  the  insurance 
as  to  future  losses,^  nevertheless,  because  of  the  breach  of  contract 


498,  43  N.  Y.  Supp.  909.  The  doc- 
trines of  warranty  and  waiver  by 
agents  also  apply,  Carrollton,  etc., 
Mfg.  Co.  V.  Am.  Credit  Ind.  Co.,  124 
Fed.  25,  59  C.  C.  A.  545;  Baer  v.  Am. 
Credit  Ind.  Co.,  116  App.  Div.  233, 
101  N.  Y.  Supp.  672,  aff'd  191  N.  Y. 
540  (knowledge  of  breach  by  mere 
solicitor  affects  no  waiver).  The 
changing  of  the  copartnership  name  of 
the  insured  without  a  change  of  mem- 
bership will  not  forfeit  the  policy,  il?n. 
Credit  Ind.  Co.  v.  Wood,  73  Fed.  81, 
19  C.  C.  A.  264.  The  liberal  rule  of 
construction  is  always  applied  in 
favor  of  the  insured  in  case  of  am- 
biguities, Aw.  Credit  Ind.  Co.  v.  Athens 
W.  Co.,  92  Fed.  581,  34  C.  C.  A.  161 
(Taft,  J.);  People  v.  Mercantile  Credit 
G.  Co.,  166  N.  Y.  416,  60  N.  E.  24 
(what  is  an  assignment  or  insolvency); 
Goodman  v.  Mercantile  Credit  G.  Co., 
17  App.  Div.  474,  45  N.  Y.  Supp.  508 
(what  is  not  a  general  assignment). 
But  see  Mercantile  Credit  G.  Co.  v. 
Wood,  08  Fed.  529,  15  C.  C.  A.  563. 
Loss  held  covered  where  sale  was 
made  within  the  period  specified  in 
the  policy,  but  the  loss  accrued  after- 
wards, Sloman  v.  Mercantile  Credit 
G.  Co.,  112  Mich.  2.58,  70  N.  W.  886. 
Under  another  bond  the  opposite 
ruling  was  made,  Hogg  v.  Am.  Credit 
Ind.  Co.,  172  Mass.  127,  51  N.  E.  517. 
Teath  of  a  partner  is  not  discontin- 
uanfe  cf  the  business  within  the 
meaning  of  the  bond,  Aw.  Credit  Ind. 
Co.  V.  Cas.sard,  83  Md.  272,  34  Atl. 
703.  Losses  clearly  excluded  cannot 
be  included  by  construction,  Talcott  v. 
National  Credit  Ins    Co.,  9  App.  Div. 


433,  41  N.  Y.  Supp.  281,  aff'd  163 
N.  Y.  577,  57  N.  E.  1125;  Brierre  v. 
Americaii  Ind.  Co.,  67  Mo.  App.  384. 
Meaning  of  the  phrase  "pro-rated," 
Talcott  V.  National  Credit  Ins.  Co., 
28  App.  Div.  75,  aff'd  163  N.  Y.  577. 

1  People  V.  Mercantile  Credit  G.  Co., 
166  N.  Y.  416,  60  N.  E.  24  (assign- 
ment); Strouse  v.  Am.  Credit  Ind.  Cc, 

91  Md.  244,  46  Atl.  .328  (the  fact  of 
insolvency  of  a  debtor  may  be  proved 
in  other  ways  as  well  as  in  those  set 
forth  in  the  policy).  "Failure"  means 
what  in  policv.  Am.  Credit  Ind.  Co.  v. 
Carrollton,  etc.,  Mfg.  Co.,  95  Fed.  Ill, 
36  C.  C.  A.  671.  Construction  as  to 
losses  under  renewal  certificates,  Amer- 
ican Credit  Ind.  Co.  v.  Cliampion,  etc., 
103  Fed.  609,  43  C.  C.  A.  340;  Lauer  v. 
Gray,  55  N.  J.  Eq.  544,  37  Atl.  53. 
And  see  American  Credit  Ind.  Co.  v. 
Champion  C.  Paper  Co..  103  Fed.  609. 

2  Smith  V.  National  Credit  Ins.  Co. , 
65  Minn.  283,  68  N.  W.  28,  33  L.  R. 
A.  511.  An  action  to  recover  back 
the  premium  is  not  an  action  on  the 
policy  and  need  not  be  brought  within 
the  one-year  limit,  McCallum  v.  A^a- 
tional  Credit  Ins.  Co.,  84  Minn.  134, 
86  N.  W.  892.  Losses  sustained  after 
the  insurer  becomes  insolvent  cannot 
be  recovered.  Gray  v.  Reynolds,  55 
N.  J.  Eq.  501,  37  Atl.  461.  Proofs  of 
loss,  how  to  be  made,  American 
Credit  Ind.   Co.   v.   Athens   W.  Mills, 

92  Fed.  581,  34  C.  C.  A.  161;  Jac' el 
v.  American  Credit  Ind.  Co.,  54  N.  Y. 
Supp.  505,  34  App.  Div.  565,  aff'd 
164  N.  Y.  598;  Strouse  v.  Am.  Credit 
Ind.  Co.,  91  Md.  244, 46  Atl.  328. 

3  Commonwealth  v.    Mass.   Ins.    Co., 


664  employers'  liability  insurance 

on  the  part  of  the  insurer  in  suspending  business  and  in  becoming 
disabled  from  fulfilling  its  engagements,  the  insured  has  a  valid 
claim  against  the  insurer,  measured  by  the  present  value  of  his 
policy  at  the  time  of  the  company's  default.' 

§  475.  Employers'  Liability  Insurance. — Proprietors  of  large  es- 
tablishments employing  many  agents  and  workers,  as,  for  exam- 
ple, factories,  mills,  and  department  stores,  also  common  carriers, 
contractors,  and  others  are  subjected  to  numerous  claims  growing 
out  of  personal  injuries. 

These  claims  naturally  fall  into  two  classes,  those  of  the  em- 
ployees, based  upon  injuries  sustained  by  themselves  in  connection 
with  their  work  for  the  employer,  and  those  of  the  customers  and 
the  outside  public  generally  who  have  been  injured  by  the  care- 
less or  improper  acts  of  the  employer  or  his  employees  in  connection 
with  running  the  employer's  elevators  or  machiner}^  or  driving  his 
delivery  wagons  or  automobiles,  or  conducting  other  branches  of 
his  business.  The  amount  of  these  claims  against  any  one  pro- 
prietor, sometimes  very  large,  it  is  impossible  to  estimate  in  ad- 
vance, but  the  aggregate  recoveries  against  many  proprietors  may 
be  brought  Avithin  laws  of  average,  and,  therefore,  such  liabilities 
offer  a  fit  subject  for  a  scheme  of  insurance.^ 

Policies  of  this  general  character  have  become  popular  within 
the  past  few  years,  though  in  their  purposes,  terms,  and  scope  they 
vary  widely.  For  injuries  to  persons  caused  by  the  careless  manage- 
ment of  the  employers'  draught  animals  or  vehicles  a  separate 
policy  is  often  issued  known  as  a  "teams  liability  policy,"  and  for 
injuries  to  any  person  or  property,  including  also  the  machine  itself, 
connected  with  running  automobiles,  "an  automobile  policy."^ 

The  premium  in  what  is  known  as  "the  general  liability  policy" 
is  based  upon  the  total  compensation  to  employees,  together  with 
specific  charges  for  floor  area,  street  frontage,  and  elevators.  In 
what  is  known  as  "the  employers'  liability  policy,"  a  policy  of 

119   Mass.   45;    Tavlor   v.    Xorth  Star  American  Life  Ins.   Co.,   162   Pa.   St. 

Mvt.  Ins.  Co.,  46  Minn.  198,  48  N.  W.  ,586,  29  Atl.  660. 

772.  2  See    §  2,    supra.      Casualty    com- 

1  Carr  v.  Hamilton,  129   U.   S.  252;  panics  may  carry  on  business  in  other 

Taylor  v.  North  Star  Mid.  Ins.  Co.,  49  states  than  where  orocanized.  People  v. 

Minn.  198;  People  v.  Commercial  AUi-  Van  Cleave,  187  111.  125,  58  N.  E.  422; 

ance  L.  Ins.  Co..  154  N.  Y.  95  (status  People  v.  Fidelitn  &  Cas.  Co.,  153  111. 

is  fixed  as  of  date  of  commencement  of  25,  38  N.   E.   752,  26  L.   R.  A.  295; 

action  for  dissolution);  Peorle  v.  Em-  Employers'    Liability    As.'iur.  Corp.   v. 

pire  Mvt.  Life  Ins.  Co..  92  N.  Y.  105;  Merrill,  155  Mass.  404,  29  N.  E.  529. 

People  V.  Security  Life  Ins.   &  Ann.  3  Gould  v.  Brock  (Pa.  St.,  1908),  69 

Co..   78  N.    Y.   114;  Commonwealth  v.  Atl.  1122. 


EMPLOYERS     LIABILITY    INSURANCE 


665 


romewhat  more  restricted  scope,  the  premium  is  based  upon  the 
total  compensation  to  employees.^  In  "the  teams  liabihty  poHcy" 
the  premium  is  usually  based  upon  the  total  compensation  to  the 
drivers.^  These  and  other  modified  forms  of  similar  policies  all 
constitute  legitimate  varieties  of  accident  insurance.^ 

An  approximate  estimate  of  pay  rolls  is  usually  made  in  advance 
to  roughly  determine  the  premium,  and  the  precise  adjustment  is 
postponed  until  the  end  of  the  term  of  insurance,  inasmuch  as 
meanwhile  the  schedule  of  8mployees  and  their  wages  is  likely  to 
show  fluctuation.^ 

To  aid  the  insurer  in  testing  the  accuracy  of  the  final  adjustment 
for  premium,  the  policy  provisions  often  secure  to  him  the  privilege 
of  examining  the  books  of  the  insured.  This  right  the  courts  will 
enforce  by  ordering  the  production  of  the  books  unless  the  insured 
allow  inspection  at  reasonable  times. ^ 


1  Swedish  Am..  Tel.  Co.  v.  The  Fi- 
delity &  Cas.  Co.,  208  111.  562,  70  N. 
E.  768. 

2  Sometimes  upon  the  number  of 
vehicles,  Grai/  v.  Standard  Life  cfc  Ace. 
Co.,  170  Mass.  558. 

3  Employers'  Liability  Assnr.  Corp. 
v.  Merrill,  155  Mass.  404,  29  N.  E. 
529.  The  policy  may  be  limited  to 
injuries  to  employees,  Travelers'  Ins. 
Co.  V.  Henderson  Cotton  Mills  (Ky., 
1905),  85  S.  W.  1090;  or  to  personal 
injuries  caused  by  an  elevator,  or  by 
steam  boiler  explosions. 

^  But  by  some  policies  the  wages 
of  both  the  injured  person  and  the 
person  injuring  him  must  be  included 
in  the  estimated  wages  named  in  its 
schedule  attached  to  the  policy,  East 
Carolina  Ey.  Co.  v.  Maryland  Cas. 
Co.,  145  N.  C.  114,  58  S.  E.  906. 

^  Sicedish  Am.  Tel.  Co.  v.  Casualtif 
Co.,  208  111.  562,  70  N.  E.  768;  Fi- 
delitif  &  Cas.  Co.  v.  Seagrist  Jr.  Co., 
79  App.  Div.  614,  SO  N.  Y.  Supp. 
277.  As  in  other  forms  of  insurance 
the  doctrine  of  waiver  applies.  Andrits 
V.  Marvland  Cas.  Co.,  91  Minn.  358, 
98  N.  W.  200  (knowledge  of  forfeiture 
at  inception  of  contract).  In  con- 
struing the  meaning  and  scope  of  the 
policy  the  insured  is  favored  in  case 
of  ambiguity.  Thus,  an  injury  received 
in  an  elevator  was  held  covered  though 
the  elevator  was  not  mentioned,  as 
required  by  the  policy,  in  the  schedule, 
Fvller  Bros.  T.  &  Lumber  Co.  v.  Fi- 
delity &  Cas.  Co.,  94  Mo.  App.  490, 
68  S.  W.  222.     A  kidnev  disease  con- 


tracted by  an  employee  in  handling 
infected  rags  is  an  "injury  accidentally 
suffered,"  Columbia  Paper  Stock  Co.  v. 
Fidelity  &  Cas.  Co.,  104  Mo.  App.  157. 
The  term  "accident"  was  broadly 
rather  than  narrowly  construed  in  Chi. 
Sugar  Refining  Co.  v.  Am.  Steam 
Boiler  Co.,  48  Fed.  198,  aff'd  57  Fed. 
294,  6  C.  C.  A.  336,  21  L.  R.  A.  572.. 
Under  a  clause  insuring  "all  opera- 
tions connected  with  the  business  of 
iron  and  steel  works,"  an  injury  to 
an  employee,  caused  by  the  fall  of 
a  girder  which  was  being  raised  by  an 
independent  crew  of  workmen,  was 
held  to  be  within  the  policy,  Hoven 
V.  Emp.  Liab.  Assur.  Corp.,  93  Wis. 
201,  67  N.  W.  46,  32  L.  R.  A.  388. 
And  see  Phillipsburg  Horse  Car  Co. 
V.  Fidelity  &  Cas.  Co.,  160  Pa.  St. 
350,  28  Atl.  823.  Losses  were  insured 
resulting  from  injuries  to  employees 
while  engaged  in  the  ice  business; 
held,  that  injuries  sustained  by  an  em- 
ployee of  the  assured  by  the  fall  of 
an  ice  house,  while  in  process  of  con- 
struction by  the  assured,  though  not 
in  the  season  for  cutting  ice,  were 
within  the  policy,  People's  Ice  Co.  v. 
Emp.  Liab.,  etc..  Co.,  161  Mass.  122, 
36  N.  E.  754.  Where,  however,  the 
policy  names  a  partnership  for  loss 
by  injuries  to  its  employees  by  the 
firm's  negligence,  it  is  not  liable  for 
the  negligence  of  a  member  of  the 
firm  when  not  engaged  in  the  part- 
nership business,  Kelley  v.  London 
Guar.  &  Ace.  Co.,  97  Mo.  App.  623, 
71  S.  W.  711.    Exception  of  injuries  to 


'><>H  KMFLOYEKS'    LIABILITY    INSURANCE 

8ince,  in  general,  the  same  doctrines  of  law  apply  as  in  other 
branches  of  insurance  law,  it  is  obvious  that  the  insured  must  noi 
deliberatel}^  enhance  the  risk  during  the  term  of  the  policy. 

In  a  Missouri  case  the  policy  insured  against  common  law  or 
statutory  liability  to  employees,  and  described  the  business  of  the 
injured  as  wholesale  dry  goods  and  general  merchandise.  After  the 
is.'^uance  of  the  policy  and  without  consent  of  the  insurers,  the  in- 
sui-ed  employer  introduced  into  his  business  machiner}-  for  polish- 
ing rusted  cutlery,  which  was  unusual  in  establishments  of  that 
character.  In  connection  with  its  use  one  of  the  employees  received 
injuries  for  which  he  recovered  judgment  against  the  employer, 
who  in  turn  brought  action  on  the  policy  to  recoup  from  the  in- 
surers the  amount  of  his  loss.  The  court  held  that  he  could  not 
recover  on  the  policy.^ 

§  476.  The  Employer,  not  the  Injured  Person,  Is  Insured. — The 

policy  may  name  both  employer  and  employees  as  beneficiaries.^ 
In  that  event  the  injured  employee  in  most  jurisdictions  may  have 
a  right  of  action  against  the  insurer  on  the  policy,  if  he  has  not 
already  been  indemnified  for  his  loss.'"'  And  if,  in  such  a  case,  the 
employer  collects  the  insurance  money  on  account  of  the  injury, 
the  fund  will  be  impressed  with  a  trust  in  favor  of  the  employee, 
of  which  the  employee  cannot  be  deprived  by  agreement  between 
the  employer  and  the  insurer.'' 

Usually,  however,  in  procuring  this  class  of  insurance,  and  iR 
paying  the  premium  for  it,  the  employer  is  looking  out  for  his  own 
protection  solely,  and  is  alone  named  in  the  policy  as  the  insured.  In 
that  event  there  is  no  privity  of  contract  between  the  injured  person 
and  the  insurer;  the  employer  alone  is  entitled  to  sue  on  the  policy  and 
no  trust  is  impressed  on  the  insurance  moneys  in  favor  of  the  injured 
person,  since  the  latter  is  altogether  a  stranger  to  the  contract.^ 

children  under  statutory  age  construed  87  Mo.  App.  677.     What  is  commonly 

in  Goodinlli  v.  London  Guar.  &  Ace.  understood     by     the     term     "general 

Co.,  108  Wis.  207,  84  N.  W.  164.     An  woodwork"   may   present   a   question 

pmployer's    liability    policy    provided  for  the  jury,  Fidelity  &   Cas.  Co.   v. 

for  cancellation   "upon  notice;"  held,  Phoenix   Mfg.    Co.,    100   Fed.   604,   40 

no    cancellation    where    the    company  C.  C.  A.  614. 

threatened  immediate  cancellation  un-  2  Statutes  expressly  authorize  this, 

less  a  certain  employee  was  discharged,  N.  Y.  L.  1892,  c.  690,  §  55. 

London  Guar.  &  Ace.  Co.  v.  Horn,  206  3  Embler   v.    Hartford   Steam    Boiler 

111.  493,  69  N.  E.  526,  99  Am.  St.  R.  Ins.  Co.,  158  N.  Y.  431,  53  N.  E.  212. 

185.      As    to    cancellation    of   such    a  44  L.  R.  A.  512. 

policy    and    suit    for    the    premium  *  Dearborn  v.  Refining  Co.,  7  Misc. 

earned,  see   Mnedonell   v.  Keeler  Mfg.  513,  28  N.  Y.  Su)-»p  493 

Co.,  90  Minn.  321,  96  N.  W.  785.  s  Hawkins  v.  McCalla,  95  Ga    192, 

^Wallmann  v.  Fidelity  &  Cas.  Co.,  22  S.   E.   141;    Frye    v.   Bath  Gas  di- 


THE  EMPLOYER,   NOT  THE   INJURED   PERSON,   IS  INSURED    (367 

Accordingly  the  employer,  when  so  insured,  may,  at  any  time, 
make  settlement  with  his  insurers  and  give  them  an  effective  dis- 
charge, without  the  consent  of  the  injured  claimant,  and  without 
notice  to  him,  although  the  latter  may  have  procured  a  final  and 
unsatisfied  judgment  against  the  employer  for  negligence  or  breach 
of  duty.^  Nor  can  such  a  claimant,  in  his  own  right,  whether  a 
judgment  creditor  or  otherwise,  have  recourse  to  an  equitable  action 
to  enforce  the  policy.^ 

If  he  have  an  unsatisfied  judgment  against  the  insured,  he  may, 
of  course,  as  such  judgment  creditor,  pursue  the  appropriate  statu- 
tory remedies,  by  attachment,  garnishment,  or  otherwise,  to  reach 
the  insurance  fund  as  property  belonging  to  his  debtor.^  But  in 
any  such  proceeding  he  is  likely  to  come  into  competition  with  the 
other  creditors  of  the  insured. 

We  have  had  occasion  to  observe  that  there  is  usually  no  privity 
of  contract  between  the  original  insured  and  a  company  issuing  a 
contract  of  reinsurance,  and  that,  therefore,  if  the  direct  insurer  is 
insolvent  it  may,  after  a  loss,  collect  the  reinsurance  for  its  creditors 
generally,  while  the  original  insured,  the  owmer  of  the  insured  prop- 
erty, is  left  without  indemnity  or  largely  so.'*  Likewise  it  is  obvious, 
for  the  same  reason,  that  an  insolvent  employer  may,  under  certain 
forms  of  liability  policies,  collect  for  injuries  to  his  employees  or 
to  outsiders,  while  the  injured  claimants  themselves;  whether  judg- 
ment creditors  or  not,  may  receive  no  compensation  for  the  losses 
which  they  have  sustained.  For  this  and  other  reasons  the  em- 
ployers' liability  policy  is  now  generally  confined  to'  an  indemnity, 
in  whole  or  in  part,  against  'paid  losses. 

An  interesting  and  perhaps  novel  litigation  is  reported  in  Illinois 
in  which  the  employee  succeeded  in  recovering  damages  in  an  action 

EUc.  Co.,  97  Me.  241,  54  Atl.  395,  59  this  does  not  prevent  an  assignee  of  a 

L.   R.   A.    444,   94   Am.    St.   R.    500;  claim  by  assignment  made  after  loss 

Bain   v.    Atkins,    181    Mass.    240,    63  from  bringing  action,  Marrland  Cas. 

N.  E.  414,  57  L.  R.  A.  791,  92  Am.  St.  Co.  v.  Omaha  Electric  L.  &  P.  Co.,  157 

R.   411.      "An   injured   employee   has  Fed.  514. 

no  rights  against  a  liability  company  '  Bain  v.  Atkins,  181  Mass.  240,  63 

which  has  an  indemnity  contract  or  N.  E.  414,  57  L.  R.  A.  791,  92  Am.  St. 

policy  with  his  employer,"  Kinnian  v.  R.  411. 

Fidelity  dfc  Cas.  Co.,  107  111.  App.  406;  ^  Cushman  v.  Carhondale  Fuel  Co., 

Bvrke  v.  London  (hiarantee  &  Ace.  Co.,  122  Iowa,  656,  98  N.  W.  509  (statutes 

47  Misc.  (N.  Y.)  171  (Gaynor,  J.,  citing  allowing  actions  to  be  brought  by  the 

cases).     The   policy  may,  and   usually  real  party  in  interest  will  not  aid  such 

does,  expressly  provide  that  the  em-  a    claimant);    Beyer    v.    International 

ployer  alone  can  bring  action,  Beyer  v.  Alnwinum  Co.,  115  App.  Div.  853. 

International  Aluminum  Co.,  115  App.  ^  Fritchie  v.  Miller's  Pa.  Extract  Co., 

Div.  (N.  Y.)  853;  Munro  v.  Maryland  197  Pa.  St.  401,  47  Atl.  351. 

Cas.  Co.,  48  Misc.  (N.  Y.)  183.  '  But  *  See  §  319,  supra. 


668  EMl'LOVEHs?     LJAIUUTY    INSURANCE 

of  tort  against  the  guarantee  company  for  inducing  the  insured 
employer  to  discharge  the  injured  employee  because  the  latter 
would  not  release  his  claim.  One  Horn,  foreman  in  the  bicycle 
factory  of  Arnold,  Schwinn  &  Co.,  of  Chicago,  lost  two  fingers  in 
attempting  to  operate  a  milling  machine.  For  this  injury  he  re- 
covered judgment  for  $3,500  against  his  employers.  Thereafter 
Horn  was  discharged  solely  because  the  guarantee  company  threat- 
ened that  otherwise  it  would  cancel  the  policy  for  the  unexpired 
term,  which  it  had  the  right  to  do  under  a  five-day  cancellation 
clause.  Horn's  employment  was  terminable  at  the  will  of  his  em- 
ployers. Prior  to  his  recovery  of  judgment  against  them,  Bloom- 
ingston,  claim  agent  and  attorney  for  the  guarantee  company, 
offered  Horn  .S75.00  in  settlement  of  his  claim  and  said  that  if  it 
were  not  accepted,  he  would  see  to  it  that  Horn  was  not  re-employed 
by  Arnold,  Schwinn  &  Co.,  and  also  that  he  did  not  get  work  any- 
where else.  Horn  Avas  awarded  damages  against  the  guarantee 
company  by  a  jury  in  the  sum  of  $800,  and  on  appeal,  the  majority 
of  the  court  affirmed  the  judgment,  concluding  that  there  was  evi- 
dence of  a  willful  and  unjustifiable  interference  on  the  part  of  the 
defendant  with  the  known  rights  of  the  plaintiff.' 

§  477.  Period  of  Risk. — If  the  casualty  causing  the  personal  in- 
jury, liability  for  which  is  insured  against,  occurs  during  the  term 
specified  in  the  policy,  it  is  covered  by  the  policy  though  the  liability 
of  the  insured  may  not  be  actually  determined  by  judgment  or 
otherwise  until  long  after  the  term  of  insurance  has  expired.' 

§  478.  Whether  the  Policy  Is  Indemnity  Against  Liability  or  Satis- 
fied Liability. — In  construing  the  meaning  of  the  employers'  lia- 
bility policy  the  practical  inquiry  arises  whether,  to  make  out  his 
cause  of  action  against  the  insurer,  it  is  enough  for  the  employer  to 
show  that  he  is  liable  to  pay  an  employee  or  outsider  for  a  personal 
injury,  or  whether  besides  the  liability  he  must  show  an  actual 
payment  or  satisfaction  of  the  liability.  The  answer  to  this  inquiry 
turns  upon  the  phraseology  of  the  policy.  It  is  a  question  of  the 
character  of  the  risk  as  defined  by  the  particular  contract. 

If  the  insurer's  promise  is  to  pay  "all  losses  with  which  the  in- 
sured may  be  legally  charged  or  for  which  he  may  become  legally 
liable,"  it  is  obvious  that  as  soon  as  the  employer's  liability  to  the 

1  London  Guar.  &  Ace.  Co.  v.  Horn,  2  Southern  Rv.  News  Co.  v.  Fidelitv 

206  111.  493,  69  N.  E.  .526  (citing  many       &    Cos.    Co.    (Ky.,    1904),  83    S.   W. 
cases).  620. 


WHETHER  THE   POLICY   IS   INDEMNITY   AGAINST   LIABILITY     (J69 

third  party  is  fixed,  his  right  to  sue  in  turn  upon  his  pohcy  is  per- 
fected. The  question  whether  the  employer  has  actually  paid,  or 
ever  does  pay,  or  is  pecuniarily  able  to  pay,  the  judgment  procured 
against  him  or  the  liability  without  judgment  is  of  no  concern  to 
the  insurer  and  is  not  germane  to  the  issues  in  the  trial  of  the  action 
on  the  policy.^ 

If,  on  the  other  hand,  as  is  now  customary,  the  insurer  obligates 
himself  to  indemnify  the  insured  within  certain  limits,  "for  loss 
actually  sustained  and  paid  by  him,"  or,  as  in  some  policies,  "for 
loss  actually  sustained  and  paid  by  him  in  satisfaction  of  a  judg- 
ment after  trial  of  the  issue,"  it  needs  no  argument  to  show  that  the 
insured  cannot  recover  on  his  liability  policy  until  he  has  proved 
a  payment  or  satisfaction  of  the  liability.- 

Accordingly,  under  a  polic}'  of  the  last-mentioned  class,  the  New 
Jersey  court  held  that  not  the  amount  of  the  employee's  judgment 
against  the  employer,  but  the  amount  actually  paid  by  the  em- 
ployer thereon  measured  the  liability  of  the  insurer.  Nevertheless, 
the  court  concluded  that  a  transfer  by  the  insolvent  employer  to  a 
trustee  in  bankruptcy  would  take  the  place  of  actual  payment  to 
the  employee,  and  the  master  in  Ijankruptcy  was  allowed  to  recover 
on  the  policy.  In  view  of  the  insolvency  of  the  employer,  however, 
the  recovery  was  reduced  in  amount,  and  the  judgment  was  held 
payable  in  part,  to  wit,  in  the  ratio  which  the  insolvent's  assets, 
excluding  the  insurance  claim,  bore  to  all  his  debts,  excluding  the 
judgment.^ 

Consistently  with  a  general  doctrine  of  insurance  law,^  all  these 
three  kinds  of  obligations,  evidenced  by  the  three  forms  of  policies 

i  American    Emp.    L.    Ins.    Co.    v.  Carter  v.   /Etna  Life  Ins.   Co.   (Kan., 

Fordfjee,  62  Ark.    562;    Frije  v.  Bath  1907),  91  Pac.  178;  O'Connell  v.  R.  R. 

Gas   &   Electric  Co.,   97  Me.   241,  54  Co.,    187   Mass.    272,   72    N.    E.    979; 

All.  395,  59  L.  R.  A.  444;  Stephens  v.  Connolhi   v.    Bolster,    187    Mass.    266, 

Penn.  Cas.  Co.,  135  Mich.  189;  Anoka  72  N.  E.  981   (payment  of  the  judg- 

Lwnber  Co.   v.   Fidelitv   &   Cas.   Co.,  ment  is  a  condition  precedent);  Frye 

63  Minn.  286,  65  N.  W.  353,  30  L,  R.  A.  v.  Bath  Gas  &  Electric  Co.,  97  Me.  241 , 

689;  Ross  v.  Am.  Emp.  Liability  Ins.  54  Atl.  395,  59  L.  R.  A.  444,  94  Am. 

Co.,  56  N.  J.  Eq.  41,  38  Atl.  22;  Fen-  St.  R.  500.    The  New  York  court  says: 

ton  V.  Casualty  Co.,  36  Ore.  283,  56  "There  was  no  loss  or  damage  sus- 

Pac.  1096,  48 'L.  R.  A.  770;  Fritchie  tained   by   the   defendant  within   the 

V.  Miller's,  etc.,  Co.,  197  Pa.  St.  401;  terms  of  this  poHcy  until  the  insured 

PicHtt  V.  Casvalty  Co.,  60  S.  C.  477.  had  been  compelled  to  pay  the  claims 

38  S.  E.  160;  Hovenv.  Assvr.  Corp. ,93  of  the  owners  of  the  vessels,  the  con- 

Wis.   201,  67   N.  W.   46,32   L.   R.  A.  tract   of   insurance    being   simply   for 

388.  indemnity,"  McWilliams  v.  Home  Ins. 

2  Allen  V.  /Etna  Life  Ins.  Co.,  145  Co.,  40  App.  Div.  400,  404. 

Fed.  881   (until  judgment  is  paid,  in-  3  Moses   v.    Travelers'   Ins.    Co.,   63 

surer  cannot  be  gamisheed);  Cushman  N.  J.  Eq.  260,  49  Atl.  720,  92  Am.  St. 

V.  Carbondale,  etc.,  Co.,  122  Iowa,  656  R.  663. 

(payment    is  a  condition    precedent);  ^  See  §  24,  supra. 


670  EMPLOYEIIS'    LlAlilUTY    INSURANCE 

above  described  in  this  section,  may  well  be  classified  as  contracts 
of  indemnity.  The  first  class  is  an  indemnity  against  liability. 
The  other  two  are  an  indemnity  against  satisfied  liabilities;  the  one, 
regardless  of  judgments;  the  other,  only  if  established  by  a  judg- 
ment rendered  after  trial  of  the  issue. 

The  usual  rule  of  construction,  however,  is  clear,  that  in  case  of 
ambiguous  phraseology,  employed  by  the  insurer  in  its  contract, 
the  insured  will  be  favored  by  the  court. ^  Accordingly,  if  the  lan- 
guage of  the  policy  permits,  the  court  will  construe  the  instrument 
as  an  insurance  against  liability,  and  not  against  a  satisfied  or  dis- 
charged liability  only. 

A  New  Hampshire  case  furnishes  a  good  illustration,  although 
the  conclusions  of  the  court  have  not  met  with  general  approval. ^ 
Here  the  employer's  liability  policy  provided  that  the  policy  should 
be  liable  only  for  losses  actually  sustained  and  paid  by  the  insured 
in  satisfaction  of  judgments.  By  another  clause  of  the  policy, 
however,  the  court  concluded  that  the  insurer  obligated  itself  to 
pay,  or  secure  the  discharge  of  the  insured  from,  any  claim  in  a  suit 
by  an  employee  against  the  employer  where  the  insurer  took  con- 
trol of  the  defense.  The  obligation  "to  defend"  was  thus  construed 
as  meaning  "to  successfully  defend."  The  insurer  had  in  fact  taken 
control  of  a  litigation  for  the  defendant,  the  insured,  and  judgment 
had  been  obtained  in  that  action  by  the  plaintiff,  the  employee. 
This  judgment  the  employer  had  not  paid  and  could  not  pay  be- 
cause he  had  become  insolvent.  The  court,  nevertheless,  taking 
advantage  of  provisions  of  the  policy,  which  it  considered  incon- 
sistent, decided  that  equity  had  jurisdiction  to  compel  a  satisfaction 
of  the  judgment  by  the  insurer.^ 

A  litigation  instituted  by  an  employer  named  Kennedy,  against 
his  insurer,  illustrates  a  further  point  involved  in  this  subject. 

Kennedy's  policy  provided,  "no  action  shall  lie  against  the  com- 
pany ....  unless  it  shall  be  brought  by  the  assured  himself  to 
reimburse  him  for  loss  actually  sustained  and  paid  by  him  in  satis- 
faction of  a  judgment,"  etc.  One  of  the  employees  in  his  steam 
laundry,  Kathryn  Carlin,  received  bodily  injuries  during  the  term 
of  the  policy  and,  based  thereon,  recovered  judgment  against  Ken- 
nedy for  nearly  $8,000.     In  the  following  month  payment  of  the 

^  Fideliti  &   Cas.   Co.   v.  Lone  Oak  Maryland  Cas.  Co.,  48  Misc    183    96 

Cotton,  etc.,  Co.   (Tex.  Civ.  App.),  80  N.  Y.  Supp.  705. 
S.  W.  541.  i  Sanders  v.  Fran'  j or t  Marine  Ace. 

2  bt.  Lams,  etc.,  Co.  v.  Marvland  Cas.  &  Plate  Glass  Ins.  Co.,  72  N    H    485, 

Co.,  201  IT.  S.   173,  182;  Connolly  v.  57  Atl.  655,  101  Am.  St.  R  688 
Bolster,    187    Mass.     266;     Munro    v 


IMMEDIATE   NOTICE   OF   INJURY   WITH    FULL   PARTICULARS    671 

judgment  was  accepted  by  Kathryn  in  the  form  of  a  series  of  promis- 
sory notes  made  by  Kennedy  in  her  favor  and  payable  at  various 
times  during  the  following  four  years.  The  judgment  was  there- 
upon satisfied.  An  action  was  brought  by  Kennedy  on  his  policy 
for  reimbursement  and  was  tried  prior  to  the  actual  payment  of  the 
notes.  The  court  held  that  a  payment  of  the  judgment  in  good 
faith  by  means  of  promissory  notes  was  a  sufficient  payment  to 
satisfy  the  terms  of  the  policy.^ 

§  479.  Immediate  Notice  of  Injury  with  Full  Particulars  Re- 
quired.— To  aid  the  insurer  in  making  prompt  compromise  of  claims 
or  suitable  preparation  for  defense,  the  policy  usually  provides  in 
substance  that  the  insured  must  give  to  the  insurer  immediate  or 
prompt  notice  with  full  information  on  the  occurrence  of  any  injury 
or  accident.  This  provision  when  properly  construed  is  reasonable,^ 
and  compliance  with  it  is  a  condition  precedent  to  a  right  of  re- 
covery on  the  policy.^ 

"Immediate  notice,"  however,  as  already  more  than  once  ob- 
served, means  notice  given  with  such  promptness  as  is  reasonable 
under  all  the  circumstances  of  the  case.''  The  obligation  to  give 
immediate  notice  in  this  connection  involves  only  the  duty  to 
exercise  due  diligence,  and  what  is  due  diligence  is  often  a  question 
of  fact  for  the  jury  to  pass  upon.^  But  where  the  court  concludes 
that  only  one  inference  is  deducible  from  the  facts,  it  will  decide 
the  question  as  one  of  law.^ 

1  Kennedy  v.  Fidelity  &  Cas.  Co.  of  an  accident  and  upon  notice  of  any 
(Minn.,  1907),  110  N.  W.  97  (some  claim,"  etc.,  it  was  held  that  notice 
policies  now  require  payment  in  cash).  need  not  be  given  until  the  claim  for 

2  Columbia  Paper  Stock  Co.  v.  Fi-  damages  had  been  made,  Grand  Rap- 
delit't  &  Cas.  Co.,  104  Mo.  App.  571,  ids  Elec.  L.  &  P.  Co.  v.  FidcUty  & 
78  S.  W.  .320.  Cas.  Co.,  Ill  Mich.  148.  69  N.  W.  249; 

3  London  Guarantee  &  Ace.  Co.  v.  Anoka  Lumber  Co.  v.  Fidelity  &  Cas. 
Livy  (Ind.  App.),  66  N.  E.  481.  Co.,  63  Minn.  286,  65  N.  W.  353,  30 

i  Columbia  Paper  Stock  Co.   v.   Fi-  L.  R.  A.  689. 
delitv  &  Cas.  Co.,  104  Mo.  App.  157,  ^Ward   v.    Maryland   Cas.    Co.,   71 

78    S.    W.    320;    Emplorers'    Liability  N.  H.  262,  51  Atl.'900,  93  Am.  St.  R. 

Assiir.  Corp.  v.  Liqht,  Heat  &  P.  Co.,  514. 

28  Ind.   App.   437,  63   N.  E.  54    (no-  «  Travelers'   Ins.    Co.    v.    Myers,   57 

tice.  among    other  things,  was  aimed  N.  E.  4.58,  49  L.  R.  A.  760;  Rooney  v. 

at  "immediate  medical  attendance")-  Maryland  Cas.  Co.,  184  Mass.  26,  67 

Similarly,  when    the    policy    specified  N.  E.  882   (3  months,  too  late);  Nat. 

alimit  of  ten  days,  the  court  concluded  Covt.  Co.  v.   Travelers'    Ins.    Co.,  176 

that  the  time  would  not  begin  to  run  Mass.   121,  57  N.   E.   350   (7  months, 

until  the  important  facts  and  partic-  too  late);  Smith,  etc.,  Co.  v.  Travelers' 

ulars  had  been  ascertained,  Trivpe  v.  Ins.  Co.,  171  Mass.  357,  50  N.  E.  516 

Provident   Fund  Soc,   140   N.   Y.   23,  (notice   after   26  days  is  not  "imme- 

35  N.  E.  316,  22  L.  R.  A.  432,  37  Am.  diate");     Underwood    Veneer    Co.    v. 

St.  R.  529.    Where  the  policy  required  London  Guaranty  &  Ace.  Co.,  100  Wis. 

immediate   notice,    "upon   occurrence  378,   75   N.   W.   996    (9   months,   too 


672  employers'  liability  insurance 

To  govern  the  rights  of  parties  under  this  important  provision, 
the  New  York  Court  of  Appeals  has  laid  down  the  following  set  of 
rules:  Under  a  clause  in  an  employers'  liability  insurance  policy, 
providing  that,  "The  assured,  upon  the  occurrence  of  an  accident 
and  also  upon  receiving  information  of  a  claim  on  account  of  an 
accident,  shall  give  immediate  notice  in  writing  of  such  accident 
or  claim,  with  full  particulars,  to  the  company  at  its  office  in  New 
York  City,  or  to  the  agent,  if  any,  who  shall  have  countersigned  this 
policy,"  the  assured  is  not  bound  to  give  notice  of  an  accident 
immediately  after  the  occurrence  thereof,  but  as  soon  as  he  has 
become  apprised  of  the  accident,  provided,  however,  he  exercises 
reasonable  diligence  to  acquire  information.  It  is  his  duty,  there- 
fore, to  use  reasonable  care  in  the  regulation  of  his  business  so  that 
he  may  be  apprised  with  reasonable  celerity  of  any  accident  that 
may  occur  in  its  conduct.  If,  despite  the  exercise  of  reasonable 
care,  the  insured  fails  to  acquire  the  information  till  after  a  lapse 
of  time,  but  on  its  acquisition  gives  prompt  notice  to  the  insurance 
company,  he  complies  with  the  obligation  of  the  policy.  Where, 
however,  the  assured  employs  many  servants  and  the  duty  of  ac- 
quiring information  of  accidents  as  they  occur  is  necessarily  com- 
mitted to  servants  or  agents,  he  is  liable  for  their  negligence  or 
fault,  in  the  discharge  of  this  duty,  to  the  same  extent  as  he  would 
be  responsible  for  their  negligence  or  misconduct  on  any  other  obli- 
gation to  third  persons,  and  the  assured  is  not  relieved  from  such 
responsibility  by  the  promulgation  of  rules  adapted  to  apprise  him 
of  accidents,  whether  the  servants  complied  with  the  rules  or  not; 
but  his  liability  for  the  negligence  of  his  servants  or  agents  in  failing 
to  apprise  him  of  an  accident  must  be  confined  to  those  agents  whose 
duty  it  was,  either  by  his  express  regulation,  or  by  their  supervision 
and  control  in  the  natural  and  proper  conduct  of  business  over  the 
subordinate  servants  by  whom  the  accident  had  been  caused,  to 
transmit  such  knowledge  to  their  superiors  or  the  assured,  and  the 
assured  is  not  chargeable  with  the  knowledge  of  the  servant  causing 
the  accident  or  with  the  knowledge  or  information  of  a  coservant 
of  the  same  rank  as  the  one  causing  the  accident.' 

late).      A   notice   of   accident   after   a  driver  informed   foreman  of  trucking 

year    was     held     insufficient    though  company.      Latter   neglected    to   give 

meanwhile  the  insured  did  not  know  prompt     notice     to      superintendent 

that  injury  had  resulted,  X orthvestern  Held,  that  it  was  for  the  jury'  to  deter- 

Tel.  Exch.  Co.  v.  Mnri/land  Cas.  Co.,  mine  whether  in  ordinary  course  it  was 

86  Mmn.  467,  90  N.  W.  1110.  the  foreman's  dutv  to  report  to  super- 

1  WoolveHon  v.  FideliU^  &  Casualty  intendent.     If  so",  notice  to  foreman 

Co.,  190  N.  Y.  41,82  N.  E.  745  (truck  was    notice    to    the    plaintiff)       Com- 


IMMEDIATE   NOTICE    OF   INJURY    WITH    FULL   PARTICULARS    673 

South  Carolina  furnishes  an  illustration.  The  Edgefield  Manu- 
facturing Company,  proprietor  of  a  mill,  had  obtained  a  policy  to 
protect  it  against  claims  for  accidents  to  its  employees,  the  insur- 
ance being  limited  to  $1,500  for  the  death  or  injury  of  any  one 
person.  An  accident  causing  personal  injuries  to  an  employee 
occurred  October  21st.  At  that  time  the  plaintiff's  officer,  Price, 
in  charge  of  the  mill  was  sick  with  the  smallpox.  The  rest  of  the 
office  force  were  mostly  ill  with  the  same  disease.  Price  died  of  the 
attack  in  February  of  the  following  year.  The  next  month,  Tomp- 
kins, the  successor  of  Price,  first  learned  of  the  casualty  insurance. 
Thereupon  he  immediately  gave  to  the  insurance  company  a  notice 
of  the  accident  and  of  the  pendency  of  the  negligence  suit,  which 
had  been  instituted  in  consequence  the  preceding  January.  In  that 
action  the  employee  ultimately  recovered  jvidgment  against  the 
employer  for  $3,500.  Thereafter  this  action  was  begun  for  $1,5C0. 
The  court  on  appeal  decided  that  the  "jury  could  not  reasonably 
reach  any  other  conclusion  than  that  the  delay  was  excusable  and 
the  notice  given  and  the  summons  sent  with  all  promptness  to  be 
fairly  expected  and  exacted."  The  judgment  of  the  mill  owner 
against  the  insurer  was  affirmed.^ 

In  another  case,  an  employer's  liability  policy  was  procured  for 
the  benefit  of  a  copartnership  by  one  of  two  partners,  without  the 
knowledge  of  the  other.  The  latter,  while  ignorant  of  the  existence 
of  the  insurance,  knew  about  an  accident  which  subsequently  hap- 
pened to  one  of  the  employees  of  the  firm.  The  other  partner, 
though  cognizant  of  the  policy,  knew  nothing  of  the  accident.  In 
consequence  of  this  situation  the  notice  of  claim,  stipulated  to  be 
immediate,  was  not  given  to  the  agent  of  the  insurance  company 
until  eight  months  after  the  occurrence  of  the  injury.  The  court 
held  that  the  notice  was  too  late,  and  that  the  neglect  of  one  partner 
to  inform  the  other  of  the  insurance  offered  no  adequate  excuse 
for  the  delay.' 

As  to  the  character  and  extent  of  the  information,  which  must 
be  furnished  to  the  insurer  with  the  notice,  the  New  Hampshire  court 
holds  that  the  particulars  required  are  only  such  as  are  sufficient 

pare  Manddl  v.  Fidelity  &  Cos.  Co.,  edge);  McShane  v.  Houard  Bank,  73 

170  Mass.  173,  49  N.  E.  110,  64  Am.  Md.  135,  20  Atl.  776,  10  L.  R.  A.  5^:2; 

St.   R.   291    (employer  not  chargeable  Pittsburg    Ft.    W.    &    C.    Ry.    Co.    v. 

■with   servant's    knovledge);    Saint    v.  Shaeffer,  59  Pa.  350. 

M/gr.  Co.,  95  Ala.  362,  10  So.  539,  36  ^  Edgefield    Mfq.    Co.    v.    Maryland 

Am.  St.  R.  210;  Fidelity  &  Cas.  Co.  v.  Cas.  Co.  (S.  C,  1907),  58  S.  E.  969. 

Bank,  97  Ga.  634,  25' S.  E.  392,  33  ^  Deer    Trail,    etc.,    Mining    Co.    v. 

L.  R.  A.  821,  54  Am.  St.  R.  440  (bank  Maryland  Cas.  Co.,  36  Wash.  46,  78 

not  chargeable  with  cashier's  knowl-  Pac.  135,  67  L.  R.  A.  275. 

43 


674  employers'  liahiljtv  insurance 

to  enable  the  insurance  company  to  judge  of  the  probability  of  a 
claim,  and  that  it  has  no  right  to  expect  the  results  of  an  exhaustive 
investigation  such  as  might  be  called  for  to  determine  the  facts  upon 
a  consideration  of  conflicting  evidence.^ 

§  480.  The  Employer  Must  not  Settle  Claims,  Without  Insurer's 
Consent. — If  the  employer  purposes  to  enforce  his  liability  policy,  it 
is  obvious  that  he  must  not,  without  his  insurer's  consent,  settle  or 
compromise  claims  made  upon  him  by  his  employees  or  by  the  public, 
which  fall  within  the  reach  of  the  insurance,^  unless,  indeed,  he  is 
coerced  into  taking  such  precautionary  measures  by  the  improper 
attitude  of  the  insurer.^ 

§  481.  The  Employer  Must  Show  a  Liability  Insured  Against. — ^To 

make  out  his  case  on  the  policy,  the  insured  employer  must  not  only 
show  a  liability,  but  a  liability  on  account  of  an  injury  covered  by 
the  policy.  Thus  it  was  held  that  his  action  against  his  insurers 
must  fail,  because  though  he  offered  in  evidence  a  judgment  for 
damages  obtained  against  him  by  an  employee,  yet  it  did  not  ap- 
pear whether  the  judgment  related  to  an  injury  sustained  during 
the  term  of  the  policy  or  to  another  injury  sustained  after  expiration 
of  the  policy.'* 

Where  the  policy  provided  that  the  amount  of  the  employer's 
liability  must  first  be  "determined,"  before  the  insurer  would  be 
obligated  to  pay,  the  court  held  that  such  amount  was  not  "deter- 
mined" so  long  as  an  appeal  from  the  judgment  against  the  insured 
employer  was  pending  in  court. ^ 

§  482.  The  Insurer  Conducts  Compromise  or  Defense  in  Accident 
Suit. — Unless   the   insurance   company    repudiates   liability   under 

^Ward   V.    Maryland   Cas.    Co.,   71  ^Fidelity  &  Cas.  Co.  v.  Fordyce,  64 

N.  H.  262,  .51  Atl.  900,  93  Am.  St.  R.  Ark.  174,  41  S.  W.  420.    The  insurance 

514;  Moran  Bros.  v.  Pac.  Coast  Cas.  was  against  liability  for  personal  in- 

Co.    (Wash.,   1908),  94   Pac.    106.     A  juries  sustained  by  employees  or  by 

30  days'  limitation  for  beginning  ac-  the  public  "caused  by  the  assured  or 

tion  has  been  held  void,  Travelers'  Ins.  by    the    assured's    workmen    but    not 

Co.   V.   Henderson   Cotton    Mills    (Ky.,  caused  by  a  subcontractor  or  subcon- 

1905),  85  S.  W.  1090,  and  will  be  con-  tractor's 'workmen."     The  court  held 

sidered    waived    by    pending    negotia-  that  the   burden  was  on  the  insured 

tions  for  settlement,  Lynchburg  Cotton  employer  to  prove  that  the  injury  was 

Mill   Co.   V.    Travelers'   Ins.    Co.,   149  not  caused   by  a  subcontractor'  or  a 

Fed.  954.  subcontractor's    workmen,    Tobnie    v. 

2  Pickett  V.  Fidelity  &  Cas.  Co.,  60  Fidelitu  d-  Cas.  Co.,  95  App.  Div.  352, 
S.  C.  477,  38  S.  E.  160.  88  N.  Y.  Supp.  717,  aff'd  as  to  extent 

3  See  §  484,  infra.  of  liability,  183  N.  Y.  581. 
*  Reigler  v.   Sherlock,  66  Ark.   215, 

49  S.  W.  1080. 


JUDGMENT   IN   ACCIDENT  SUIT   CONCLUSIVE  675 

the  policy  in  respect  to  the  claim,  it  properly  should  control  the  con- 
duct of  the  defense  in  the  action  against  the  employer  for  negligence, 
or  breach  of  statutory  duty,  inasmuch  as  the  ultimate  responsibility 
to  the  extent  of  the  policy  will  rest  upon  the  insurer.^  Indeed,  even 
though  the  policy  be  silent  on  the  subject,  the  employer  must,  for 
his  own  proper  protection,  tender  this  privilege  to  his  insurer,  other- 
wise the  insurer  may  repudiate  the  binding  force  of  any  judgment 
which  is  obtained  by  the  injured  person;  '  but  usually  the  terms  of 
the  policy  expressly  obligate  the  insurer  to  defend  against  claims 
which  are  not  repudiated,  or  else  secure  to  it  the  option  through  its 
own  counsel,  and  at  its  own  expense  to  take  charge  of  the  litigations 
against  the  insured  based  upon  them/"* 

While  the  policy  usually  reserves  to  the  insurers  the  right  to 
compromise  such  an  action,  they  may  not  credit  on  the  judgment 
therein  the  amount  of  a  compromise  of  a  claim  not  in  suit  made 
without  consent  of  the  insured.'* 

§  483.  Judgment  in  Accident  Suit  Conclusive. — ^The  insurer,  hav- 
ing received  proper  notice  of  the  accident  suit  and  opportunity 
to  conduct  the  defense,  is  concluded  by  the  judgment  therein  ren- 
dered, which  naturally  is  offered  in  evidence  in  the  suit  on  the  policy, 
to  establish  the  fact  of  the  employer's  liability  to  the  injured  person, 
and  the  amount  of  that  liability/^  But  the  estoppel  of  the  judgment 
does  not  extend  beyond  the  issues  which  were  litigated  in  the  prior 
action  in  which  it  was  rendered.^ 

1  Washington  Gas  Co.  v.  Dist.  of  S.  W.  794,  38  Am.  St.  R.  626.  The 
Columbia,  161  U.  S.  316,  16  S.  Ct.  564,  United  States  Supreme  Court  says: 
40  L.  Ed.  712.  By  taking  charge  of  "When  a  person  is  responsible  over 
the  defense  of  the  accident  suit,  it  to  another  either  by  operation  of  law 
has  been  held,  that  the  insurer  waives  or  by  express  contract,  and  he  is  duly 
the  policy  exception  to  liability  for  notified  of  the  pendency  of  the  suit, 
injuries  caused  by  failure  of  assured  to  and  requested  to  take  upon  himself 
observe  statutes  affecting  the  safety  the  defense  of  it,  he  is  no  longer  re- 
of  persons,  Royle  Min.  Co.  v.  Fidelity  garded  as  a  stranger,  because  he  had 
(fcCas.  Co.  (Mo.  App.,  1907),  103  S.  W.  the  right  to  appear  and  defend  the 
1098.  See  Chicago-CovlterviUe  Coal  action,  and  has  the  same  means  and 
Co.  V.  Fidelity  &  Cas.  Co.,  130  Fed.  advantages  of  controverting  the  claim 
957.  as   if  he   were   the   real  and  nominal 

2  Glens  Falls  Portland  Cewent  Co.  v.  party  upon  the  record.  In  every 
Ins.  Co.,  162  N.  Y.  399,  56  N.  E.  897.  such  case,  if  due  notice  is  given  to 

3  Ano!a  Lumber  Co.  v.  Fidelity  &  such  person,  the  judgment,  if  obtained 
Cas.  Co.,  63  Minn.  286,  65  N.  W. '353,  without  fraud  or  collusion,  will  be 
30  L.  R.  A.  689.  conclusive    against    him    whether    he 

*  New  Orleans  &  C.  R.  Co.  v.  Mary-  has    appeared    or    not,"    Washington 

land  Cas.  Co.  (La.),  38  So.  89.  Gas  Co.  v.  Dist.  of  Columbia,  161  U.  S. 

5  B.  Roth  Tool  Co.  V.  New  Amster-  316,  16  S.  Ct.  564,  40  L.  Ed.  712. 

dam  Cas.  Co.,  161  Fed.  709;  City  of  ^  B.  Roth  Tool  Co.  v.  New  Amster- 

St.  Joseph  v,  Ry.  Co.,  116  Mo,  636,  22  dam  Cas.  Co.,  161  Fed,  709, 


676  employers'  liability  insurance 

It  has  been  held,  however,  that  the  insurer,  by  taking  dominion 
over  the  conduct  of  the  defense  in  the  accident  suit  and  depriving 
the  employer  of  control,  estops  itself  from  denying  liability  on  the 
alleged  ground  that  the  case  is  one  to  which  the  policy  is  not  ap- 
plicable.' 

§  484.  Effect  of  Insurer's  Breach  of  Agreement  to  Defend.— The 

insurer,  erroneously  contending  that  the  particular  accident  or 
injury  does  not  come  within  the  reach  of  the  policy,  often  declines 
to  have  anything  to  do  with  the  defense  in  the  accident  suit.  It  then 
becomes  of  moment  to  determine  the  practical  effect  of  a  breach 
by  the  insurer  of  its  agreement  in  this  particular. 

If  the  insurance  company  declines  to  take  charge  of  the  defense 
in  the  action  against  the  insured,  it  has  been  held  that  a  compromise 
made  by  the  insured  and  the  injured  person,  in  good  faith  and  with 
reasonable  prudence,  can  properly  be  taken  into  consideration  as 
evidence  of  the  actual  loss  sustained.^  It  has  also  been  held  that 
where,  after  due  notice  of  the  pendency  of  an  accident  suit,  the  in- 
surance company  refused  to  defend,  the  judgment  entered  therein 
upon  a  bona  fide  compromise  was  conclusive  evidence  of  the  em- 
ployer's liability  and  prima  facie  evidence  of  its  amount.^ 

In  a  New  York  case  the  insurer  was  obligated  to  defend  actions 
brought  by  employees  against  the  insured  and  founded  on  personal 
injuries.  The  defense  in  such  an  action  the  insurer  had  actually 
conducted  to  the  very  eve  of  trial,  but  then  it  had  withdrawn, 
leaving  the  employer  no  reasonable  opportunity  to  make  its  own 
preparation  for  trial.  The  employee  accordingly  obtained  judgment 
by  default.  In  the  subsequent  action  by  the  employer  against  the 
insurance  company,  the  defendant  was  held  estopped  from  denying 
the  effect  of  the  employee's  judgment  as  conclusively  establishing 
negligence  and  violation  of  the  Factory  Law  on  the  part  of  the 
employer,  defenses  set  up  in  the  first  action  by  the  insurer's  counsel 
himself.** 

The  St.  Louis  Dressed  Beef  and  Provision  Company  had  a  teams 
liability  policy,  issued  by  the  defendant,  which  therein  agreed  to 
defend  any  suit  for  damages  brought  against  the  assured,  the  latter 
not  to  make  any  settlement  without  the  company's  consent.    One  of 

1  Employers'  Liahilitv  Assur.  Corp.  Nev^s  Co.,  151  Mo.  373,  52  S.  W.  205, 
V.  CMcano,  etc.,  Coal  &  C.  Co.,  141  Fed.  45  L.  R.  A.  380,  74  Am.  St.  R.  545. 
962,  73  C.  C.  A.  278.  And  see  Conner  v.  Reeves,  103  N.  Y. 

2  Southern  Ry.  News  Co.  v.  Fidelity  527,  9  N.  E.  439. 

&  Cas.  Co.  (Ky.,  1904),  83  S.  W.  620.  ^  Glens  Falls,  etc.,  Co.  v.  Travelers' 

^Kansas  City   M.   <f-    /?.    /?.    Co.    v,       /r».v.  To  ,  1fi2  N   Y   .399    56  N   E   897 


COSTS   AND    EXPENSES   OF   ACCIDENT   SUIT  677 

the  plaintiff's  employees,  Nellie  Heideman,  was  seriously  injured 
by  the  negligence  of  John  Berry,  a  driver  of  one  of  plaintiff's  wagons. 
She  brought  suit  for  $10,000  as  her  damages.  The  casualty  com- 
pany, though  duly  requested,  refused  to  defend  this  suit,  erroneously 
contending  that  Berry  was  not  in  the  employ  of  the  insured  at  the 
time.  The  insured,  alarmed  at  the  gravity  and  size  of  the  claim 
made  against  it,  effected  a  compromise  with  Nellie  in  good  faith  at 
$2,000,  and  paid  her  that  amount,  and  thereafter  brought  suit  on 
the  policy.  The  court  held  that  the  insurer  by  its  breach  of  contract 
to  defend  had  released  the  assured  from  the  stipulation  regarding 
settlement  without  consent  and  had  waived  the  condition  that  the 
insurer  was  liable  only  for  a  satisfied  judgment  rendered  after  a  trial. 
The  court  further  held  that  the  liability  of  the  assured  to  the  em- 
ployee and  its  amount  might  be  litigated  in  the  action  on  the  policy.^ 

§  485.  Costs  and  Expenses  of  Accident  Suit. — Where  the  policy 
contains  no  provision  on  the  subject,  the  question  arises  whether  it 
covers  the  costs  and  expenses  which  the  employer  has  incurred  in 
his  defense  in  the  action  for  negligence  or  breach  of  duty. 

If  the  insurer  is  obligated  to  conduct  the  defense  for  the  em- 
ployer and  has  neglected  to  do  so,  the  employer  may  recover  on  the 
policy  the  costs  and  expenses  which  he  has  been  compelled  to  incur 
in  addition  to  the  judgment,^  but  limited  in  the  aggregate  by  the 
amount  specified  in  the  policy,^  unless  the  policy  is  so  worded  as  to 
be  susceptible  of  the  construction  that  the  limit  of  liability  specified 
for  damages  is  exclusive  of  the  costs  and  expenses  which  may  then 
be  superadded."* 

It  is  also  held  that  the  insurer  cannot,  in  order  to  limit  the  re- 
covery of  the  insured  upon  the  policy,  credit  itself  with  the  expenses 
which  it  has  incurred  in  defending  the  negligence  suit.^ 

In  a  New  York  case,  the  only  question  involved  was  one  regard- 
ing expenses  in  the  negligence  suit,  inasmuch  as  the  employer  had 
been  successful  in  establishing  his  defense  therein.  On  this  state  of 
facts  the  court  decided  that  he  could  recover  nothing  on  his  liability 

1  Sf .  Louis  Dressed  Beef  &  P.  Co.  v.  '^  National,  etc.,  Mills  v,  Franffort, 
Maryland  Cas.  Co.,  201  V.  S.  173.  etc.,  Ins.  Co.  (R.  I.,  1907),  66  Atl.  58 

2  Southern  Ry.  Nevs  Co.  v.  Fidelity  (.'$75  extra  allowed  for  services  of 
(fc  Cas.  Co.  (Ky.,  1904),  83  S.  W.  620;  doctors  rendered  at  request  of  in- 
Travelers'  Ins.  Co.  v.  Henderson  Cotton  surer);  Miinro  v.  Maryland  Cas.  Co., 
Mills  (Ky.),  85  S.  W.  1090;  New  Or-  48  Misc.  183,  96  N.  Y.Supp.  705. 
leans  &  (j.  R.  Co.  v.  Maryland  Cas.  Co.  *  New  Amsterdam  Cas.  Co.  v.  Cum- 
(La.),  38  So.  89.  And  see  MonrM  v.  fcerZand  T.  <fc  T.  Co.,  152  Fed.  961. 
Fidelity  &  Cas.  Co.,  170  Mass.  173,  49  5  Cudahy  Packing  Co.  v.  New  Am- 
N.  E.  Iin,  64  Am.  St.  R.  291.  i^prdnyn  Cas.  Co.,  132  Fed.  623. 


678  employers'  liability  insurance 

policy,  although  the  judgment  obtained,  dismissing  the  complaint 
of  the  alleged  employee,  might  enure  to  the  benefit  of  the  insurer. 
The  judges  stood  four  to  three. ^ 

Where  the  policy  provides  that  the  insurer  shall  pay  the  cost  of 
defending  in  the  accident  suit  brought  against  the  employer,  the 
word  "cost"  is  not  to  be  limited  to  statutory  costs,  but  means 
"expense"  and  includes  also  the  fees  of  its  attorneys  and  of  stenog- 
raphers and  the  like.^ 

§  486.  Carriers'  Liability  Policy. — Railway  companies  and  other 
common  carriers  are  subjected  to  so  many  claims  at  the  instance 
of  their  employees  and  of  the  traveling  public,  based  upon  negli- 
gence and  breach  of  statutory  duty,  that  some  public  carriers  prefer 
to  be  their  own  insurers.  Others  are  glad  to  take  out  liability  in- 
surance to  protect  themselves,  at  least  in  part.  Of  late  years  insurers 
have,  for  the  most  part,  discontinued  carrying  this  class  of  risks. 

Although  the  law  holds  the  common  carrier  to  the  exercise  of  a 
high  degree  of  care,  and  although  insurance  may  sometimes  tend  to 
diminish  the  exercise  of  such  care  on  the  part  of  the  insured,  never- 
theless, the  doctrine  of  public  policy  is  not  pressed  so  far  as  to  make 
it  unlawful  for  a  common  carrier  to  protect  himself  from  the  results 
of  negligence  and  breach  of  duty  by  procuring  policies  of  this  char- 
acter.^ 

In  a  Massachusetts  case  the  policy  insured  against  loss  from  lia- 
bility to  any  person  accidentally  sustaining  bodily  injuries  while 
traveling  on  the  street  railway  of  the  insured  under  circumstances 
which  would  impose  a  common-law  or  statutory  liability.  Where 
the  death  of  the  insured  passenger  followed  the  occurrence  of  the 
accident  so  closely  that  no  time  was  allowed  for  conscious  suffering 
on  his  part  in  consequence  of  his  injuries,  it  was  held  that  the  loss 
did  not  come  within  the  terms  of  the  ))olicy.'* 

^Cornell  v.  Travelers'  Ins.  Co.,  175  '^Trenton  Pass.   R.   Co.   v.  Guaran- 

N.  Y.  239,  67  N.  E.  578;  but  see  ChUson  tars',  etc.,Inde7n.  Co.,  60  N.  J.  L.  246, 

V.  Downer,  27  Vt.  536.     And  compare  37  Atl.  609,  44  L.  R.  A.  213;  American 

Fernald  v.  Prov.  Washinqton  Ins.  Co.,  Casualty   Co.'s  Case,  82  Md.   535,  34 

27  App.  Div.  137,  50  X.  Y.  Supp.  838  Atl.  778,  38  L.  R.  A.  97;  Boston,  etc., 

(counsel  fees  not  recoverable);   Egbert  R.  R.  Co.  v.  Mercantile  Trust,  etc.,  Co., 

V.  St.  Paul  F.  &  M.  Ins.  Co.,  92  Fed.  82  Md.  535,  34  Atl.  778,  38  L.  R.  A. 

517;  Munson  v.  Stand.   M.   Ins.   Co.,  97;  Kansas  City,  etc.,  Co.  v.  South.  Ry. 

156  Fed.  44;  Xenos  v.  Fox,  L.  R.  3  News  Co.,  151  Mo.  373,  52  S.  W.  205, 

C.  P.  630,  4  C.  P.  665.  45  L.  R.  A.  38,  74  Am.  St.  R.  645.    See 

2  Maryland  Cas.  Co.  v.  Omaha  Elec-  also  §  469,  supra, 

trie  Light  &  P.  Co.,  157  Fed.  514,  85  *  Worcester    S.    Street    Ry.    Co.    v. 

C.  C.  A.  106  (recoveiy  for  costs  may  Travelers'  Ins.  Co.   (Mass.),"  62  N.  E. 

exceed  the  limit  of  $5,000  named  foV  364, 
damages). 


APPENDIX 


APPENDIX 

CHAPTER  1 

An  KxtrrHiT  OB  LisT  OP  American  Statxttes  Rei^ting  to  the  Insurance 
Contract  and  Revised  to  January  1st,  1909 

1 

Civil  Codes 

The  following  states  have  adopted  civil  codes  which  treat  of  the  subject  of 
insurance  law  with  some  detail. 

California,  Deering's  Civ.  Code,  1903.        North  Dakota,  Rev,  Codes,  1899. 
Georgia,  Code,  1895.  South  Dakota,  Rev.  Codes,  1903. 

Montana,  Rev.  Civ.  Code,  1907. 

2 

Subject  of  Insurance — Contingent  or  Unknown  Event 

The  California  Code  provision  is  given: 

"Any  contingent  or  unknown  event,  whether  past  or  future,  which  may 
damnify  a  person  having  an  insurable  interest,  or  create  a  liability  against  him, 
may  be  insured  against,  subject  to  the  provisions  of  this  chapter." 

California,  Civ.  Code,  1903,  §  2531.  North  Dakota,  Rev.  Code,  1899,  §  4442. 

Montana,  Rev.  Civ.  Code,  1907,  §  5546.     South  Dakota,  Civ.  Code,  1903,  §  1794. 

3 

What  Policy  Must  Specify 

In  several  states  there  are  express  requirements  of  what  must  be  specified  in 
a  policy  of  insurance  generally. 

California,  Civ.  Code,  1903,  §  2587.  tions  appearing  upon  the  face  of  the 

Georgia  Code,  1895,   §  2022,  provides  policy, 

that  contracts  are  to  be  evidenced  North  Dakota,  Civ.  Code,  1899,  §  4488. 

by  the  policy  and  that  the  liability  South  Dakota,  Civ.  Code,  1903,  §  1837. 

of  the  company  "shall  be  governed  See  as  to  statutes  as  to  life  policy, 

by  the  terms,  stipulations  and  condi-  Nos.  52-54,  herein. 

4 

Corporate  Seal  Not  Required  on  Policy 

The  following  States  have  adopted  laws  providing  that  policies  of  insurance 
not  executed  over  the  corporate  seal  of  the  company  are  nevertheless  binding. 

[681] 


682 


APPENDIX   OF   STATUTES 


[chap.  I 


The  Pennsylvania  statute  is  given  as  a  specimen: 

"Policies  of  insurance  made  or  entered  into  by  the  company  may  be  made 
either  with  or  without  the  seal  thereof,  and  they  shall  be  subscribed  by  the 
president  or  such  other  officer  as  may  be  designated  by  the  directors  for  that 
jjurpose,  and  attested  by  the  secretary;  and  when  so  subscribed  and  attested, 
shall  be  obligatory  on  the  company." 


Arizona,  Rev.  Stat.  1901,  §  786. 
Colorado,  Sess.  Laws,   1907,  ch.   193, 

§  m,  p.  453. 
Idaho,  Civ.  Code,  1901,  §  2216. 
Indiana,  Burns's  Ann.  Stat.  Rev.  1908, 

§  4652. 
Iowa,  Ann.  Code,  1897,  §  1712. 
Kansas,  Gen.  Stat.  1905,  §  3528. 
Maine,  Rev.  Stat.  1903,  ch.  49,  §  15, 

p.  476. 


Montana,  Rev.  Code,  1907,  §  4051. 
Nebraska,   Comp.   Stat.    1903,   §  3876. 

See  Laws,  1907,  ch.  7.5,  §  9,  p.  282. 
New     Mexico,     Comp.     Laws,     1897, 

§  2106. 
Ohio,  Bates's  Ann.  Stat.  1906,  §  3645. 
Pennsylvania,  Pepper  &  Lewis's  Dig., 

vol.  1,  col.  2364,  §  41. 
Wyonaing,  Rev.  Stat.  1899,  §  3166. 


Annexation  of  Application  to  Polio/ 

The  following  states  have  adopted  laws  requiring  the  annexation  of  applica- 
tions to  policies. 

The  Ohio  statute  is  given  as  a  specimen: 

"  Every  company  doing  business  in  this  State  shall  return  with,  and  as  part  of 
any  policy  issued  by  it,  to  any  person  taking  such  policy,  a  full  and  complete 
copy  of  each  application  or  other  document  held  by  it  which  is  intended  in  any 
manner  to  affect  the  force  or  validity  of  such  policy,  and  any  company  which  neg- 
lects so  to  do  shall,  so  long  as  it  is  in  default  for  such  copy,  be  estopped  from  deny- 
ing the  truth  of  any  such  application  or  other  document;  and  in  case  such  com- 
pany neglect,  for  thirty  days  after  demand  made  therefor,  to  furnish  such  copies, 
it  shall  be  forever  barred  from  setting  up,  as  a  defense  to  any  suit  on  such  policy, 
any  incorrectness  or  want  of  truth  of  such  application  or  other  document." 


California.     See  Deering's  Civil  Code, 

1903,  §  2605. 
Georgia,  Laws,  1906,  No.  466,  p.  107. 
lUinois,    Rev.    Stat.    1908,    p.    1248, 

§  208,  n.  (3). 
Iowa,  Ann.  Code,  1897,  §§  1741,  1819, 

1826.    Supp.  to  Code,  1907,  §§  1741, 

1819,  1826. 
Maine,  Laws,  1907,  ch.  30,  p.  28;  ch. 

187,  p.  204. 


Massachusetts,  Acts  &  Res.  1907,  ch. 

576,  §  73,  p.  894. 
Michigan,  Pub.  Acts,  1899,  p.  127. 
Mississippi,  Code,  1906,  §  2675. 
Missouri,  Rev.  Stat.  1899,  §  7929. 
Ohio,     Bates's     Annot.    Stat.     1906, 

§3623. 
Oklahoma,  Rev.  Stat.  1903,  §  3200. 
Texas,  Supp.    1903    to    Sayles's    Civ. 

Stats.,  §  3096ee. 
Wisconsin,  Laws,  1905,  ch.  51,  p.  108. 


Provisions  of  Application  or  By-Laws  to  Be  Set  Forth  in  Policy 
The  following  states  have  adopted  laws  providing  that  conditions  are  not 


CHAP,  1 3  CONTRACT   OF  INSURANCE   SUBJECT  TO  STATE   LAWS       683 

valid  or  provisions  of  application  or  by-laws  are  not  binding  unless  set  forth  in 
the  policy. 

The  Pennsylvania  statute  is  given  as  a  specimen: 

"  All  life  and  fire  insurance  policies  upon  the  lives  or  property  of  persons  within 
this  commonwealth,  whether  issued  by  companies  organized  under  the  laws  of 
this  State,  or  by  foreign  companies  doing  business  therein,  which  contain  any 
reference  to  the  application  of  the  insured,  or  the  constitution,  by-laws  or  other 
rules  of  the  company,  either  as  forming  part  of  the  policy  or  contract  between  the 
parties  thereto,  or  having  any  bearing  on  said  contract,  shall  contain,  or  have  at- 
tached to  said  policies,  correct  copies  of  the  application,  as  signed  by  the  appli- 
cant, and  the  by-laws  referred  to;  and  unless  so  attached  and  accompanying  the 
policy,  no  such  application,  constitution  or  by-laws  shall  be  received  in  evidence, 
in  any  controversy  between  the  parties  to,  or  interested  in  the  said  policy,  nor 
shall  such  application  or  by-laws  be  considered  a  part  of  the  policy  or  contract 
between  such  parties." 

Connecticut,  Gen.  Stat.  1902,  §  3496.  Mississippi,  Code,  1906,  §  2597. 

Georgia,  Code,  1895,  §  2022.  New  Jersey,  Laws,  1907,  p.  134. 

Louisiana,  Acts,1906,  Act  No.  52,  p.  86.  New  York,  Ins.  Law,  1892,  ch.  690,  §  58, 

Massachusetts,  Acts  &  Res.  1907,  ch.  Pennsylvania,  Pepper  &  Lewis's  Dig., 

576,  §  59,  p.  882.  vol.  1,  col.  2375,  §  68. 

Minnesota,  Rev.  Laws,  1905,  §§  1616,  Tennessee.      See    Shannon's    Annot. 

1693.  Code,  1896,  p.  776,  §  3356. 

7 

Statements  to  Be  Deemed  Representations  and  Not  Warranties 
The  New  York  statute  is  given  as  a  specimen : 

"All  statements  purporting  to  be  made  by  the  insured  shall  in  the  absence  of 
fraud  be  deemed  representations  and  not  warranties." 

Kentucky,  Stats.  1909,  §  4286.  New  Hampshire,  Pub.  Stat.  1901,  ch. 

Louisiana,   Acts,    1906,    Act    No.    52,  170,  §  2,  p.  570. 

p.  86  (life).  New  York,  Ins.  Law,  1892,  ch.  690, 

Missouri,    Rev.    Stat.    1899,    §§7973,  §  58,  am'd  L.  1906,  ch.  326  (life). 

7974  (other  than  life).  Ohio,  Laws,  1908,  p.  171  (life). 

Tennessee,  Acts,  1907,  p.  1530. 

In  New  Hampshire  it  is  provided  that: 

"A  policy  shall  not  be  avoided  by  reason  of  any  mistake  or  misrepresentation, 
unless  it  appears  to  have  been  intentionally  and  fraudulently  made  or  unless  the 
difference  between  the  property  as  it  was  represented  and  the  property  as  it 
really  existed  contributed  to  the  loss." 

New  Hampshire,  Pub.  Stat.  1901,  ch.  170,  §  2,  p.  570. 

8 

When  Contract  of  Insurance  Subject  to  Laws  of  State 

The  Alabama  Code  provides  that: 

"  All  contracts  of  insurance,  the  application  for  which  is  taken  within  the  state, 


684 


APPENDIX   OF   STATUTES 


[chap.  I 


shall  be  deemed  to  have  been  made  within  this  state,  and  subject  to  the  laws 
thereof." 


Alabama,  Civ.  Code,  1907,  §  4583. 
Colorado,  Sess.  Laws,   1907,  ch.   193, 

§  54,  p.  469. 
Minnesota.      See    Rev.    Laws,    1905, 

§  1596. 


Mississippi.    See  Code,  1906,  §  2563. 
North  Carolina,  Rev.  of  1905,  §  4806. 
Tennessee,  Acts,  1907,  ch.  441,  p.  1496. 
Texas,   Supp.    1903   to   Sayles's   Civ. 
Stats.  §  3096dci. 


9 

Representations  and  ConcealmerU 

In  some  of  the  states  express  provisions  are  made  as  to  the  information  of 
matters  which  are  and  are  not  necessary  to  be  communicated  or  disclosed. 

5570  et 


California,  Civ.  Code,  1903,  §§  2563  et 

seq. 
Georgia.     Code,   1895,   §§2098,  2099, 

2101  (fire  risk).    Id.,  §  2138  (mutual 

insurance). 


Montana.    Rev.  Code,  1907, 

seq. 
North     Dakota,     Rev.     Code,     1899, 

§§4466e<se5. 
South  Dakota,  Civ.  Code,  1903,  §§  1815 

et  seq. 


10 

Concealment — Rescission  of  Contract 

The  California  Code  provision  is  given: 

"A  concealment,  whether  intentional  or  unintentional,  entitles  the  injured 
party  to  rescind  a  contract  of  insurance." 


California,  Civ.  Code,  1903,  §  2562. 
Georgia,  Code,  1895,  §  2099. 
Montana,  Rev.  Code,  1907,  §  5569. 


North     Dakota,     Rev,    Code,     1899, 

§  4465. 
South  Dakota,  Civ.  Code,  1903,  §  1816. 


11 


Falsity  of  Representation — Rescission  of  Contract 

The  California  Code  provision  is  given: 

"If  a  representation  is  false  in  a  material  point  whether  affirmative  or  promis- 
sory, the  injured  party  is  entitled  to  rescind  the  contract  from  the  time  when  the 
representation  becomes  false." 


California,  Civ.  Code,  1903,  §  2580. 
Georgia,  Code,  1895,  §  2101  (fire  pol- 
icy). 
Montana,  Rev.  Code,  1907,  §  5587. 
North  Dakota,  Rev.  Code,  1899,  §  4483. 
South  Dakota.  Civ.  Code,  1903,  §  1834. 


See  Colorado,  Sess.  Laws,  1907,  p.  447, 
ch.  193,  (1)  as  to  false  statements  in 
application  by  solicitor,  agent  or  ex- 
amining physician  being  a  misde- 
meanor, etc. 


12 

Falsity  of  Warranty — Fraudulent  Omission — Rescission  of  Contract 
The  California  Code  provision  is  given: 


CHAP.  l]   AGREEMENT  BEFORE  LOaS  NOT  TO  TRANSFER       085 

"An  intentional  and  fraudulent  omission,  on  the  part  of  one  insured,  to  com- 
municate information  of  matters  proving  or  tending  to  prove  the  falsity  of  a 
warranty,  entitles  the  insurer  to  rescind." 

California,  Civ.  Code,  1903,  §  2569.  North  Dakota,  Rev.  Code,  1899,  §  4472. 

Montana,  Rev.  Code,  1907,  §  5576.  South  Dakota,  Civ.  Code,  1903,  §  1823. 

13 

Express  Warranties  Must  Be  Contained  in  Policy 

The  California  Code  provision  is  given: 

"Every  express  warranty,  made  at  or  before  the  execution  of  a  policy,  must 
be  contained  in  the  policy  itself,  or  in  another  instrument  signed  by  the  insured, 
and  referred  to  in  the  policy,  as  making  a  part  of  it." 

California,  Civ.  Code,  1903,  §  2605.  North  Dakota,  Rev.  Code,  1899,  §  4505. 

Montana,  Rev.  Code,  1907,  §  5608.  South  Dakota,  Civ.  Code,  1903,  §  1853. 

14 
Policy  Avoided  by  Violation  of  Material  Warranty  or  Other  Provisions 

The  California  Code  provision  is  given: 

"The  violation  of  a  material  warranty,  or  other  material  provisions  of  a  policy, 
on  the  part  of  either  party,  thereto,  entitles  the  other  to  rescind." 

California,    Civ.    Code,    1903,    §2610.       Montana,  Rev.  Code,  1907,  §  5613. 
Policy  may,  however,  also  provide      North  Dakota,  Rev.  Code,  1899,  §4510. 
for  avoidance..    Id.  §  2611.  South  Dakota,  Civ.  Code,  1903,  §  1858. 

15 
Breach  of  Warranty  Without  Fraud — Effect  of 

The  California  Code  provision  is  given : 

"A  breach  of  warranty,  without  fraud,  merely  exonerates  the  insurer  from 
the  time  that  it  occurs,  or  where  it  is  broken  in  its  inception  prevents  the  policy 
from  attaching  to  the  risk." 

California,  Civ.  Code,  1903,  §  2612.  North  Dakota,  Rev.  Code,  1899,  §  4512. 

Montana,  Rev.  Code,  1907,  §  5615.  South  Dakota,  Civ.  Code,  1903,  §  1860. 

16 
AgreemerU  Before  Loss  Not  to  Transfer — Effect  of 

The  California  Code  provision  is  given: 

"An  agreement  made  before  a  loss,  not  to  transfer  the  claim  of  a  person  in- 
sured against  the  insurer,  after  the  loss  has  happened,  is  void." 

California,  Civ.  Code,  1903,  §  2599.  North  Dakota,  Rev.  Code,  1898,  §  4500. 

Montana,  Rev.  Code,  1907,  §  5605.  South  Dakota,  Civ.  Code,  1903,  §  1850. 


686  APPENDIX   OF  STATUTES  [CHAP.  I 

17 

Insured  Not  to  Be  Deprived,  by  Policy  Provision,  of  Right  of  Trial  by  Jury 

The  statute  of  Arkansas  provides: 

"No  policy  of  insurance  shall  contain  any  condition,  provision  or  agreement 
which  shall  directly  or  indirectly  deprive  the  insured  or  beneficiary  of  the  right 
to  trial  by  jury  on  any  question  of  fact  arising  under  such  policy,  and  all  such 
provisions,  conditions  or  agreements  shall  be  void. 

"The  provisions  of  this  act  shall  apply  to  all  forms  of  insurance." 

Arkansas,  Acts,  1903,  p.  188,  Act  No.  111. 

18 

When  Policy  Void 

The  California  Code  provision  is  given: 

"Every  stipulation  in  a  policy  of  insurance  for  the  payment  of  loss,  whether 
the  person  insured  has  or  has  not  any  interest  in  the  property  insured,  or  that  the 
policy  shall  be  received  as  proof  of  such  interest,  and  every  policy  executed  by 
way  of  gaming  or  wagering  is  void." 

California,  Civ.  Code,  1903,  §  2558.  North  Dakota,  Civ.  Code,  1899,  §  4463. 

Montana,  Rev.  Civ.  Code,  1907,  §  5567.      South  Dakota,  Civ.  Code,  1903,  §  1814. 

19 
Solicitor  Is  Agent  of  Insurer 
The  following  states  have  adopted  laws  providing  that  the  soliciting  agent 
shall  be  deemed  the  agent  of  the  insurer. 
The  Iowa  statute  is  given  as  a  specimen: 

"Any  person  who  shall  hereafter  solicit  insurance  or  procure  applications 
therefor  shall  be  held  to  be  the  soliciting  agent  of  the  insurance  company  or  asso- 
ciation issuing  a  policy  on  such  application  or  on  a  renewal  thereof,  anything  in 
the  application,  policy  or  contract  to  the  contrary  notwithstanding." 

Arizona,  Rev.  Stat.  1901,  §  814.  Maine,  Rev.  Stat.  1903,  ch.  49,  §§  29, 
Colorado,  Sess.  L.  1907,  p.  446,  ch.  193,  93. 

1 9  Massachusetts,  Acts  &  Res.  1907, 
Connecticut,  Gen.  Stat.  1902,  §  .3575.  ch.  576,  §  96,  p.  910. 

Delaware,  Laws,  1907,  ch.  108,  p.  192.  Michigan,  Pub.  Acts,  1907,  p.  245. 

Florida,  Gen.  Stat.  1906,  §§  2765,  2777.  Minnesota,    Laws,    1907,    ch.  41,   §  1, 
Georgia,  Code,  1895,  §  2054.  p.  47.  Id.,  p.  639,  ch.  446,  last  clause 

Illinois,  Rev.  Stat.  1908,  p.  1243,  §  203.  §  1642. 

Indiana,   Burns's   Annot.    Stat.,   Rev.  Mississippi,  Code,  1906,  §  2615. 

1908,  §  4714.  Missouri,  Rev.  Stat.  1899,  §  8000. 
Iowa,  Ann.  Code,  1897,  §§  1749,  1750,  See  Laws,  1907,  p.  317. 

1815;  Supp.  to  Code,  1907,  §§  1749,  Montana,  Rev.  Code,  1907,  §  5589. 

1750,  1815.  Nebraska,  Comp.  Stat.  1903,  §  1942. 

Kentucky,  Stat.  1909,  §  4281.  New  Hampshire,  Laws,  1907,  ch.  109, 
Louisiana,  Acts,  1906,  Act  No.  94,  p.  p.  109. 

156.  New  Jersey,  Laws,  1907,  p.  138. 


CHAP.  I  ]  RETURN   OF   PREMIUM   IN   GENERAL  687 

New  Mexico.     See  Comp.  Laws,  1897,  Tennessee,  Acts,  1907,  ch.  442,  p.  1497; 

§  2120.  compare    Shannon's    Annot.    Code, 

New  York,  Ins.  Law,  1892,  ch.  690,  1896,  p.  772,  §  3332,  as  to  brokers. 

§  59;     Laws,    1905,   ch.    568,   am'd  Texas,  Saylcs's  Civ.  Stat.   1897,  and 

1906,  ch.  326.  Supp.  1903,  art.  3093. 

North    Carolina,     Pub.    Laws,     1907,  Vermont,  Pub.  Stat.  1906,  §  4775. 

p.  1361.  Virginia,  Code,  1904,  §  1286a  (5). 

North  Dakota,  Laws,   1907,  ch.    146,  Washington,     Ball's    Ann.    Codes    <fe 

p.  238.  Stat.,  Supp.  1903,  §  2841,  p.  305. 

Ohio,     Bates's     Annot.    Stat.      1906,  West  Virginia,  Acts  1907,  ch.  53,  §  1, 

§  3644,  Laws,  1908,  p.  175.  p.  238. 

Oklahoma,  Rev.  Stat.  1903,  §  3227.  Wisconsin,  Laws,  1905,  ch.  353,  p.  536; 

Rhode  Island,  Gen.  Laws,  1896,  p.  574,  Sanborn  &  B.'s  Annot.  Stat.  1898, 

§  10.  §  1977,  p.  1489. 
South    Carolina,    Civil   Code,    §  1810; 

vol.  1,  Code  of  Laws,  1902,  p.  692. 

20 
Payment  of  Premium — When  Earned 

The  California  Code  provision  is  given : 

"An  insurer  is  entitled  to  payment  of  the  premium  as  soon  as  the  thing  in- 
sured is  exposed  to  the  peril  insured  against." 

California,  Civ.  Code,  1903,  §  2616.  North  Dakota,  Rev.  Code,  1899,  §4513. 

Montana,  Rev.  Code,  1907,  §  5616.  South  Dakota,  Civ.  Code,  1903,  §  1861. 

21 

Receipt   of  Premium  Acknowledged  in  Policy — Effect  of 

The  California  Code  provision  is  given : 

"An  acknowledgment  in  a  policy  of  the  receipt  of  premium  is  conclusive  evi- 
dence of  its  payment,  so  far  as  to  make  the  policy  binding,  notwithstanding  any 
stipulation  therein  that  it  shall  not  be  binding  until  the  premium  is  actually 
paid." 

California,  Civ.  Code,  1903,  §  2598.  North  Dakota,  Rev.  Code,  1899,  §  4499. 

Montana,  Rev.  Code,  1907,  §  5604.  South  Dakota,  Civ.  Code,  1903,  §  1849. 

22 

Return  of  Premium  in  General — When  and  When  Not  Allowed — Return  for  Fraud, 

etc. ,  of  Insurer 

In  several  states  the  statutes  provide  when  the  insured  is  and  is  not  entitled 
to  a  return  of  premium,  and  also  for  a  return  thereof  for  fraud  and  misrepresenta- 
tion of  the  insurer  "or  on  account  of  facts  of  the  existence  of  which  the  insured 
was  ignorant  without  his  fault;  or  when  by  default  of  the  insured,  other  than 
actual  fraud,  the  insurer  never  incurred  any  liability  imder  the  policy." 

California,  Civ,  Code,  1903,  §§2617-      Montana,  Rev.  Code,  1907,   §§5617- 
2619,  5619. 


088  APPENDIX   OF  STATUTES  [CHAP.  I 

North     Dakota,    Rev.     Code,     1899,      South  Dakota,  Civ.  Code,  1903,  §§  1862, 
§§  4514-4518.  1867. 

23 

Peril  Specially  Excepted — Excepted  Loss 

The  California  Code  provision  is  given: 

"Where  a  peril  is  specially  excepted  in  a  contract  of  insurance,  a  loss,  which 
would  not  have  occurred  but  for  such  peril,  is  thereby  excepted;  although  the 
immediate  cause  of  the  loss  was  a  peril  which  was  not  excepted." 

California,  Civ.  Code,  1903,  §  2628.  North  Dakota,  Rev.  Code,  1899,§  4523. 

Montana,  Rev.  Code,  1907,  §  5625.  South  Dakota,  Civ.  Code,  1903,  §  1870. 

24 
Reinsurance — What  Communications  or  Disclosures  Required 

The  California  Code  provision  is  given: 

"Where  an  insurer  obtains  reinsurance,  he  must  communicate  all  the  rep- 
resentations of  the  original  insured,  and  also  all  the  knowledge  and  information 
he  possesses,  whether  previously  or  subsequently  acquired,  which  are  material  to 
the  risk." 

California,  Civ.  Code,  1903,  §  2647.  North  Dakota,  Rev.  Code,  1899,  § 4534. 

Montana,  Rev.  Code,  1907,  §  5635.  South  Dakota,  Civ.  Code,  1903,  §  1880. 

25 

Reinsurance  with  Companies  Not  Authorized  to  Do  Business  in  State  Forbidden 

The  statute  of  Arkansas  is  given  as  a  specimen : 

"That  no  insurance  company  shall  directly  or  indirectly  contract  for  or  effect 
reinsurance  of  any  risk  in  the  State  of  Arkansas  with  any  company  not  author- 
ized to  do  business  therein." 

Arkansas,  Acts,  1901,  p.  182,  Act  No.  ability   insurance   on   the   fraternal 

CXV.  plan). 

Colorado,    Sess.    Laws,    1907,   p.   471,  Michigan,  Pub.  Asts,  1899,  p.  376. 

oh,    193,    §  58  (2)    (fire  or   casualty  Montana,  Rev.  Civ.  Code,  1907,  §  4037 

companies).  (fire  insurance). 

Florida,  Gen.  Stat.  1906,  §  2766  (fire).  New    Hampshire,    Pub.    Stat.    1901, 

Illinois,   Kurd's   Rev.    Stat.    1908,   p.  ch.  86,  §  2,  p.  567. 

1219,  ch.  73,  §  80o  (fire  insurance).  New  Mexico,  Laws,  1905,  ch,  5,  §  23, 

Indiana,   Burns's   Annot.    Stat.   Rev.  p.  21  (fire  insurance). 

1908,  §  4702  (stock  or  mutual  life).  North  Carolina,  Laws  of  1901,  ch.  100, 

§  4753  (mutual  life  or  accident).  §  2,  p.  127. 

Kentucky,  Stat.  1909,  §  4390  (life  in-  Pennsylvania,  Pepper  &  Lewis's  Dig. 

surance).  Supp.  1901,  col.  1102,  §  8. 

Louisiana,  Acts,  Pamp.   Laws,   1906,  West  Virginia,  Code,  1906,  §  1111. 

p.  25,  §  20  (Acts,  1906,  p.  188,  Act  Wisconsin,  Laws,  1899,  ch.  190,  S  2, 

No.  115,  §  14,  covers  only  life,  acci-  p.  287. 

dent,  sick  benefit,  or  physical  di»- 


CHAP.  l]  SUITS,    WHERE   INSTITUTED  689 

26 

Effect  of  War 

The  following  states  have  passed  laws  as  to  policy  not  being  invalidated  by  war. 

The  Massachusetts  statute  is  given  as  a  specimen: 

"No  policy  of  insurance  issued  to  a  citizen  of  this  Commonwealth  by  an  au- 
thorized company  organized  under  the  laws  of  a  foreign  country  shall  be  in- 
validated by  the  occurrence  of  hostilities  between  such  foreign  country  and  the 
United  States." 

Alabama,  Civ.  Code,  1907,  §  4574.  Tennessee,    Shannon's    Annot.     Code, 

Massachusetts,  Acts  &  Res.  1907,  ch.  1896,  p.  768,  §  3.307. 

576,  §  89,  p.  908.  West  Virginia,  Acts,  1907,  §  41,  p.  307. 
Minnesota,  Rev.  Laws,  1905,  §  1708. 

27 

Limitation  of  Time  for  Suit 

The  following  states  have  adopted  laws  forbidding  certain  limitations  of  time 
for  bringing  suit: 

The  Massachusetts  statute  is  given  as  a  specimen: 

"  No  foreign  or  domestic  insiu'ance  company  or  association  transacting  busi- 
ness in  this  commonwealth  shall  make,  issue  or  deliver  therein  any  policy  or 
contract  of  insurance  containing  any  condition,  stipulation  or  agreement  de- 
priving the  courts  of  this  commonwealth  of  jurisdiction  of  actions  against  such 
companies  or  associations,  or  limiting  the  time  for  commencing  actions  against 
such  companies  or  associations  to  a  period  of  less  than  two  years  from  the  time 
when  the  cause  of  action  accrues;  and  any  such  condition,  stipulation  or  agree- 
ment shall  be  void." 

Colorado,  Sess.  Laws,   1907,  ch.   193,  Michigan,  Pub.  Acts,  1907,  p.  254. 

§  37,  p.  456.  Mississippi,  Code,  1906,  §  2575. 

Connecticut,  Gen.  Stat.  1902,  §  3605.  New  Jersey,  Laws,  1907,  p.  136. 

lUinois,    Rev.    Stat.    1908,    p.    1250,  North  Carolina,  Rev.  of  1905,  §  4809. 

§  208?;,  1.  Ohio,  Laws,  1908,  p.  174. 

Indiana,    Burns's    Ann.    Stat.     1908,  Tennessee,  Acts,  1907,  p.  1533. 

§  4803.  Vermont,  Pub.  Stat.  1906,  §  4823. 

Iowa,  Ann.  Code,  1897,  §§  1744,  1820;  Virginia,    Acts,    1906,   ch.    112,     J  39, 

Supp.  to  Code,  1907,  §§  1744,  1820.  p.  143. 

Maine,  Rev.  Stat.  1903,  ch.  49,  §  94,  West  Virginia,  Acts,  1907.  ch.  77,  §  48, 

p.  490.  p.  309. 

Massachusetts,    Acts    &    Res.    1907, 

ch.  576,  §  29,  p.  857. 

28 
Suits,  Where  Instituted 

The  provision  of  the  Idaho  Code  is  given: 

"  Suits  may  be  instituted  and  prosecuted  against  any  fire,  marine,  inland,  life 
or  health  insurance  company  in  any  county  where  loss  occurs,  or  where  the 
policyholder  instituting  such  suit  resides,  and  the  process  in  any  such  suit  may  b« 

44 


690 


APPENDIX   OF   STATUTES 


[chap.  1 


served  upon  any  person  in  this  state  holding  a  power  of  attorney  for  such  com- 
pany." 

Idaho,  Civ.  Code,  1901,  §  2244.  Ohio,      Bates's     Ann.     Stat.      1906, 

Indian    Territory.      See    Stats.    1899,  §  3630/. 

§  3207.  South  Carolina,  Acts,  1906,  Act  No.  70, 

Michigan,  Pub.  Acts,  1901,  p.  79.  p.  111. 

Nebraska,  Laws,  1905,  ch.  171,  §  5.5,  Texas,  Sayles's  Civ.  Stat.  1897,  §  3070. 

p.  655.  West  Virginia,  Code,  1906,  §  3794. 
New  Hampshire.    See  Pub.  Stat.  1901, 

ch.  170,  §  12,  p.  571. 

29 

Anti-compact  Laws 

The  following  states  have  adopted  anti-compact  laws. 

The  New  Hampshire  statute  is  given  as  a  specimen: 

"  If  a  licensed  foreign  insurance  company  shall  enter  into  a  contract  or  com- 
bination with  other  insurance  companies  for  the  purpose  of  controlling  the  rates 
to  be  charged  for  insurance  upon  property  within  the  state,  or  shall  make  appUca- 
tion  for  the  removal  of  any  action  brought  against  it  in  the  courts  of  this  'state  to 
the  United  States  courts,  the  commissioner  shall  forthwith  revoke  its  license  and 
those  of  its  agents;  and  no  renewal  of  the  licenses  shall  be  granted  until  after  the 
expiration  of  three  years  from  the  date  of  such  revocation." 


Arkansas,  Acts,  1905,  p.  1,  as  amended 

by  Acts,  1907,  p.  430. 
Georgia,  Code,  1895,  §  2085. 
low^a,  Annot.  Code,  1897,  §  1754,  Supp. 

to  Code,  1907,  §  1754. 
Michigan,  Comp.  Laws,  1897,  §  5124. 
New  Hampshire,  Pub.  Stat.  1901,  ch. 

169,  §  10. 
Ohio,  Bates's  Annot.  Stat.  1906,  §  3659. 
South  Carolina,  Civ.  Code,    §  1819;   1 

Code  of  Laws,  1902,  p.  695  (fire). 
South  Dakota,   Laws,   1903,  ch.    158, 

p.  183  (fire). 


Tennessee,  Acts,  1905,  ch.  479,  p.  1019 
(fire). 

Washington,  BaUinger's  Codes  &  Stats, 
p.  725,  §  28416. 

See  Louisiana,  Act  No.  110  of  1900, 
Pamph.  L.  1906,  pp.  37-39,  pro- 
hibiting fire  insurance  companies, 
associations  or  partnerships,  or  their 
agents  from  entering  into  combina- 
tions to  fix  rates.  A  statutory  pro- 
hibition of  combination  to  control 
rates  is  constitutional,  Carroll  v. 
Greenwich  Ins.  Co.,  199  U.  S.  401. 


Compare  the  following  more  general  statutes  against  pools,  trusts,  or  com- 
binations to  fix  prices  of  articles  or  to  restrain  trade: 

Alabama,    Cr.    Code,    1907,    §§  7579-  Kansas,  Gen.  Stat.  1905,  ch.  67a. 

7582.  Kentucky,  Stat.  1909,  Art.  35,  p.  885. 

CaUfornia,  Civ.  Code,  1903,  §  1673.  Louisiana,  Const.  &  Rev.  Laws,  1904, 

District    of    Columbia.      See    United  p.  1806. 

States.  Maine,  Rev.  Stat.  1903,  ch.  47,  §§  53- 

Illinois,    Rev.     Stat.     1908,    ch.     38,  55,  p.  443. 

§§  269a-269j,  pp.  765-768.  Minnesota,  Rev,  Laws,  1905.  §§  5168, 

Iowa,  Code,  1897,  §§  .5060  et  seq.  5169. 


CHAP.  l]  REQUIRING   CONDITIONS   INSERTED   IN   POLICIES  691 

Mississippi,     Code,     1906,     ch.     145,  Oklahoma,  Rev.  &  Ann.  Stat.   1903, 

p.  1348.  ch.  83,  p.  1501. 

Missouri,    Rev.    Stat.    1899,    ch.    143,  Texas,  Sayles's  Civ.  Stat.   1897,  title 

p.  2082.  108,  p.  1878. 

New     Mexico,     Comp.     Laws,     1897,  United  States,  Stat,  at  Large,  vol.  26, 

§§  1292-1294.  ch.  647,  p.  209. 

Wisconsin,  Stat.  1898,  §  1791/,  p.  1319. 


Fire  Insurance 

30 

Standard  Policy 

The  following  states  have  passed  statutes  for  the  adoption  of  a  standard  form 
of  fire  policy: 


Connecticut,  Comp.  Ins.  Laws,   1905, 

p.  18,  §§  3497,  3499;  Gen.  Stat.  1902, 

§§  3497,  3499. 
Iowa,  Supp.  to  Code,  1907,    §§  1758a, 

17586. 
Louisiana,  Const,  and  Rev.  Laws,  1904, 

p.  864;  Pamph.  of  Ins.   L.,   issued 

Dec.  31,  1906,  p.  26,  art.  Ill,  §  22, 

adopted  only  by  reference  to  New 

York  Standard. 
Maine,  Laws,  1905,  ch.  158,  p.  169. 
Massachusetts,    Acts,    1907,    ch.    576, 

§  60,  pp.  882-886. 
Michigan,  Pub.  Acts,  1905,  p.  423,  Act 

No.  277. 
Minnesota,  Rev.  Laws,  1905,  §  1640. 
New  Hampshire,  Laws,  1885,  ch.  93. 
New  Jersey,  Laws,  1902,  p.  437,  par.  77, 

ch.  134. 
New  York,  Laws,  1886,  ch.  488,  am'd 


1887,  ch.  429,  am'd  1901,  ch.  513, 

am'd  1903,  ch.  106. 
North  Carolina,   Rev.    1905,    §§  4759, 

4760. 
North  Dakota,  Civ.  Code,  1899,  §  4608. 
Oregon,  Laws,  1907,  ch.  137. 
Rhode   Island,    Gen.  Laws,   1896,    pp. 

579,  580,  §§4,  5. 
South  Dakota,   Laws,    1907,   ch.    170, 

amending  Laws,  1905,  ch.  126,  §  2, 

repealing  Rev.  Codes,  1903,  p.  682, 

§§  664,  665,  666. 
West  Virginia,  Acts,  1907,  ch.  77,  §  68, 

p.    313,   amending  and   re-enacting 

ch.  34,  Code. 
Wisconsin,    Laws,    1907,   ch.  525,  pp. 

506,  507,  amending  Laws,  1905,  ch. 

102,  168,  amending  §§  1941-1964  of 

Sand.  &  Berr.  Stat.  1898. 


31 

Requiring  That  Conditions  Be  Inserted  in  Fire  Policies 

In  West  Virginia  it  is  provided  that: 

"In  all  policies  of  insurance  issued  against  loss  by  fire,  made  by  companies 
chartered  by  or  doing  business  in  this  State,  no  condition  shall  be  valid  unless 
stated  in  the  body  of  the  policy  or  attached  thereto." 


West  Virginia,  Acts,  1907,  ch.  77,  §  69, 
p.  313. 


See  also  Mississippi  Code,  1906,  §  2597. 
North  Carolina,  Rev.  of  1905,  §  4758. 


692  APPENDIX  OF  STATUTES  [CHAP.  I 

32 
Discrimination  in  Fire  Insurance  Premiums 

The  statute  in  Minnesota  is  given  as  a  specimen: 

"  No  fire  insurance  company  shall  charge  or  receive,  directly  or  indirectly,  a 
higher  or  greater  rate  or  premium  for  insurance  against  destruction  or  damage 
by  fire  of  any  property  within  this  state  than  it  charges  for  other  risks  within 
this  state  of  the  same  kind  or  class,  taking  into  consideration  the  local  fire  loss 
record,  the  nature  of  the  risk,  the  exposures  and  hazards  thereof,  and  the  means 
of  fire  prevention  applicable  thereto." 

Minnesota,  Laws,   1905,  ch.  331,   §  1,  See    Kentucky,    Stat.     1909,     §  4318, 

p.  522.  which  provides  for  classification  of 

Montana,  Rev.  Codes,  1907,  §  4026.  property  and  the  issuance  of  policies 

South  Carolina.     See  Laws,  1903,  p.  at  different  rates  in  assessment  or  co- 

475,  §  9.  operative  fire  companies. 

33 
Return  of  Unearned  Premiums 

The  following  states  have  adopted  laws  providing  that  fire  insurance  com- 
panies in  case  of  total  loss  shall  return  the  unearned  premium  where  the  loss  is 
less  than  the  amount  of  the  policy. 

The  Idaho  statute  is  given  as  a  specimen: 

"  In  the  event  of  the  total  destruction  of  any  insured  property,  on  which  the 
amount  or  agreed  loss  shall  be  less  than  the  total  amount  insured  thereon,  the 
insuring  company  or  companies  shall  return  to  the  insured  the  unearned  insur- 
ance premium  for  the  excess  of  the  insurance  over  the  appraised  or  agreed  loss, 
to  be  paid  at  the  same  time  and  in  the  same  manner  as  the  loss  shall  be  paid." 

Hawaii,  Rev.  Laws,  1905,  §  2622.  Virginia,    Acts,    1906,    ch.    112,    §  30, 

Idaho,  Civ.  Code,  1901,  §  2235.  p.  140. 

Louisiana,  Const.  &  Rev.  Laws,  1904,  See  Colorado,  Sess.  Laws,  1907,  §  57, 

p.  861,  Pamph.,  Ins.   Laws,    1906;  as  to  necessity  of  policy  containing  a 

pp.  23,  31,  §  15.  provision  for  cancellation  at  request 

Massachusetts,     Acts    &    Res.     1907  of  assured  and  that  the  unearned 

ch.  576,  §  57,  p.  882.  premium    "shall    be    returned"    on 
Nevada,  Comp.  Laws,  1900,  §  921.  surrender  of  the  policy  or  last  re- 
North  Carolina,  Rev.  of  1905,  §  4756.  newal,  etc. 
Oregon,    Bellinger    &    Cotton's    Ann. 

Code  &  Stats.  1902,  §  3737. 

See  also  following  statutes  providing  for  return  of  unearned  premium  where 
there  is  overinsurance  by  several  insurers: 

California,  Civ.  Code,  §  2620.  North  Dakota,  Rev.  Code,  1899,  §  5967. 

Montana,  Rev.  Code,  1907,  §  5620.  South  Dakota,  Civ.  Code,  1903,  §  1865, 

34 

Breach  of  Condition — Risk  Not  Increased 

In  some  states  it  is  provided  that  a  breach  of  a  condition  shall  not  avoid  unless 
loss  occurs  during  or  by  reason  of  it  or  unless  risk  thereby  be  materially  increased. 


CHAP.  l]  EXAMINATION    OF   PREMISE.S    BY    INSURER 


693 


Maine,  Rev.  Stat.  1883,  ch.  49,  §  20. 

Michigan,  Comp.  L.  1897,  §  5180. 

Missouri,  2  Rev.  Stat   1899,  §  7974. 

New  Hampshire,  Pub.  Stat.  1901,  ch. 
170,  §  4. 

North  Carohna,  Acts,  1903,  ch.  299, 
§9. 

Ohio,  Rev.  Stat.,  §  3643. 

Oklahoma,  1  Rev.  Stat.  1903,  §  3202. 

Vacancy  of  Premises. — The  Kansas 
statute  provides  that:  "Any  condi- 
tion or  stipulation  in  an  application 
policy  or  contract  of  fire  insurance 
hereafter  made,  making  the  policy 
void  in  case  the  insured  premises  be- 
come vacant,  shall  not  prevent  re- 


covery on  such  policy  if  it  shall  be 
showTi  by  the  plaintiff  that  the  in- 
sured premises  had  ceased  to  be  va- 
cant and  were  occupied  at  the  time 
of  the  loss."  Kansas,  Gen.  Stat. 
1905,  §  3542. 
In  Michigan  it  is  provided  that:  "If  a 
building  that  is  insured,  whether  in- 
tended for  occupancy  by  owner  or 
tenant,  be  or  become  vacant  or  un- 
occupied and  so  remain  for  ten  days, 
without  the  consent  of  the  company 
indorsed  on  the  policy,  such  vacancy 
shall  not  avoid  said  policy  of  insur- 
ance," Michigan,  Comp.  Laws,  1897, 
§  5181. 


35 

Alteration  in  Use  or  Condition — Increase  of  Risk — Rescission 

The  California  Code  is  given  as  a  specimen : 

"An  alteration  in  the  use  or  condition  of  a  thing  insured  from  that  to  which 
it  is  limited  by  the  policy,  made  without  the  consent  of  the  insurer,  by  means 
within  the  control  of  the  insured,  and  increasing  the  risk,  entitles  an  insurer  to 
rescind  a  contract  of  fire  insurance."  But  where  such  an  alteration  does  not 
increase  the  risk  it  "does  not  affect"  the  contract. 

California,   Civ.   Code,   1903,    §§  2753,  North     Dakota,     Rev.     Code,     1899, 

2754.  §§4604-4606. 

Georgia,  Code,  1895,  §  2100.     See  also  Oklahoma,  Rev.  Stat.  1903,  §§  3201- 

Id.,  §§  2102-2105.  3203. 

Montana,     Rev.     Civ.     Code,     1907,  South  Dakota,  Civ.  Code,1903,  §§  1950, 

§§5639,5640.  1953. 


36 
Increase  of  Risk — Acts  of  Insured  Subsequent  to  Execution  of  Policy 

The  California  Code  provision  is  given : 

"A  contract  of  fire  insurance  is  not  affected  by  any  act  of  the  insured  subse- 
quent to  the  execution  of  the  policy,  which  does  not  violate  its  provisions,  even 
though  it  increases  the  risk  and  is  the  cause  of  a  loss. 


CaUfomia,  Civ.  Code,  1903,  §  2755. 
Montana,  Rev.  Civ.  Code,  1907,  §  5641. 


North  Dakota,  Rev.  Civ,  Code,  1899, 

§  4606. 
South  Dakota,  Civ.  Code,  1903,  §  1952. 


37 

Examination  of  Premises  by  Insurer — Error  in  Description 

In  Kansas  the  statute  provides  for  an  examination  of  the  premises  by  the  in- 
surer and  that  the  policy  shall  contain  a  full  and  complete  description  of  the 


694  APPENDIX   OF   STATUTES  [CHAP.  1 

property  or  premises  insured,  and  that  "no  failure  to  properly  and  fully  describe 
such  property  or  premises,  nor  any  erroneous  description  of  such  property  or 
premises,  shall  be  a  defense  in  any  action  to  collect  for  loss  thereon  or  thereundc: 
when  such  description  shall  be  sufhcient  to  enable  a  person  of  ordinary  intelli- 
gence to  find  and  fully  identify  the  property  or  premises  upon  which  said  insur- 
ance was  written  or  upon  which  premiums  have  been  paid  and  this  notwithstand- 
ing any  provision  in  said  insurance  policy  contained." 

Kansas,  Gen.  Stat.  1905,  §  3539. 

38 

Non-forfeiture — Insurance  Other  Than  Life 

The  Iowa  Code  provides  as  follows: 

"No  policy  or  contract  of  insurance  provided  for  in  this  chapter  shall  be  for- 
feited or  suspended  for  non-payment  of  any  premium,  assessment  or  installment 
provided  for  in  the  policy,  or  in  any  note  or  contract  for  the  payment  thereof, 
unless  Avithin  thirty  days  prior  to  or  on  or  after  the  maturity  thereof  the  com- 
pany shall  serve  notice  in  writing  upon  the  insured  that  such  premium,  assess- 
ment or  installment  is  due  or  to  become  due,  stating  the  amount  and  the  amount 
necessary  to  pay  the  customary  short  rates,  up  to  the  time  fixed  in  the  notice 
when  the  insurance  will  be  suspended,  forfeited  or  canceled,  which  shall  not  be 
less  than  thirty  days  after  the  service  of  such  notice,  which  may  be  made  in 
person,  or  by  mailing  in  a  registered  letter  addressed  to  the  insured  at  his  post- 
office  as  given  in  or  upon  the  policy,  and  no  suspension,  forfeiture  or  cancellation 
shall  take  effect  until  the  time  thus  fixed  and  except  as  herein  provided,  anything 
in  the  policy,  application  or  a  separate  agreement  to  the  contrary  notwith- 
standing." 

Iowa,  Annot.  Code,  1897,  §  1727. 

39 
Cancellation  of  Policy 

The  following  states  have  adopted  laws  providing  that  no  company  shall  can- 
cel a  fire  insurance  policy  without  notice  first  given  and  unearned  part  of  premium 
ieturned. 

The  Connecticut  statute  is  given  as  a  specimen: 

"  No  insurance  company  or  association  shall  cancel  a  policy  issued  against  loss 
by  fire  on  property  in  this  State  without  giving  the  party  insured  at  least  five 
days'  notice,  in  writing,  of  such  intention  and  returning  the  ratable  proportion 
of  the  premium  for  the  unexpired  term  of  the  policy." 

California.     See  Civ.  Code,  1903,  Ap-  North  Dakota.     See  Rev.  Code    1899, 

pendix,  p.  737,  §  16,  as  to  cancella-  §  4502. 

tion  by  county  fire  insurance  com-  South  Dakota.     See  Civ.  Code,  1903, 

panies.  §  677. 

Connecticut,  Gen.  Stat.  1902,  §  3526.  West  Virginia,  Acts,  1907,  ch.  77,  §  67, 

Idaho.    See  Act  March  10,  1903,  §  15,  p.  312. 

as   to    cancellation    by    mutual    co-  Wisconsin.     See  Sanborn  &  B.  Annot. 

operative  fire  insurance  corporations.  Stat.  1898,  §§  1941-52,  p.  1440. 
Iowa,  Ann.  Code,  1897,  §  1727;  Supp. 

to  Code,  1907,  §  1727. 


CHAP.  1  ]  VALUED   POLICY  696 

40 

Privilege  of  Insured  to  Cancel  Policy 

The  following  states  have  adopted  laws  providing  that  the  insured  shall  have 
the  privilege  of  insisting  on  the  cancellation  of  the  policy  at  any  time. 

The  New  York  statute  is  given  as  a  specimen : 

"  Any  corporation,  person,  company  or  association  transacting  the  business  of 
fire  insurance  in  this  State,  shall  cancel  any  policy  of  insurance  upon  the  request 
of  the  insured  or  his  legal  representatives,  and  shall  return  to  him  or  to  such 
representative  the  amount  of  premium  paid,  less  the  customary  short-rate  pre- 
mium for  the  expired  time  of  the  full  term  for  which  the  policy  has  been  issued  or 
renewed,  notwithstanding  anything  in  the  policy  to  the  contrary.  Where  the 
laws  of  any  State  permit  corporations  organized  under  its  laws  to  cancel  policies 
of  insurance  upon  different  terms  than  herein  set  forth,  corporations  organized 
under  the  laws  of  this  State  may  cancel  policies  upon  risks  in  any  such  State  upon 
the  same  terms  as  are  provided  for  corporations  organized  under  its  laws." 

California,  Deering's  Civil  Code,  1903,  Nebraska,  Comp.  Stat.  1903,  §  3905. 

§§  2617  et  seq.    See  Civ.  Code,  1903,  New    York,  Ins.  Law,  1892,  ch.  690, 

Appendi.x,  p.  737,  §  16,  as  to  can-  §§  122,  123. 

cellation  by  members  of  county  fire  North    Dakota,     Rev.     Codes,     1899, 

insurance  companies.  §  4501. 

Colorado,   Sess.    1907,   ch.    193,    §57,  Ohio,  Bates's  Annot.  Stat.  1906,  §§3664 

p.  470.  et  seq. 

Idaho.    See  Act  March  10,  1903,  §  15,  Philippines    and    Puerto    Rico.      See 

as   to    cancellation    by   member   of  Laws    of    (ed.,    1899)    Commercial 

mutual   co-operative   fire   insurance  Code,  arts.  392,  426. 

corporation.  South  Dakota,  Rev.  Codes,  1903,  Civ. 

Iowa,  Ann.  Code,  1897,  §§  1728,  1745;  Code,  §  676. 

Supp.  to  Code,  1907,  §§  1728,  1745.  Wisconsin,  Sanborn  &  B.  Annot.  Stat. 

Kentucky.      See    Stat.    1909,    §  4324,  1898,  §§  1941-52,  p.  1440,  §  1946d, 

providing   for   withdrawal,   etc.,   of  p.  1456. 

members  of  assessment  or  co-opera- 
tive fire  companies. 

41 

Valued  Policy 

The  following  states  have  adopted  valued  policy  laws. 

The  Wisconsin  statute  is  given  as  a  specimen: 

"Whenever  anj'  policy  of  insurance  shall  be  written  to  insure  real  property, 
and  the  property  insured  shall  be  wholly  destroyed,  without  criminal  fault  on 
the  part  of  the  insured  or  his  assigns,  the  amount  of  the  insurance  written  in  such 
policy  shall  be  taken  conclusively  to  be  the  true  value  of  the  property  when  in- 
sured, and  the  true  amount  of  loss  and  measure  of  damages  when  destroyed." 

Arkansas,    Sandel's    &    Hill's   Dig.    of  ch.    695,    §§1,    2,    as    am'd    Laws 

Stat.   1894,  §  4140,  am'd   by   Acts,  (vol.  19),  p.  889,  ch.  696  (with  pro- 

1899,  p.  112,  Act  LXI.  viso  that  company  may  nevertheless 

Delaware,  Laws  (vol.  18),  1889,  p.  961.  adjust  loss  by  replacing  property). 


696 


APPENDIX   OF  STATUTES 


[chap.  I 


Florida,  Gen.  Stat.  1906,  §§  1528,  2776. 
Georgia,    Code,     1895,     §2110.       See 

Laws,  1895,  p.  51. 
Iowa,  Ann.  Code,  1897,  §  1742;  Supp. 

to  Code,  1907,  §  1742. 
Kansas,  Gen.  Stat.  1905,  §  3538. 
Kentucky,  Stat.  1909,  §§  4307,  4308. 
Louisiana,  Const.  &  Rev.  Laws.  1904, 

pp.  888,  889;    Pamph.   Laws,  1906, 

pp.  32,  39. 
Minnesota,  Rev.  Laws,  1905,  §  1642. 
Mississippi.    See  Code,  1906,  §  2592. 
Missouri,  Rev.  Stat.  1899,  §  7969. 
Nebraska,  Comp.  Stat.  1903,  §  3906. 
New  Hampshire,  Pub.  Stat.  1901,  ch. 

170,  §  5,  p.  571. 
North  Dakota,   Laws,   1907,  ch.   158, 

p.  253. 
Ohio,  Bates's  Annot.Stat.  1906,  §  3643. 
Oklahoma,   Rev.  Stat.    1903,  §§  3199, 

3204. 
Oregon,    Ballinger    &    Cotton's    Ann. 

Codes  &  Stats.  1902,  §§  3720,  3721. 


Pennsylvania,  Pepper  &  Lewis's  Dig., 

vol.  1,  col.  2387,  §  101  (boiler  ins.). 
South    Carolina,    Civ.    Code,    §  1816, 

vol.  1,  Code  of  Laws,  1902,  p.  095. 
South  Dakota,  Civ.  Code,  1903,  §  1939 

(marine);  §  1953  (fire);  §  1958  (Ufe). 
Tennes.see,    Shannon's     .Vnnot.    Code, 

1896,  p.  775,  §  3348. 
Texas,  Sayles's  Rev.  Civ.  Stat.  1897; 

Supp.  1903,  art.  3089. 
Washington,  Ballinger's  Annot.  Codes 

&  Stat.  1897,  and  Supp.  1899-1903, 

§  2833. 
West  Virginia,  Code,  1903,  §  1108. 
Wisconsin,  Sanborn  &  B.  Annot.  Stat. 

1898,  §  1943,  p.  1450. 
See  California,  Civ.  Code,  1903,  §  2756, 

as  to  effect  of  valuation  and  of  no 

valuation  in  policy. 
Kentucky,    Stat.    1909,    §4308,    pro- 
vides for  liability  for  value  of  live 

stock  as  fixed  in  policies  on  life  and 

accident  risks  thereon. 


42 

Assignment  to  Mortgagee — Effect  of  as  to  Mortgagor's  Interest  and  Acts 

The  California  Code  provides: 

"Where  a  mortgagor  of  property  effects  insurance  in  his  own  name,  providing 
that  the  loss  shall  be  payable  to  the  mortgagee,  or  assigns  a  policy  of  insurance 
to  the  mortgagee,  the  insurance  is  deemed  to  be  upon  the  interest  of  the  mort- 
gagor, who  does  not  cease  to  be  a  party  to  the  original  contract,  and  any  act  of 
his  which  would  otherwise  avoid  the  insurance  will  have  the  same  effect,  although 
the  property  is  in  the  hands  of  the  mortgagee,  but  any  act  which,  under  the  con- 
tract of  insurance  is  to  be  performed  by  the  mortgagor,  may  be  performed  by  the 
mortgagee  with  the  same  effect  as  if  it  had  been  performed  by  the  mortgagor." 


California,  Civ.  Code,  1903,  §2541,  as 
am'd  by  Acts,  1905,  p.  616,  ch. 
CCCCLVIIL 

Montana,  Rev.  Civ.  Code,  1907,  §  5553. 


North  Dakota,  Rev.  Civ.  Code,  1899, 

§  4448. 
South  Dakota,  Civ.  Code,  1903,  §  1800. 


43 

Mortgagor  and  Mortgagee — Assignment — New  Contract  vnth  Insurer 
The  California  Code  provides: 

"If  an  insurer  assents  to  the  transfer  of  an  insurance  from  a  mortgagor  to  a 
mortgagee,  and,  at  the  time  of  his  assent,  imposes  further  obligations  on  the 


CHAP,  l]  NOTICE    AAD    PKOOF    0¥   LOttS  097 

assignee,  making  a  new  contract  with  him,  the  acts  of  the  mortgagor  cannot 
affect  his  rights." 

California,  Civ.  Code,  1903,  §  2542.  North  Dakota,  Rev.  Civ.  Code,  1899, 

Montana,  Rev.  Civ.  Code,  1907,  §  5554.  §  4449. 

South  Dakota,  Civ.  Code,  1903,  §  1801. 

44 

Notice  and  Proofs  of  Loss — Preliminary  Proofs — Waivers  in  Defects  in  Notice,  or 

of  Delay,  etc. 

In  several  states  the  statutes  expressly  provide  for  notice  of  loss  without 
unnecessary  delay,  as  to  the  sufficiency  of  preliminary  proofs;  and  as  to  waiver 
of  defects  in  notice  of  loss  or  of  delay,  etc. 

California,  Civ.  Code,  1903,  §§  2633-      North  Dakota,  Rev.  Civ.  Code,  1899, 

2636.  §§  4525-4530. 

Georgia.     See  Code,  1895,  §  2108.  Pennsylvania,  Pepper  &  Lewis's  Dig., 

Montana.     See  Rev.  Civ.  Code,  1907,  col.  2386,  §  99. 

§§  5627-5630.  South  Dakota,  Civ.  Code,  1903,  §§  1872 

-1875. 


45 

Dispensing  with  Certificate — Proof  of  Loss 

The  California  statute  provides: 

"If  a  policy  requires  by  way  of  preliminary  proof  of  loss  the  certificate  or  testi- 
mony of  a  person  other  than  the  insured,  it  is  sufficient  for  the  insured  to  use 
reasonable  diligence  to  procure  it,  and  in  case  of  the  refusal  of  such  person  to 
give  it,  then  to  furnish  reasonable  evidence  to  the  insurer  that  such  refusal  was 
not  induced  by  any  just  grounds  of  disbelief  in  the  facts  necessary  to  be  certified." 

California,  Civ.  Code,  1903,  §  2637.  North  Dakota,  Rev.  Civ.  Code,  1899, 

Montana,  Rev.  Civ.  Code,  1907,  §  5631.  §  4530. 

South  Dakota,  Civ.  Code,  1903,  §  1876. 

46 
Notice  and  Proof  of  Loss — Magistrate's  Certificate 

The  following  states  have  adopted  laws  forbidding  the  insertion  of  conditions 
requiring  notice  of  loss  within  less  than  five  days  and  the  presentation  of  certifi- 
cates of  nearest  magistrate. 

The  Indiana  statute  is  given  as  a  specimen: 

"  No  such  insurance  company  shall  insert  any  condition,  in  any  policy  here- 
after issued,  requiring  the  insured  to  give  notice  forthwith,  or  within  the  period 
o"  time  less  than  five  days,  of  the  loss  of  the  insured  property;  nor  shall  any  con- 
dition be  inserted  in  such  policy,  reqviiring  the  insured  to  procure  the  certificate 
of  the  nearest  Justice  of  the  Peace,  Mayor,  Judge,  clergyman,  or  other  official,  or 
person,  of  such  loss,  or  the  amount  of  such  loss;  and  any  provision  or  condition 
contrary  to  the  provisions  of  this  section,  or  any  condition  in  said  poUcy,  in- 


(i98  APPENDIX   OF   STATUTES  [CHAP.  I 

seitcd  to  avoid  the  provisions  of  this  section,  shall  be  void,  and  no  condition  or 
agreement,  not  to  sue  for  a  period  of  less  than  three  years,  shall  be  valid." 

Indiana,   Burns's  Annot.  Stat.   1908,  §  95,  as  to  notice  of  accident,  injury 

§  4803.  or  death. 

Maine.     See  Rev.  Stat.  1903,  ch.  49,       Mortgagee,    Conn.    Gen.    Stat,    1902, 

§  3512. 

47 

Appraisal — Disagreement  as  to  Amount  of  Loss 

The  provision  of  the  Rhode  Island  standard  policy  is  given: 
"In  the  event  of  disagreement  as  to  the  amount  of  loss,  the  same  shall  .  .  . 
be  ascertained  by  two  competent  and  disinterested  appraisers,  the  insured  and 
the  company  each  selecting  one,  and  the  two  so  chosen  shall  first  .select  a  com- 
petent and  disinterested  umpire;  the  appraisers  together  shall  then  estimate  and 
appraise  the  loss,  stating  separately  sound  value  and  damage,  and  failing  to 
agree  shall  submit  their  differences  to  the  umpire;  and  the  award  in  writing  of 
any  two  shall  determine  the  amount  of  such  loss;  the  parties  thereto  shall  pay 
the  appraiser  respectively  selected  by  them  and  shall  bear  equally  the  expenses 
of  the  appraisal  and  the  umpire." 

Rhode  Island,  Gen.  Laws,  1896,  ch.  183,  §  5. 

48 
Appraisal  Clause — Failure  to  Select  Umpire 

In  New  Jersey  it  is  provided  as  follows: 

"When  any  contract  or  policy  of  fire  insurance  covering  property  in  this  state 
contains  any  clause  or  provision  for  the  ascertainment  by  appraisers  of  the 
amount  of  any  loss  or  damage  to  the  property  described  in  such  contract  or 
policy,  and  the  clause  or  provision  of  such  ascertainment  of  loss  by  appraisers 
provides  that  the  insured  and  the  insurer  shall  each  select  an  appraiser  and  the 
two  appraisers  so  chosen  shall  select  an  umpire,  and  the  loss  to  the  property  de- 
scribed in  such  contract  or  policy  of  fire  insurance  shall  have  occurred,  and  the 
insured  and  the  insurer  shall  have  each  selected  an  appraiser,  and  the  appraisers 
.so  selected  shall  have  failed  or  neglected,  for  a  .space  of  ten  days  after  they  have 
both  been  chosen,  to  agree  upon  and  select  an  umpire,  it  shall  be  lawful  for 
either  the  insured  or  the  insurer  to  apply  to  the  inferior  court  of  common  pleas 
of  the  county  in  which  said  property  is  or  was  situated,  on  five  days'  notice,  in 
writing,  to  the  other  party  of  his  or  its  intention  so  to  do,  to  appoint  a  competent 
and  disinterested  umpire;  and  said  notice  in  writing,  when  served  by  the  in- 
sured, may  be  served  upon  any  local  agent  of  the  insurer;  and  the  judge  or  judges 
of  said  inferior  court  of  common  pleas  shall,  on  proof  by  affidavit  of  the  failure  or 
neglect  of  the  said  appraisers  to  agree  upon  and  select  an  umpire  within  the  time 
aforesaid,  and  of  the  service  of  notice  aforesaid,  forthwith  appoint  a  competent 
and  disinterested  person  to  act  as  umpire  in  the  ascertainment  of  the  amount  of 
said  loss;  and  the  acts  of  the  umpire  so  appointed  shall  be  binding  upon  the  in- 
.sured  ahd  the  insurer  to  the  same  extent  as  if  such  umpire  had  been  selected  in 
the  manner  provided  for  in  said  contract  of  insurance." 

New  Jersey,  Laws,  1902,  ch.  134,  §  79,  p.  439. 


CHAP.  l] 


ANTI-COINSURANCE   LAWS 


699 


49 

Protection  of  Mortgagee 

In  some  states  the  mortgagee  is  protected  by  lien  on  policy  to  mortgagor 
or  by  payment  to  in  order  of  priority. 


Maine,  Rev.  Stat.  1903,  ch.  49,  §  54, 

p.  482. 
Massachusetts.    See  Acts  &  Res.  1907, 

ch.  576,  §  58,  p.  882,  as  to  payment 

to  mortgagees  upon  proof. 
Minnesota.      See    Rev.    Laws,    1905, 

§  1644,  as  to  payment  to  mortgagees 

in  order  of  priority. 
Mississippi,  Code,  1906,  §  2595,  as  to 

payment  to  mortgagees  in  order  of 

priority. 
North  Carolina,  Rev.  of  1905,  §  4757, 

as  to  payment  to  mortgagees  in  order 

of  priority. 


See  Cahfornia  Stats,  and  Amend,  to 
Codes,  1905,  pp.  616,  458,  amending 
§  2541,  Civ.  Code,  as  to  insurance  of 
mortgaged  property.  Effect  of  acts 
performed  by  mortgagee  for  mort- 
gagor. 

(As  to  mortgagor.)  See  California 
Stats.  &  Amend,  to  Codes,  1905, 
p.  616,  ch.  CDLVIII,  amending 
§  2541,  Civ.  Code. 

(Same.)  See  Montana  Civ.  Code,  1895, 
§  3393. 


50 

Anti-Coinsurance  Laws 

In  the  following  states  an  option  in  some  form  is  given  to  the  insured. 

The  New  Jersey  statute  is  given  as  a  specimen: 

"  No  fire  insurance  company  doing  business  in  this  State  may  issue  any  policy 
or  contract  of  insm-ance  covering  property  in  this  State  which  shall  contain  any 
clause  or  provision  requiring  the  insured  to  take  out  or  maintain  a  larger  amount 
of  insurance  than  that  expressed  in  such  policy,  nor  in  any  way  providing  that 
the  insured  shall  be  liable  as  coinsurer  with  the  company  issuing  the  policy  for 
any  part  of  the  loss  or  damage  which  may  be  caused  by  fire  or  lightning  to  the 
property  described  in  such  policy,  and  any  such  clause  or  provision  shall  be  null 
and  void  and  of  no  effect,  provided,  that  it  may  be  optional  with  the  insured  to 
accept  a  policy  or  contract  of  insurance  containing  a  coinsurance  clause  or  pro- 
vision when  a  reduction  in  the  rate  for  insurance  on  the  property  described  in 
such  policy  is  the  consideration  named  in  such  clause,  and  when  so  accepted  the 
coinsurance  clause  or  provision  shall  be  binding  on  the  insured." 


New  Jersey,  Laws,  1902,  ch.  134,  §  78. 

Indiana,  Burns's  Annot.  Stat.,  Rev. 
1908,  §§  4623,  4624. 

Michigan,  Laws,  1907,  No.  307  (co- 
insurance clause  may  be  used  on 
wTitten  application  of  insured). 

Minnesota,  Laws,  1907,  p.  639,  ch.  446, 
amending  Rev.  Laws,  1905,  §  1642 
("any  policy  where  the  entire  risks 
covered  by  the  same  amounts  to 
more  than  $20,000  may  contain  a 
co-insurance  clause,  if  the  insured  re- 


quests the  same  in  writing,  of  which 
fact  such  writing  shall  be  the  only 
evidence,  and  if  in  consideration 
thereof,  a  reduction  in  the  rate  of 
premium  is  made  by  the  company"). 
Missouri,  Laws,  1903,  p.  209  (coinsur- 
ance clauses  prohibited,  but  the  pro- 
hibition does  not  apply  to  policies 
issued  upon  personal  property  in 
cities  which  now  contain,  or  which 
may  het-eafter  contain  one  hundred 
thousand  inhabitants  or  more,  when- 


700 


APPENDIX   OF   STATUTES 


[chap.  I 


ever  the  insured  sign  an  agreement 
endorsed  across  the  face  of  said 
pohcy  to  be  exempt  from  the  pro- 
hibition). 
Tennessee,  Laws,  1903,  ch.  539  (co- 
insurance clauses  apply  only  to  cities 
and  towns  having  a  population  of 


more  than  fifteen  thousand.  Option 
to  accept  or  reject  coinsurance  clause 
given  to  the  insured). 
Wisconsin,  1  Rev.  Stat.  1898,  §  1943a 
(no  coinsurance  clause  or  rider  to  be 
attached  or  made  a  part  of  any  policy 
except  at  the  option  of  the  insured). 


In  the  following  states  the  prohibition  or  limitation  as  to  coinsurance  is  in- 
ferential because  coinsurance  would  be  inconsistent  with  affirmative  statutory 
provisions  regarding  payment  of  loss,  or  an  exclusive  form  of  contract  prescribed. 

The  Georgia  statute  is  given  as  a  specimen: 

"  All  insurance  companies  shall  pay  the  full  amount  of  loss  sustained  upon  the 
property  insured  by  them  provided  said  amount  of  loss  does  not  exceed  the 
amount  of  insurance  expressed  in  the  policy;  and  all  stipulations  in  such  policies 
to  the  contrarv  shall  be  null  and  void." 


Georgia,  Civil  Code,  1895,  §  2110. 
Iowa,  Code,  1907,  §  1758a. 
Mississippi,    Code,    1906,    §  2592    (co- 
insurance clause  not  allowed  in  case 


of  real  property  or  buildings,  house- 
hold or  kitchen  furniture). 
Oklahoma,    Rev.    Stat.    1903,    §  3199 
(all  insurance,  however,  is  limited  to 
seventy-five  per  cent  of  value) . 


In  the  following  states  coinsurance  clauses  are  not  allowed  in  policies  on  build- 
ings or  immovables. 


Arkansas,  1  Kirby  Dig.  of  Laws,  1904, 
§  4375  (fire  insurance  policy  in  case 
of  total  loss  to  be  a  liquidated  de- 
mand for  the  full  amount  stated  in 
policy,  but  this  shall  not  apply  to 
personal  property). 

Florida,  Rev.  Stat.  1906,  §§  2775,  2776. 

Louisiana,  Acts,  1908,  p.  282,  Act  No. 
187,  prohibits  use  of  clause  on  im- 
movables; does  not  apply  to  personal 
or  movable  property  where  such  pol- 
icies are  stamped  so  as  to  show  that 
they  are  subject  to  such  clause. 


New  Hampshire,  Pub.  Stat.  1901,  ch. 
170,  §  5  (when  the  loss  is  total  the 
sum  insured  is  taken  to  be  the  value: 
when  there  is  a  partial  loss  the  in- 
sured is  entitled  to  his  actual  dam- 
ages, not  exceeding  the  sum  in- 
sured). 

Ohio,  Bates's  Stat.,  5th  ed.,  §  3643. 

Oregon,  Rev.  Stat.  1902,  §§  3720,  3721 
(goes  to  valued  pohcy). 

South  Dakota,  Laws,  1905,  ch.  126. 


51 

Exemption  of  Money  from  Fire  Policy 

In  Utah  it  is  provided  that: 

"Whenever  the  homestead  improvements  are  insured  in  favor  of  the  owner, 
and  a  loss  occurs  entitling  such  person  to  the  insurance,  the  money  thus  derived 
shall  be  exempt  to  the  same  extent  as  the  improvements  would  have  been  had 
not  such  loss  occurred." 


Utah,  Comp.  Laws,  1907,  §  ll59. 


Washington.     See  Ballinger's  Annot. 
Stats.  1897,  §  5251. 


CHAP.  1  ]  WHAT  LIFE   TULICY  bUALL   CONTAIN 

LiPB  Insukancs 


701 


52 

Standard  Policy 

In  New  York  the  statute  provides  for  standard  forms  of  life  insurance  policies 
on  and  after  January  1,  1907. 


New  York,  Laws,  1906,  eh.  32G,  §  101, 
am'd  eh.  714,  Laws,  1907.  In  Minne- 
sota the  statute  provides  standard 
forms  in  which  life  insurance  policies 
"may  be  issued  and  delivered"  in 
that  state.  Laws,  1907,  ch.  220; 
O'Br'en  &  Farnham's  Comp.  of  Ins. 
Laws,  par.  82,  p.  27.  See  also  North 
Dakota,  Act,  March  19,  1907,  pro- 


viding standard  forms  in  which  poli- 
cies of  life  insurance  "may"  be  issued 
"and  regulating  the  conditions  and 
provisions  to  be  contained  in  policies 
of  life  insurance  companies  that  do 
not  adopt  such  standard  forms." 
Ohio  has  prescribed  standard  life  policy 
by  Laws,  1908,  pp.  139-175. 


53 

Policy  to  Contain  the  Entire  Contract 

The  New  York  statute  is  given  as  a  specimen: 

"  Every  policy  of  insurance  issued  or  delivered  within  the  State  on  or  after  the 
first  day  of  January,  nineteen  hundred  and  seven,  by  any  life  insurance  corpora- 
tion doing  business  within  the  State  shall  contain  the  entire  contract  between  the 
parties  and  nothing  shall  be  incorporated  therein  by  reference  to  any  constitu- 
tion, by-laws,  rules,  application  or  other  writings  unless  the  same  are  endorsed 
upon  or  attached  to  the  policy  when  issued." 


Colorado,  Sess.  Laws,  1907,   ch.    193, 

§  36,  p.  455. 
Delaware,  Laws,  1907,  ch.  106,  p.  190. 
Kentucky,  Stat.  1909,  §  4400. 
Louisiana,    Acts,    1906,    Act    No.    52, 

p.  86. 
Michigan,  Pub.  Acts,  1907,  p.  243. 


Montana,  Rev.  Codes,  19U7,  §  5593. 
New  Hampshire,  Laws,  1907,  ch.  110, 

p.  109. 
New  York,  Ins.   Law,  1892,  ch.  690, 

§  58,  am'd  1906,  ch.  326. 
North  Dakota,  Laws,   1907,  ch.   155, 

p.  246. 


Minnesota,  Laws,  1907,  ch.  44,  p.  49.      Tennessee,  Acts,  1907,  p.  1530. 


54 

What  Life  Policy  Shall  Contain 

In  several  states  statutes  have  been  passed  prescribing  certain  provisions 
which  the  life  policy  must  contain  and  certain  provisions  which  it  must  not  con- 
tain. 


Arizona,  Civ.  Code,  par.  809,  as  am'd 
by  Act  March  21, 1907,  Sess.  L.,  1907, 
p.  162. 

California,  Civ.  Code,  1903,  §  450. 

Colorado,  Sess.  Laws,  1907,  p.  455, 
§§  36,  37,  ch.  193. 


IlHnois,  Rev.  Stat.  1908,  pp.  1248- 
1250,  §§  208u,  208v. 

Indiana.  See  Burns's  Annot.  Stat., 
Rev.  1908,  §  4725  (providing  for  cer- 
tain conditions  in  cases  of  mutual  life 
and  accident  policies);  §4752  (pro- 


702 


APPENDIX  OF  STATUTES  [CHAP.  1 


viding  that  mutual  life  and  accident  New  Jersey,  Laws,  1907,  ch.  72,  p.  133. 

policies  shall  specify  the  payments  to  North   Carolina.      See   Rev.   of   1905, 

be  made  and  that  the  corporation  §  4773. 

shall   be  liable  therefor),  Ohio,  Laws,  1908,  pp.  171-174. 

Massachusetts,  Acts  &  Res.  1907,  ch.  Tennessee,  Acts,  1907,  ch.  457,  p.  1529. 

576,  §  75,  pp.  895  et  seq.  See  ch.  441,  p.  1496. 
Michigan,  Pub.  Acts,  1907,  p.  252. 

55 

Insurance  Without  the  Consent  of  the  Insured  Prohibited— Exceptions 

The  New  York  statute  is  given  as  a  specimen: 

"No  policy  of  insurance  shall  be  issued  upon  any  property  except  upon  the 
application  and  on  the  name  of  some  person  having  an  interest  in  the  property. 
No  policy  or  agreement  for  insurance  shall  be  issued  upon  the  life  or  health  of 
another  or  against  loss  by  disablement  by  accident  except  upon  application  of 
the  person  insured;  but  a  wife  may  take  a  policy  of  insurance  upon  the  life  or 
health  of  her  husband  or  against  loss  by  his  disablement  by  accident;  an  em- 
ployer may  take  out  a  policy  of  accident  insurance  covering  his  employees  col- 
lectively for  the  benefit  of  such  as  may  be  injured,  and  a  person  liable  for  the 
support  of  a  child  of  the  age  of  one  year  and  upward  may  take  a  yearly  renewable 
term  policy  of  insurance  thereon,  the  amount  payable  under  which  may  be  made 
to  increase  with  advancing  age  and  which  shall  not  exceed  the  sums  specified  in 
the  following  table,  the  age  wherein  specified  being  the  age  at  the  time  of  death, 
and  which  after  the  age  of  thirteen,  may  become  an  ordinary  life  policy  for  an 
amount  not  exceeding  the  sum  specified  in  the  table:  .  .  .  In  respect  of  insurance 
heretofore  or  hereafter,  by  any  person  not  of  the  full  age  of  twenty-one  years  but 
of  the  age  of  fifteen  years  or  upwards,  effected  upon  the  life  of  such  minor,  for 
the  benefit  of  such  minor,  or  for  the  benefit  of  the  father,  mother,  husband,  wife, 
brother  or  sister  of  such  minor,  the  assured  shall  not,  by  reason  only  of  such 
minority,  be  deemed  incompetent  to  contract  for  such  insurance  or  for  the  sur- 
render of  such  insurance,  or  to  give  a  valid  discharge  for  any  benefit  accruing,  or 
for  money  payable  under  the  contract." 

New  York,  Ins.  Law,  1892,  ch.  690,  policy  without  insured's  knowledge 

§  55,  as  amended   by  Laws,   1902,  or  consent). 

ch.  437.  Massachusetts,  Acts  &  Res.  1907, 
Georgia.  See  Code,  1895,  §  2091  (re-  p.  894,  §  73,  provides  that  policies  of 
quires  insurance  of  another's  interest  life  insurance  issued  without  knowl- 
to  be  done  by  his  consent  or  a  subse-  edge  or  consent  of  insured  or  in  case 
quent  ratification;  applies  to  fire  in-  of  a  minor,  without  the  consent  of 
surance).  the  guardian,  etc.,  certain  state- 
Indiana,  Bums's  Annot.  Stat.,  Rev.  ments  are  binding,  unless,  etc. 
1908,  §  4728  (fraud  in  procuring  life 

56 

To  WJiom  Policy  May  Issue 

The  Illinois  statute  is  given  as  a  specimen: 

"  No  corporation  doing  business  of  life  insurance  under  this  act  shall  issue  a 


CHAP.  I  ] 


DISCRIMINATION    IN   RATES 


703 


certificate  or  policy  upon  the  life  of  any  person  more  than  sixty-five  yean  of  age, 
excepting  in  case  of  transfer  of  policyholders  as  provided  herein,  nor  upon  a  life 
m  which  the  beneficiary  named  has  no  insurable  interest.  Any  assignment  of  the 
pohcy  or  certificate  to  a  person  having  no  insurable  interest  in  the  insured  life 
shall  render  such  a  poUcy  or  certificate  void." 


Illinois,  Rev.  Stat.  1908,  p.  1258,  §  238. 
Indiana,   Burns's  Annot.   Stat.    1908, 

§  4746. 
Iowa,  Ann.  Code,  1897,  §§  1789,  1824; 

Supp.  to  Code,  1907,  §§  1789,  1824. 
Kentucky,  Stat.  1909,  §  4399. 
Missouri.    See  Rev.  Stat.  1899,  §  7907. 
Nebraska,  Comp.  Stat.  1903,  §§  3995, 

4015,  4075,  4099. 
Nevada,  Comp.  Laws,  1900,  §  949. 


North  Dakota.     See  Laws,  1907,  ch. 

157,  §  8,  p.  250  (accident  insurance). 
Ohio,     Bates's     Annot.     Stat.     1906, 

§  3630sr. 
South  Dakota,  Sess.  Laws,  1905,  p.  185. 

§24. 
Tennessee,  Acts,  1897,  p.  304. 
West  Virginia,  Code,  1906,  §  2586. 
Georgia,  Code,  1895,  §§  2115,  2116. 


57 

Policy  Void  When  in  Favor  of  Person  Convicted  of  Felonious  Homicide 

The  statute  of  the  District  of  Columbia  provides: 

"And  every  policy  of  insurance  procured,  directly  or  indirectly,  by  the  per- 
son so  convicted  "  (of  "the  felonious  homicide  of  another  by  way  of  murder  or 
manslaughter")  "  for  his  own  benefit  or  payable  to  him  upon  the  life  of  the  person 
so  killed  shall  be  void." 

District  of  Columbia,  Code  of  Law,  as  am'd  to  March,  1905,  §  961. 


58 
Days  of  Grace 
The  New  York  statute  is  given  as  a  specimen: 

"A  grace  of  thirty  days  from  the  day  when  it  would  otherwise  be  payable  shall 
be  granted  for  the  payment  of  every  premium  after  the  first,  during  which  time 
the  insurance  shall  continue  in  force." 


New  York,  Ins.  Law,  1892,  ch.  690, 
§  101;  am'd  by  Laws.  1906,  ch.  326; 
Laws,  1907,  ch.  714. 

Illinois,  Act,  May  20,  1907,  §  1  (2); 
Kurd's  Rev.  Stat.  1908,  p.  1248. 


Massachusetts,     Acts    &    Res.     1907, 

ch.  576,  §  75,  subd.  1,  p.  896. 
Michigan,  Pub.  Acts,  1907,  p.  252. 
New  Jersey,  Laws,  1907,  ch.  72,  p.  133. 
Ohio,  Laws,  1908,  p.  171. 
Tennessee,  Acts,  1907,  ch.  457,  p.  1529. 


59 

Discrimination  in  Rates — Contracts  or  Agreements  for  Rebates,  etc. 

The  following  states  have  adopted  laws  prohibiting  discrimination  in  rates  by 
life  insurance  companies. 

The  New  York  statute  is  given  as  a  specimen: 

"No  life  insurance  corporation  doing  business  in  this  State  shall  make  or  per- 
mit any  discrimination  between  individuals  of  the  same  class  or  of  equal  expecta- 


704  APPENDIX   OF  STATUTES  [CHAP.  I 

tion  of  life,  in  the  amount  or  payment  or  return  of  premiums  or  rates  charged  for 
policies  of  insurance,  or  in  the  dividends  or  other  benefits  payable  thereon,  or  in 
any  of  the  terms  and  conditions  of  the  policy;  nor  shall  any  such  company  per- 
mit or  agent  thereof  offer  or  make  any  contract  of  insurance  or  agreement  as  to 
such  contract  other  than  as  plainly  expressed  in  the  policy  issued  thereon;  nor 
shall  any  such  company  or  any  officer,  agent,  solicitor  or  representative  thereof 
pay,  allow  or  give,  or  offer  to  pay,  allow  or  give,  directly  or  indirectly,  as  induce- 
ment to  any  person  to  insure,  or  give,  sell  or  purchase,  or  offer  to  give,  sell  or 
purchase  as  such  inducement  or  in  connection  with  such  insurance,  any  stocks, 
bonds  or  other  securities  of  any  insurance  company  or  other  corporation,  associa- 
tion or  partnership,  or  any  dividends  or  profits  accruing  thereon,  or  any  valuable 
consideration  or  inducement  whatever  not  specified  in  the  policy,  nor  shall  any 
person  knowingly  receive  as  such  inducement,  any  rebate  or  premium,  or  any 
special  favor  or  advantage  in  the  dividends  or  other  benefits  to  accrue  thereon, 
or  any  paid  employment  or  contract  for  services  of  any  kind  or  any  valuable 
consideration  or  inducement  whatever,  not  specified  in  the  policy.  No  person 
..hall  be  excused  from  attending  and  testifying  or  producing  any  books,  papers 
or  other  documents  before  any  court  or  magistrate,  upon  any  investigation,  pro- 
ceeding or  trial  for  a  violation  of  any  of  the  provisions  of  this  section,  upon  the 
ground  or  for  the  reason  that  the  testimony  or  evidence,  documentary  or  other- 
wise, required  of  him  may  tend  to  convict  him  of  a  crime  or  subject  him  to  a 
penalty  or  forfeiture;  but  no  person  shall  be  prosecuted  or  subjected  to  any 
penalty  or  forfeiture  for  or  on  account  of  any  transaction,  matter  or  thing  con- 
cerning which  he  may  so  testify  or  produce  evidence,  documentary  or  otherwise, 
and  no  testimony  so  given  or  produced  shall  be  received  against  him  upon  any 
criminal  investigation  or  proceeding.  No  premium  upon  any  policy  of  life  insur- 
ance issued  on  or  after  January  first,  nineteen  hundred  and  seven,  shall  be 
charged  for  term  insurance  for  one  year,  higher  in  amount  than  the  premium 
for  term  insurance  for  one  year  at  the  same  age  under  any  other  form  of  policy 
issued  by  such  corporation." 

Alabama.    See  Civ.  Code,  1907,  §  4579,  Louisiana,  Acts,  1908,  Act  No.  210, 

as  to  rebates  on  premiums  being  pro-  p.  314. 

hibited.  Maine,  Laws  1907,  c.  121,  p.  135. 

Arkansas,  Acts,  1907,  p.  781.  Maryland,  Code  Pub.  Gen.  Laws,  1903, 
Colorado,  Sess.   Laws,   1907,  ch.   193,  art.  23,  §  151,  p.  391. 

§  49,  p.  461,  see  also  Id.,  p.  462,  §  50.  Massachusetts,  Acts  &  Res.  1907,  cb. 
Lonnecticut,   Gen.  Laws,   Rev.    1902,  576,  §  69,  p.  892. 

§  3538,  am'd   by  Pub.   Acts,   1907,  Michigan,  Pub.  Acts,  1907,  p.  243. 

p.  741,  ch.  193.  Minnesota,  Rev.  Laws,  1905,  §  1689. 

Delaware,  Laws  (vol.  19),  1893,  ch.  273,  Mississippi,  Code,  1906,  §  2600. 

p.  551,  as  amended  by  Laws  (vol.  20)  Missouri,  Laws,  1907,  p.  316;  Rev.  Stat. 

1897,  ch.  595,  p.  713.  1899,  §  7931. 

Idaho,  Civ.  Code,  §  2238;  Act  March  7,  Montana,  Rev.  Codes,  1907,  §  4141. 

1905;  Sess.  Laws,  1905,  p.  256.  New  Hampshire,  Laws,  1907,  ch.  Ill, 
lUinois,    Rev.    Stat.    1908,    p.    1200,  p.  110. 

§§  27-30.  New  Jersey,  Laws,  1907,  p.  153. 

Iowa,  Ann.  Code,  1897,  §  1782;  Supp.  New  York,  Ins.  Law,  1892,  ch.  690, 

to  Code,  1907,  §  1782.  §  89,  amended.  Laws,  1906,  ch.  826, 

Kentucky,  Stat.  1909,  §  4379.  Laws,  1907,  ch.  729. 


CHAP.  I]        NO   FORFEITURE    OF   POLICY    WITHOUT   NOTICE 


705 


North  Carolina,  Rev.  of  1905,  §  4775. 
North  Dakota,  Laws,   1907,  ch.   148, 

p.  239. 
Ohio,     Bates's     Annot.     Stat.     1906, 

§  3631,  amended.  Laws,  1908,  p.  183. 
Oregon,  Gen.  Laws,  1907,  p.  377. 
Pennsylvania,  Pepper  &  Lewis's  Dig., 

vol.  3  (suppl.),  cols.  349,  350,  §  5. 
Rhode  Island,  Gen.  Laws,  1896,  p.  579, 

§1- 
Tennessee,   Acts,    1897,    p.    304,    §  8; 


Shannon's  Annot.  Code,  1896,  p.  769, 

§  3312. 
Vermont,  Pub.  Stat.  190G,  §  4782. 
Virginia,  Acts,  1906,  p.  141. 
Washington,    Laws,     1905,    ch.     178, 

p.  373. 
West  Virginia,  Acts,  1907,  ch.  77,  §  15, 

p.  298. 
Wisconsin,  Laws,  1907,  p.  543. 
Wyoming,  Rev.  Stat.  1899,  §  3274. 


60 

Discriminations  Against  Colored  Persons — Rates,  Rebates,  etc. 

The  following  states  have  adopted  laws  prohibiting  discrimination  against 
colored  persons,  by  life  insm^ance  companies. 

The  New  York  statute  is  given  as  a  specimen: 

**§  1.  No  life  insurance  corporation  doing  business  within  this  State  shall 
make  any  distinction  or  discrimination  between  white  persons  and  colored  per- 
sons, wholly  or  partially  of  African  descent,  as  to  the  premiums  or  rates  charged 
for  policies  upon  the  lives  of  such  persons,  or  in  any  other  manner  whatever;  nor 
shall  any  such  company  demand  or  require  a  greater  premium  from  such  colored 
persons  than  is  at  that  time  required  by  such  company  from  white  persons  of  the 
same  age,  sex,  general  condition  of  health  and  prospect  of  longevity;  nor  shall 
any  such  corporation  make  or  require  any  rebate,  diminution  or  discount  upon 
the  amount  to  be  paid  on  such  policy  in  case  of  the  death  of  such  colored  persons 
insured,  nor  insert  in  the  policy  any  condition,  nor  make  any  stipulation  whereby 
such  person  insured  shall  bind  himself,  or  his  heirs,  executors,  administrators  and 
assigns  to  accept  any  sum  less  than  the  full  value  or  amount  of  such  policy  in  case 
of  a  claim  accruing  thereon  by  reason  of  the  death  of  such  person  insured,  other 
than  such  as  are  imposed  upon  white  persons  in  similar  cases;  and  any  such 
stipulation  or  condition  so  made  or  inserted  shall  be  void. 

Connecticut,  Gen.  Stat.  1902,  §§3535-  New  York,  Ins.  Law,  1892,  ch.  690, 

3537.  §  90. 

Massachusetts,  Acts  &  Res.  1907,  ch.  Ohio,     Bates's     Annot.      Stat.    1906, 

576,  §  70,  p.  892.  §  3831-1. 

Michigan,  Comp.   Laws    1897,  §  7220,  Tennessee,    compare    Acts    1905,    ch. 

p.  2272.  480,    §  16,   p.    1028   (association  of 

Minnesota,  Rev.  Laws,  1905,  §  1689.  races). 
New  Jersey,  Laws,  1902,  p.  441. 


61 

No  Forfeiture  of  Policy  Without  Notice    • 

The  following  states  have  adopted  non-forfeiture  laws  in  life  insurance. 
The  New  York  statute  is  given  as  a  specimen: 

"No  life  insurance  corporation  doing  business  in  this  state  shall  within  one 
year  after  the  default  in  payment  of  any  premium,  instalment  or  interest  declare 
45 


706  APPENDIX   OF   STATUTES  [CHAP.  I 

forfeited,  or  lapsed,  any  policy  hereafter  issued  or  renewed,  and  not  issued  upon 
the  payment  of  monthly  or  weekly  premiums,  or  unless  the  same  is  a  term  insur- 
ance contract  for  one  year  or  less,  nor  shall  any  such  policy  be  forfeited,  or  lapsed, 
by  reason  of  nonpayment  when  due  of  any  premium,  interest  or  instalment  or 
any  portion  thereof  required  by  the  terms  of  the  policy  to  be  paid,  within  one 
year  from  the  failure  to  pay  such  premium,  interest  or  instalment,  unless  a  writ- 
ten or  printed  notice  stating  the  amount  of  such  premium,  interest,  instalment, 
or  portion  thereof,  due  on  such  policy,  the  place  where  it  shall  be  paid,  and  the 
person  to  whom  the  same  is  payable,  shall  have  been  duly  addressed  and  mailed 
to  the  person  whose  life  is  insured,  or  the  assignee  of  the  policy,  if  notice  of  the 
assignment  has  been  given  to  the  corporation,  at  his  or  her  last  known  post-office 
address  in  this  state,  postage  paid  by  the  corporation,  or  by  any  officer  thereof, 
or  person  appointed  by  it  to  collect  such  premium,  at  least  fifteen  and  not  more 
than  forty-five  days  prior  to  the  day  when  the  same  is  payable.  The  notice  shall 
also  state  that  unless  such  premium,  interest,  instalment  or  portion  thereof,  then 
due,  shall  be  paid  to  the  corporation,  or  to  the  duly  appointed  agent  or  person 
authorized  to  collect  such  premium  by  or  before  the  day  it  falls  due,  the  policy 
and  all  payments  thereon  will  become  forfeited  and  void  except  as  to  the  right 
to  a  surrender  value  or  paid-up  policy  as  in  this  chapter  provided.  If  the  pay- 
ment demanded  by  such  notice  shall  be  made  within  its  time  limited  therefor, 
it  shall  be  taken  to  be  in  full  compliance  with  the  requirements  of  the  policy  in 
respect  to  the  time  of  such  payment;  and  no  such  policy  shall  in  any  case  be 
forfeited  or  declared  forfeited,  or  lapsed,  until  the  expiration  of  thirty  days  after 
the  mailing  of  such  notice.  The  affidavit  of  any  officer,  clerk,  or  agent  of  the  cor- 
poration, or  of  any  one  authorized  to  mail  such  notice  that  the  notice  required 
by  this  section  has  been  duly  addressed  and  mailed  by  the  corporation  issuing 
such  policy  shall  be  presumptive  evidence  that  such  notice  has  been  duly  given. 
No  action  shall  be  maintained  to  recover  under  a  forfeited  policy,  unless  the 
same  is  instituted  within  two  years  from  the  day  upon  which  default  was  made 
in  paying  the  premium,  instalment,  interest  or  portion  thereof  for  which  it  is 
claimed  that  forfeiture  ensued." 

Arizona,   Rev.    Stat.    1901,    §  809,   as  Maine,  Rev.  Stat.  1903,  p.  492,  ch.  49, 

amended  by  Act  March  21,  1907.  §  101. 

California,  Deering's  Civ.  Code,  1903,  Massachusetts,  Acts  &  Res.  1907,  ch. 

§  450.    Id.,  Appendix,  p.  729,  §  11.  576,  §  80,  p.  901. 

Colorado,  Sess.  Laws,   1907,  ch.   193,  Michigan,  Pub.  Acts,  1907,  p.  253. 

§  43,  p.  457.  Missouri,  Laws,  1903,  p.  208. 

Illinois,    Rev.    Stat.    1908,    p.    1249,  Montana,  Rev.  Codes,  1907,  §  4139. 

§  208m,  (6).  Nevada,  Comp.  Laws,  1900,  §  953. 

Kansas.    See  Gen.  Stat.  1905,  §  3657.  New  Jersey,  Laws,  1907,  p.  135. 

Kentucky,  Stat.  1909,  §  4382.  New  York,  Ins.  Law,  1982,  ch.  690, 

Louisiana,  Acts,    1906,  Acts  Nos.  68,  §  92,  as  amended,  Laws,  1906,  ch. 

193,  Pamph.  Laws,  1906,  pp.  86,  97.  326. 

Tennessee,  Acts,  1907,  p.  1531. 

62 

Technical  Forfeitures — Warranties  Converted  into  Representations 
The  following  states  have  adopted  laws  providing  that  misrepresentations  and 
other  breaches  of  policy  shall  not  avoid  unless  in  matters  material  to  the  risk. 


CHAP.  I  ] 


MISSTATEMENTS  AS   TO   AGE 


707 


The  Alabama  statute  is  given  as  a  specimen: 

"No  TVTitten  or  oral  misrepresentation,  or  warranty  therein  made,  in  the  ne- 
gotiation of  a  contract  or  policy  of  life  insurance,  or  in  the  application  therefor 
or  proof  of  loss  thereunder  shall  defeat  or  void  the  policy,  or  prevent  its  attach- 
ing, unless  such  misrepresentation  is  made  with  actual  intent  to  deceive  or  unless 
the  matter  misrepresented  increase  the  risk  of  loss." 


Alabama,  Civ.  Code,  1907,  §  4572. 
Arizona   Act   March    18,   1907;     Sess. 

L.,  1907,  p.  59. 
Georgia.      See    Code,    1895,    §§  2098, 

2099. 
Iowa,  Ami.  Code,  1897,  §  1743;  Supp. 

to  Code,  1907,  §  1743. 
Kansas,  Laws,  1907,  ch.226,  §  1,  p.  359. 
Kentucky,  Stat.  1909,  §  4286. 
Maryland,     Pub.    Gen.     Laws,     1903, 

art.  23,  §  192^  p.  417. 
Massachusetts,  Acts  &  Res.  1907,  ch. 

576,  §  21,  p.  854. 
Michigan,  Pub.  Acts,  1907,  p.  252. 
Minnesota,  Rev.  Laws,  1905,  §  1623. 
Missouri,  Rev.  Stat.  1899,  §§  7890. 
New  Hampshire,  Pub.  Stat.  1901,  ch. 

170,  §  2,  p.  570. 


North  Carolina,  Rev,  of   1905,  §  4808 

(general) . 
North    Dakota,     Rev.    Codes,     1899, 

§  4485. 
Ohio,  Bates's  Ann.  8tat.  1906,  §  3625. 
Pennsylvania,  Pepper  &  Lewis's  Dig., 

vol.  1,  col.  2382,  §  88. 
Rhode   Island,   Laws,    1902,   ch.   997, 

p.  75. 
South     Carolina.       See     Civil     Code, 

§§  1817,  1825  (vol.  1,  Code  of  Laws, 

1902,  pp.  695,  697). 
Tennessee,    Shannon's    Annot.    Code, 

1896,  p.  768,  §  3306. 
Texas,   Supp.    1903,   to   Sayles's  Civ. 

Stat.,  art.  3096aa  (general). 
Virginia,  Acts,  1906,  ch.  112,  §  28,  p. 

139. 


63 

Misstatements  as  to  Age 

The  provision  of  the  New  York  Statutory  Life  Policy  is  given  as  a  specimen: 
"  If  the  age  of  the  insured  has  been  misstated,  the  amount  payable  hereunder 
shall  be  such  as  the  premium  paid  would  have  purchased  at  the  correct  age." 


Colorado,  Sess.  Laws,   1907,  ch.   193, 

§  36,  p.  455. 
lUinois,    Rev.    Stat.    1908,    p.    1248, 

§  208,  n. 
Iowa,    Annot.     Code,    1897,     §  1813, 

Supp.  to  Code,  1907,  §  1813. 
Maryland,  Code  Pub.  Genl.  Laws,  1903, 

p.  417,  art.  23,  §  193. 
Massachusetts,    Acts    &    Res.     1907, 

ch.  576,  §  75,  p.  896.    See  7c?.,  p.  894, 

§73. 
Michigan,  Pub.  Acts,  1907,  p.  253. 
Mississippi,  Code,  1906,  §  2676. 
New  Jersey,  Laws,  1907,  eh.  72,  p.  134. 
New  York,  Ins.   Law,  1892,  ch,  690, 


§  101,  as  amended  by  Laws,  1906, 
ch.  326;  Laws,  1907,  ch.  714. 

Ohio,  Laws,  1908,  p.  171. 

Pennsylvania,  Pepper  &  Lewis's  Dig., 
col.  2383,  §  89. 

South  Dakota,  Civ.  Code,  1903,  §  733. 

Tennessee,  Acts  1907,  p.  1530. 

See  Louisiana,  Act,  1906,  No.  115,  §  33, 
Pamph.  Laws,  1906,  p.  112,  making 
certificates  in  life,  accident,  sick 
benefit,  or  physical  disability  insur- 
ance on  the  fraternal  plan  incon- 
testable for  errors  or  innocent  state- 
ments as  to  age. 


708 


APPENDIX   OF   s^TATUTES 


[chap.  I 


64 

Waiver  of  Forfeiture  for  Misrepresentation,  etc. — Notice  to  Agent,  When  Notice  tc 

Company 

The  Louisiana  statute  provides  that  life,  health  and  accident  insurance  com- 
panies, which  issue  policies  or  contracts  of  insurance  to  the  assured  without  a 
medical  examination  by  a  physician,  shall  waive  their  right  to  claim  forfeiture 
for  misrepresentation,  etc.,  under  certain  conditions;  also  making  notice  to  the 
agent  notice  to  the  company  as  to  the  health,  habits  or  occuoation  of  the  assured. 


Louisiana,  Acts,  1908,  p.  139,  Act 
No.  97. 

See  Massachusetts,  Acts  &  Res.,  1907, 
p.  894,  §  73,  providing  that  certain 
policies  issued  without  medical  ex- 
amination to  be  valid,  unless,  etc. 

In  Minnesota  it   is  provided   that: 

"  In  any  action  upon  a  policy  issued  in 
this  state  without  previous  medical 
examination,  or  without  the  knowl- 
edge or  consent  of  the  insured,  or,  in 


case  of  a  minor,  without  the  consent 
of  his  parent,  guardian,  or  other  per- 
son having  his  legal  custody,  the 
statements  made  in  the  application 
as  to  the  age,  physical  condition,  and 
family  history  of  the  insured  shall  be 
valid  and  binding  upon  the  company, 
unless  wilfully  false  or  intentionally 
misleading,"  Minnesota,  Rev.  Laws, 
1905,  §  1693. 


65 

Misrepresentation  by  Insurance  Company 

The  New  York  statute  is  given  as  a  specimen: 

"No  life  insurance  corporation  doing  business  in  this  State  and  no  oflBcer, 
director  or  agent  thereof  shall  issue  or  circulate,  or  cause  or  permit  to  be  issued 
or  circulated,  any  estimate,  illustration,  circular  or  statement  of  any  sort  mis- 
representing the  terms  of  any  policy  issued  by  it  or  the  benefits  or  advantages 
promised  thereby,  or  the  dividends  or  share  of  surplus  to  be  received  thereon,  or 
shall  use  any  name  or  title  to  any  policy  or  class  of  policies  misrepresenting  the 
true  nature  thereof.  Nor  shall  any  such  corporation  or  agent  thereof  make  any 
misrepresentation  to  any  person  insured  in  another  company  for  the  purpose  of 
inducing  or  tending  to  induce  such  person  to  lapse,  forfeit,  or  surrender  his  said 
insurance.  Any  violation  of  this  section  shall  constitute  a  misdemeanor  and  it 
shall  be  the  duty  of  the  superinte  :dent  of  insurance  to  revoke  the  license  of  the 
corporation  or  agent  so  offending." 


Colorado,  Sess.  Laws,   1907,  ch.   193, 

§48,  p.  460.    M,p.  446,  §9. 
Delaware,  Laws,  1907,  ch.  105,  p.  189. 
Illinois,    Rev.    Stat.    1908,    p.    1246, 

§  208,  n. 
Iowa,  Supp.  to  Code,  1907,  §  18206. 
Louisiana,  Acts,  1906,  p.  172,  Act  No. 

107,  Pamph.  Laws,  1906,  p.  96. 
Massachusetts,    Acts    &    Res.     1907, 

ch.  576,  §  74,  p.  895. 
Michigan,  Pub.  Acts,  1907,  p.  250. 
Minnesota,  Laws,  1907,  ch.  43,  p.  49. 


Missouri,  Laws,  1907,  p.  317. 

New  Jersey,  Laws,  1907,  p.  138. 

New  York,  Ins.  Law,  1892,  ch.  690, 

§  60,   as   amended   by  Laws,    1908, 

p.  1015,  ch.  347. 
North  Dakota,  Laws,  1907,  ch.  147, 

p.  239. 
Ohio,  Laws,  1908,  p.  175. 
Tennessee,  Acts,  1907,  p.  1526. 
West  Virginia,  Acts,  1907,  ch.  77,  {  34 

p.  304. 
Wi.sconsin,  Laws,  1907,  p.  509. 


CHAP.  I  ] 


CHANGE  OF  BENEFICIARY 


709 


See  Connecticut,  Genl.  Stat.,  Rev.  1902, 
I  3617,  as  to  false  statement  of  assets 
by  insurance  companies  generally  or 
their  agents.  Id.,  §  3618,  as  amended 
by  Pub.  Acts,  1907,  p.  742,  ch.  193, 
§  3,  providing  that  advertisements 
must  conform  to  last  verified  state- 


ment. Louisiana,  Pamph.  Ins.  Laws, 
1906,  p.  23,  §§13,  14,  read:  "No  in- 
surance company,  corporation,  asso- 
ciation, partnership,  or  society,"  etc., 
and  applies  to  advertisements,  etc., 
to  funds  or  assets. 


66 

Effect  of  Change  of  Interest  or  Transfer — Exceptions 

The  California  Code  provides: 

"Except  1  ...  in  the  cases  of  life,  accident,  and  health  insurance,  a  change  of 
interest  in  any  part  of  a  thing  insured,  unaccompanied  by  a  corresponding  change 
of  interest  in  the  insurance,  suspends  the  insurance  to  an  equivalent  extent, 
until  the  interest  in  the  thing  and  the  interest  in  the  insurance  are  vested  in 
the  same  person." 


California,  Civ.   Code,    1903,    §  2553. 

See  Id.,  §  2593. 
Montana,  Rev.  Civ.  Code,  1907,  §  5562. 


North  Dakota,  Rev.  Civ,  Code,  1899, 

§  4457. 
South  Dakota,  Civ.  Code,  1903,  §  1809. 


67 

Change  of  Beneficiary 

The  following  states  have  adopted  laws  providing  that  a  member  of  certain 
life  insurance  societies  may  make  a  change  of  beneficiary  without  consent  of 
former  beneficiary. 

The  New  York  statute  is  given  as  a  specimen: 

'■  Membership  in  any  such  corporation,  association  or  society  shall  give  to  any 
member  thereof  the  right,  at  any  time,  with  the  consent  of  such  corporation,  as- 
sociation or  society,  to  make  a  change  in  his  payee  or  payees  or  beneficiary  or 
beneficiaries  without  requiring  the  consent  of  such  payee  or  beneficiaries." 

Illinois,   Kurd's  Rev.    Stat.    1908,   p.      Montana,  Rev.  Code,  1907,  §  4170. 


1262. 
Indiana,   Burns's   Annot.   Stat.,   Rev. 

1908,  §§4703,4760. 
Iowa,  Ann.  Code,  1897,  §§  1789,  1834; 

Supp.  to  Code,  1907,  §  1789. 
Kansas,  Gen.  Stat.  1905,  §  3649. 
Kentucky,  Stat.  1909,  §  4392. 
Maine.     See  Rev.   Stat.   1903,  c.   49, 

§  130,  p.  500. 


Nebraska,  Comp.  Stats.  1903,  §  4095. 
New  York,  Ins.  Law,  1892,  ch.  690, 

§211.    See  also  M,  §238. 
Oklahoma,  Rev.  Stat.  1903,  §  3247. 
Texas,  Suppl.   1903,  to  Sayles's  Civ. 

Code,  p.  308  (accident  insurance). 
Virginia,  Acts,  1906,  p.  152. 
Wisconsin,  Laws,  1899,  ch.  101,  p.  138, 

repealing  §  1955c,  ch.  89,  Stat.  1898. 


The  exceptions  specified  here  are: 
§  2554.  A  change  after  the  occur- 
rence of  an  injury  which  results  in 
the  loss;  §  2555,  "a  change  of  inter- 
est in  one  or  more  of  several  distinct 
things,  separately  insured  by  one 
policy,  does  not  avoid  the  insurance 


as  to  the  others;"  §  2556,  "a  change 
of  interest,  by  will  or  succession,  in 
the  death  of  the  insured;"  §  2557,  "a 
transfer  of  interest  by  one  of  several 
partners,  joint  o^Tiers,  or  owners  in 
common  who  are  jointly  insured,  to 
the  others." 


710  APPENDIX  OF  STATUTES  [CHAP.  I 

68 
Notice  of  Transfer  of  Policy  Upon  Life  or  Health 

The  California  Code  provides: 

"  Notice  to  an  insurer  of  a  transfer  or  bequest  thereof  is  not  necessary  to  pre- 
serve the  validity  of  a  policy  of  insurance  upon  life  or  health,  unless  thereby  ex- 
pressly required." 

California,  Civ.  Code,  1903,  §  2765.  Oklahoma,  Rev.  Stat.  1903,  §  3234. 

Montana,  Rev.  Civ.  Code,  1907,  §  5646.      South  Dakota,  Civ.  Code,  1903,  §  1957. 
North  Dakota,  Rev.  Civ.  Code,  1899, 
§  4613. 

69 

Suicide 

Colorado  has  enacted: 

"  From  and  after  the  passage  of  this  act  the  suicide  of  a  policyholder,  after  the 
first  policy  year  of  any  life  insurance  company  doing  business  in  this  state,  shall 
not  be  a  defense  against  the  payment  of  a  life  insurance  policy,  whether  said  sui- 
cide was  voluntary  or  involuntary  and  whether  said  policyholder  was  sane  or 
insane." 

Colorado,  Sess.  Laws,   1907,  ch.   193-,  self-caused  death  releases  insurer,  in- 
§  55,  p.  469.  eluding  death  by  the  hands  of  Jus- 
Missouri,  Rev.  Stat.  1899,  §  7896.  tice. 
Under  the  Georgia  Code,  1895,  §  2118, 

70 

Defense  of  Intoxication  of  Insured 

The  provision  of  the  Iowa  Code  is  given  as  a  specimen: 

"  In  any  action  pending  in  any  court  of  the  State  on  any  policy  or  certificate 
of  life  insurance,  wherein  the  defendant  seeks  to  avoid  liability  upon  the  alleged 
ground  of  the  intemperate  habits  or  habitual  intoxication  of  the  insured,  it  shall 
be  a  sufficient  defense  for  the  plaintiff  to  show  that  such  habits  or  habitual  in- 
toxication of  the  assured  was  generally  known  in  the  community  or  neighborhood 
where  the  agent  of  the  defendant  resided  or  did  business,  if  thereafter  the  com- 
pany continued  to  receive  the  premiums  falling  due  thereon." 

Iowa,   Code,   1897,   §1811;  Supp.   to      South  Dakota,  Civ.  Code.  1903,  §  730. 
Code,  1907,  §  1811. 

71 

Incontestable 

The  following  states  have  adopted  an  incontestable  clause  in  life  risks. 
The  New  Jersey  lav/  is  given  as  a  specimen: 

"On  and  after  the  first  day  of  January,  nineteen  hundred  and  eight,  no  policy 
of  life  insurance  shnll  be  issued  by  any  domestic  company  or  be  iesued  or  de- 


CHAP.  I J  PROTECTION   OF   WIPE   AND    CHILDREN  711 

livered  within  this  State  to  any  resident  thereof  by  any  foreign  eompany,  unless 
the  same  shall  contain  the  following  provisions:  ..." 

A  provision  that  the  policy  shall  constitute  the  entire  contract  between  the 
parties  and  that  after  a  specified  time,  not  later  than  two  years  from  its  date, 
shall  be  incontestable,  except  for  non-payment  of  premiums  and  for  violation  of 
its  express  conditions,  if  any,  relating  to  hazardous  travel,  residence  or  occupa- 
tion, in  which  case  the  liability  of  the  company  may  be  limited  to  a  definitely 
determinable  reduced  amount,  which  shall  not  be  less  than  the  full  reserve  for 
the  policy  and  any  dividend  additions. 

Alabama,  Civ.  Code,  1907,  §  4573.  Michigan,  Pub.  Acts,  1907,  p.  252. 

Colorado,   Sess.    Laws,    1907,   p.    455,  New  Jersey,  Gen.  Laws,  1907,  p.  133. 

ch.  193,  §  36  (2).  Ohio,  Bates's  Annot.  Stat.  1906,  §  3626; 
Illinois,  Act  May    20,    1907,  §1    (3);  Laws,  1908,  p.  171. 

Kurd's  Rev.  Stat.  1908,  p.  1248.  South  Carolina,  Civ.  Code,  §  1825;  1 
Kansas,  Gen.  Stat.  1905,  §  3657.  Code  of  Laws,  1902,  p.  697. 

Massachusetts,  Acts  &  Res.  1907,  ch.  South  Dakota,  Civ.  Code,  1903,  §  732. 

676,  §  75,  p.  896.  Tennessee,  Acts,  1907,  p.  1530. 

72 
Sum  Fixed  in  Policy  Measures  Indemnity;  Unless 

The  California  Code  provides: 

"Unless  the  interest  of  a  person  insured  is  susceptible  of  exact  pecuniary 
measurement,  the  measure  of  indemnity  under  a  policy  of  insurance  upon  life  or 
health  is  the  sum  fixed  in  the  policy." 

California,  Civ.  Code,  1903,  §  2766.  Oklahoma,  Rev.  Stat.  1903,  §  3235. 

Montana,  Rev.  Civ.  Code,  1907,  §  5647.       South  Dakota,  Civ.  Code,  1903,  §  1958. 
North  Dakota,  Rev.  Civ.  Code.  1899, 
§  4614. 

73 

Protection  of  Wife  and  Children 

The  following  states  have  adopted  laws  protecting  beneficiaries,  if  wife  and 
children,  against  creditors  and  acts  of  the  insured. 

The  New  York  statute  is  given  as  a  specimen: 

"  A  married  woman  may,  in  her  own  name,  or  in  the  name  of  a  third  person, 
with  his  consent,  as  her  trustee,  cause  the  life  of  her  husband  to  be  insured  for  a 
definite  period,  or  for  the  term  of  his  natural  life.  Where  a  married  woman  sur- 
vives such  period  or  term  she  is  entitled  to  receive  the  insurance  money,  payable 
by  the  terms  of  the  policy,  as  her  separate  property,  and  free  from  any  claim  of  a 
creditor  or  representative  of  her  husband,  except  that  where  the  premium  actu- 
ally paid  annually  out  of  her  husband's  property  exceeds  five  hundred  dollars, 
that  portion  of  the  insurance  money  which  is  purchased  by  excess  of  premium 
above  five  hundred  dollars,  is  primarily  liable  for  the  husband's  debts.  The 
policy  may  provide  that  the  insurance,  if  the  married  woman  dies  before  it  be- 
comes due  and  without  disposing  of  it,  shall  be  paid  to  her  husband  or  to  his,  her 
or  their  children,  or  to  be  for  the  use  of  one  or  more  of  those  persons;  and  it  may 
designate  one  or  more  trustees  for  a  child  or  children  to  receive  and  manage  such 


712 


APPENDIX   or   STATUTES 


[chap.  I 


money  until  such  child  or  children  attain  full  age.  The  married  woman  may  dis- 
pose of  such  policy  by  will  or  written  acknowledged  assignment  to  take  effect  on 
her  death,  if  she  dies  thereafter  leaving  no  descendant  surviving.  After  the  will 
or  the  assignment  takes  effect,  the  legatee  or  assignee  takes  such  policy  absolutely. 
"  A  policy  of  insurance  on  the  life  of  any  person  for  the  benefit  of  a  married 
woman,  is  also  assignable  and  may  be  surrendered  to  the  company  issuing  the 
same,  by  her,  or  her  legal  representative,  with  the  written  consent  of  the  as- 
sured." 


Arkansas,    Sandel's   &   Hill's   Dig.    of 

Stat.  1894,  §  4944. 
Connecticut,  Gen.  Stat.  1902,  §  4548. 
Delaware,  Rev.  Code,  1872,  am'd  1874, 

p.  478,  ch.  76,  §  3. 
District  of  Columbia,  Code  of  Laws, 

as    amended    to    March    3,     1905, 

§§  1161-1163. 
Hawaii,    Rev.    Laws,    1905,    §§  2268- 

2270. 
Illinois,  Rev.  Stat.  1908,  p.  1242,  §  199. 
Indian    Territory,    Ann.    Stat.    1899, 

§  3023. 
Iowa.     See  Ann.  Code,   1897,  §  1805; 

Supp.  to  Code,  1907,  §  1805. 
Kentucky,  Stat.  1909,  §  4377. 
Maine,  Rev.  Stat.  1903,  ch.  77,  §  19, 

p.  667. 
Maryland,     Pub.     Gen.    Laws,     1903, 

art.  23,  §  146,  p.  389. 
Massachusetts,     Acts    &    Res.     1907, 

ch.  576,  §  73,  p.  894. 
Michigan,  Comp.  Laws,   1897,  §  7212, 

p.  2238. 
Minnesota,  Rev.  Law,  1905,  §  1692. 
Missouri,    Rev.    Stat.    1899,    §§  7892- 

7895. 
New    Hampshire,    Pub.    Stat.     1901, 

ch.  1171,  §  1,  p.  573. 


New  Jersey,  Laws,  1902,  pp.  421,  422. 
New  York,  Domestic  Relations  Law, 

1896,  ch.  272,  §  22. 
North  Carolina,  Rev.  of  1905,  §§  4771, 

4772. 
Ohio,  Bates's  Annot.  Stat.  1906,  §§  3628, 

3629. 
Oklahoma,  Rev.  Stat.  1903,  §  3223. 
Pennsylvania,  Pepper  &  Lewis's  Dig., 

vol.  1,  col.  2383,  §  91. 
Rhode  Island,  Gen.  Laws,  1896,  p.  589, 

§8. 
South    Carolina,    Civ.    Code,     §  1824 

(vol.  1,  Code  of  Laws,  1902,  p.  697). 
South  Dakota,  Civ.  Code,  1903,  §  728. 
Tennessee,    Shannon's    Annot.    Code, 

1896,      p.     991,     §4030;     p.    1051, 

§§  4231,  4232. 
Vermont,    Pub.   Stat.    1906,    §§  3047, 

3051. 
Washington,  Ballinger's  Annot.  Codes  & 

Stat.  1897;  Supp.  1899-1903,  §§  4452, 

5252. 
West  Virginia,  Code,  1906,  §  2954. 
West  Virginia,   Code,    1899   (Warth), 

p.  669,  ch.  66,  §  5. 
Wisconsin,  Sanborn  &  B.  Annot.  Stat. 

1898,  §  2347,  p.  1700. 


74 
Protection  of  All  Beneficiaries 

The  following  states  have  adopter  1  laws  securing  to  the  beneficiaries  in  certain 
cases  the  proceeds  of  life  insurance  free  from  creditors,  etc. 

The  New  York  statute  is  given  as  a  specimen: 

"  The  money  or  other  benefit,  charity,  relief  or  aid  paid  or  to  be  paid,  provided 
or  rendered  by  any  such  corporation,  association  or  society  shall  not  be  liable 
to  be  seized,  taken  or  appropriated  by  any  legal  or  equitable  process,  to  pay  any 
debt  or  liability  of  a  member  or  any  debt  or  liability  of  the  widow  of  a  deceased 
member  of  such  corporation  designated  as  the  beneficiary  thereof,  which  was  in- 


CHAP.  l]      VOTING   FOR  DIRECTORS  OF  MUTUAL  LIFE  INS.   CO.      713 


curred  before  such  money  was  paid  to  her  or  such  benefit,  charity,  relief  or  aid 
was  provided  or  rendered." 


California,  Deering's  Civ.  Code,  1903, 

Appendix,  p.  728,  §  8. 
Colorado,  Sess.  Laws,   1907,   ch.    193, 

p.  483. 
Connecticut,  Genl.   Stat.,  Rev.    1902, 

§  3588. 
District  of  Columbia,  Code  of  Laws, 

as  amended  to  March,  1905,  §§  759, 

1162. 
Idaho,  Civ.  Code,  1901,  §  2255. 
Illinois,    Rev.    Stat.    1908,    pp.    1262, 

1268,  §§  254,  266. 
Indiana,   Burns's  Annot.  Stat.   1908, 

§  4761. 
Iowa.     See  Ann.  Code,  1897,  §§  1805, 

1828;  Supp.  to  Code,  1907,  §  1805. 
Kansas,  Gen.  Stat.  1905,  §  3587. 
Kentucky,  Stat.  1909,  §§4378,  4393. 
Maine,  Rev.  Stat.  1903,  ch.  49,  §  106, 

p.  493;  ch.  49,  §  130,  p.  500. 
Maryland,  Code  Pub.  Genl.  Laws,  1903, 

p.  389,  art.  23,  §  145.     Id.,  p.  427, 

art.  23,  §  213. 
Massachusetts,  Acts  &  Res.  1907,  ch. 

576,  §  73,  p.  894. 
Minnesota,  Rev.  Laws,  1905,  §  1691. 
Mississippi,  Code,  1906,  §§  2140,  2141, 

2602,    2603;    Laws,    1908,    ch.    175, 

p.  188. 
Missouri,    Rev.    Stat.    1899,    §§  7908, 

7927. 
Montana,  Rev.  Codes,  1907,  §§  4092, 

4171. 


Nebraska,  Comp.  Stat.  1903,  §  4018. 

Nevada,  Comp.  Laws,  1900,  §  950. 

New  Hampshire,  Pub.  Stat.  1901, 
p.  569;  ch.  171,  §  2,  p.  573;  ch.  86, 
§  10,  p.  581. 

New  Jersey,  Laws,  1902,  p.  422. 

New  York,  Ins.  Law,  1892,  ch.  690, 
§212. 

North  Carohna,  Rev.  of  1905,  §  4772. 

Oklahoma,  Rev.  Stat.  1903,  §  3248. 

Pennsylvania,  Pepper  &  Lewis's  Dig., 
vol.  1,  col.  2383,  §  90. 

Rhode  Island.  See  Gen.  Laws,  1896, 
p.  589,  §  8. 

South  Carolina,  Civ.  Code,  §  1837; 
1  Code  of  Laws,  1902,  p.  704. 

South  Dakota.  See  Civ.  Code,  1903, 
§728. 

Tennessee,  Acts,  1905,  ch.  480,  §12, 
p.  1024.' 

Utah,  Comp.  Laws,  1907,  §  3245, 
subd.  8. 

Vermont,  Pub.  Stats.  1906,  §  4783. 

Virginia  See  Acts,  1906,  p.  139,  ex- 
empting weekly  or  monthly  pay- 
ments of  sick  benefits. 

Washington,  Ballinger's  Annot.  Codes 
&  Stat.  1897,  and  Supp.  1899-1903, 
§  5252;  and  Supp.  2841c?,  p.  301. 

Wisconsin,  Laws,  1899,  ch.  270,  §  14, 
p.  468. 

Wyoming,  Laws,  1901,  p.  51,  §  7. 


75 

Voting  for  Directors  of  Mutual  Life  Insurance  Companies — Effect  of  Mailing  of 

Ballot  to  Policyholder 

In  Wisconsin  it  is  provided  that: 

"The  mailing  by  the  corporation  of  the  said  ballot,  to  any  person  under  the 
provisions  of  this  act,  shall  not  be  construed  as  an  admission  by  the  corporation 
of  the  validity  of  any  policy,  or  of  the  fact  that  such  person  was  a  policyholder 
of  said  company;  and  no  such  mailing  shall  be  competent  evidence  against  the 
corporation  in  any  action  or  proceeding,  in  which  the  question  of  the  validity  of 
any  policy  or  of  any  claim  under  it  is  involved." 


Wisconsin,  Laws,  1907,  p.  525. 


714  APPENDIX  OF  STATUTES  [cHAP.  I 

Accident  Insurance 

76 
Insurance  Against  Accident  or  Disease — What  Policies  Must  State 

The  Connecticut  statute  provides: 

"Any  company  chartered  by  and  now  doing  business  in  this  State j  and  em- 
powered to  make  contracts  contingent  upon  life,  may  issue  poHcies  or  certificates 
insuring  persons  against  loss  of  life  or  personal  injury  resulting  from  any  cause 
and  against  loss  of  time  resulting  from  disease,  which  policies  or  certificates  shall 
state  on  their  face  the  agreement  with  the  persons  receiving  the  same,  and,  when 
executed  in  accordance  with  the  charter  and  by-laws  of  said  company,  shall  be 
binding  upon  the  company." 

Connecticut,  Genl.   Stat.,   Rev.   1902,  Assessment   accident   associations  re- 

§  3541.  quired  to  print  plainly  and  legibly  in 

Montana,  Rev.  Civ.  Code,  1907,  §  4161,  every  policy  or  certificate  issued,  the 

providing  that  the  policy  shall  state  minimum  and  maximum  limit  of  the 

the  sum  of  money  which  it  promises  contingent   mutual   liability  of  the 

to  pay  upon  the  happening  of  each  person  to  whom  the  policy  is  issued, 

contingency  insured  against.  etc.,    Colorado,    Sess.    Laws,    1907, 

Texas,  Suppl.  1903,  to  Sayles's  Civ.  p.  482,  eh.  193  (4). 
Stat.,  p.  308. 

77 

Prohibiting  Limitation  of  Time  for  Service  of  Notice 

The  Wisconsin  statute  is  given: 

"It  shall  be  unlawful  for  any  accident  or  casualty  insurance  company,  corpo- 
ration or  association  licensed  to  transact  business  in  the  state  of  Wisconsin,  its 
officers,  employees  or  agents  to  limit  by  any  means  or  in  any  manner  the  time  for 
the  service  of  any  notice  of  injury  that  may  be  required  of  the  person  insured  to 
a  less  period  of  time  than  twenty  full  calendar  days." 

Wisconsin,  Laws,  1901,"  ch.  235,   §  1;      Maine,    Sess.    Laws,    1907,    ch.    170, 
and  deposit  of  notice  in  post  office,  p.  186. 

postage  prepaid,  is  sufficient,  §  3. 

78 

What  Notice  of  Injury  Is  Sufficient 

The  Wisconsin  statute  is  given : 

"The  deposit  in  any  post  office  by  any  injured  person,  his  agent  or  attorney, 
of  a  registered,  postage  prepaid  letter,  containing  the  proper  notice  of  injury  at 
any  time  within  twenty  full  calendar  days  after  the  injury  received  by  the  as- 
sured, properly  addressed  to  the  company,  corporation  or  association  issuing  the 
accident  or  casualty  policy  or  certificate,  shall  be  a  lawful  and  sufficient  service 
of  any  notice  of  injury  that  may  be  required." 

Maine,  Laws,  1907,  ch.  170,  p.  186.  Wisconsin,  Laws,  1901,  ch.  235,  S  3. 


CHAP.  l]  CONCEALMENTS  AND   REPRESENTATIONS  716 

79 
Assessment  Accident  Associations — Benefit  Not  Subject  to  Attachment 
The  Colorado  statute  is  given: 

"The  money  or  other  benefit,  charity,  relief  or  aid  to  be  paid,  or  provided  or 
rendered  by  any  corporation  authorized  to  do  casualty  insurance  on  the  assess- 
ment plan,  shall  not  be  liable  to  attachment  or  other  process,  and  shall  not  be 
seized,  taken,  appropriated  or  applied  by  any  legal  or  equitable  process,  nor  by 
operation  of  law,  to  pay  any  debts  or  liability  of  a  policy  or  certificate  bolder,  or 
any  beneficiary  named  therein. " 

Colorado,  Sess.  Laws,  1907,  p.  483,  ch.  193  (6). 

80 
Cancellation — Mutual  Corporations — Accidents  of  Employees 

The  Illinois  statute  provides: 

"When  any  policy  for  which  a  premium  note  shall  have  been  given  in  part 
payment  of  the  premium  therefor,  is  cancelled  by  the  company,  the  insured  must 
upon  demand  from  the  company  pay  his  proportion  of  all  losses  which  have  ac- 
tually occurred  up  to  the  date  when  such  policy  was  cancelled,  upon  the  doing  of 
which  the  company  shall  return  such  notes  to  the  maker  thereof." 
Illinois,  Kurd's  Rev.  Stat.,  1908,  p.  1289,  ch.  73. 

Marine  Insurance. 

81 
Wagering  Policies 

The  statute  of  the  District  of  Columbia  provides: 

"No  insurance  shall  be  made  by  any  person  or  persons,  bodies  politic  or  cor- 
porate, oi\  any  ship  or  ships,  or  on  any  goods,  merchandise,  or  effects  laden  or  to 
be  laden  on  board  of  any  ship  or  ships,  interest  or  no  interest,  or  without  further 
proof  of  interest  than  the  policy,  or  by  way  of  gaming  or  wagering,  or  without 
benefit  of  salvage  to  the  insurer;  and  every  such  insurance  shall  be  null  and  void 
to  all  intents  and  purposes." 

District  of  Columbia,  Code  of  Laws,  as  amended  March,  1905,  §  656. 

82 

Concealments  and  Representations — What  Information  Must  Be  Communicated — 

Marine  Risk 

Several  states  expressly  provide  by  statute  what  information  must  be  com- 
municated or  disclosures  made  in  marine  risks;  what  is  material  information; 
and  what  concealments  and  representations  or  misrepresentations  do  and  do 
not  vitiate  the  contract  in  marine  risks. 

California,  Civ.  Code,  1903,   §§2669-      North     Dakota,     Rev.     Code,     1899, 

2677.  §§  4545-4550. 

Georgia,  Code,  1895,  §  2131.  South  Dakota,  Civ.  Code,  1903,  §§  1891 

-1896. 


716  APPENDIX   OF  STATUTES  [CHAP.  I 

83 

Particular  Average  Loss — Ejfect  of  Agreement  as  to 

The  California  Code  provides: 

"Where  it  has  been  agreed  that  an  insurance  upon  a  particular  thing  or  class 
of  things  shall  be  free  from  particular  average,  a  marine  insurer  is  not  liable  for 
any  particular  average  loss  not  depriving  the  insured  of  the  possession,  at  the 
port  of  destination,  of  the  whole  of  such  thing  or  class  of  things,  even  though  it 
become  entirely  worthless;  but  he  is  liable  for  his  proportion  of  all  general 
average  loss  assessed  upon  the  thing  insured." 

California,  Civ.  Code,  1903,  §  2711.  South      Dakota,     Civ.    Code,     1903, 

North  Dakota,  Rev.  Civ.  Code,  1899,  §  1920. 

§  4574. 

84 

Insurance  Confined  in  Terms  to  an  Actual  Total  Loss — Effect  of 

The  California  Code  provides: 

"An  insurance  confined  in  terms  to  an  actual  total  loss  does  not  cover  a  con- 
structive total  loss,  but  covers  any  loss  which  necessarily  results  in  depriving  the 
insured  of  the  possession,  at  the  port  of  destination,  of  the  entire  thing  insured." 

California,  Civ.  Code,  1903,  §  2712.  South     Dakota,     Civ.     Code,     1903, 

North  Dakota,  Rev.  Civ.  Code,  1899,  §  1921. 

§  4575. 

85 

Notice  of  Abandonment — Requisites  of 

The  California  Code  provides: 

"A  notice  of  abandonment  must  be  explicit,  and  must  specify  the  particular 
cause  of  the  abandonment,  but  need  state  only  enough  to  show  that  there  is 
probable  cause  therefor,  and  need  not  be  accompanied  with  proof  of  interest  or 
of  loss." 

California,  Civ.  Code,  1903,  §  2722.  South      Dakota,    Civ.     Code,     1903, 

North  Dakota,  Rev.  Civ.  Code,  1899,  §  1928. 

§  4582. 

86 

Effect  of  Abandonment 

The  California  Code  provides: 

"An  abandonment  is  equivalent  to  a  transfer,  by  the  insured,  of  his  interest, 
to  the  insurer,  with  all  the  chances  of  recovery  and  indemnity." 

California,Civ.Code,  1903,  §2724.  South      Dakota,     Civ.     Code,     1903, 

North  Dakota,  Rev.  Civ.  Code,  1899,  §  1930. 

§4534. 


CHAP.  I]  PROFITS  VALUED — EFFECT  717 

87 

Acceptance  of  Abandonment 

The  statutes  of  several  states  expressly  provide  as  to  the  acceptance  of  an 
abandonment  with  relation  to  the  rights  of  assured  and  its  effect  as  being  con- 
clusive and  irrevocable;  its  effect  upon  freightage;  and  also  the  effect  of  a  refusal 
to  accept,  or  of  an  omission  to  abandon. 

California.  Civ.  Code,  1903,   §§2727-      South  Dakota,  Civ.  Code,  1903,  §§1934 

2732.  -1937. 

North  Dakota,  Rev,  Civ.  Code,  1899, 

§§  4587-4591. 


Valuation  in  Policy  of  Marine  Insurance — When  Conclusive — Fraudulent  Valtia- 

tion — Rescission 

The  California  Code  provides : 

"A  valuation  in  a  policy  of  marine  insurance  is  conclusive  between  the  parties 
thereto  in  the  adjustment  of  either  a  partial  or  total  loss,  if  the  insured  has  some 
interest  at  risk,  and  there  is  no  fraud  on  his  part;  except  that  when  a  thing  has 
been  hypothecated  by  bottomry  or  respondentia,  before  its  insurance,  and  with- 
out the  knowledge  of  the  person  actually  procuring  the  insurance,  he  may  show 
the  real  value.  But  a  valuation  fraudulent  in  fact  entitles  the  insurer  to  rescind 
the  contract." 

California,  Civ.  Code,  1903,  §  2736.  South      Dakota,    Civ.     Code,     1903, 

North  Dakota,  Rev.  Civ.  Code,  1899,  §  1939. 

§  4593. 

89 
Profits  Valued — Effect 

The  California  Code  provides: 

"When  profits  are  valued  and  insured  by  a  contract  of  marine  insurance,  a  loss 
of  them  is  conclusively  presumed  from  a  loss  of  the  property  out  of  which  they 
were  expected  to  arise,  and  the  valuation  fixes  their  amount." 

California,   Civ.    Code,    1903,    §  2740.      North  Dakota,  Rev.  Civ.  Code,  1899, 
See  also  Id.,  §  2738.  §  4597. 

South  Dakota,  Civ.  Code,  1903,  §  1943. 


71S 


APPENDIX  OF  fOKMS 


[chap.  II 


CHAPTER  II 

Forms 

1 


Simple  Form  of  Application  for  Fire  Policy.    See  §  75 

The  Home  Insurance  Co.,  New  York.     Insurance  is  wanted  by to 

the  amount  of  $ rate term. . 

190..    On 


.from ,  190..   to. 


Location 


Name.  .  . 
Location. 


Binding  Slip  Used  in  New  York  City.    See  §  7S 


Amount  $ Rate Time Months. 

Each  of  the  undersigned  companies,  for  itself  only,  insures  the  property  above 
described  for  the  amount  set  opposite  its  name  until  the  issue  of  its  Standard 
PoHcy  on  the  same  in  place  hereof,  or  until  twelve  o'clock  noon  of  the  next 
business  day  after  the  risk  is  declined,  by  notice  to  the  assured  or  broker  placing 
the  risk.  But  in  no  event  shall  this  insurance  be  in  force  over  fifteen  days  from 
the  date  of  commencement  of  liability  hereunder. 


Binder  Signed 


Company 


Amount 


Date  of 

Commencement 

of  Liability 


Signature 


(The  use  of  the  foregoing  form  of  binder  is  compulsory  among  the  members  of 
the  New  York  Fire  Exchange,  to  wit,  the  stock  companies  and  certain  insurance 
agencies.  The  late  judge  William  Rumsey,  who  prepared  it,  advised  that  it  was 
not  inconsistent  with  the  cancellation  clause  of  the  standard  fire  policy,  but  the 
point  has  not  been  adjudicated.  The  New  York  Fire  Exchange  governs  the  ac- 
tion both  of  stock  companies  and  of  brokers  within  specified  territory.    Some  such 


CHAP.  II  ]  NEW   YORK  STANDARD  FIRE   POLICY  719 

institution  is  almost  a  necessity  to  compel  uniformity  and  system  in  rates  and 
forms  of  clauses  and  in  other  particulars  relating  to  the  conduct  of  insurance. 
The  Exchange  prohibits  rebates  and  encourages  improvements  by  the  insured 
which  shall  diminish  the  risk  of  fire  loss  and  lower  the  rates  of  premium.  For  a 
shorter  form  of  binder  once  in  general  use  and  sometimes  still  used  elsewhere  than 
in- New  York  City,  see  28  App.  Div.  163,  51  N.  Y.  Supp.  79.) 

3 

Standard  Form  of  Fire  Insurance  Policy  for  New  York  State.    See  §  S27 

The Insurance  Company,  in  consideration  of  the  stipulations  herein 

named  and  of dollars  premium,  does  insure for  the  term  of 

from  the day  of ,  190.  .,  at  noon,  to  the day 

of ,  190.  .,  at  noon,  against  all  direct  loss  or  damage  by  fire,  except  as 

hereinafter  provided,  to  an  amount  not  exceeding dollars,  to  the  follow- 
ing described  property  while  located  and  contained  as  described  herein,  and  not 
elsewhere,  to  wit: — 

(Description  of  property  insured,  and  special  clauses,  see  next  forms.) 

This  company  shall  not  be  liable  beyond  the  actual  cash  value  of  the  property 
at  the  time  any  loss  or  damage  occurs,  and  the  loss  or  damage  shall  be  ascer- 
tained or  estimated  according  to  such  actual  cash  value,  with  proper  deduction 
for  depreciation  however  caused,  and  shall  in  no  event  exceed  what  it  would 
then  cost  the  insured  to  repair  or  replace  the  same  with  material  of  like  kind 
and  quality;  said  ascertainment  or  estimate  shall  be  made  by  the  insured  and 
this  company,  or,  if  they  differ,  then  by  appraisers,  as  hereinafter  provided; 
and,  the  amount  of  loss  or  damage  having  been  thus  determined,  the  sum  for 
which  this  company  is  liable  pursuant  to  this  policy  shall  be  payable  sixty  days 
after  due  notice,  ascertainment,  estimate,  and  satisfactory  proof  cf  the  loss  have 
been  received  by  this  company  in  accordance  with  the  terms  of  this  policy. 
It  shall  be  optional,  however,  with  this  company  to  take  all,  or  any  part,  of 
the  articles  at  such  ascertained  or  appraised  value,  and  also  to  repair,  rebuild, 
or  replace  the  property  lost  or  damaged  with  other  of  like  kind  and  quality 
within  a  reasonable  time  on  giving  notice,  within  thirty  days  after  the  receipt 
of  the  proof  herein  requii'ed,  of  its  intention  so  to  do;  but  there  can  be  no  aban- 
donment to  this  company  of  the  property  described. 

This  entire  policy  shall  be  void  if  the  insured  has  concealed  or  misrepresented, 
in  writing  or  otherwise,  any  material  fact  or  circumstance  concerning  this  in- 
surance or  the  subject  thereof;  or  if  the  interest  of  the  insured  in  the  property 
be  not  truly  stated  herein;  or  in  case  of  any  fraud  or  false  swearing  by  the  in- 
sured touching  any  matter  relating  to  this  insurance  or  the  subject  thereof, 
whether  before  or  after  a  loss. 

This  entire  policy,  unless  otherwise  provided  by  agreement  indorsed  hereon 
or  added  hereto,  shall  be  void  if  the  insured  now  has  or  shall  hereafter  make 
or  procure  any  other  contract  of  insurance,  whether  valid  or  not,  on  property 
covered  in  whole  or  in  part  by  this  policy;  or  if  the  subject  of  insurance  be  a 
manufacturing  estabhshment,  and  it  be  operated  in  whole  or  in  part  at  night 
later  than  ten  o'clock,  or  if  it  cease  to  be  operated  for  more  than  ten  consecutive 
days;  or  if  the  hazard  be  increased  by  any  means  within  the  control  or  knowl- 


720 


APPENDIX  OF   FORMS  [CHAP.  II 


edge  of  the  insured;  or  if  mechanics  be  employed  in  building,  altering,  or  re- 
pairing the  within  described  premises  for  more  than  fifteen  days  at  any  one 
time;  or  if  the  interest  of  the  insured  be  other  than  unconditional  and  sole  owner- 
ship;'or  if  the  subject  of  insurance  be  a  building  on  ground  not  owned  by  the 
insured  in  fee-simple;  or  if  the  subject  of  insurance  be  personal  property  and 
b.:  or  become  incumbered  by  a  chattel  mortgage;  or  if,  with  the  knowledge  of 
the  insured,  foreclosure  proceedings  be  commenced  or  notice  given  of  sale  of 
any  property  covered  by  this  policy  by  virtue  of  any  mortgage  or  trust  deed; 
or  if  any  change,  other  than  by  the  death  of  an  insured,  take  place  in  the  in- 
terest, title,  or  possession  of  the  subject  of  insurance  (except  change  of  occupants 
without  increase  of  hazard),  whether  by  legal  process  or  judgment  or  by  vol- 
untary act  of  the  insured,  or  otherwise;  or  if  this  policy  be  assigned  before  a  loss; 
or  if  illuminating  gas  or  vapor  be  generated  in  the  described  building  (or  adjacent 
thereto)  for  use  therein;  or  if  (any  usage  or  custom  of  trade  or  manufacture  to 
the  contrary  notwithstanding)  there  be  kept,  used,  or  allowed  on  the  above 
described  premises,  benzine,  benzole,  dynamite,  ether,  fireworks,  gasoline,  greek 
fire,  gunpowder  exceeding  twenty-five  pounds  in  quantity,  naphtha,  nitro- 
glycerine or  other  explosives,  phosphorus,  or  petroleum  or  any  of  its  products 
of  greater  inflammability  than  kerosene  oil  of  the  United  States  standard  (which 
last  may  be  used  for  lights  and  kept  for  sale  according  to  law,  but  in  quantities 
not  exceeding  five  barrels,  provided  it  be  drawn  and  lamps  filled  by  daylight 
or  at  a  distance  not  less  than  ten  feet  from  artificial  light);  or  if  a  building  herein 
described,  whether  intended  for  occupancy  by  owner  or  tenant,  be  or  become 
vacant  or  unoccupied  and  so  remain  for  ten  days. 

This  company  shall  not  be  hable  for  loss  caused  directly  or  indirectly  by 
invasion,  insurrection,  riot,  civil  war  or  commotion,  or  military  or  usurped 
power,  or  by  order  of  any  civil  authority;  or  by  theft;  or  by  neglect  of  the  in- 
sured to  use  all  reasonable  means  to  save  and  preserve  the  property  at  and  after 
a  fire,  or  when  the  property  is  endangered  by  fire  in  neighboring  premises;  or 
(unless  fire  ensues,  and,  in  that  event,  for  the  damage  by  fire  only)  by  explosion 
of  any  kind,  or  lightning;  but  Hability  for  direct  damage  by  lightning  may  be 
assumed  by  specific  agreement  hereon. 

If  a  building  or  any  part  thereof  fall,  except  as  the  result  of  fire,  all  insurance 
by  this  policy  on  such  building  or  its  contents  shall  immediately  cease. 

This  company  shall  not  be  liable  for  loss  to  accounts,  bills,  currency,  deeds, 
evidences  of  debt,  money,  notes,  or  securities;  nor,  unless  liability  is  specifically 
assumed  hereon,  for  loss  to  awnings,  bullion,  casts,  curiosities,  drawings,  dies, 
implements,  jewels,  manuscripts,  medals,  models,  patterns,  pictures,  scientific 
apparatus,  signs,  store  or  office  furniture  or  fixtures,  sculpture,  tools,  or  prop- 
erty held  on  storage  or  for  repairs;  nor  beyond  the  actual  value  destroyed  by 
fire,  for  loss  occasioned  by  ordinance  or  law  regulating  construction  or  repair 
of  buildings,  or  by  interruption  of  business,  manufacturing  processes,  or  other- 
wise; nor  for  any  greater  proportion  of  the  value  of  plate  glass,  frescoes,  and 
decorations  than  that  which  this  policy  shall  bear  to  the  whole  insurance  on  the 
building  described. 

If  an  application,  survey,  plan,  or  description  of  property  be  referred  to  in 
this  policy,  it  shall  be  a  part  of  this  contract  and  a  warranty  by  the  insured. 

In  any  matter  relating  to  this  insurance,  no  person,  unless  duly  authorized 
in  writing,  shall  be  deemed  the  agent  of  this  company. 

This  policy  may  by  a  renewal  be  continued  under  the  original  atipulationa, 


CHAP.  II  ]  NEW   YORK  STANDARD   FIRE   POLICY  721 

in  consideration  of  premium  for  the  renewed  term,  provided  that  any  increase 
of  hazard  must  be  made  known  to  this  company  at  the  time  of  renewal  or  thia 
policy  shall  be  void. 

This  policy  shall  be  canceled  at  any  time  at  the  request  of  the  insured;  or  by 
the  company  by  giving  five  days'  notice  of  such  cancellation.  If  this  policy 
shall  be  canceled  as  hereinbefore  provided,  or  become  void  or  cease,  the  premium 
having  been  actually  paid,  the  unearned  portion  shall  be  returned  on  surrender 
of  this  policy  or  last  renewal,  this  company  retaining  the  customary  short  rate; 
except  that  when  this  policy  is  canceled  by  this  company  by  giving  notice  it 
shall  retain  only  the  -pro  rata  premium. 

If,  with  the  consent  of  this  company,  an  interest  under  this  policy  shall  exist 
in  favor  of  a  mortgagee  or  of  any  person  or  corporation  having  an  interest  in 
the  subject  of  insurance  other  than  the  interest  of  the  insured  as  described  herehi, 
the  conditions  hereinbefore  contained  shall  apply  in  the  manner  expressed  in 
such  provisions  and  conditions  of  insurance  relating  to  such  interest  as  shall  be 
written  upon,  attached,  or  appended  hereto. 

If  property  covered  by  this  policy  is  so  endangered  by  fire  as  to  require  re- 
moval to  a  place  of  safety,  and  is  so  removed,  that  part  of  this  policy  in  excess 
of  its  proportion  of  any  loss  and  of  the  value  of  property  remaining  in  the  original 
location,  shall,  for  the  ensuing  five  days  only,  cover  the  property  so  removed 
in  the  new  location;  if  removed  to  more  than  one  location,  such  excess  of  this 
policy  shall  cover  therein  for  such  five  days  in  the  proportion  that  the  value  in 
any  one  such  new  location  bears  to  the  value  in  all  such  new  locations;  but  this 
company  shall  not,  in  any  case  of  removal,  whether  to  one  or  more  locations, 
be  liable  beyond  the  proportion  that  the  amount  hereby  insured  shall  bear  to 
the  total  insurance  on  the  whole  property  at  the  time  of  fire,  whether  the  same 
cover  in  new  location  or  not. 

If  fire  occur  the  insured  shall  give  immediate  notice  of  any  loss  thereby  in 
writing  to  this  company,  protect  the  property  from  further  damage,  forthwith 
separate  the  damaged  and  undamaged  personal  property,  put  it  in  the  best 
possible  order,  make  a  complete  inventory  of  the  same,  stating  the  quantity 
and  cost  of  each  article  and  the  amount  claimed  thereon;  and,  within  sixty  days 
after  the  fire,  unless  such  time  is  extended  in  writing  by  this  company,  shall 
render  a  statement  to  this  company,  signed  and  sworn  to  by  said  insured,  stating 
the  knowledge  and  belief  of  the  insured  as  to  the  time  and  origin  of  the  fire;  the 
interest  of  the  insured  and  of  all  others  in  the  property;  the  cash  value  of  each 
item  thereof  and  the  amount  of  loss  thereon;  all  incumbrances  thereon;  all  other 
insurance,  whether  vahd  or  not,  covering  any  of  said  property;  and  a  copy  of  all 
the  descriptions  and  schedules  in  all  policies;  any  changes  in  the  title,  use,  occupa- 
tion, location,  possession,  or  exposures  of  said  property  since  the  issuing  of  this 
policy;  by  whom  and  for  what  purpose  any  building  herein  described  and  the 
several  parts  thereof  were  occupied  at  the  time  of  fire;  and  shall  furnish,  if  re- 
,  quired,  verified  plans  and  specifications  of  any  building,  fixtures,  or  machinery 
destroyed  or  damaged;  and  shall  also,  if  required,  furnish  a  certificate  of  the 
magistrate  or  notary  public  (not  interested  in  the  claim  as  a  creditor  or  other- 
wise, nor  related  to  the  insured)  living  nearest  the  place  of  fire,  stating  that  he 
has  examined  the  circumstances  and  believes  the  insured  has  honestly  sustained 
loss  to  the  amount  that  such  magistrate  or  notary  public  shall  certify. 

The  insured,  as  often  as  required,  shall  exhibit  to  any  person  designated  by 
thia  company  all  that  remains  of  any  property  herein  described,  and  submit  to 

46 


722  APPENDIX  OF  FORMS  [CHAP.  H 

examinations  under  oath  by  any  person  named  by  this  company,  and  subscribe 
the  same;  and,  as  often  as  required,  shall  produce  for  examination  all  books  of 
account,  bills,  invoices,  and  other  vouchers,  or  certified  copies  thereof  if  originals 
be  lost,  at  such  reasonable  place  as  may  be  designated  by  this  company  or  its 
representative,  and  shall  permit  extracts  and  copies  thereof  to  be  made. 

In  the  event  of  disagreement  as  to  the  amount  of  loss  the  same  shall,  as  above 
provided,  be  ascertained  by  two  competent  and  disinterested  appraisers,  the 
insured  and  this  company  each  selecting  one,  and  the  two  so  chosen  shall  first 
select  a  competent  and  disinterested  umpire;  the  appraisers  together  shall  then 
estimate  and  appraise  the  loss;  stating  separately  sound  value  and  damage,  and, 
failing  to  agree,  shall  submit  their  differences  to  the  umpire;  and  the  award  in 
writing  of  any  two  shall  determine  the  amount  of  such  loss;  the  parties  thereto 
shall  pay  the  appraiser  respectively  selected  by  them,  and  shall  bear  equally 
the  expenses  of  the  appraisal  and  umpire. 

This  company  shall  not  be  held  to  have  waived  any  provision  or  condition 
of  this  policy  or  any  forfeiture  thereof  by  any  requirement,  act,  or  proceeding 
on  its  part  relating  to  the  appraisal  or  to  any  examination  herein  provided  for; 
and  the  loss  slmll  not  become  payable  until  sixty  days  after  the  notice,  ascer- 
tainment, estimate,  and  satisfactory  proof  of  the  loss  herein  required  have  been 
received  by  this  company,  including  an  award  by  appraisers  when  appraisal 
has  been  required. 

This  company  shall  not  be  hable  under  this  policy  for  a  greater  proportion 
of  any  loss  on  the  described  property,  or  for  loss  by  and  expense  of  removal 
from  premises  endangered  by  fire,  than  the  amount  hereby  insured  shall  bear 
to  the  whole  insurance,  whether  vahd  or  not,  or  by  solvent  or  insolvent  insurers, 
covering  such  property,  and  the  extent  of  the  apphcation  of  the  insurance  under 
this  policy  or  of  the  contribution  to  be  made  by  this  company  ui  case  of  loss, 
may  be  provided  for  by  agreement  or  condition  written  hereon  or  attached  or 
appended  hereto.    Liability  for  reinsurance  shall  be  as  specifically  agreed  hereon. 

If  this  company  shall  claim  that  the  fire  was  caused  by  the  act  or  neglect 
of  any  person  or  corporation,  private  or  municipal,  this  company  shall,  on  pay- 
ment of  the  loss,  be  subrogated  to  the  extent  of  such  payment  to  all  right  of 
recovery  by  the  insured  for  the  loss  resulting  therefrom,  and  such  right  shall 
be  assigned  to  this  company  by  the  insured  on  receiving  such  payment. 

No  suit  or  action  on  this  policy,  for  the  recovery  of  any  claim,  shall  be  sus- 
tainable in  any  court  of  law  or  equity  until  after  full  compliance  by  the  insured 
with  all  the  foregoing  requirements,  nor  unless  commenced  within  twelve  months 
next  after  the  fire. 

Wherever  in  this  policy  the  word  "insured"  occurs,  it  shall  be  held  to  in- 
clude the  legal  representative  of  the  insured;  and  wherever  the  word  "loss" 
occurs,  it  shall  be  deemed  the  equivalent  of  "loss  or  damage." 

If  this  policy  be  made  by  a  mutual  or  other  company  having  special  regula- 
tions lawfully  applicable  to  its  organization,  membership,  policies,  or  contracts^ 
of  insurance,  such  regulations  shall  apply  to  and  form  a  part  of  this  policy  aa 
the  same  may  be  written  or  printed  upon,  attached,  or  appended  hereto. 

This  policy  is  made  and  accepted  subject  to  the  foregoing  stipulations  and  con- 
ditions, together  with  such  other  provisions,  agreements,  or  conditions  as  may 
be  indorsed  hereon  or  added  hereto,  and  no  officer,  agent,  or  other  representative 
of  this  company  shall  have  power  to  waive  any  provision  or  condition  of  this 
policy  except  such  as  by  thp  terms  of  this  policy  may  be  the  subject  of  agree- 


CHAP.  II  ]   DESCRIPTION  AND   CLAUSES  FOR  DEPARTMENT   STORE   723 

ment  indorsed  hereon  or  added  hereto,  and  as  to  such  provisions  and  conditions 
no  officer,  agent,  or  representative  shall  have  such  power  or  be  deemed  or  held 
to  have  waived  such  provisions  or  conditions  unless  such  waiver,  if  any,  shall  be 
written  upon  or  attached  hereto,  nor  shall  any  privilege  or  permission  affecting 
the  insurance  under  this  pohcy  exist  or  be  claimed  by  the  insured  unless  so 
written  or  attached. 

In  Witness  Whereof,  this  company  has  executed  and  attested  these  presents, 
but  this  policy  shall  not  be  valid  unless  countersigned  by  the  duly  author- 
ized agent  of  the  company  at ,  this day  of ,  19. .  . 

The  legislatures  of  the  following  states  have  adopted  the  New  York  standard 
fire  policy,  Connecticut,  Louisiana,  New  Jersey,  North  Carohna,  North  Dakota, 
Oregon,  Rhode  Island,  and  West  Virginia,  and  it  is  in  fact  generally  used  in  all 
the  other  states  except  Massachusetts,  Maine,  Michigan,  Minnesota,  Iowa,  New 
Hampshire,  South  Dakota  and  Wisconsin,  which  have  statutory  forms  of  fire 
policies  of  their  own.  No  attempt  has  been  made  here  to  follow  precisely  the 
styles  of  type  designated  in  the  statutes  or  the  statutory  numbering  of  the  lines. 
Notice  that  a  policy  is  issued  subject  to  the  New  York  guaranty,  and  special  re^ 
serve  fund  provisions  must  be  printed  upon  such  policy,  say  as  follows:  "Pro- 
visions required  by  law  to  be  stated  in  this  policy.  This  policy  is  in  a  stock  cor- 
poration, and  is  issued  under  and  in  pursuance  of  sections  130,  131,  132  of  the 
Insurance  Law  of  the  State  of  New  York."  In  addition  to  the  form  prescribed 
by  statute  the  insurance  departments  generally  have  allowed  companies  to  ex- 
press upon  the  face  of  a  standard  policy  appropriate  words  to  indicate  limited 
hability,  thus  a  foreign  company,  which  abroad  is  allowed  to  transact  the  busi- 
ness both  of  life  and  of  fire  insurance,  is  allowed  to  state  to  which  class  of  assets 
alone  the  insured  under  its  fire  policies  have  a  right  to  look.  On  the  back  of  almost 
all  policies,  among  other  things,  are  endorsed  the  words,  "It  is  important  that 
the  written  portions  of  all  policies  covering  the  same  property  read  exactly  alike. 
If  they  do  not  they  should  be  made  uniform  at  once."  Where  at  the  time  of  loss 
the  subsisting  policies  are  nonconcurrent,  the  adjustment  under  the  pro  rata  or 
contribution  clause  often  becomes  very  complicated.    See  §§  317,  318. 


Printed  Rider  Called  "  The  Forms"  (Including  Description  of  the  Property  and 
Special  Clauses),  Prepared  by  the  Broker  to  Be  Attached  to  the  Policies  on  Stock 
of  a  Department  Store.    See  §  75 

S On  merchandise  and  articles  on  sale  of  every  description,  including 

materials,  samples  and  supplies,  manufactured,  unmanufactured  and 
in  process  of  manufacture,  their  own  or  held  by  them  in  trust  or  on 
consignment  or  commission,  or  sold  but  not  delivered  or  removed, 
including  the  property  of  others  held  on  storage,  or  for  repairs,  or 
for  which  the  insured  may  be  liable,  also  for  labor  and  materials  put 
on  same,  contained  in  the  brick,  stone  and  iron  buildings  and  addi- 
tions  situate i 

It  is  understood  and  agreed  that  this  insurance  shall  cover  the  assured,  as 

now  or  hereafter  constituted. 

It  is  understood  and  agreed  that  this  insurance  is  for  the  benefit  of  Brown  & 

Co.,  as  now  or  may  be  hereafter  constituted. 


724  APPENDIX   OF   FORMS  [CHAP.  11 

Privileged  to  work  overtime  and  to  keep  for  use  not  exceeding  two  (2)  quarts 
of  benzine,  in  patent  safety  cans. 

Privileged  to  do  such  work  and  to  use  such  materials  as  are  usual  in  the  busi- 
ness of  department  store. 

Privileged  to  use  steam  for  heat  and  power  and  gas  for  light  and  heat,  and 
for  existing  communications. 
Other  insurance  permitted. 

Soh  Occupancy  TFarranij/.—"  Warranted  by  the  assured  that  the  building 
herein  described  is  occupied  exclusively  by  one  tenant." 

Watchman  and  Clock. — "  Warranted  by  the  assured  to  maintain  Night,  Sunday 
and  Holiday  Watchman,  with  approved  stations  and  approved  watch  clock, 
and  making  such  reports  to  the  New  York  Fire  Insurance  Exchange  as  may 
be  required." 

Special  Building  Signal.—"  Warranted  by  the  assured  to  maintain  a  Special 
Building  Signal  approved  by  the  New  York  Board  of  Fire  Underwriters  for  the 
transmission  cf  alarms  to  Fire  Department  Headquarters." 

Automatic  Fire  Alarm  Clause.— The  entire  building  containing  the  property 
hereby  insured,  having  been  equipped  with  the  Automatic  Fire  Alarm  Signal 
Telegraph,  in  accordance  with  the  Rules  and  Regulations  of  the  New  York 
Board  of  Fire  Underwriters,  and  a  certificate  to  that  effect  issued  by  authority 
of  said  Board,  this  policy  is  issued  at  a  reduced  rate  of  premium,  and  in  con- 
sideration of  such  reduced  rate,  it  is  hereby  made  a  condition  of  this  policy 
that  the  assured  shall  use  due  diligence  that  such  equipment  shall  continue  to 
be  maintained  during  the  full  term  of  this  insurance. 

Automatic  Sprinkler  Clause. — It  is  hereby  made  a  condition  of  this  pohcy  that 
the  insured  shall  use  due  diligence  to  maintain  in  full  working  order  during 
the  term  of  this  insurance  the  automatic  sprinkler  equipment  now  in  use,  and 
that  no  change  shall  be  made  in  such  system  without  the  approval  of  the  New 
York  Fire  Insurance  Exchange  or  the  New  York  Board  of  Fire  Underwriters, 
and  that  if  such  sprinkler  equipment  is  not  automatically  connected  with  a 
central  fire  alarm  station  in  a  manner  approved  by  said  Exchange  or  Board  the 
insured  shall  maintain  a  watchman,  with  an  approved  watch  clock,  during  the 
hours  when  the  premises  are  not  regularly  in  operation  and  when  closed  or 
whenever  such  automatic  fire  alarm  signal  station  is  temporarily  disconnected 
(The  100%  average  clause  in  form  No.  25  as  given  below  is  here  inserted.) 
Mechanics'  Privilege. — Permission  for  mechanics  to  be  employed  for  ordinary 
alterations  and  repairs  in  the  within  described  premises,  but  this  shall  not  be 
held  to  include  the  constructing  or  reconstructing  of  the  building  or  buildings, 
or  additions  or  the  enlargement  of  the  premises. 

New  York  Standard  Clause  Forbidding  the  Use  of  Electricity. — This  entire 
policy  shall  be  void  if  electricity  is  used  for  light,  heat  or  pov/er  in  the  above 
described  premises  unless  written  permission  is  given  by  this  company  hereon. 
"Privileged  to  Use  Electricity  in  the  above  mentioned  premises  for  light,  and/ 
or  heat,  and /or  power,  it  being  hereby  made  a  condition  of  this  policy  that 
where  the  equipment  is  owned  or  controlled  in  whole  or  in  part  by  the  assured 
a  Certificate  shall  be  obtained  from  the  New  York  Board  of  Fire  Underwriters, 
and  that  no  alterations  shall  be  made  in  that  portion  of  the  equipment  owned 
or  controlled  by  the  assured  after  Certificate  is  issued  without  notice  thereof 
being  given  to  the  said  Board." 

Lightning  Clause. — This  policy  shall  cover  any  direct  loss  or  damage  caused 


CHAP.  II  ]  FORM   FOR  DWELLING  AND   FURNITURE  725 

by  Lightning  (meaning  thereby  the  commonly  accepted  use  of  the  term  Light- 
ning, and  in  no  case  to  include  loss  or  damage  by  cyclone,  tornado  or  wind- 
storm), not  exceeding  the  sum  insured,  nor  the  interest  of  the  insured  in  the 
property,  and  subject  in  all  other  respects  to  the  terms  and  conditions  of  this 
policy.  Provided,  however,  if  there  shall  be  any  other  insurance  on  said  property, 
this  Company  shall  be  liable  only  pro  rata  with  such  other  insurance  for  any 
direct  loss  by  Lightning,  whether  such  other  insurance  be  against  direct  loss  by 
Lightning  or  not. 

Attached  to  and  forming  part  of  Policy  No Insurance  Company. 

Send  Policy  to 

Benedict  &  Benedict. 

Liberty  and  Nassau  Sts. 

New  York.  (Signed) 

Please  Sign   This  Form,  and  Make  no  Alterations 

5 

A  Combined  Form  for  Dwelling-House  and  Furniture  Prepared  by  the  Broker. 

See    §  76 

$ On  the Dwelling, 

Additions  and  extensions.  Decorations,  Frescoes,  Plate  and  other  Glass, 
Heating  and  Electric  Apparatus,  Wiring  and  Moulding  covering  the 
same.  Gas  and  Electric  Fixtures,  Elevators,  Plumbing,  Steam,  Gas  and 
Water  Pipes,  Awnings,  Stoops,  Sidewalks,  Fences  and  Yard  Fixtures, 
and  all  permanent  fixtures  contained  in  or  attached  to  said  dwelling 

and  additions  situate 

Loss,  if  any,  payable  to Mortgagee, 

subject  to  clause  hereto  attached 

$ On  Household  Furniture  and  Utensils,  useful  and  ornamental,  Beds, 

Bedding,  Carpets,  Rugs,  Linen,  Wearing  Apparel,  Plate,  Plated  Ware, 
Chandeliers,  Gas  Fixtures,  Printed  Books  and  Music,  Pictures,  Paint- 
ings, Engravings  and  their  Frames  (at  not  exceeding  cost).  Bronzes, 
Statuary  and  other  Works  of  Art,  objects  of  Virtu,  Curiosities,  Curios, 
Antiques,  Pianofortes,  Musical  Listruments,  Scientific  Instruments, 
Billiard  Tables,  Bicycles,  Guns,  Fishing  Rods,  and  other  Sporting  Im- 
plements, Trunks,  Tools,  Sewing  Machines,  Curtains,  Mirrors,  Clocks, 
Watches,  Diamonds,  and  all  other  Jewelry,  Crockery,  Glass  and  China 
Ware,  Stoves,  Fuel  and  Family  Stores  and  all  other  household  furni- 
ture the  property  of  the  assured,  or  any  member  of  the  family  or  ser- 
vants or  guests,  all  contained  in  the  above-described  dwelling,  add' 
tions  and  extensions. 
The  item  of  this  policy  covering  on  household  furniture  does  not  cover  on  prop- 
erty insured  under  policies  covering  on  building. 

It  is  understood  that  the  existence  of  a  mortgage  on  the  above-described  build- 
ings shall  not  invalidate  this  insurance. 

It  is  understood  that  the  insurance  shall  not  be  invalidated  should  the  build- 
ings stand  on  leased  ground  or  be  vacant  or  unoccupied.  Other  insurance  per- 
mitted. 


726  APPENDIX   OF   FORMS  [CHAP.  II 

Privileged  to  make  additions,  alterations  and  repairs,  and  this  policy  to  cover 
thereon  and  therein;  to  use  Steam  Furnaces  or  Grates  for  heating,  to  use  Gas, 
Kerosene  Oil  or  Electricity  for  lighting,  and  to  use  Kerosene  Oil  or  Gas  Stoves; 
also  to  use  small  (juantity  of  Benzine  or  Naphtha  for  cleaning  purposes. 
(Lightning  Clause  as  in  last  preceding  form.) 

Attached  to  and  forming  part  of  Policy  No Insurance  Company. 

Send  Policy  to 
Benedict  &  Benedict, 
Liberty  and  Nassau  Sts. 
New  York. 

(Signed). 

Please  Sign  This  Form,  and  Make  no  Alterations 

(The  purport  of  some  of  the  provisions  in  the  last  two  forms  shows  that  they 
are  included  by  the  broker,  because  they  are  required  by  the  insurer  or  because 
they  secure  a  lower  rate  of  premium.) 


Dwelling  Warranties 

Dwelling  Warranty. — Warranted  by  the  assured  that  the  within-described 
building  is  occupied  exclusively  for  dwelling  purposes  by  not  more  than  two 
families; 

or 

Flat  House  Warranty. — Warranted  by  the  assured  that  the  within-described 
building  is  occupied  exclusively  for  dwelling  purposes.  (The  New  York  Fire  Ex- 
change requires  one  or  the  other  to  indicate  whether  private  residence  or  apart- 
ment house.    The  latter  calls  for  the  higher  rate.    See  103  App.  Div.  12.) 


A  Form  of  Warehouse  Clause.     See  §  236 

Linen  and  jute  form — add  20  cents  to  base  rate  of  warehouse. 

On  Manufactures  of  Linen,  of  Linen  and  Jute,  of  Jute,  of  Cotton,  of  Cotton  and 
Linen,  and  of  Cotton  and  Jute,  the  property  of  the  assured  or  held  by  said  as- 
sured in  trust  or  on  commission,  or  sold  but  not  delivered  while  contained  in ...  . 

This  policy  does  not  cover,  attach  or  apply  to  any  merchandise  above  enum- 
erated the  value  of  which  exceeds  .$2.00  per  square  yard;  nor  does  this  pohcy 
cover  Awnings,  Banners,  Braids,  Burlaps  coated  or  backed  for  wall  decorations, 
Carpets,  Comforters,  Cord,  Cordage,  Cotton  batting,  Curtains,  Flags,  Fringes, 
Gimps,  Labels,  Gunny  bags.  Laces,  Mattings,  Nettings,  Quilts,  Rove  bagging 
made  of  jute.  Rugs,  Tassels,  Tents,  Twine,  Velours,  Window  shades.  Yarns,  or 
Articles  of  Wearing  apparel. 

This  policy  shall  not  attach,  apply  to  or  cover  any  merchandise  insured  more 
specifically  or  more  generally  than  this  policy  covers. 

Other  insurance  permitted  without  notice  \mtil  required. 

Attached  to  and  forming  part  of  Policy  No Insurance  Company. 

(The  use  of  this  and  similar  warehouse  forms  differing  as  to  property  and  rate 
of  premium  is  required  by  the  New  York  Fire  Exchange.) 


CHAP.  II  ]  COINSURANCE  CLAUSE  727 

8 
A  Form  of  Average  Clause.      See  §  242 

It  is  understood  and  agreed,  that  the  amount  insured  by  this  policy  shall  at- 
tach in  each  of  the  above-named  premises  in  that  proportion  of  the  amount 
hereby  insured  that  the  value  of  property  covered  by  this  policy,  contained  in 
each  of  said  places,  shall  bear  to  the  value  of  such  property  contained  in  all  of 
above-named  premises. 

(The  New  York  standard  fire  policy  and  others  expressly  allow  the  attachment 
to  the  policy  of  special  clauses,  see  181  N.  Y.  472.) 

Authorized  Standard  Fire  Policy  Riders.     Filed  Under  N.  Y.  Ins.  L. 
§  121  AS  Amended  by  L.  1901,  c.  513 

9 

Clause  Forbidding  the  Use  of  Electricity 

New. York  Standard. 

This  entire  policy  shall  be  void  if  electricity  is  used  for  light,  heat,  or  power 
in  the  above  described  premises,  unless  written  permission  is  given  by  this 
Company  hereon. 

10 

Application  and  Survey  Clause.     See  §  S82 

New  York  Standard. 

This  policy  is  based  upon  an  application  and  survey  of  the  property  on  file 
which  is  hereby  referred  to  as  forming  part  of  this  policy. 

Date  of  Application, 

Where  Filed, 

Attached  to  and  forming  part  of  Policy  No 

[Signature  for  Company.') 

11 

Coinsurance  Clause.    See  §  242 

New  York  Standard. 

If  at  the  time  of  fire  the  whole  amount  of  insurance  on  the  property  covered 
by  this  policy  shall  be  less  than  the  actual  cash  value  thereof,  this  Company 
shall,  in  case  of  loss  or  damage,  be  liable  for  such  portion  only  of  the  loss  or 
damage  as  the  amoimt  insured  by  this  pohcy  shall  bear  to  the  actual  cash  value 
of  such  property. 

Attached  to  and  forming  part  of  Policy  No 

[Signaiure  for  Company.] 

12 

Coinsurance  Clause  (for  Application  to  Specific  Items  of  Policy) 

New  York  Standard. 

If  at  the  time  of  fire  the  whole  amount  of  insurance  on  the  property  covered 
by  the item of  this  policy  on shall  be  less  than  the 


728  APPENDIX   OF   FORMS  [CHAP.  II 

actual  cash  value  thereof,  this  Company  shall,  in  case  of  loss  or  damage,  be 
liable  for  only  such  portion  of  such  loss  or  damage  as  the  amount  insured  under 

said  item shall  bear  to  the  actual  cash  value  of  property  covered  by 

such  item 

Attached  to  and  forming  part  of  Policy  No 

[Signature  for  Company.] 

13 

Coinsurance  Clause  for  Floating  Policy 

New  York  Standard. 

It  is  hereby  declared  and  agreed  that  in  case  the  property  aforesaid  in  all  the 
buildings,  places,  or  limits  included  in  this  insurance,  shall  at  the  breaking  out 
of  any  fire  or  fires,  be  collectively  of  greater  value  than  the  sum  insured,  then 
thfs  Company  shall  pay  and  make  good  such  a  portion  only  of  the  loss  or  dam- 
age as  the  sum  insured  shall  bear  to  the  whole  value  of  the  property  aforesaid, 
at  the  time  when  such  fire  or  fires  shall  first  happen. 

But  it  is  at  the  same  time  declared  and  agreed,  that  if  any  specific  parcel  of 
goods  included  in  the  terms  of  this  policy,  or  such  goods  in  any  specified  building 
or  buildings,  place  or  places,  within  the  limits  of  this  insurance,  shall  at  the  time 
of  any  fire  be  insured  in  this  or  any  other  office,  this  policy  shall  not  extend 
to  cover  the  same,  excepting  only  as  far  as  relates  to  any  excess  of  value  beyond 
the  amount  of  such  specific  insurance  or  insurances,  and  shall  not  be  liable  for 
any  loss,  unless  the  amount  of  such  loss  shall  exceed  the  amount  of  such  specific 
insurance  or  insurances,  which  said  excess  only  is  declared  to  be  imder  the  pro- 
tection of  this  policy  and  subject  to  average,  as  aforesaid. 

It  being  the  true  intent  and  meaning  of  this  agreement  that  this  Company 
shall  not  be  liable  for  any  loss,  unless  the  amoimt  of  such  loss  shall  exceed  the 
amount  of  the  specific  insurance  or  insurances,  and  then  only  for  such  excess, 
which  said  excess  shall  be  the  subject  to  average,  as  above. 

Attached  to  and  forming  part  of  Policy  No 

[Signature  for  Company.] 

14 
Percentage  Coinsurance  Clause 

New  York  Standard. 

If  at  the  time  of  fire  the  whole  amount  of  insurance  on  the  property  covered 

by  this  policy  shall  be  less  than per  cent,  of  the  actual  cash  value  thereof, 

this  Company  shall,  in  case  of  loss  or  damage,  be  liable  for  only  such  portion 
of  such  loss  or  damage  as  the  amount  insured  by  this  policy  shall  bear  to  the 

said per  cent,  of  the  actual  cash  value  of  such  property. 

Attached  to  and  forming  part  of  Policy  No 

[Signature  for  Company.  ] 

15 

Percentage  Coinsurance  Clause  {for  Application  to  Specific  Items  of  Policy) 

New  York  Standard. 

If  at  the  time  of  fire  the  whole  amount  of  insuranoe  on  the  property  covered 


CHAP.  II  ]  COINSURANCE   CLAUSES  729 

by  the item of  this  policy  on shall  be  less  than 

per  cent,  of  the  actual  cash  value  thereof,  this  Company  shall,  in  case  of  loss  or 
damage,  be  liable  for  only  such  portion  of  such  loss  or  damage  as  the  amount 

insured  under  said  item shall  bear  to  the  said per  cent,  of  the 

actual  cash  value  of  the  property  covered  by  such  item 

Attached  to  and  forming  part  of  Policy  No 

[Signature  for  Company.] 


16 

Percentage  Coinsurance  and  Limitation  Clause 

New  York  Standard. 

If  at  the  time  of  fire  the  whole  amount  of  insurance  on  the  property  covered 

by  this  policy  shall  be  less  than per  cent,  of  the  actual  cash  value  thereof, 

this  Company  shall,  in  case  of  loss  or  damage,  be  liable  for  such  portion  only  of 
the  loss  or  damage  as  the  amount  insured  by  this  policy  shall  bear  to  the  said 

per  cent,  of  the  actual  cash  value  of  such  property;  provided,  that  in 

case  the  whole  insurance  shall  exceed per  cent,  of  the  actual  cash  value 

of  the  property  covered  by  this  policy,  this  Company  shall  not  be  liable  to  pay 

more  than  its  pro  rata  share  of  said per  cent,  of  the  actual  cash  value 

of  such  property;  and  should  the  whole  insurance  at  the  time  of  fire  exceed  the 
said  per  cent,  a  pro  rata  return  of  premium  on  such  excess  of  insurance  from 
the  time  of  the  fire  to  the  expiration  of  this  policy  shall  be  made  on  surrender 
of  the  policy. 

Attached  to  and  forming  part  of  Policy  No 

[Signature  for  Company.] 


17 

Percentage  Coinsurance  and  Limitation  Clause  (for  Application  to  Specific  Items 

of  Policy) 

New  York  Standard. 

If  at  the  time  of  fire  the  whole  amount  of  insurance  on  the  property  covered 

by  the item of  this  policy  on shall  be  less  than 

per  cent,  of  the  actual  cash  value  thereof,  this  Company  shall,  in  case  of  loss  or 
damage,  be  liable  for  only  such  portion  of  such  loss  or  damage  as  the  amount 

insiired  under  said  item shall  bear  to  the  said per  cent,  of  the 

actual  cash  value  of  property  covered  by  such  item ;  promded,  that  in 

case  the  whole  insurance  on  the  property  covered  by  said  item shall 

exceed per  cent,  of  the  actual  cash  value  of  the  same,  this  company  shall 

not  on  said  item be  liable  to  pay  more  than  its  pro  rata  share  of  said 

per  cent,  of  the  actual  cash  value  of  such  property;  and  should  the 

whole  insurance  on  said  item at  the  time  of  fire  exceed  the  said 

per  cent,  a  pro  rata  return  of  premium  on  such  excess  of  insurance  from  the  time 
of  the  fire  to  the  expiration  of  this  pohcy  shall  be  made  on  surrender  of  the 
policy. 

Attached  to  and  forming  part  of  Policy  No 

[Signature  for  Company.] 


730  APPENDIX  OF  FORMS  [CHAP.  II 

18 

Assessment,  Installment  or  Credit  Clause.    See  §§  328,  332 

New  York  Standard. 

If  any  assessment  or  installment,  or  any  part  of  the  premium  for  which  credit 
is  given  be  not  paid  when  due  the  whole  premium  shall  be  considered  earned 
and  be  immediately  payable,  and  this  policy  shall  be  void  so  long  as  any  part 
of  such  premium  remains  unpaid. 

Dated, 

Attached  to  and  forming  part  of  Policy  No 

[Signature  for  Company.] 

19 

Condition  as  to  Incumbrances 

New  York  Standard. 

If  the  property,  real  or  personal,  covered  by  this  policy  be  or  become  in- 
L'umbered  by  a  mortgage,  trust  deed,  judgment  or  otherwise,  this  entire  policy 
shall  be  void,  unless  otherwise  provided  by  agreement  indorsed  hereon  or  added 
hereto. 

Attached  to  and  forming  part  of  Policy  No 

[Signature  for  Company.] 

20 
Lightning  Clause 

New  York  Standard. 

This  poHcy  shall  cover  any  direct  loss  or  damage  caused  by  Lightning  (mean- 
ing thereby  the  commonly  accepted  use  of  the  term  Lightning,  and  in  no  case 
to  include  loss  or  damage  by  cyclone,  tornado  or  wind-storm),  not  exceeding  the 
.'sum  insured,  nor  the  interest  of  the  insured  in  the  property,  and  subject  in  all 
other  respects  to  the  terms  and  conditions  of  this  policy;  provided,  however,  if 
there  shall  be  any  other  insurance  on  said  property  this  Company  shall  be  liable 
only  pro  rata  with  such  other  insurance  for  any  direct  loss  by  Lightning,  whether 
such  other  insurance  be  against  direct  loss  by  Lightning  or  not. 

Attached  to  and  forming  part  of  Policy  No 

[Signature  for  Company.] 

21 

Mortgagee  Clause.     See  §  291 

New  York  Standard. 

Loss  or  damage,  if  any,  under  this  policy,  shall  be  payable  to as 

mortgagee  [or  trustee],  as  interest  may  appear,  and  this  insurance,  as 

to  the  interest  of  the  mortgagee  [or  trustee]  only  therein,  shall  not  be  invalidated 
by  any  act  or  neglect  of  the  mortgagor  or  owner  of  the  within  described  prop- 
erty, nor  by  any  foreclosure  or  other  proceedings  or  notice  of  sale  relating  to 
the  property,  nor  by  any  change  in  the  title  or  ownership  of  the  property,  nor 
by  the  occupation  of  the  premises  for  purposes  more  hazardous  than  are  per- 
mitted by  this  policy;  provided,  that  in  case  the  mortgagor  or  owner  shall  neg- 


CHAP.  II  ]  MORTGAGEE   CLAUSE  731 

lect  to  pay  any  premium  due  under  this  policy,  the  mortgagee  [or  trustee]  shall, 
on  demand,  pay  the  same. 

Provided,  also,  that  the  mortgagee  [or  trustee]  shall  notify  this  Company  of 
any  change  of  ownership  or  occupancy  or  increase  of  hazard  which  shall  come 
to  the  knowledge  of  said  mortgagee  [or  trustee],  and,  unless  permitted  by  this 
pohcy,  it  shall  be  noted  thereon  and  the  mortgagee  [or  trustee]  shall,  on  demand, 
pay  the  premium  for  such  increased  hazard  for  the  term  of  fhe  use  thereof; 
otherwise  this  policy  shall  be  null  and  void. 

This  Company  reserves  the  right  to  cancel  this  policy  at  any  time  as  pro- 
vided by  its  terms,  but  in  such  case  this  policy  shall  continue  in  force  for  the 
benefit  only  of  the  mortgagee  [or  trustee]  for  ten  days  after  notice  to  the  mort- 
gagee [or  trustee]  of  such  cancellation  and  shall  then  cease,  and  this  Company 
shall  have  the  right,  on  like  notice,  to  cancel  this  agreement. 

Whenever  this  Company  shall  pay  the  mortgagee  [or  trustee]  any  sum  for 
loss  or  damage  under  this  policy  and  shall  claim  that,  as  to  the  mortgagor  or 
owner,  no  liability  therefor  existed,  this  Company  shall,  to  the  extent  of  such 
payment,  be  thereupon  legally  subrogated  to  all  the  eights  of  the  party  to  whom 
such  payment  shall  be  made,  under  all  securities  held  as  collateral  to  the  mort- 
gage debt,  or  may,  at  its  option,  pay  to  the  mortgagee  [or  trustee]  the  whole 
principal  due  or  to  grow  due  on  the  mortgage  with  interest,  and  shall  thereupon 
receive  a  full  assignment  and  transfer  of  the  mortgage  and  of  all  such  other 
securities;  but  no  subrogation  shall  impair  the  right  of  the  mortgagee  [or  trustee] 

to  recover  the  full  amount  of claim. 

Dated, 

Attached  to  and  forming  'part  of  Policy  No 

[Signature  for  Company.] 


22 
Mortgagee  Clause  {When  Owner  Has  no  Interest  in  the  Insurance) 

New  York  Standard. 

It  is  hereby  specially  understood  and  agreed  that  this  policy  is  for  the  benefit 
of  the  mortgagee  [or  trustee]  only,  the  owner  having  no  interest  whatever  therein. 

And  it  is  further  agreed  that  whenever  this  Company  shall  pay  the  mortgagee 
any  sum  for  loss  under  this  policy  this  Company  shall  at  once  be  legally  subro- 
gated to  all  the  rights  of  the  mortgagee  [or  trustee]  vmder  all  the  securities  held 
as  collateral  to  the  mortgage  debt  to  the  extent  of  such  payment,  but  such 
subrogation  shall  not  impair  the  right  of  the  mortgagee  [or  trustee]  to  recover 
the  full  amount  of  his  claim. 

Attached  to  and  forming  part  of  Policy  No 

[Sigrmture  of  Insured.] 

[Signature  of  Company.] 

23 

Mortgagee  Clause   loith  Full  Contribution 

New  York  Standard. 

Loss  or  damage,  if  any,  under  this  policy,  shall  be  payable  to as 

mortgagee  [or  trustee],  as  interest  may  appear,  and  this  insurance,  as 


782  APPENDIX    (Jl'    FORMS  [CHAP.  II 

to  the  interest  of  the  mortgagee  [or  trustee]  only  therein,  shall  not  be  invalidated 
by  any  act  or  neglect  of  the  mortgagor  or  owner  of  the  within  described  property, 
nor  by  any  foreclosure  or  other  proceedings  or  notice  of  sale  relating  to  the 
property,  nor  by  any  change  in  the  title  or  ownership  of  the  property,  nor  by 
the  occupation  of  tlu;  premises  for  purposes  more  hazardous  than  are  permitted 
by  this  iK)licy;  provided,  that  in  case  the  mortgagor  or  owner  shall  neglect  to 
pay  any  premium  due  under  this  policy,  the  mortgagee  [or  trustee]  shall,  on 
demand,  pay  the  same. 

Provided,  also,  that  the  mortgagee  [or  trustee]  shall  notify  this  Company  of 
any  change  of  ownership  or  occupancy  or  increase  of  hazard  which  shall  come 
to  the  knowledge  of  said  mortgagee  [or  trustee],  and,  unless  permitted  by  this 
policy,  it  shall  be  noted  thereon  and  the  mortgagee  [or  trustee]  shall,  on  demand, 
pay  the  premium  for  such  increased  hazard  for  the  term  of  the  use  thereof; 
otherwise  this  policy  shall  be  null  and  void. 

This  Company  reserves  the  right  to  cancel  this  policy  at  any  time  as  pro- 
vided by  its  terms,  but  in  such  case  this  policy  shall  continue  in  force  for  the 
benefit  only  of  the  mortgagee  [or  trustee]  for  ten  days  after  notice  to  the  mort- 
gagee [or  trustee]  of  such  cancellation  and  shall  then  cease,  and  this  Company 
shall  have  the  right,  on  like  notice,  to  cancel  this  agreement. 

In  case  of  any  other  insurance  upon  the  within  described  property  this  Com- 
pany shall  not  be  liable  under  this  policy  for  a  greater  proportion  of  any  loss  or 
damage  sustained  tiian  the  sum  hereby  insured  bears  to  the  whole  amount  of 
insurance  on  said  property,  issued  to  or  held  by  any  party  or  parties  having  an 
insurable  interest  therein,  whether  as  owner,  mortgagee  or  otherwise. 

Whenever  this  Company  shall  pay  the  mortgagee  [or  trustee]  any  sum  for  loss 
or  damage  under  this  policy,  and  shall  claim  that,  as  to  the  mortgagor  or  owner, 
no  liability  therefor  existed,  this  Company  shall,  to  the  extent  of  such  payment, 
be  thereupon  legally  subrogated  to  all  the  rights  of  the  party  to  whom  such 
payment  shall  be  made,  under  all  securities  held  as  collateral  to  the  mortgage 
debt,  or  may,  at  its  option,  pay  to  the  mortgagee  [or  trustee]  the  whole  principal 
due  or  to  grow  due  on  the  mortgage  with  interest,  and  shall  thereupon  receive 
a  full  assignment  and  transfer  of  the  mortgage  and  of  all  such  other  securities; 
but  no  subrogation  shall  impair  the  right  of  the  mortgagee  [or  trustee]  to  recover 

the  full  amount  of claim. 

Dated, 

Attached  to  and  forming  part  of  Policy  No 


.  [Signature  for  Company.] 


24 
Average  Clause.    See  §  24^ 

New  York  Standard. 

This  Company  shall  not  be  liable  for  a  greater  proportion  of  any  loss  or  dam- 
age to  the  property  described  herein  than  the  sum  hereby  insured  bears  to 

per  centum  ( %)  of  the  actual  cash  value  of  said  property  at 

the  time  such  loss  shall  happen. 

If  the  insurance  under  this  policy  be  divided  into  two  or  more  items  this 
Average  Clause  shall  apply  to  each  item  separately. 


CHAP.  II J  AK    lKOx\    bAli.    CLAUfcil!:  73li 

25 
Average  Clause  with  Exemption  of  Special  Inventory  or  Appraisement  in  Certain 

Cases 
New  York  Standard. 

This  Company  shall  not  be  liable  for  a  greater  proportion  of  any  loss  or  dam- 
age to  the  property  described  herein  than  the  sum  hereby  insured  bears  to 

per  centum  ( %)  of  the  actual  cash  value  of  said  property 

at  the  time  such  loss  shall  happen. 

In  case  of  claim  for  loss  on  the  property  described  herein  not  exceeding  five 
per  cent.  (5%)  of  the  maximum  amount  named  in  the  policies  written  thereon 
and  in  force  at  the  time  such  loss  shall  happen,  no  special  inventory  or  appraise- 
ment of  the  undamaged  property  shall  be  required. 

If  the  insurance  under  this  policy  be  divided  into  two  or  more  items  these 
clauses  shall  apply  to  each  item  separately. 

26 

A   Three-Fourth  a  Value  Clause.     See  §  ^2 

It  is  understood  and  agreed  to  be  a  condition  of  this  insurance  that  in  the 
event  of  loss  or  damage  by  fire-  to  the  property  insured  under  this  policy,  this 
Company  shall  not  be  liable  for  an  amount  greater  than  three-fourths  of  the 
actual  cash  value  of  each  item  of  property  insured  by  this  policy  (not  exceeding 
the  amount  insured  on  each  such  item)  at  the  time  immediately  preceding  sucli 
loss  or  damage,  and  in  the  event  of  additional  insurance — if  any  is  permitted 
thereon — then  this  Company  shall  be  lial)le  for  its  proportion  only  of  three- 
fourths  such  cash  value  of  each  item  insured  at  the  time  of  the  fire,  not  exceed- 
ing the  amount  insured  on  each  such  item. 

(The  above  clause  is  used  sometimes  in  the  South,  not  in  New  York.) 

27 
An  Iron  Safe  Clause.    See  §  333 

The  following  covenant  and  warranty  is  hereby  made  a  part  of  this  policy: 

1st.  The  assured  will  take  a  complete  itemized  inventory  of  stock  on  hand 
at  least  once  in  each  calendar  year,  and  unless  such  inventory  has  been  taken 
within  twelve  calendar  months  prior  to  the  date  of  this  policy,  one  shall  be 
taken  in  detail  within  30  days  thereof,  or  this  policy  shall  then  be  null  and  void 
and  upon  demand  of  the  assured  the  unearned  premium  from  that  date  shall 
be  returned. 

2d.  The  assured  will  keep  a  set  of  books,  which  shall  clearly  and  plainly 
present  a  complete  record  of  business  transacted,  including  all  purchases,  sales 
and  shipments,  both  for  cash  and  credit,  from  date  of  inventory  as  provided 
for  in  first  section  of  this  clause,  and  during  the  continuance  of  this  policy. 

3d.  The  assured  will  keep  such  books  and  inventory,  and  also  the  last  pre- 
ceding inventory,  if  such  has  been  taken,  securely  locked  in  a  fire-proof  safe 
at  night,  and  at  all  times  when  the  building  mentioned  in  this  policy  is  not 
actually  open  for  business;  or,  failing  in  this,  the  assured  will  keep  such  books 
and  inventories  in  some  place  not  exposed  to  a  fire  which  would  destroy  the 
aforesaid  building. 


734  APPENDIX  OF  FORMS  [CHAP.  U 

In  the  event  of  failure  to  produce  such  set  of  books  and  inventories  for  the 
inspection  of  this  Company,  this  policy  shall  become  null  and  void,  and  such 
failure  shall  constitute  a  perpetual  bar  to  any  recovery  thereon. 

(The  above  clause  is  used  sometimes  in  the  South,  not  in  New  York.) 

28 
An  Earthquake  Clause.    See  §§  280,  333 

This  Company  shall  not  be  liable  for  loss  or  damage  occasioned  by  or  through 
any  volcano,  earthquake,  hurricane  or  other  eruption,  convulsion  or  disturb- 
ance of  nature. 

(See  164  Fed.  404;  159  Fed.  991;  157  Fed.  280;  ibid  285.) 

29 

A  Description  for  an  Open  Policy.    See  §  SO 

On  goods,  wares,  merchandise,  produce,  or  other  property,  his  own,  or  held 
by  him  in  trust,  or  on  commission,  or  sold,  but  not  delivered,  as  shall  be  specified 
and  indorsed  hereon  by  this  Company  and  for  such  amounts,  in  such  store- 
houses and  places,  and  at  such  rates  of  premium  as  shall  be  approved  and  so 
indorsed  hereon,  or  in  a  book  attached  hereto,  by  one  of  the  officers  of  this 
Company,  or  by  the  duly  authorized  agent  at 

30 

A  Description  for  a  Floater.     See  §  SO 

On  merchandise  consisting  principally  of excluding  cotton  and  other 

vegetable  fibre  and  petroleum  and  its  liquid  products,  the  property  of  the  as- 
sured, or  held  by  the  assured  in  trust  or  on  commission,  or  on  joint  account 
with  others  or  sold  but  not  delivered,  while  contained  in  any  or  all  the  bonded 
warehouses,  general  order  stores,  or  brick  and  stone  storage  stores,  and  while 
in  transitu  in  or  on  any  of  the  streets,  yards,  wharves,  piers  and  bulkheads, 
in  the  cities  of  New  York,  Brooklyn,  Jersey  City  and  Hoboken,  and  while  afloat 
in  transitu  in  the  ports  of  said  cities;  subject  to  the  following  conditions  of  co- 
insurance and  exceptions  named  below: 

(Here  is  inserted  coinsurance  clause,  form  No.  13,  supra.) 

This  policy  does  not  cover  in  whole  or  in  part,  any  specific  parcel  of  goods  in- 
cluded in  the  terms  of  this  policy,  or  such  goods  in  any  specified  building  or  build- 
ings, place  or  places,  within  the  limits  of  this  insurance,  which  shall  at  the  time 
of  any  fire  be  insured  in  this  or  any  other  office.  This  policy  does  not  cover  in 
whole  or  in  part,  goods  on  which  at  the  time  of  any  fire  there  may  be  any  marine, 
inland  or  transportation  insurance. 

(As  to  when  specific  insurance  is  to  be  deemed  exhausted  so  that  an  excess 
floater  will  attach,  see  85  N.  E.  (Mass.)  174.) 

31 

A  Form  of  Clause  for  Insurance  of  Use  and  Occupancy.    See  §  SO 

On  the  use  and  occupancy  of  his  mill  buildings,  situate  at 

It  is  a  condition  of  this  contract  of  insurance  that,  if  the  said  buildings  or 


CHAP.  II]  LUMBER   CLEAR-SPACE   CLAUSE  735 

machinery  therein,  or  either  of  them,  or  any  part  thereof,  shall  be  destroyed, 
or  so  damaged  by  fire  occurring  during  the  continuance  of  this  policy  that  the 
mill  is  entirely  prevented  from  producing  goods,  this  Company  shall  be  liable 

at  the  rate  of dollars  per  day  for  each  working  day  of  such  prevention 

and  in  case  the  buildings,  or  machinery,  or  any  part  thereof,  are  so  damaged 
as  to  prevent  the  making  of  a  full  daily  average  production  of  goods,  this  Com- 
pany is  to  be  liable  per  day  for  that  proportion  of dollars  which  the 

product  so  prevented  from  being  made  bears  to  the  average  daily  yield  previous 
to  the  fire,  which,  for  the  purpose  of  this  insurance  is  agreed  to  be  the  average 
daily  production  of  goods  based  upon  the  time  said  mill  was  running  for  one 
year  previous  to  the  fire,  not  exceeding  in  either  case  the  amount  insured.  Loss 
to  be  computed  from  the  day  of  the  occurrence  of  any  fire  to  the  time  when 
the  mill  could  with  ordinary  diligence  and  dispatch  be  repaired  or  rebuilt,  and 
machinery  be  replaced  therein,  and  not  to  be  limited  by  the  day  of  expiration 
named  in  the  policy.. 


The  National  Board  of  Fire  Underwriters  Have  Recommended  Cer- 
tain Forms  of  Clauses  Among  Which  Are  the  Following 

32 

Rent  Clause.    See  §  SO 

National  Board  Standard. 

$ On    the    rents    of    the story building,    situated    and 

known  as  No. 

The  intention  of  this  insurance  is  to  make  good  the  loss  of  rents,  caused  by 
fire  or  lightning,  actually  sustained  by  the  assured  on  occupied  or  rented  por- 
tions of  the  premises  which  have  become  untenantable,  for  and  during  such 
time  as  may  be  necessary  to  restore  the  premises  to  the  same  tenantable  con- 
dition as  before  the  fire;  said  time,  in  case  of  disagreement,  to  be  determined 
by  appraisement  in  the  manner  provided  in  the  conditions  of  this  policy;  but 
this  Company  shall  not  be  liable  for  a  greater  proportion  of  any  loss  than  the 
sum  hereby  insured  bears  to  the  actual  annual  rental  of  such  occupied  or  rented 
portions  of  the  premises. 

Attached  to  and  made  a  part  of  Policy  No of Insurance 

Company. 

33 

Lumber  Clear-Space  Clause 

National  Board  Standard. 

It  is  a  condition  of  this  contract  that  a  continuous  clear  space  of feet 

shall  be  maintained  between  the  property  hereby  insured  and  any  wood-working 
establishment  or  dry  kiln,  otherwise  this  policy  shall  be  void;  this  does  not 
prohibit  the  transportation  of  lumber  or  timber  products  across  such  clear 
space. 

Attached  to  and  made  a  part  of  Policy  No of Insurance 

Company. 


736  APPENDIX   OF   FORMS  [CHAP.  U 

34 

Reinsurance  Clause.    See  5  S20 

National  Board  Standard. 

"This  policy  is  issued  as  reinsurance  to  apply  to  Policy  No of  the 

Insurance  Company,  and  is  subject  to  the  same  risks,  privileges,  con- 
ditions and  endorsements  (except  changes  of  location),  assignments,  changes 
of  interest  or  of  rate,  valuations  and  modes  of  settlement,  as  are  or  may  be 
assumed  or  adopted  by  the  said  company. 

"The  amount  payable  under  this  policy  shall  bear  the  same  ratio  to  the  amount 
payable  by  the  reinsured  company  under  any  and  all  policies  upon  the  property 
specified  and  contained  within  the  limits  described  herein,  that  the  amount 
of  this  reinsurance  in  force  at  the  time  of  loss  shall  bear  to  the  total  amount 
insured  by  the  reinsured  company  upon  such  property  in  force  at  the  time  of 
such  loss,  and  shall  be  paid  at  the  same  time  and  in  the  same  manner  as  pay- 
ment shall  be  made  by  said  reinsured  company. 

"Other  reinsurance  is  permitted  without  notice  until  required. 

"Attached  to  and  forming  part  of  Policy  No of  the Insur- 
ance Company." 

Where  a  Retainer  Clause  is  desired  to  be  attached  to  the  foregoing  Reinsur- 
ance Clause,  the  following  is  approved  by  the  National  Board  of  Fire  Under- 
writers : 

Retainer  Clause 

"The  reinsured  company  shall  retain  at  its  own  risk,  on  the  identical  prop- 
erty covered  at  the  time  of  any  loss,  by  this  policy,  over  and  above  all  its  rein- 
surance thereon,  an  amount  equal  to  the  amount  of  this  policy  upon  such  prop- 
erty, and,  failing  so  to  do,  the  amount  which  would  otherwise  be  payable  under 
this  policy  by  reason  of  said  loss  shall  be  proportionately  reduced. 

"Attached  to  and  forming  part  of  Policy  No of  the Insur- 
ance Company." 


35 

Permit  for  Buildings  and  Contents  Where  Automobiles  Using  Gasolene  Are  Kept 

or  Stored 

National  Board  Standard. 

In  consideration  of  $ additional  premium,  and  the  compliance  by 

the  assured  with  the  hereinafter  named  warranties,  permission  is  hereby  given 
when  not  in  violation  of  any  law,  statute  or  municipal  restriction  to  keep  not 

more   than (state   number  here)    automobiles  using  gasolene 

(insert  "fuel"  or  "explosion  engine  power"),  in  the  building  described  in  this 
policy. 

The  warranties  of  this  permit  are  as  follows:— 

First. — That  no  claim  shall  be  made  for  loss  or  damage  to  an  automobile, 
any  of  its  parts  or  contents  thereof,  unless  such  automobile  is  specifically  men- 
tioned as  insured  under  this  policy. 

Second. — That  the  filling,  emptying  or  opening  of  any  gasolene  reservoir  of 
an  automobile  while  the  same  is  contained  in  the  within-described  building, 
shall  be  done  by  daylight  or  incandescent  electric  light  only,  and  that  there 


CHAP.  II  ]  PROOF   OF   LOSS  7^7 

shall  be  no  other  artificial  light,  no  fire  or  blaze  in  the  room  where  and  when 
such  reservoir  is  open. 

Third. — That  there  shall  be  no  gasolene  kept  inside  of  such  building,  its  addi- 
tions or  connections,  except  that  contained  in  said  automobiles,  and  not  ex- 
ceeding one  gallon  in  the  chamber  of  a  measuring  pump. 

Fourth. — The  supply  tank  shall  be  at  least  ten  feet  from  such  building,  its 
additions  or  connections,  unless  it  is  buried  at  least  two  feet  below  the  level  of 
the  basement  floor.  All  pipes  for  filling  or  ventilating  the  supply  tank  to  be 
outside  the  building,  and  piping  to  pump  to  be  so  laid  as  to  drain  toward  the 
tank. 

Fijlh. — That  when  acetylene  gas  is  used  for  automobile  lamps,  it  shall, be 
contained  in  an  air-tight  metal  tank  or  generator,  and  not  over  twenty-five  (25) 
pounds  of  calcium  carbide  shall  be  kept  in  the  within-described  building,  its 
additions  or  connections,  the  same  to  be  contained  in  water-tight  metal  re- 
ceptacles. 

Sixth.^The  term  "Gasolene"  shall  be  held  to  include  naphtha,  benzine,  or  any 
of  ike  light  products  of  petroleum,  by  whatever  naine  known,  and  the  term  "Auto- 
mobile" shall  be  held  to  include  motor  cycles  or  any  other  self-propelled  vehicle  u^ng 
gasolene. 

(See  193  N.  Y.  142,  85  N.  E.  1006.) 

36 

A  Form  of  Proof  of  Loss.     See  §  300 
State  of ) 

r  SS 

County  of ) 

Be  it  known.  That  on  this day  of ,  189.  . ,  before  me, , 

a  Notary  Public  duly  commissioned  and  sworn,  and  residing  in  the  County  and 

State   aforesaid,   personally   appeared ,   who,    being  duly   sworn,   says 

that  the  following  statement  and  the  papers  therein  referred  to  and  signed  with 
his  own  hand  contain  a  particular,  just  and  true  account  of  his  loss  in  the  words 
and  figures  following,  to  wit: 

I.  That  on  the day  of ,  189.  . ,  the Insurance  Com- 
pany by  their  Policy  of  Insurance,  numbered ,  did  insure  the  party 

herein  and  therein  named  against  loss  or  damage  by  fire  to  the  amount  of 

doll^irs  on  (description  of  property  insured  from  the  policy)  for  the  term  of 

from  the day  of ,  189.  . ,  to  the day  of , 

189.  . ,  at  noon. 

II.  That  in  addition  to  the  amount  covered  by  said  policy  of  said  company, 

there  was  other  insurance  made  thereon  to  the  amount  of dollars,  as 

specified  in  the  following  schedule,  besides  which  there  was  no  other  insurance 
thereon.  (List  of  policies  covering  any  of  the  property,  showing  as  to  each 
policy  its  date,  term,  and  amount,  the  name  of  the  company,  and  a  copy  of  the 
description  and  schedule  of  property  insured  contained  in  such  policy.) 

III.  That  the  property  insured  belonged  to (statement  of  interest  of 

insured  and  of  all  others  in  the  property  and  of  all  incumbrances  thereon  and 
changes  of  title,  etc.,  since  the  issuing  of  the  policy). 

IV.  That  the  building  insured  or  containing  the  property  destroyed  or  dam- 
aged, was  occupied  at  the  time  of  fire  in  its  several  parts  by  the  parties  herein- 
after named,  and  for  the  following  purposes,  to  wit:  (List  of  tenants.) 

47 


738  APPENDIX    OF   FORMS  [CHAP.  II 

V.  That  the  actual  cash  value  of  the  property  so  insured  amounted  to  the 

6um  of dollars  at  the  time  immediately  preceding  the  tire,  as  set  forth 

in  the  following  schedule: 

That  on  the day  of ,  1S9.  . ,  a  fire  occurred  by  which  the 

property  insured  was  injured  or  destroyed  to  the  amount  of dollars, 

as  set  forth  in  the  following  schedule  which  the  deponent  declares  to  be  a  just, 
true  and  faithful  account  of  his  loss  as  far  as  he  has  been  able  to  ascertain  the 
same : 

(Schedule  of  property  damaged  or  destroyed,  showing  the  cash  value  of  each 
item  thereof  and  the  amount  of  loss  thereon.)  And  the  insured  claims  of  the 
. Insurance  Company  the  sum  of dollars. 

(If  there  are  subdivisions  in  policy,  also  a  statement  of  the  amount  claimed 
under  each  subdivision.) 

VI.  That  the  fire  originated  (statement  of  knowledge  and  belief  of  the  insured 
as  to  the  time  and  origin  of  the  fire),  and  the  said  deponent  further  declares 
that  the  said  fire  did  not  originate  by  any  act,  design  or  procurement  on  his  part, 
or  in  consequence  of  any  fraud  or  evil  practice  done  or  suffered  by  him,  and 
that  nothing  has  been  done  by  or  with  his  privity  or  consent  to  violate  the  con- 
ditions of  insurance  or  render  void  the  policy  aforesaid. 


(insured.) 


Sworn  to  before  me  this, 
day  of ,  189.  . 


Notary  Public. 

37 

The  Michigan  Standard  Fire  Policy.    See  §  S27 

This  follows  the  New  York  policy,  except  as  follows:  After  the  lir.t  of  con- 
ditions for  breach  of  which  the  entire  policy  shall  be  void,  unless  otherwise 
provided  by  agreement,  etc.,  the  Michigan  policy  adds,  "Provided,  a  loss  shall 
occur  on  the  property  insured  while  such  breach  of  condition  continues,  or 
such  breach  of  condition  is  the  primary  or  contributory  cause  of  the  loss." 

In  the  clause,  "In  any  matter  relating  to  this  insurance  no  person,  unless 
duly  authorized  in  writing,  shall  be  deemed  the  agent  of  this  company,"  the 
Michigan  policy  after  the  words  "relating  to"  adds  the  words  "the  procur- 
ing of." 

In  the  appraisal  clause  in  place  of  the  words,  "And  the  award  in  writing  of 
any  two  shall  determine  the  amount  of  such  loss,"  the  Michigan  policy  reads, 
"And  the  award  in  writing  of  any  two  shall  be  prima  facie  evidence  of  the  amount 
of  such  loss." 

38 

The  Missouri  Fire  Policy.    See  §  S27 

The  Missouri  legislature  has  not  adopted  a  prescribed  form  of  fare  insurance 
policy,  but  the  New  York  form  is  used  with  the  addition  of  the  following  clause 
required  by  Missouri  law:  "It  is  hereby  agreed  on  the  part  of  the  company  issuing 
the  policy  that  any  provisions  of  said  policy  in  conflict  with  the  statutes  of  the 


CHAP.  II  ]     THE   MASSACHUSETTS   STANDARD   FIRE   POLICY  739 

State  of  Missouri  are  distinctly  held  and  acknowledged  to  be  inoperative  and  of 
no  avail." 

39 

The  Massachusetts  Standard  Fire  Policy.    See  §  227 

(Corporate  name  of  the  company  or  association;  its  principal  place  or  places 
of  business.) 

This  company  shall  not  be  liable  beyond  the  actual  value  of  the  insured 
property  at  the  time  any  loss  or  damage  happens. 

In  consideration  of dollars  to  them  paid  by  the  insured,  hereinafter 

named,   the  receipt  whereof  is   hereby   acknowledged,  do   insure and 

legal  representatives  against  loss  or  damage  by  fire,  to  the  amount  of 

dollars 

Bills  of  exchange,  notes,  accounts,  evidences  and  securities  of  property  of 
every  kind,  books,  wearing  apparel,  plate,  money,  jewels,  medals,  patterns, 
models,  scientific  cabinets  and  collections,  paintings,  sculpture  and  curiosities 
are  not  included  in  said  insured  property,  unless  specially  mentioned. 

Said  property  is  insured  for  the  term  of beginning  on  the 

day  of in  the  year  nineteen  hundred  and ,  at  noon,  and  con- 
tinuing until  the day  of ,  in  the  year  nineteen  hundred  and 

,  at  noon,  against  all  loss  or  damage  by  fire  originating  from  any  cause 

except  invasion,  foreign  enemies,  civil  commotions,  riots,  or  any  miUtary  or 
usurped  power  whatever;  the  amount  of  said  loss  or  damage  to  be  estimated 
according  to  the  actual  value  of  the  insured  property  at  the  time  when  such  loss 
or  damage  happens,  but  not  to  include  loss  or  damage  caused  by  explosions  of 
any  kind  unless  fire  ensues,  and  then  to  include  that  caused  by  fire  only. 

This  policy  shall  be  void  if  any  material  fact  or  circumstance  stated  in  writing 
has  not  been  fairly  represented  by  the  insured, — or  if  the  insured  now  has  or 
shall  hereafter  make  any  other  insurance  on  the  said  property  without  the 
assent  in  writing  or  in  print  of  the  company, — or  if,  without  such  assent,  the 
said  property  shall  be  removed,  except  that,  if  such  removal  shall  be  necessary 
for  the  preservation  of  the  property  from  fire,  this  policy  shall  be  valid  without 
such  assent  for  five  days  thereafter, — or  if,  without  such  assent,  the  situation 
or  circumstances  affecting  the  risk  shall,  by  or  Avith  the  knowledge,  advice, 
agency  or  consent  of  the  insured,  be  so  altered  as  to  cause  an  increase  of  such 
risks,  or  if,  without  such  assent  the  said  property  shall  be  sold,  or  this  policy 
assigned,  or  if  the  premises  hereby  insured  shall  become  vacant  by  the  removal 
of  the  owner  or  occupant,  and  so  remain  vacant  for  more  than  thirty  days  with- 
out such  assent,  or  if  it  be  a  manufacturing  establishment,  running,  in  whole  or 
in  part,  extra  time,  except  that  such  establishment  may  run,  in  whole  or  in 
part,  extra  hours  not  later  than  nine  o'clock  p.  m.,  or  if  such  establishment  shall 
cease  operation  fc?  more  than  thirty  days  without  permission  in  writing  in- 
dorsed hereon,  oi  if  the  insured  shall  make  any  attempt  to  defraud  the  com- 
pany either  before  or  after  the  loss, — or  if  gunpowder  or  other  articles  subject 
to  legal  restriction  shall  be  kept  in  quantities  or  manner  different  from  those 
allowed  or  prescribed  by  law, — or  if  camphene,  benzine,  naphtha,  or  other 
chemical  oils  or  burning  fluids  shall  be  kept  or  used  by  the  insured  on  the  premises 
insured,  except  that  what  is  known  as  refined  petroleum,  kerosene  or  coal  oil, 


740  APPENDIX   OF   FORMS  [CHAP.  II 

may  be  used  for  lighting,  and  in  dwelling  houses  kerosene  oil  stoves  may  be 
used  for  domestic  purposes, — to  be  filled  when  cold,  by  daylight,  and  with  oil 
of  lawful  fire  test  only. 

If  the  insured  propcity  shall  be  exposed  to  loss  or  damage  by  fire,  the  insured 
shall  make  all  reasonable  exertions  to  save  and  protect  the  same. 

In  case  of  any  loss  or  damage  under  this  policj^  a  statement  in  writing,  signed 
and  sworn  to  by  the  insured,  shall  be  forthwith  rendered  to  the  company,  setting 
forth  the  value  of  the  property  insured,  the  interest  of  the  insured  therein,  all 
other  insurance  thereon,  in  detail,  the  purposes  for  which  and  the  persons  by 
whom  the  building  insured,  or  containing  the  property  insured,  was  used,  and 
the  time  at  which  and  manner  in  which  the  fire  originated,  so  far  as  known  to 
the  insured.  The  company  may  also  examine  the  books  of  accounts  and  vouchers 
of  the  insured,  and  make  extracts  from  the  same. 

In  case  of  any  loss  or  damage,  the  company,  within  sixty  days  after  the  in- 
sured shall  have  submitted  a  statement,  as  provided  in  the  preceding  clause, 
shall  either  pay  the  amount  for  which  it  shall  be  liable,  -which  amount  if  not 
agreed  upon  shall  be  ascertained  by  award  of  referees  as  hereinafter  provided,  or  re- 
place the  property  with  other  of  the  same  kind  and  goodness, — or  it  may,  within 
fifteen  days  after  such  statement  is  submitted,  notify  the  insured  of  its  intention 
to  rebuild  or  repair  the  premises,  or  any  portion  thereof  separately  insured  by 
this  policy,  and  shall  thereupon  enter  upon  said  premises  and  proceed  to  rebuild 
or  repair  the  same  with  reasonable  expedition.  It  is  moreover  understood  that 
there  can  be  no  abandonment  of  the  property  insured  to  the  company,  and 
that  the  company  shall  not  in  any  case  be  liable  for  more  than  the  sum  insured, 
with  interest  thereon  from  the  time  when  the  loss  shall  become  payable,  as 
above  provided. 

If  there  shall  be  any  other  insurance  on  the  property  insured,  whether  prior 
or  subsequent,  the  insured  shall  recover  on  this  policy  no  greater  proportion 
of  the  loss  sustained  than  the  sum  hereby  insured  bears  to  the  whole  amount 
insured  thereon.  And  whenever  the  company  shall  pay  any  loss,  the  insured 
shall  assign  to  it,  to  the  extent  of  the  amount  so  paid,  all  rights  to  recover  satis- 
faction for  the  loss  or  damage  from  any  person,  town  or  other  corporation, 
excepting  other  insurers;  or  the  insured,  if  requested,  shall  prosecute  therefore 
at  the  charge  and  for  the  account  of  the  company. 

If  this  policy  shall  be  made  payable  to  a  mortgagee  of  the  insured  real  estate, 
no  act  or  default  of  any  person  other  than  such  mortgagee  or  his  agents,  or 
those  claiming  under  him,  shall  affect  such  mortgagee's  right  to  recover  in  case 
of  loss  on  such  real  estate:  provided,  that  the  mortgagee  shall,  on  demand,  pay 
according  to  the  established  scale  of  rates  for  any  increase  of  risks  not  paid 
for  by  the  insured;  and  whenever  this  company  shall  be  liable  to  a  mortgagee 
for  any  sum  for  loss  under  this  policy,  for  which  no  liability  exists  as  to  the 
mortgagor,  or  owner,  and  this  company  shall  elect  by  itself,  or  with  others,  to 
pay  the  mortgagee  the  full  amount  secured  by  such  mortgage,  then  the  mort- 
gagee shall  assign  and  transfer  to  the  companies  interested,  upon  such  pay- 
ment, the  said  mortgage,  together  with  the  note  and  debt  thereby  secured. 

This  policy  may  be  cancelled  at  any  time  at  the  request  of  the  insured,  who 
shall  thereupon  be  entitled  to  a  return  of  the  portion  of  the  above  premium 
remaining,  after  deducting  the  customary  monthly  short  rates  for  the  time  this 
policy  shall  have  been  in  force.  The  company  also  reserves  the  right,  after 
giving  written  notice  to  the  insiirod  and  to  nny  mortgagee  to  whom  this  policy 


CHAP.  II  ]  THE   xMINNESOTA  STAXDARD    FIRE   POLICY  741 

is  made  payable,  and  tendering  to  the  insured  a  ratable  proportion  of  the  pre- 
mium, to  cancel  this  policy  as  to  all  risks  subsequent  to  the  expiration  of  ten 
days  from  such  notice,  and  no  mortgagee  shall  then  have  the  right  to  recover 
as  to  such  risks. 

In  case  of  loss  under  this  policy  and  a  failure  of  the  parties  to  agree  as  to  the 
amount  of  loss,  it  is  mutually  agreed  that  the  amount  of  such  loss  shall  be  re- 
ferred to  three  disinterested  men,  the  company  and  the  insured  each  choosing 
one  out  of  three  persons  to  be  named  by  the  other,  and  the  third  being  selected 
by  the  two  so  chosen;  the  award  in  writing  by  a  majoritj'-  of  the  referees  shall 
be  conclusive  and  final  upon  the  parties  as  to  the  amount  of  loss  or  damage, 
and  such  reference  unless  waived  by  the  parties  shall  be  a  condition  precedent 
to  any  right  of  action  in  law  or  equity  to  recover  for  such  loss;  but  no  person  shall 
be  chosen  or  act  as  a  referee,  against  the  objection  of  either  party,  who  has 
acted  in  a  like  capacity  within  four  months. 

No  suit  or  action  against  this  company  for  the  recovery  of  any  claim  by  virtue 
of  this  policy  shall  be  sustained  in  any  court  of  law  or  equity  in  this  common- 
wealth unless  commenced  within  two  years  from  the  time  the  loss  occurred. 

In  Witness  Whereof,  etc. 

40 

The  Maine  Standard  Fire  Policy.    See  §  SS7 

This  follows  the  Massachusetts  policy  except  as  follows:  Instead  of  the  words 
"In  consideration  of Dollars  to  them  paid,"  the  Maine  policy  sub- 
stitutes the  words  "In  consideration  of Dollars  to  it  paid,"  etc. 

In  the  paragraph  beginning  "In  case  of  any  loss  or  damage  under  this  policy, 

a  statement shall  be  forthwith  rendered  to  the  company,"  the  Maine 

policy  substitutes  for  the  word  "forthwith"  the  words  "within  a  reasonable 
time." 

41 

The  Minnesota  Standard  Fire  Policy.    See  §  227 

This  follows  the  Massachusetts  policy  except  as  follows:  Instead  of  the  words 
"In  consideration  of Dollars  to  them  paid,"  the  Minnesota  pohcy  sub- 
stitutes the  words  "In  consideration  of Dollars  to  be  paid,"  etc. 

It  omits  the  clause  "This  company  shall  not  be  liable  beyond  the  actual 
value  of  the  insured  property  at  the  time  any  loss  or  damage  occurs." 

To  the  words  "the  amount  of  said  loss  or  damage  to  be  estimated  according 
to  the  actual  value  of  the  insured  property  at  the  time  when  such  loss  or  dam- 
age happens,"  it  adds  "except  in  case  of  total  loss  on  buildings." 

In  the  clause  providing  "if  the  insured make  any  other  insurance 

on  the  said  property  without  the  assent  in  writing  or  in  print  of  the  company," 
etc.,  it  omits  the  words  "in  writing  or  in  print." 

After  the  word  "insured"  in  the  clause  providing  that  "In  case  of  any  loss 

or  damage  under  this  policy,  a  statement setting  forth  the  value  of 

the  property  insured,"  etc.,  it  adds  the  words  "except  in  case  of  total  loss  on 
buildings  the  value  of  said  buildings  need  not  be  stated." 

After  the  word  "loss"  in  the  clause  providing  that  "If  there  shall  be  any 
other  insurance the   insured    shall    recover  on    this   policy  nn   greater 


742  APPENDIX   OF   FORMS  [CHAP.  II 

proportion  of  loss,"  etc.,  it  adds  the  words  "except  in  case  of  total  loss  on  build- 
ings." 

At  the  end  of  the  clause  providing  for  an  assignment  of  the  mortgage  to  the 
company  in  the  event  of  payment  of  loss  under  a  mortgagee  policy,  it  substitutes 
for  the  word  "debt"  the  words  "debts." 

At  the  beginning  of  the  appraisal  clause,  after  the  words  "In  case  of  loss," 
it  adds  "except  in  case  of  total  loss  on  buildings." 

In  the  clause  providing  for  a  two-year  limitation  of  time  in  which  to  bring 
an  action  on  the  poHcy  it  substitutes  for  the  word  "commonwealth"  the  word 
"state." 

42 

The  Iowa  Standard  Fire  Policy.    See  §  2S7 

Insert  in  this  space  the  name  and  location  of  the  company  and  whether  it 
be  a  stock  or  mutual  company 

In  consideration  of  the  stipulations  herein  named  and  of Dollars 

does  insure for  the  term  of from  the day  of , 

19.  . ,  at  noon  (Standard  time),  to  the day  of ,  19.  . ,  at  noon 

(Standard  time),  against  all  direct  loss  or  damage  by  fire,  except  as  hereinafter 
provided,  to  an  amount  not  exceeding dollars,  to  the  follow-ing  de- 
scribed property,  while  located  and  contained  herein,  and  not  elsewhere,  to  ■wit: 

It  is  hereby  agreed  that  the  insured  may  obtain  $ additional  insur- 
ance in  companies  authorized  to  do  business  in  the  State  of  Iowa. 

II.  This  company  shall  not  be  liable  beyond  the  actual  cash  value  of  the 
property  covered  by  this  policy  at  the  time  any  loss  or  damage  occurs,  and  said 
hability  shall  in  no  event  exceed  what  it  would  cost  the  insured  to  repair  or  re- 
place the  property  lost  or  damaged  with  material  of  like  kind  and  quality.  The 
sum  for  which  this  company  is  liable  pursuant  to  this  policy,  shall  be  payable 
forty  days  after  due  notice  and  proofs  of  loss  have  been  received  by  this  com- 
pany in  accordance  with  huv. 

III.  This  policy  shall  be  void  if  the  insured  has  concealed  or  misrepresented 
any  material  fact  or  circumstance  concerning  this  insurance  or  the  subject 
thereof. 

IV.  Unless  otherwise  provided  by  agreement  of  this  company  this  policy 
shall  be  void: 

(a)  If  the  insured  now  has  or  shall  hereafter  procure  any  other  contract  of 
insurance  valid  or  invalid  on  the  property  covered  in  whole  or  in  part  by  this 
policy;  or 

(b)  If  the  subject  of  insurance  be  a  manufacturing  establishment,  and  it 
cease  to  be  operated  for  more  than  ten  consecutive  days;   or 

(c)  If  the  building  herein  described,  whether  intended  for  occupancy  by  the 
owner  or  tenant  be  or  become  vacant  or  unoccupied  and  so  remain  for  ten  con- 
secutive days;  or 

(d)  If  the  interest  of  the  insured  be  other  than  unconditional  and  sole  owner- 
ship; or 

(e)  If  the  subject  of  insurance  be  a  building  on  ground  not  owned  by  the 
insured;  or 

(f)  If  any  change  other  tlinn  by  death  nf  tho  insurrrl,  whether  by  legal  pro- 


CHAP.  II  ]  THE   IOWA    STANDARD    fltiK    POLICY  74iJ 

ceedings,  judgment,  voluntary  act  of  the  insured  or  otherwise,  take  place  in 
the  interest,  title,  possession  or  use  of  the  subject  of  insurance,  if  such  change 
in  the  possession  or  use  makes  the  risk  more  hazardous;    or 

(g)  If  the  subject  of  insurance  or  a  part  thereof  (as  to  the  part  so  encum- 
bered) be  or  become  encumbered  by  lien,  mortgage  or  otherwise  created  by 
voluntary  act  of  the  insured  or  within  his  control;    or 

(h)  If  tlie  property  insured  or  any  part  thereof  (as  to  the  part  so  removed) 
be  removed  to  any  other  building  or  location  than  that  specified  in  the  policy;  or 

(i)  If  this  policy  be  assigned  before  loss. 

V.  Unless  otherwise  provided  by  agreement  of  this  company,  this  policy 
shall  be  void: 

(a)  If  the  subject  of  insurance  be  a  manufacturing  establishment,  and  it  be 
operated  in  whole  or  in  part  at  night  later  than  10  o'clock;   or 

(b)  If  the  hazard  be  increased  by  any  means  within  the  knowledge  of  the 
insured;  or 

(c)  If  mechanics  be  employed  in  building,  altering  or  repairing  the  within- 
described  premises  for  more  than  fifteen  days  at  any  one  time;    or 

(d)  If  illuminating  gas  or  vapor  be  generated  in  any  building  covered  hereby, 
or  on  any  premises  adjacent  thereto  for  use  upon  the  insured  premises;    or 

(e)  If  there  be  kept,  used,  or  allowed  on  the  within-described  premises  ben- 
zine, benzole,  dynamite,  ether,  fireworks,  gasolene,  Greek  fire,  gunpowder, 
exceeding  twenty-five  pounds  in  quantity,  naphtha,  nitroglycerine,  or  other 
explosives,  phosphorus,  calcium  carbide,  petroleum  or  any  of  its  products  of 
greater  inflammability  than  kerosene  of  lawful  standard,  which  last-named 
article  may  be  used  for  lights  and  kept  for  sale  according  to  law,  in  quantities 
not  exceeding  five  barrels;    or 

(f)  If  the  insured  permits  the  property  which  is  the  subject  of  insurance, 
or  any  part  thereof,  to  be  used  for  any  unlawful  purpose. 

Provided  that  nothing  contained  in  paragraph  five  herein  shall  operate  to 
avoid  this  policy  in  any  case,  if  the  insured  shall  establish  that  the  failure  to 
observe  and  comply  with  such  provisions  and  conditions  did  not  contribute 
to  the  loss. 

VI.  This  company  shall  not  be  liable  for  loss  caused  directly  or  indirectly 
by  invasion,  insurrection,  riot,  civil  war,  or  military  or  usurped  power,  or  by 
theft,  or  by  neglect  of  the  insured  to  use  all  reasonable  means  to  save  and  pre- 
serve the  property  during  and  after  a  fire,  or  when  the  property  is  endangered 
by'fire  in  neighboring  premises;  or  (unless  fire  ensues,  and,  in  that  event,  for 
damage  by  fire  only)  by  explosion  of  any  kind  or  by  lightning;  but  liability  for 
direct  damage  by  lightning  may  be  assumed  by  specific  agreement. 

VII.  This  company  shall  not  be  liable  for  loss  or  damage  to  any  property 
covered  by  this  policy  if  the  insured  shall  fail  to  pay  any  written  obligation 
given  to  the  company  for  the  premium  or  any  assessment  or  installment  of 
premium  when  due;  provided  the  company  shall  have  given  the  insured  notice 
as  required  by  law.  Upon  payment  and  acceptance  by  the  company  of  the 
delinquent  premium,  assessment  or  installment  of  premium  before  loss  occurs, 
or  after  loss,  if  the  company  shall  have  had  notice  thereof  and  accepts  such 
payment,  this  policy  shall  be  revived  and  in  full  force  according  to  its  terms. 

VIII.  If  a  building  or  any  part  thereof  fall,  except  as  the  result  of  fire,  all 
insurance  by  this  policy  on  such  building,  or  its  contents,  shall  immediately 
cease. 


744  APPENDIX   OF   FORMS  [CHAP.  II 

IX.  This  company  shall  not  be  liable  for  loss  to  accounts,  bills,  currency, 
deeds,  evidences  of  debt,  money,  notes  or  securities;  nor,  unless  liability  is 
specifically  assumed  thereon,  for  loss  to  awnings,  bullion,  casts,  curiosities, 
drawings,  dies,  implements,  jewels,  manuscripts,  medals,  models,  patterns, 
pictures,  scientific  apparatus,  signs,  store  or  office  furniture  or  fixtures,  sculpture, 
plate  glass,  frescoes  or  decorations;  or  property  held  in  storage  or  for  repairs; 
nor,  beyond  the  actual  value  destroyed  by  fire  for  loss  occasioned  by  ordinance 
or  law  regulating  construction  or  repairs  of  buildings,  or  by  interruption  of 
business,  manufacturing  processes  or  otherwise. 

X.  Any  application,  survey,  plan,  or  description  of  property  signed  by  the 
insured  and  referred  to  in  this  policy  shall,  when  a  copy  is  attached  hereto,  be 
a  part  of  this  contract,  and  shall  be  held  to  be  a  representation  and  not  a  war- 
ranty. 

XI.  This  policy  shall  be  cancelled  at  any  time  at  the  request  of  the  insured; 
or  by  the  company  by  giving  five  days'  notice  of  such  cancellation  either  by 
registered  letter  directed  to  the  insured  at  his  last  known  address,  or  by  personal 
written  notice.  If  this  policy  shall  be  cancelled  as  hereinbefore  provided,  or 
becomes  void  or  cease,  the  premium  having  been  actually  paid,  the  unearned 
portion  shall  be  returned  on  surrender  of  this  policy  or  last  renewal,  this  com- 
pany retaining  the  customary  short  rates;  except  that  when  this  policy  is  can- 
celled by  this  company  by  giving  notice  it  shall  retain  only  the  pro  rata  premium. 

XII.  If,  with  the  consent  of  this  company,  an  interest  under  this  policy  shall 
exist  in  favor  of  a  mortgagee  or  of  any  person  or  corporation  having  an  interest 
in  the  subject  of  insurance  other  than  the  interest  of  the  insured  as  described 
herein,  the  provisions  and  conditions  hereinbefore  contained  shall  apply  in  the 
manner  expressed  in  such  provisions  and  conditions  of  insurance  relating  to 
such  interest,  as  shall  be  agreed  upon  by  the  company. 

XIII.  If  property  covered  by  this  insurance  is  so  endangered  by  fire  as  to 
require  removal  to  a  place  of  safety  and  is  so  removed,  that  part  of  this  policy 
in  excess  of  its  proportion  of  any  loss  and  of  the  value  of  property  remaining 
in  the  original  location,  shall,  for  the  ensuing  five  days  only,  cover  the  property 
so  removed  in  the  new  location;  if  removed  to  more  than  one  location,  such 
excess  of  this  policy  shall  cover  therein  for  such  five  days  in  the  proportion  that 
the  value  in  any  one  new  location  bears  to  the  value  in  all  such  new  locations; 
but  this  company  shall  not  in  any  case  of  removal,  whether  to  one  or  more 
locations,  be  liable  beyond  the  proportion  that  the  amount  hereby  insured  shall 
bear  to  the  total  valid  and  collectible  insurance  on  the  whole  property  at  the 
time  of  fire,  whether  the  same  cover  in  new  location  or  not. 

XIV.  If  loss  occur  the  insured  shall  as  soon  as  practicable  after  he  ascertains 
the  fact  of  such  loss,  give  notice  in  writing  thereof  to  the  company,  protect  the 
property  from  further  damage,  forthwith  separate  the  damaged  and  undamaged 
personal  property,  and  put  it  in  the  best  possible  order,  and  shall,  within  sixty 
days  from  date  of  loss,  furnish  this  company  with  notice  thereof  in  writing  ac- 
companied by  affidavit  stating  the  facts  as  to  how  the  loss  occurred  and  the 
extent  thereof,  so  far  as  such  facts  are  within  his  knowledge. 

XV.  The  insured,  as  often  as  reasonably  required,  shall  exhibit  to  any  person 
designated  by  this  company,  all  that  remains  of  any  property  herein  described 
as  to  which  a  claim  for  loss  or  damage  is  made,  and  submit  to  examination  under 
oath  by  any  person  named  by  this  company,  and  subscribe  the  same,  and,  as 
often  as  reasonably  required,  shall  produce  for  examination  all  books  of  ac- 


CHAP.  II  ]     THE  NEW   HAMPSHIRE   STANDARD   FIRE  POLICY  745 

count,  bills,  invoices,  and  other  vouchers,  or  certified  copies  thereof,  if  originals 
be  lost,  at  such  reasonable  place  as  may  be  designated  by  this  company  or  its 
representatives,  and  shall  permit  extracts  and  copies  thereof  to  be  made;  pro- 
vided, however,  that  this  company  shall  not  be  held  to  have  waived  any  of  the 
provisions  or  conditions  of  this  policy  or  any  forfeiture  thereof  by  any  examina- 
tion or  investigation  herein  provided  for. 

XVI.  This  company  shall  not  be  liable  under  this  policy  for  a  greater  propor- 
tion of  any  loss  on  the  described  property,  or  for  loss  by  and  expense  of  removal 
from  premises  endangered  by  fire,  than  the  amount  thereby  insured  shall  bear 
to  the  whole  amount  of  valid  and  collectible  insurance  covering  such  property. 

XVII.  No  suit  or  action  on  this  policy,  for  the  recovery  of  any  claim  thereon, 
shall  be  sustainable  in  any  court  of  law  or  equity,  unless  commenced  within 
twelve  months  next  after  the  right  of  action  for  the  loss  accrues. 

XVIII.  Wherever  in  this  policy  the  word  "insured"  occurs,  it  shall  be  held 
to  include  the  legal  representative  of  the  insured,  and  wherever  the  word  "loss" 
occurs,  it  shall  be  deemed  the  equivalent  of  "loss  or  damage." 

XIX.  This  policy  is  issued  and  accepted  subject  to  the  foregoing  stipulations 
and  conditions,  together  with  such  other  provisions,  agreements  or  conditions 
now  or  hereafter  specifically  authorized  by  law  as  may  be  endorsed  hereon  or 
added  hereto. 

In  Witness  Whereof,  etc. 

Endorsed  on  the  back  of  the  policy  is  a  short  rate  table  to  govern  in  case  of 
cancellations,  prepared  by  the  state  auditor  pursuant  to  the  Code,  §  1729. 

43 
The  New  Hampshire  Standard  Fire  Policy.    See  §  227 

The of in  consideration  of dollars,  to  them  paid  by 

the  insured,  hereinafter  named,  the  receipt  whereof  is  hereby  acknowledged, 

do  insure against  loss  or  damage  by  fire,  to  the  amount  of 

dollars 

This  company  shall  not  be  liable  beyond  the  actual  value  of  the  insured  prop- 
erty at  the  time  any  loss  or  damage  happens,  except  on  buildings  totally  de- 
stroyed, in  which  case  the  full  amount  of  the  limitation  shall  be  paid. 

Bills  of  exchange,  notes,  accounts,  evidences  and  securities  of  property  of 
every  kind,  books,  wearing  apparel,  plate,  money,  jewels,  medals,  patterns, 
models,  scientific  cabinets  and  collections,  paintings,  sculpture,  and  curiosities 
are  not  included  in  said  insured  property,  unless  specially  mentioned. 

Said  property  is  insured  for  the  term  of beginning  on  the 

day  of ,  in  the  year  nineteen  hundred  and ,  at  noon,  and  con- 
tinuing until  the day  of ,  in  the  year  nineteen  hundred  and 

,  at  noon,  against  all  loss  or  damage  by  fire  originating  from  any  cause 

except  invasion,  foreign  enemies,  civil  commotions,  riots,  or  any  militarj'  or 
usurped  power  whatever;  the  amount  of  said  loss  or  damage  to  be  estimated 
according  to  the  actual  value  of  the  insured  property  at  the  time  when  such 
loss  or  damage  hrpp^ns,  except  on  buildings,  but  not  to  include  loss  or  damage 
caused  by  explosions  of  any  kind  unless  fire  ensues,  and  then  to  include  that 
caused  by  fire  only. 

This  policy  shall  be  void  if  any  material  fact  or  circumstance  stated  in  writ- 
ing has  not  been  fairly  represented  by  the  insured;  or  if  the  insured,  at  the  time 


746  APPENDIX   OF   FORMS  [CHAP.  11 

of  any  loss,  has  any  other  insurance  on  the  said  property,  without  the  assent 
in  writing  or  in  print  of  the  company;  or  if,  without  such  assent,  the  said  prop- 
erty shall  be  removed,  except  that,  if  such  removal  shall  be  necessary  for  the 
preservation  of  the  property  from  fire,  this  policy  shall  be  valid  without  such 
assent  for  five  days  thereafter;  or  if  the  insured  shall  make  any  attempt  to  de- 
fraud the  company,  either  before  or  after  the  loss;  and  this  policy  shall  be  void 
and  inoperative  during  the  existence  or  continuance  of  the  acts  or  conditions 
of  things  stipulated  against,  as  follows:  if,  without  such  assent,  the  situation 
or  circumstances  affecting  the  risk,  shall,  by  or  with  the  knowledge,  advice, 
agency,  or  consent  of  the  insured,  be  so  altered  as  to  cause  an  increase  of  such 
risk;  or  if,  without  such  assent,  the  said  property  shall  be  sold,  or  this  policy 
assigned;  or  if  the  premises  hereby  insured  shall  become  vacant  by  the  removal 
of  the  owner  or  occupant,  and  so  remain  vacant  for  more  than  thirty  days  with- 
out such  assent;  or  if  it  be  a  manufacturing  establishment  in  which  the  works 
or  machinery  are  operated  more  than  the  customary  or  legal  working  hours,  or 
all  night,  without  the  written  or  printed  assent  of  this  company  thereto;  except 
that  permission  is  hereby  given  to  operate  machinery  extra  hours,  not  later 
than  10  o'clock  p.  m.,  for  the  purpose  of  equalizing  work,  a  competent  man, 
other  than  the  regular  watchman,  being  kept  in  charge  of  those  rooms  in  which 
shafting  and  belts  are  running,  but  where  the  machinery  is  not  at  work;  or  if 
such  establishment  shall  cease  operation  for  more  than  thirty  days  without 
permission  in  writing  endorsed  hereon;  or  if  gunpowder  or  other  articles  sub- 
ject to  legal  restriction  shall  be  kept  in  quantities  or  manner  different  from 
those  allowed  or  prescribed  by  law;  or  if  camphene,  benzine,  naphtha,  or  other 
chemical  oils  or  burning  fluids  shall  be  kept  or  used  by  the  insured  on  the  prem- 
ises insured,  except  that  what  is  known  as  refined  petroleum,  kerosene,  or  coal- 
oil  may  be  used  for  lighting. 

If  the  insured  property  shall  be  exposed  to  loss  or  damage  by  fire,  the  insured 
shall  make  all  reasonable  exertions  to  save  and  protect  the  same. 

In  case  of  any  loss  or  damage  under  this  policy,  a  statement  in  writing,  signed 
and  sworn  to  by  the  insured,  shall  be  forthwith  rendered  to  the  company,  setting 
forth  the  value  of  the  property  insured  in  detail,  the  interest  of  the  insured 
therein,  all  other  insurance  thereon,  the  purposes  for  which  and  the  persons 
by  whom  the  building  insured,  or  containing  the  property  insured,  was  used, 
and  the  time  at  which,  and  the  manner  in  which,  the  fire  originated,  so  far  as 
known  to  the  insured.  The  company  may  also  examine  the  books  of  account 
and  vouchers  of  the  insured,  and  make  extracts  from  the  same,  and  shall  have 
access  to  the  premises  and  property  damaged.  It  is  moreover  understood  that 
there  can  be  no  abandonment  of  the  property  insured  to  the  company,  and 
that  the  company  shall  not  in  any  case  be  liable  for  more  than  the  sum  insured, 
with  interest  thereon  from  the  time  when  the  lass  shall  become  payable  as  here- 
after provided. 

In  case  of  any  loss  or  damage,  the  company,  within  sixty  days  after  the  in- 
sured shall  have  submitted  a  statement,  as  provided  in  the  preceding  clause, 
shall  either  pay  the  amount  for  which  it  shall  be  liable,  or  replace  the  property 
with  other  of  the  same  kind  and  goodness;  or  it  may,  within  ten  days  after  such 
statement  is  submitted,  notify  the  insured  of  its  intention  to  rebuild  or  repair 
the  premises,  or  any  portion  thereof  separately  insured  by  this  policy,  and  shall 
thereupon  enter  upon  said  premises  and  proceed  to  rebuild  or  repair  the  same 
with  reasonable  expedition. 


CHAP.  II  ]     TH;:   NEW   HAMPSHIRE  STANDARD  FIRE  POLIO V  747 

In  case  difference  of  opinion  shall  arise  as  to  the  amount  of  any  loss  under 
this  policy  other  than  on  buildings  totally  destroyed,  unless  the  company  and 
the  insured  shall,  within  fifteen  days  after  notice  of  the  loss,  mutually  agree 
upon  referees  to  adjust  the  same,  either  party  may,  upon  giving  written  notice 
to  the  other,  apply  to  a  justice  of  the  supreme  court,  who  shall  appoint  three 
referees,  one  of  whom  shall  be  thoroughly  acquainted  with  the  kind  of  property 
to  be  considered,  and  their  award  in  writing,  after  proper  notice  and  hearing, 
shall  be  final  and  binding  on  the  parties. 

The  referees'  fees  shall  be  equally  divided  between  the  company  and  the  in- 
sured. 

If  there  shall  be  any  other  insurance  on  the  property  insured,  valid  or  invalid, 
whether  prior  or  subsequent,  the  insured  shall  recover  on  this  policy  no  greater 
proportion  of  the  loss  sustained  than  the  sum  hereby  insured  bears  to  the  whole 
amount  insured  thereon.  And  whenever  the  company  shall  pay  any  loss,  the 
insured  shall  assign  to  it,  to  the  extent  of  the  amount  so  paid,  all  rights  to  re- 
cover satisfaction  for  the  loss  or  damage  from  any  person,  town,  or  other  cor- 
poration, excepting  other  insurers;  or  the  insured,  if  requested,  shall  prosecute 
therefor  at  the  charge  and  for  the  account  of  the  company. 

If  this  policy  shall  be  made  payable  to  a  mortgagee  of  the  insured  real  estate, 
no  act  or  default  of  any  person  other  than  such  mortgagee  or  his  agents,  or 
those  claiming  under  him,  shall  affect  such  mortgagee's  right  to  recover  in  case 
of  loss  on  such  real  estate;  -provided,  that  the  mortgagee  shall,  on  demand,  pay 
according  to  the  established  scale  of  rates  for  any  increase  of  risks  not  paid 
for  by  the  insured;  and  whenever  this  company  shall  be  liable  to  a  mortgagee 
for  any  sum  for  loss  under  this  policy,  for  which  no  liability  exists  as  to  the 
mortgagor  or  owner,  and  this  company  shall  elect  by  itself,  or  with  others,  to 
pay  the  mortgagee  the  full  amount  secured  by  such  mortgage,  then  the  mort- 
gagee shall  assign  and  transfer  to  the  companies  interested,  upon  such  payment, 
the  said  mortgage,  together  with  the  note  and  debt  thereby  secured. 

This  policy  may  be  cancelled  at  any  time  at  the  request  of  the  insured,  who 
shall  thereupon  be  entitled  to  a  return  of  the  portion  of  the  above  premium  re- 
maining, after  deducting  the  customary  monthly  short  rates  for  the  time  this 
policy  shall  have  been  in  force.  The  company  also  reserves  the  right,  after 
giving  written  notice  to  the  insured,  and  to  any  mortgagee  to  whom  this  policy 
is  made  payable,  and  tendering  to  the  insured  a  ratable  proportion  of  the  pre- 
mium, to  cancel  this  policy  as  to  all  risks  subsequent  to  the  expiration  of  ten 
days  from  such  notice;  and  no  mortgagee  shall  then  have  the  right  to  recover 
as  to  such  risks.  Mutual  companies  may  vary  this  clause  to  suit  their  methods 
of  business. 

In  case  any  special  provisions  or  stipulations  not  enumerated  or  inserted 
above  require  mention  in  effecting  insurance,  such  provisions  or  stipulations 
shall  be  legibly  written  or  printed,  and  prominently  and  securely  attached  to 
this  policy,  and  signed  separately  by  the  company  or  agent. 

No  suit  or  action  against  this  company  for  the  recovery  of  any  claim  by  virtue 
of  this  policy  shall  be  sustained  in  any  court  of  law  or  equity  in  this  State,  unless 
commenced  within  one  year  from  the  time  the  loss  occurred. 

Chapter  170  of  the  Public  Statutes  is  printed  on  the  back  of  this  policy  con- 
tract, and  hereby  made  a  part  thereof. 

In  witness  whereof,  etc. 

Endorsed  on  the  back  is  Chapter  170  of  the  Public  Statutes  of  New  Hampshire. 


748  *  APPENDIX   OF   FORMS  [CHAP.  II 

Section  1.  The  form  of  policy  and  insurance  contract  now  in  force  in  the 
state  is  continued  until  the  insurance  commissioner  shall  change  it.  He  is  au- 
thorized to  change  the  form  of  such  contracts  from  time  to  time  as  he  may  think 
the  public  good  requires.  Any  company  using  any  other  form  of  policy  than 
the  one  prescribed  shall  forfeit  its  license. 

Sect.  2.  Descriptions  of  property  and  statements  concerning  its  value  and 
the  title  of  the  insured  thereto  in  an  application  of  insurance  or  in  an  insurance 
policy  shall  not  bo  treated  as  warranties.  A  policy  shall  not  be  avoided  by  rea- 
son of  any  mistake  or  misrepresentation,  unless  it  appears  to  have  been  inten- 
tionally and  fraudulently  made,  or  unless  the  difference  between  the  property 
as  it  was  represented  and  the  property  as  it  really  existed  contributed  to  the 
loss;  but  the  sum  insured  by  the  policy  shall  be  taken  to  be  such  fractional  part 
of  the  sum  mentioned  therein  as  the  premium  paid  by  the  insured  is  of  the 
premium  which  he  ought  to  have  paid,  not  exceeding  in  any  event  the  value  of 
the  insured's  interest  in  the  property. 

Sect.  3.  If  a  company  shall  issue  a  policy  upon  an  application  prepared  by  a 
third  person  assuming  to  act  as  its  agent  or  otherwise,  it  shall  be  charged  with 
his  knowledge  of  facts  relating  to  the  property  insured  as  if  they  were  stated 
in  the  application. 

Sect.  4.  A  change  in  the  property  insured  or  in  its  use  or  occupation,  or  a 
breach  of  any  of  the  terms  of  the  policy  by  the  insured,  shall  not  affect  the 
policy  except  while  the  change  or  breach  continues. 

Sect.  5.  If  insured  buildings  are  totally  destroyed,  the  sum  insured  shall  be 
taken  to  be  the  value  of  the  insured's  interest  therein,  as  such  interest  is  de- 
scribed in  the  policy,  unless  over-insurance  thereon  was  fraudulently  obtained; 
if  they  are  only  partially  destroyed,  the  insured  shall  be  entitled  to  his  actual 
damages,  not  exceeding  the  sum  insured. 

Sect.  6.  In  case  of  loss  or  damage  of  property  insured,  the  party  insured 
shall  give  notice  thereof,  in  writing,  to  the  secretary,  a  director,  or  an  agent  of 
the  company,  w-ithin  thirty  days. 

Sect.  7.  The  company  shall  adjust  the  loss  within  fifteen  days  after  the  re- 
ceipt of  such  notice. 

Sect.  8.  If  the  company  decides  to  rebuild  or  repair  the  property  destroyed 
or  injured,  it  shall  begin  to  do  so  within  twenty  days  after  adjusting  the  loss, 
and  shall  prosecute  the  work  with  reasonable  diligence  until  it  is  completed. 

Sect.  9.  If  the  company  neglects  to  adjust  the  loss  within  fifteen  days  after 
receiving  notice  of  it,  or  to  begin  to  rebuild  or  repair  the  property  destroyed 
or  damaged  within  twenty  days  after  the  adjustment  of  the  loss,  the  insured 
may  proceed  to  rebuild  or  repair  at  the  expense  of  the  company,  who  shall  be 
hable  for  the  reasonable  expenses  incurred  in  so  doing  and  for  the  loss  sustained 
by  its  neglect,  not  exceeding  the  amount  insured;  or  the  insured  may  com- 
mence an  action  upon  the  policy. 

Sect.  10.  If  dissatisfied  with  such  adjustment,  the  party  insured  may  bring 
his  action,  by  causing  his  writ  to  be  served  on  the  proper  ofTicer  or  agent  of  such 
company,  within  six  months  after  the  reception  of  such  notice  in  writing,  aud 
not  afterward. 

Sect.  11.  Unless  the  company,  in  their  notice  of  the  amount  of  loss  or  dam- 
age determined  by  it  shall  notify  the  insured  that  his  action  will  be  forever 
barred  by  law  if  his  writ  is- not  served  on  the  company  within  six  months  next 
after  the  service  of  such  notice  upon  him,  he  may  bring  his  action  at  any  time. 


CHAP.  II]      THE  SOUTH   DAJiOTA    6T/V>.DAKD    FIRE   POLICY  749 

Sect.  12.  The  insured  may  bring  his  action  in  the  county  of  his  residence, 
notwithstanding  anything  to  the  contrary  contained  in  the  poHcy. 

Sect.  13.  If  upon  trial  the  insured  recovers  more  than  the  amount  deter- 
mined by  the  insurers,  he  shall  have  judgment  and  execution  immediately 
therefor,  with  interest  and  costs.  If  he  recovers  no  more  than  such  amount, 
the  court  may  allow  interest  thereon,  and  such  costs  to  either  party  as  may  be 
just;  but  execution  shall  not  issue  against  the  company  within  three  months, 
unless  by  special  order  of  court. 

Sect.  14.  A  person  having  a  claim  against  an  insurance  company  not  organ- 
ized under  the  laws  of  the  state,  arising  from  a  transaction  with  an  agent  of  the 
company  in  the  state,  may  sue  therefor  in  the  courts  of  the  state.  Service  of 
any  process  pertaining  to  such  action  upon  the  insurance  commissioner  shall 
have  the  same  effect  as  if  the  company  were  a  domestic  corporation  and  the 
service  were  lawfully  made  within  the  state  upon  its  officers. 

Sect.  15.  If  in  such  action  the  plaintiff  shall  recover  a  judgment,  and  the 
company  does  not  pay  it  w^ithin  thirty  days  after  notice  of  it  is  given  to  the 
insurance  commissioner,  the  commissioner  may  suspend  the  authority  of  the 
company  to  do  business  in  the  state.  If  the  company  or  any  of  its  agents  shall 
issue  a  policy  during  such  suspension,  the  company  and  agents  shall  each  forfeit 
two  hundred  dollars  for  each  policy  so  issued,  but  the  policies  shall  be  valid  and 
binding,  nevertheless. 

Sect.  16.  If  a  policy  has  been  transferred  or  assigned  by  the  assured  to  a 
pei'son  to  hold  absolutely  or  as  collateral  security,  with  the  assent  of  the  insurer, 
the  assignee  may  bring  an  action  thereon  in  his  own  name  or  in  that  of  the 
assignor,  and  may  recover  the  full  amount  due  upon  the  policy  for  the  benefit 
of  whom  it  may  concern. 

Sect.  17.  Copies  of  charters,  by-laws,  certificates,  appointments,  and  other 
papers  required  by  law  to  be  filed  in  the  office  of  the  insurance  commissioner, 
and  certified  by  him,  shall  be  competent  evidence  in  the  courts  of  this  state. 

Sect.  18.  This  chapter  shall  be  a  part  of  every  contract  of  insurance  to  which 
it  is  applicable  and  shall  be  plainly  printed  in  every  such  contract.  No  waiver 
of  any  part  of  it  shall  be  set  up  by  the  insurer,  and  every  stipulation  in  the  con- 
tract in  conflict  with  it  shall  be  void. 

44 

The  South  Dakota  Standard  Fire  Policy.    See  §  227 

In  consideration  of dollars  to  it  paid  by  insured,  hereinafter  named, 

the  receipt  whereof  is  hereby  acknowledged,  does  insure and 

legal  representatives  and  assigns  against  loss  or  damage  by  fire,  to  the  amount 
of dollars  to  the  following  described  property: 

Bills  of  exchange,  notes,  accounts,  evidence  and  securities  of  property  of 
every  kind,  books,  wearing  apparel,  plate,  money,  jewels,  medals,  patterns, 
models,  scientific  cabinets  and  collections,  paintings,  sculpture  and  curiosities 
are  not  included  in  said  insured  property,  unless  specifically  mentioned. 

Said  property  is  insured  for  the  term beginning  the day  of 

,  in  the  year  19.  . ,  at  noon,  and  continuing  until  the day  of 

,  in  the  year  19.  . ,  at  noon,  against  all  loss  or  damage  by  fire  originating 

from  any  cause  except  invasion,  foreign  enemies,  civil  commotions,  riots  or  any 


750  APPENDIX   OF   FORMS  [CHAP.  II 

military  or  usurped  power  whatever;  the  amount  of  said  loss  or  damage  to  be 
estimated  according  to  tlie  actual  value  of  the  insured  property  at  the  time 
when  such  loss  or  damage  happens,  except  that  the  amount  of  insurance  written 
herein  upon  any  real  property,  including  structures  on  land  owned  by  another 
than  the  insured,  shall  be  taken  conclusively  to  be  the  true  value  of  such  prop- 
erty and  the  amount  of  loss  sustained  by,  and  the  measure  of  damages  of,  the 
insured,  in  case  the  same  is  wholly  destroyed  without  criminal  fault  on  the  part 
of  the  insured  or  his  assigns. 

This  policy  shall  be  void  if  any  material  fact  or  circumstance  concerning  the 
risk  has  been,  or  the  amount  of  loss  shall  be,  fraudulently  concealed  or  mis- 
represented by  the  insured,  or  if  the  insured  now  has  or  shall  hereafter  obtain 
any  other  insurance  on  said  property  without  the  assent  of  the  company,  or  if 
without  such  assent  the  property  shall  be  removed,  except  that  if  such  removal 
shall  be  necessary  for  the  preservation  of  the  property  from  fire  or  water,  this 
policy  shall  be  valid  without  such  assent  for  five  days  thereafter,  or  if  without 
such  assent  the  situation  or  conditions  affecting  the  insured  property  shall  be 
altered  so  as  to  materially  increase  the  hazard,  if  such  increase  in  hazard  be 
occasioned  by  the  act  or  agency  of  the  insured,  or  if  without  such  assent  the 
insured  shall  sell  and  dispose  of  all  insurable  interests  in  the  insured  property, 
or  if  the  premises  hereby  insured  shall  remain  vacant  and  unoccupied  for  more 
than  thirty  days  without  the  assent  of  the  company,  or  if  the  subject  of  the 
insurance  be  a  manufacturing  establishment  and  it  be  operated  in  whole  or  in 
part  at  night  later  than  ten  o'clock,  or  if  it  cease  to  be  operated  for  more  than 
twenty  consecutive  days  without  permission  in  writing  endorsed  hereon,  or  if 
this  policy  be  assigned  before  a  loss  without  the  assent  of  the  insurer,  or  without 
such  assent  illuminating  gas  or  vapor  be  generated  in  the  described  building  (or 
adjacent  thereto)  for  use  therein,  or  if  without  the  assent  of  the  insurer  there 
be  kept  on  the  above-described  premises  dynamite,  gunpowder  exceeding  twenty- 
five  pounds  in  quantity,  naphtha,  nitro-glycerine  or  other  explosives,  or  pe- 
troleum or  any  of  its  products  of  greater  inflammability  than  gasoline  or  kero- 
sene oil  of  lawful  fire  test  (which  gasoline  and  kerosene  may  be  kept  and  used 
for  lights  and  usual  domestic  purposes)  and  kerosene  may  be  kept  for  sale  ac- 
cording to  law,  but  in  quantities  not  exceeding  five  barrels,  provided  it  be  drawn 
and  lights  filled  by  daylight  or  at  a  distance  not  less  than  ten  feet  from  artificial 
light. 

If  the  insured  property  shall  be  exposed  to  loss  or  damage  by  fire  the  insured 
shall  make  all  reasonable  exertions  to  save  and  protect  the  same. 

In  case  of  any  loss  or  damage  under  this  policy  the  insured  shall  promptly 
give  notice  of  such  loss,  and  within  sixty  days  from  the  time  of  the  oceurrenco 
of  the  fire  he  shall  make  a  statement  in  writing,  sign  and  swear  to  the  same, 
and  render  it  to  the  company,  setting  forth  substantially  the  property  destroyed 
or  damaged  and  a  statement  or  estimate  of  the  amount  of  his  loss  (except  in  case 
of  total  loss  on  buildings  where  the  fire  occurs  without  criminal  fault  on  the 
part  of  the  insured,  or  his  assigns,  in  which  case  the  value  on  the  buildings  need 
not  be  stated),  the  interest  of  the  insured  therein,  all  other  insurance  thereon, 
the  purpose  for  which  the  building  insured  or  containing  the  property  insured 
was  used,  and  bj'  whom  occupied,  and  the  time  and  manner  in  which  the  fire 
originated  as  far  as  known  to  the  insured.  The  company  may  also  examine 
the  vouchers,  books  and  accounts  of  the  insured  and  make  extracts  from  tht. 
Bame.     Should  proof  of  loss  not  be  furnished  within  six  months  from  the  date 


CHAP.  II  ]      THE   SOUTH    DAKOTA   STANDARD    FIRE    POLICY  751 

of  loss  this  policy  shall  be  void,  unless  such  proof  of  loss  snail  have  been 
■waived. 

In  case  of  any  loss  or  damage  the  company,  within  sixty  days  after  the  in- 
sured shall  have  submitted  the  statement  as  hereinbefore  provided,  shall  either 
pay  the  amount  for  which  it  shall  be  liable,  which  amount,  if  not  agreed  upon 
or  determined  by  the  provisions  of  the  policy,  shall  be  ascertained  by  award 
of  appraisers  as  hereafter  provided,  or  sliall  replace  the  property  with  other 
of  the  same  kind  and  quality  (except  in  case  of  total  loss  of  buildings  as  afore- 
said where  the  amount  of  loss  is  fixed),  or  it  may  within  fifteen  days  after  such 
statement  is  submitted  notify  the  insured  of  its  intention  to  repair  the  premises 
or  any  portion  thereof  separately  insured  by  this  policy  and  shall  thereupon 
enter  upon  said  premises  and  proceed  to  repair  the  same  with  reasonable  ex- 
pedition. It  is  moreover  understood  that  there  can  be  no  abandonment  of  the 
property  insured  to  the  company,  and  that  the  company  shall  not  in  any  case 
be  liable  for  more  than  the  sum  insured,  with  interest  thereon  from  the  time 
when  the  loss  shall  become  payable  as  above  provided.  It  shall  be  optional, 
however,  with  the  company  to  take  all  or  any  part  of  the  articles  of  personal 
property  injured  or  damaged  at  the  actual  or  appraised  sound  value  thereof 
without  deduction  for  damage.  If  there  be  any  other  insurance  on  the  property 
insured,  whether  prior  or  subsequent,  the  insured  shall  recover  on  this  policy 
no  greater  proportion  of  loss  sustained  (except  in  case  of  total  loss  on  buildings) 
than  the  sum  hereby  insured  bears  to  the  whole  amount  of  insurance  thereon. 

Except  in  cases  of  loss  where  the  amount  thereof  is  fixed,  as  hereinbefore 
provided,  in  the  event  of  disagreement  as  to  the  amount  of  loss,  the  same  shall, 
as  above  provided,  be  ascertained  by  two  competent  and  disinterested  ap- 
praisers, the  insured  and  this  company  each  selecting  one,  and  the  two  chosen 
shall  select  a  competent  and  disinterested  umpire;  the  appraisers  together  shall 
then  estimate  and  appraise  the  loss,  stating  separately  sound  value  and  damage, 
and,  failing  to  agree,  shall  submit  their  difference  to  the  umpire;  and  the  award 
in  writing  of  any  tw^o  shall  determine  the  amount  of  such  loss;  the  parties  thereto 
shall  pay  the  appraisers  respectively  selected  by  them  and  shall  bear  equally 
the  expenses  of  the  appraisal  and  umpire. 

If  this  company  shall  claim  that  the  fire  was  caused  by  the  act  or  neglect  of 
any  third  person  or  corporation,  private  or  municipal,  this  company  shall,  on 
payment  of  the  loss,  be  subrogated  to  the  extent  of  such  payment  to  all  right 
of  recovery  by  the  insured  for  loss  resulting  therefrom,  and  such  right  shall  be 
assigned  to  this  company  by  the  insured  on  receiving  such  payment. 

Whenever  in  this  policy  the  word  "insured"  occurs,  it  shall  be  held  to  include 
the  legal  representative  of  the  insured,  and  whenever  the  word  "loss"  occurs, 
it  shall  be  deemed  the  equivalent  of  "loss  or  damage." 

If  this  policy  shall  be  made  payable  to  a  mortgagee  or  trustee  of  the  insured 
real  estate,  no  act  or  default  of  any  person  other  than  such  mortgagee  or  his 
agents,  or  those  claiming  under  him,  shall  affect  such  mortgagee's  or  trustee's 
rights  to  recover  in  case  of  loss  on  such  real  estate.  Provided,  that  such  mort- 
gagee or  trustee  shall,  on  demand,  pay  according  to  the  customary  scale  of 
vates  for  any  increase  of  risk  not  paid  for  by  the  insured.  And  in  case  this  policy 
shall  have  been  issued  to  the  owner  of  the  insured  property  with  the  loss  pay- 
able to  a  mortgagee,  and  the  owner  shall  have  done  any  act  voiding  the  policy 
as  herein  provided,  or  the  policy  shall  have  been  cancelled  so  that  the  com- 
pany is  not  liable  to  him  in  any  event,  then  the  mortgagee,  upon  payment  to 


"752  APPENDIX   OF   FORMS  [CHAP.  II 

him  of  the  full  amount  secured  by  such  mortgage,  shall  assign  to  the  company 
or  companies  making  such  payment  the  mortgage,  together  with  the  note  or 

debt  secured  thereby.  ,    ,      .  .      u 

This  policy  may  be  cancelled  at  any  time  at  the  request  of  the  msured,  who 
shall  thereupon  be  entitled  to  a  return  of  the  portion  of  the  above  premium  re- 
maining after  deducting  the  customaiy  short  rates  for  the  time  this  policy  shall 
have  been  in  force. 

The  company  also  reserves  the  right  to  cancel  this  policy  as  to  all  risks  subse- 
quent to  the  expiration  of  five  days  after  the  giving  of  such  notice  in  writing 
to  the  insured  and  to  any  mortgagee  or  trustee  to  wliom  this  policy  is  made 
payable,  and  tendering  to  the  insured  the  ratable  proportion  of  the  premium. 

Any  person  who  solicits  insurance  or  issues  policies  of  insurance,  or  procures 
applications  therefor,  shall  be  held  to  be,  and  considered,  the  general  agent  of 
the  insurer  issuing  the  policy  or  making  a  renewal  thereof,  except  as  to  proof 
of  loss  and  adjustment  thereof,  and  neither  the  application  of  the  insured  nor 
the  by-laws  of  the  company  shall  be  considered  as  a  warranty  or  a  part  of  the 
contract  of  insurance. 

It  shall  be  the  duty  of  the  insurer,  in  order  to  avail  himself  of  any  provision 
in  this  policy  rendering  it  void,  to  promptly  cancel  the  policy  as  provided  herein 
upon  having  or  obtaining  notice  or  knowledge  of  the  existence  of  any  facts  or 
circumstances  which  would,  according  to  the  terms  of  the  policy,  render  it  void; 
otherwise  it  will  be  deemed  to  have  waived  such  provision  or  provisions  void- 
ing the  policy.  Provided,  that  if  the  grounds  for  cancellation  under  the  last 
clause  shall  be  distinctly  specified  in  the  written  notice,  such  cancellation  may 
be  effected  upon  twenty-four  hours'  notice  to  the  insured;  and  actual  notice  to, 
or  the  knowledge  of,  any  agent  of  the  company  as  above  mentioned  shall  be 
deemed  notice  to,  and  knowledge  of,  the  company. 

In  witness  whereof,  etc. 

45 

The  Wisconsin  Standard  Fire  Policy.    See  §  SS7 

In  consideration   of   the   stipulations   herein   named   and   of dollars 

premium  does  insure for  the  term  of from  the day  of 

,  19.  . ,  at  noon,  to  the day  of ,  19.  . ,  at  noon,  against 

all  direct  loss  or  damage  by  fire  except  as  hereinafter  provided,  to  an  amount 

not  exceeding dollars,  to  the  following  described  property  while  located 

and  contained  as  described  herein,  and  not  elsewhere,  to  wit: 

This  policy  is  made  and  accepted  subject  to  the  following  stipulations  and 
conditions,  together  with  such  other  provisions,  agreements,  or  conditions  as 
may  be  endorsed  hereon  or  added  hereto,  and  no  officer,  agent,  or  other  repre- 
sentative of  the  company  shall  have  power  to  waive  any  provision  or  condition 
of  this  policy  except  such  as  by  the  terms  of  this  policy  may  be  the  subject  of 
agreement  endorsed  hereon  or  added  hereto,  and  as  to  such  provisions  and  con- 
ditions no  officer,  agent,  or  representative  shall  have  such  power  or  be  deemed 
or  held  to  have  waived  such  provisions  or  conditions  unless  such  waiver,  if  any, 
shall  be  written  upon  or  attached  hereto,  nor  shall  any  privilege  or  permission 
affecting  the  insurance  under  this  policy  exist  or  be  claimed  by  the  insured  un- 
leaR  so  written  or  attachpd.     Up  to  the  time  of  the  delivery  of  the  policy  to  as* 


CHAP.  II  ]  THE   WISCONSIN   STANDARD   FIRE   POLICY  753 

sured.  in  all  transactions  relating  to  this  policy  or  to  the  property  herein  insured, 
between  the  assured  and  any  agent  of  the  company,  knowledge  of  the  agent  shall 
be  knowledge  of  the  company;  and  in  all  transactions  relating  to  the  subject  of 
insurance,  between  the  insured  and  any  agent  of  the  company  after  loss,  knowl- 
edge of  the  agent  shall  be  knowledge  of  the  company. 

In  witness  whereof,  etc. 

Except  when  otherwise  provided  by  statute,  this  company  shall  not  be  liable 
beyond  the  actual  cash  value  of  the  property  at  the  time  any  loss  or  damage 
occurs,  and  the  loss  or  damage  shall  be  ascertained  or  estimated  according  to 
such  actual  cash  value,  with  proper  deduction  for  depreciation  however  caused, 
and  shall  in  no  event  exceed  what  it  would  then  cost  the  insured  to  repair  oi- 
replace  the  same  with  material  of  like  kind  and  quality;  said  ascertainment  or 
estimate  shall  be  made  by  the  insured  and  this  company,  or,  if  they  differ,  theii 
by  appraisers,  as  hereinafter  provided;  and,  the  amount  of  loss  or  damage  having 
been  thus  determined,  the  sum  for  which  this  company  is  liable  pursuant  to 
this  policy  shall  be  payable  sixty  days  after  due  notice  and  proof  of  the  loss 
have  been  received  by  this  company  in  accordance  with  the  terms  of  this  policy. 
It  shall  be  optional,  however,  with  this  company  to  take  all,  or  any  part,  of  the 
articles  at  such  ascertained  or  appraised  value,  and  also  to  repair,  rebuild,  or 
replace  the  property  lost  or  damaged  with  other  of  like  kind  and  quality  within 
a  reasonable  time  on  giving  notice,  within  thirty  days  after  the  receipt  of  the 
proof  herein  required,  of  its  intention  so  to  do;  but  there  can  be  no  abandon- 
ment to  this  company  of  the  property  described. 

This  entire  policy  shall  be  void  if  the  insured  has  concealed  or  misrepresented, 
in  writing  or  otherwise,  any  material  fact  or  circumstance  concerning  this  insur- 
ance or  the  subject  thereof;  or  if  the  interest  of  the  insured  in  the  property  be 
not  truly  stated  herein;  or  in  case  of  any  fraud  or  false  swearing  by  the  insured 
touching  any  matter  relating  to  this  insurance  or  the  subject  thereof,  whether 
before  or  after  a  loss. 

This  entire  policy,  unless  otherwise  provided  by  agreement  indorsed  hereon 
or  added  hereto,  shall  be  void  if  the  insured  now  has  or  shall  hereafter  make  or 
procure  any  other  contract  of  insurance,  whether  valid  or  not,  on  property  cov- 
ered in  whole  or  in  part  by  this  policy,  or  if  the  subject  of  insurance  be  a  manu- 
facturing establishment  and  it  be  operated  in  whole  or  in  part  at  night  later 
than  ten  o'clock,  or  if  it  cease  to  be  operated  for  more  than  ten  consecutive  days; 
or  if  the  hazard  be  increased  by  any  means  within  the  control  or  knowledge  of 
the  insured,  or  if  mechanics  be  employed  in  building,  altering,  or  repairing  the 
within  described  premises  for  more  than  fifteen  days  at  any  one  time;  or  if  the 
interest  of  the  insured  be  other  than  unconditional  and  sole  ownership;  or  if 
the  subject  of  insurance  be  a  building  on  ground  not  owned  by  the  insured  in 
fee-simple;  or  if  the  subject  of  insurance  be  personal  property  and  be  or  become 
encumbered  by  a  chattel  mortgage;  or  if,  with  the  knowledge  of  the  insured, 
foreclosure  proceedings  be  commenced  or  notice  given  of  sale  of  any  property 
covered  by  this  policy  by  virtue  of  any  mortgage  or  trust  deed;  or  if  any  change 
other  than  by  the  death  of  an  insured,  take  place  in  the  interest,  title,  or  posses- 
sion of  the  subject  of  insurance  (except  change  of  occupants  without  increase 
of  hazard)  whether  by  legal  process  or  judgment  or  by  voluntary  act  of  the 
insured,  or  otherwise;  or  if  this  policy  be  assigned  before  a  loss;  or  if  illuminating 
gas  or  vapor  be  generated  in  the  described  building  (or  adjacent  thereto)  for 
use  therein;  or  if  (any  usage  or  custom  of  trade  or  manufacture  to  the  contrary 
48 


754 


APPENDIX   OF   FORMS  [CHAP.  H 


notwithstanding)  there  be  kept,  used,  or  allowed  on  the  above  described  prem- 
ises, benzine,  benzole,  dynamite,  ether,  fireworks,  gasoline,  Greek  fire,  gun- 
powder exceeding  twenty-five  pounds  in  quantity,  naphtha,  nitro-glycerine  or 
other  explosives,  phosphorus,  or  petroleum  or  any  of  its  products  of  greater 
inflammability  than  kerosene  oil  of  the  Wisconsin  standard  (which  last  may 
be  used  for  lights  and  kept  for  sale  according  to  law  but  in  qua,ntities  not  ex- 
ceeding five  barrels,  provided  it  be  drawn  and  lamps  filled  by  daylight  or  at  a 
distance  not  less  than  ten  feet  from  artificial  light);  or  if  a  building  herein  de- 
scribed, whether  intended  for  occupancy  by  owner  or  tenant,  be  or  become 
vacant  or  unoccupied  and  so  remain  for  ten  days  and  continuing  until  the  time 

of  the  fire. 

This  company  shall  not  be  liable  for  loss  caused,  directly  or  indirectly,  by 
invasion,  commotion,  riot,  insurrection,  civil  war,  or  military  or  usurped  power, 
or  by  order  of  any  civil  authority;  or  by  theft;  or  by  neglect  of  the  insured  to 
use  all  reasonable  means  to  save  and  preserve  the  property  at  and  after  a  fire 
or  when  the  property  is  endangered  by  fire  in  neighboring  premises;  or  (unless 
fire  ensue,  and,  in  that  event,  for  the  damage  by  fire  only)  by  explosion  of  any 
kind.  This  policy  shall  cover  any  direct  loss  or  damage  caused  by  lightning 
(meaning  thereby  the  commonly  accepted  use  of  the  term  lightning,  and  in  no 
case  to  include  loss  or  damage  by  cyclone,  tornado,  or  windstorm),  not  exceed- 
ing the  sum  insured,  nor  the  interest  of  the  insured  in  the  property  and  subject 
in  all  other  respects  to  the  terms  and  conditions  of  this  policy.  If  there  shall 
be  any  other  insurance  on  said  property  this  company  shall  be  liable  only  pro 
rata  with  such  other  insurance  for  any  direct  loss  by  lightning,  whether  such 
other  insurance  be  against  direct  loss  by  lightning  or  not. 

If  a  building  or  any  part  thereof  fall,  except  as  a  result  of  fire,  all  insurance 
by  this  policy  on  such  building  or  its  contents  shall  immediately  cease. 

This  company  shall  not  be  liable  for  loss  to  accounts,  bills,  currency,  deeds, 
evidences  of  debt,  money,  notes,  or  securities;  nor,  unless  liability  is  specifically 
assumed  hereon,  for  loss  to  awnings,  bullion,  casts,  curiosities,  drawings,  dies, 
implements,  jewels,  manuscripts,  medals,  models,  patterns,  pictures,  scientific 
apparatus,  signs,  store  or  office  furniture  or  fixtures,  sculpture,  tools,  or  prop- 
erty held  on  storage  or  for  repairs;  nor,  beyond  the  actual  value  destroyed  by 
fire,  for  loss  occasioned  by  ordinance  or  law  regulating  construction  or  repair 
of  buildings,  or  by  interruption  of  business,  manufacturing  processes,  or  other- 
wise; nor  for  any  greater  proportion  of  the  value  of  plate  glass,  frescoes,  and 
decorations  than  that  which  this  policy  shall  bear  to  the  whole  insurance  on  the 
building  described. 

If  an  application,  survey,  plan  or  description  of  property  be  referred  to  in 
this  policy  it  shall  be  a  part  of  this  contract  and  a  warranty  by  the  insured. 

This  policy  may  by  a  renewal  be  continued  under  the  original  stipulations, 
in  consideration  of  premium  for  the  renewed  term,  provided  that  any  increase 
of  hazard  must  be  made  kno'WTi  to  this  company  at  the  time  of  renewal  or  this 
policy  shall  be  void. 

This  policy  shall  be  cancelled  at  any  time  at  the  request  of  the  insured;  or 
by  the  company  by  giving  five  days'  notice  of  such  cancellation.  Unless  during 
a  time  in  which  the  hazard  shall  be  increased  solely  by  the  act  of  God,  and  in 
euch  case  and  during  such  time  of  such  increase  of  hazard  the  company  shall 
not  cancel  this  policy  except  upon  sixty  days'  notice  of  such  cancellation  without 
the  consent  of  the  assured.     If  this  policy  sh.nll  bp  cincelled  as  hereinbefore 


CHAP.  II  ]  THE   WISCONSIN   STANDARD   FIRE   POLICY  755 

provided,  or  become  void  or  cease,  the  premium  having  been  actually  paid,  the 
unearned  portion  shall  be  returned  on  surrender  of  this  policy  or  last  renewal, 
this  company  retaining  the  customary  short  rate;  except  that  when  this  policy 
is  cancelled  by  this  company  by  giving  notice  it  shall  retain  only  the  pro  rata 
premium. 

If,  with  the  consent  of  this  company,  an  interest  under  this  policy  shall  exist 
in  favor  of  a  mortgagee  or  of  any  person  or  corporation  having  an  interest  in  the 
subject  of  insurance  other  than  the  interest  of  the  insured  as  described  herein, 
the  conditions  hereinbefore  contained  shall  apply  in  the  manner  expressed  in 
such  provisions  and  conditions  of  insurance  relating  to  such  interest  as  shall  be 
written  upon,  attached,  or  appended  hereto. 

If  property  covered  by  this  policy  is  so  endangered  by  fire  as  to  require  re- 
moval to  a  place  of  safety,  and  is  so  removed,  that  part  of  this  policy  in  excess 
of  its  proportion  of  any  loss  and  of  the  value  of  property  remaining  in  the  original 
location,  shall,  for  the  ensuing  five  days  only,  cover  the  property  so  removed 
in  the  new  location;  if  removed  to  more  than  one  location,  such  excess  of  this 
policy  shall  cover  therein  for  such  five  days  in  the  proportion  that  the  value 
in  any  one  such  new  location  bears  to  the  value  in  all  such  new  locations;  but 
this  company  shall  not,  in  any  case  of  removal,  whether  to  one  or  more  locations, 
be  liable  beyond  the  proportion  that  the  amount  hereby  insured  shall  bear  to 
the  total  insurance  on  the  whole  property  at  the  time  of  fire,  whether  the  same 
cover  in  new  location  or  not. 

If  fire  occur  the  insured  shall  give  immediate  notice  of  any  loss  thereby  in 
writing  to  this  company,  protect  the  property  from  further  damage,  forthwith 
separate  the  damaged  and  undamaged  personal  property,  put  it  in  the  best 
possible  order,  make  a  complete  inventory  of  the  same,  stating  the  quantity 
and  cost  of  each  article  and  the  amount  claimed  thereon;  and,  within  sixty 
days  after  the  fire,  unless  such  time  is  extended  by  agreement  with  the  com- 
pany through  the  local  agent,  or  any  other  authorized  agent  or  any  adjuster 
acting  for  such  company  concerning  such  loss,  shall  render  a  statement  to  this 
company,  signed  and  sworn  to  by  said  insured,  stating  the  knowledge  and  belief 
of  the  insured  as  to  the  time  and  origin  of  the  fire;  the  interest  of  the  insured 
and  of  all  others  in  the  property;  the  cash  value  of  each  item  thereof  and  the 
amount  of  loss  thereon;  all  encumbrances  thereon;  all  other  insurance,  whether 
valid  or  not,  covering  any  of  said  property;  and  a  copy  of  all  the  descriptions 
and  schedules  in  all  policies,  any  changes  in  the  title,  use,  occupation,  location, 
possession,  or  exposures  of  said  property  since  the  issuing  of  this  policy,  by 
whom  and  for  what  purpose  any  building  herein  described  and  the  several  parts 
thereof  were  occupied  at  the  time  of  fire;  and  shall  furnish,  if  required,  verified 
plans  and  specifications  of  any  building,  fixtures,  or  machinery  destroyed  or 
damaged;  and  shall  also,  if  required,  furnish  a  certificate  of  a  magistrate  or 
notary  public  residing  in  the  county  where  the  insured  property  is  located  (not 
interested  in  the  claim  as  a  creditor  or  otherwise  nor  related  to  the  insured) 
stating  that  he  has  examined  the  circumstances  and  believes  the  insured  has 
honestly  sustained  loss  to  the  amount  that  such  magistrate  or  notary  public 
shall  certify. 

The  insured,  as  often  as  required,  shall  exhibit  to  any  person  designated  by 
this  company  all  that  remains  of  any  property  herein  described,  and  submit  to 
examinations,  all  under  oath,  by  any  person  named  by  this  company,  and  sub- 
scribe the  same;  and  as  often  as  required,  shall  produce  for  examination  aU 


756  APPENDIX   OF   FORMS  [cHAP.  II 

books  of  account,  bills,  invoices,  and  other  vouchers,  or  certified  copies  thereof 
if  originals  be  lost,  at  such  reasonable  place  as  may  be  designated  by  this  com- 
pany or  its  representative,  and  shall  permit  extracts  and  copies  thereof  to  be 

made. 

In  the  event  of  disagreement  in  the  amount  of  loss  the  same  shall,  as  above 
provided,  be  ascertained  by  two  competent  and  disinterested  api; raisers,  who 
shall  be  residents  of  this  state  unless  otherwise  agreed  by  the  parties  thereto; 
the  insured  and  this  company  each  selecting  one,  within  thirty-five  days  after 
the  mailing  of  proof  of  loss  to  said  company,  as  herein  stated,  and  in  case  either 
party  fails  to  select  an  appraiser  within  such  time  the  other  appraiser  and  the 
umpire  selected,  as  herein  provided,  may  act  as  a  board  of  appraisers,  and  what- 
ever award  they  shall  find  snail  be  as  binding  as  though  the  two  appraisers  had 
been  chosen;  and  the  two  so  chosen  shall  first  select  a  competent  and  disin- 
terested umpire,  provided  that  if  after  five  days  the  two  appraisers  cannot 
agree  on  such  an  umpire,  the  presiding  judge  of  the  circuit  court  of  the  county 
wherein  the  loss  occurs  may  appoint  such  an  umpire,  upon  application  of  either 
party  in  writing  by  giving  five  days'  notice  thereof  in  writing  to  the  other  party. 
Unless  within  thirty  days  after  proof  of  the  loss  has  been  mailed  to  the  company, 
either  party,  the  assured  or  the  company,  shall  have  notified  the  other  in  writing 
that  such  party  demands  an  appraisal,  such  right  of  an  appraisal  shall  be  waived; 
the  appraisers  together  shall  then  estimate  and  appraise  the  loss,  stating  sepa- 
rately sound  value  and  damage,  and,  failing  to  agree,  shall  submit  their  differ- 
ences to  the  umpire;  and  the  award  in  writing  of  any  two  shall  determine  the 
amount  of  such  loss;  the  parties  thereto  shall  pay  the  appraiser  respectively 
selected  by  them  and  shall  bear  equally  the  expenses  of  the  appraisal  and  um- 
pire. 

This  company  shall  not  be  held  to  have  waived,  except  as  above  expressly 
provided  for,  any  provision  or  condition  of  this  policy  or  any  forfeiture  thereof 
by  any  requirement,  act,  or  proceeding  on  its  part  relating  to  the  appraisal  or 
to  any  examination  herein  provided  for;  and  the  loss  shall  become  payable  sixty 
days  after  the  notice  and  proof  of  the  loss  herein  required  have  been  received 
by  this  company. 

This  company  shall  not  be  liable  under  this  policy  for  a  greater  proportion 
of  any  loss  on  the  described  property,  or  for  loss  by  and  expense  of  removal 
from  premises  endangered  by  fire,  than  the  amount  hereby  insured  shall  bear 
to  the  whole  insurance,  whether  valid  or  not,  or  by  solvent  or  insolvent  insurers, 
covering  such  property,  and  the  extent  of  the  application  of  the  insurance  under 
this  policy  or  of  the  contribution  to  be  made  by  this  company  in  case  of  loss,  may 
be  provided  for  by  agreement  or  condition  written  hereon  or  attached  or  appended 
hereto.     Liability  for  re-insurance  shall  be  as  specifically  agreed  hereon. 

If  this  company  shall  claim  that  the  fire  was  caused  by  the  act  or  neglect  of 
any  person  or  corpoiation,  private  or  municipal,  this  company  shall,  on  pay- 
ment of  the  loss,  be  subrogated  to  the  extent  of  such  payment  to  all  right  of 
recovery  by  the  insured  for  ths  loss  resulting  therefrom,  and  .such  right  shall  be 
assigned  to  this  company  by  the  insured  on  receiving  such  payment. 

Wherever  in  this  policy  the  word  "insured"  occurs,  it  shall  be  held  to  in- 
clude the  legal  representative  of  the  insured,  and  wherever  the  word  "loss" 
occurs,  it  shall  be  deemed  the  equivalent  of  "loss  or  damage." 

If  this  policy  be  made  by  a  mutual  or  other  company  having  special  regula- 
tions lawfully  applicable  to  its  organization,  membership,  policies  or  contracts 


CHAP.  II  ]  APPLICATION   FOR   LIFE    INSURANCE  757 

of  insurance,  such  regulations  shall  apply  to  and  form  a  part  of  this  policy  as 
the  same  may  be  written  or  printed  upon,  attached,  or  appended  hereto. 

46 

A  Form  of  Application  for  Life  Insurance.    See  §  77 

I  hereby  apply  for  an  assurance  of  $ on  the plan,  premiums 

payable with    the Life    Insurance    Company,    on    the    life    of 

,   born   at ,   on ,    18.  . ,   at   present   and    for 

years  resident  of I  hereby  warrant  that  he  is  not  intemperate  in  the 

use  of  stimulants  or  narcotics.  I  agree  that  the  answers  given  herewith  to  the 
questions  of  the  Agent  and  Examiner,  which  I  declare  and  warrant  to  be  true, 
shall  be  the  basis  of  my  contract  with  the  company,  and  that  such  contract 
shall  at  all  times  and  places  be  held  and  construed  to  have  been  made  in  the 

City  of I  also  agree  that  if  within  two  years  from  this  date,  the  Insured 

shall,  without  the  written  consent  of  the  company,  reside  or  travel  elsewhere 
than  in  or  to  the  United  States,  Canada,  or  Europe;  or  shall  within  such  period 
and  without  such  consent,  be  personally  engaged  in  blasting,  mining,  submarine 
operations,  or  in  the  making  of  explosives,  or  in  service  on  any  railway  train,  or 
on  a  steam  or  sailing  vessel,  or  in  naval  or  army  service  in  times  of  war;  the 
policy  hereby  applied  for  shall  thereupon  cease  and  determine. 

Dated    at this day   of ,    18.  . . 

Witness Signature 

Questions  to  be  asked  by  the  Agent,  and  answered  by  the  person  to  be  insured: 

1.  A  What  is  your  full  name?     b  Are  you  married? 

2.  What  is  your  occupation?     (Give  kind  of  business  and  position  held.) 

3.  Are  you  in  good  health? 

4.  A  For  whose  benefit  is  the  proposed  insurance?     b  How  related  to  you? 

5.  What  is  the  total  insurance  now  on  your  life? 

6.  In  what  companies  and  for  what  amounts? 

7.  Have  you  any  application  for  insurance  now  pending?    In  what  companies? 

8.  A  Have  you  ever  applied  to  any  agent  or  sought  insurance  in  any  company 
which  either  postponed  or  refused  to  issue  a  Policy?  b  State  companies  and 
cause. 

9.  Are  you  engaged  in  or  connected  with  the  manufacture  or  sale  of  Malt  or 
Spirituous  Liquors? 

The  answers  to  the  following  questions  must  be  written  by  one  of  the  Com- 
pany's Examiners: 

10.  Have  you  now  any  disease  or  disorder?     If  so,  what? 

11.  A  For  what  have  you  sought  medical  advice  during  the  past  seven  years? 
B  Dates?     c  Duration?     d  Physicians  consulted? 

12.  A  Have  you  had  any  personal  injury  or  accident?  b  What?  c  When? 
D  Result? 

13.  A  Have  you  had  Rheumatism?  b  Number  of  attacks?  c  Dates?  D  Dura- 
tion?    E  Severity? 

14.  A  Are  you  or  have  you  been  subject  to  Dyspepsia?  b  Dates?  c  Dura- 
tion?    D  Severity? 

15.  Have  you  ever  had  any  of  the  following? 


758 


APPENDIX   OF   FORMS 


[chap.  II 


Calculus  or  gravel,  .     . 

Difficulty  in  urinating,  .  . 
Swelling  of  feet  or  face,     . 

Dropsy, 

Palpitation, 

Disease  of  heart  or  brain,  . 
Loss  of  consciousness,  .  . 
Habitual  or  chronic  cough, 

Consumption, 

Bronchitis, 

Asthma, 

Spitting  of  blood,  .  ,  . 
Bleeding  piles,         .... 

Pleurisy,         

Varicose  veins,  .  .  .  . 
Paralysis  or  palsy,     .     .     . 

Apoplexy, 

Nervous  exhaustion,        .     . 

Fits, 

Sunstroke, 

16.  Family  record. 


Dizziness  or  short  breath. 
Pneumonia,        .... 

Diabetes,       

Delirium  Tremens,      .     . 

Vertigo, 

Insanity,  .  .  .-  i  . 
Liver  complaint,     .     .     . 

Jaundice, 

CoUc 

Dysentery, 

Diarrhoea  (chronic),  .  . 
Disease  of  spine,     .     .     . 

Gout, 

Tumors  of  any  kind,  . 
Swelling  of  glands,  .  . 
Ulcers  or  open  sores,     . 

Fistula, 

Discharge  from  the  ear, 

Rupture,        

Difficulty  in  swallowing, 


Is  your  father  living?.  . 
Is  your  mother  living?. 


How  many  brothers  living?. 
(If  none,  so  state.) 


How  many  sisters  living?. 
(If  none,  so  state.) 
Father's  father  living?.  . .  . 
Father's  mother  living?. .  . 
Mother's  father  living?.  . . 
Mother's  mother  living?.  . 


Age 


Condition  of  Health 


Age 

Disease  which  Caused 
Death 

Duration 

Previous 
Health 

Is  your  father  dead? 

Is  your  mother  dead? 

How  many  brothers  dead?  J 
(If  none,  so  state.)        ( 

How  many  sisters  dead?.  .  J 

(If  none,  so  state.)        ( 

Father's  father  dead? 

Father's  mother  dead? 

Mother's  father  dead? 

Mother's  mother  dead? 

CHAP.  II  ]  A  FORAI   OF   POLICY    OF   LIFE  INSURANCE  759 

17.  Have  any  two  members  of  the  family,  grandparents  included,  had  con- 
sumption, cancer,  paralysis  or  apoplexy,  disease  of  heart,  disease  of  kidneys? 

Signed  this day  of ,  19.  . . 

{Party  to  be  insured  sign  here) 

47 
A  Form  of  Policy  of  Life  Insurance.    See  §  SS5 

This  policy  witnesseth  that  the Life  Insurance  Company,  in  con- 
sideration of  the  statements  and  agreements  in  the  application  for  this  Policy 
which  are  herebj-^  made  a  part  of  this  contract  and  of  the  sum  of dol- 
lars to  it  in  hand  paid  by and  of  the  annual  premium  of dollars 

to  be  paid  at  or  before  twelve  o'clock,  u.,  on  the day  of in 

every  year  during  the  continuance  of  this  policy,  does  insure  the  life  of 

in  the  amount  of dollars,  for  the  term  of  life,  payable  to .his 

executors,  administrators  or  assigns,  at  its  office  in  the  City  of ,  upon 

due  and  satisfactory  proof  of  interest  and  of  the  death  of  the  said  insured,  de- 
ducting therefrom  all  indebtedness  of  the  party  to  the  company,  together  with 
the  balance,  if  any,  of  the  then  current  year's  premium. 

Provided,  that  in  case  the  said  premiums  shall  not  be  paid  on  or  before  the 
several  days  hereinbefore  mentioned  for  the  payment  thereof,  at  the  office  of 

the  company  in  the  City  of ,  or  to  agents  when  they  produce  receipts 

signed  by  the  President  or  Treasurer,  then,  and  in  every  such  case,  this  policy 
shall  cease  and  determine,  subject  to  the  provisions  of  the  company's  non- 
forfeiture SYSTEM  as  indorsed  hereon,  with  accompanying  table. 

This  policy  does  not  take  effect  until  the  first  premium  shall  have  been  actually 
paid;  nor  are  agents  authorized  to  make,  alter  or  discharge  this  or  any  other 
contract  in  relation  to  the  matter  of  this  insurance,  or  to  waive  any  forfeiture 
hereof,  or  to  grant  permits,  or  to  receive  for  the  cash  due  for  premiums  arv- 
thing  but  cash.  Any  error  made  in  understating  the  age  of  the  insured  will 
be  adjusted  by  paying  such  amount  as  the  premiums  paid  would  purchase  at 
the  table  rate. 

No  assignment  of  this  policy  shall  take  effect  until  written  notice  thereof  shall 
be  given  to  the  company. 

This  policy,  after  two  years,  will  be  incontestable,  except  for  fraud  or  non- 
payment of  premium. 

In  Witness  Whereof,  the  said Life  Insurance  Company  has,  by  its 

President  and  Secretary,  signed  and  delivered  this  contract,  at  the  City  of 
,  this day  of ,  one  thousand  nine    hundred  and 


, ,  Secretary.  ,  President. 


non-forfeiture  provisions 

When  after  two  full  annual  premiums  shall  have  been  paid  on  this  policy 
it  shall  cease  or  become  void  solely  by  the  non-payment  of  any  premium  when 
due,  its  entire  net  reserve  by  the  American  Experience  Mortality  and  interest 
at  four  per  cent,  yearly,  less  any  indebtedness  to  the  company  on  this  pohcy, 
shall  be  applied  by  the  company  as  a  single  premium  at  the  company's  rates  pub- 
lished and  in  force  at  this  date,  either,  first,  to  the  purchase  of  non-participating 


700 


APPENDIX   OF   FORMS 


[chap.  II 


term  insurance  for  the  full  amount  insured  by  this  policy,  or,  second,  upon 
the  written  application  by  the  owner  of  this  policy  and  the  surrender  thereof 

to  the  company  at within  three  months  from  such  non-payment  of 

premium,  to  the  purchase  of  a  non-participating  paid-up  policy  payable  at  the 
time  this  policy  would  be  payable  if  continued  in  force.  Both  kinds  of  insur- 
ance aforesaid  will  be  subject  to  the  same  conditions,  except  as  to  payment  of 
premiums,  as  those  of  this  policy.  No  part,  however,  of  such  term  insurance 
shall  bo  due  or  payable  unless  satisfactory  proofs  of  death  be  furnished  to  the 
company  Avithin  one  year  after  death;  and  if  death  shall  occur  within  three  years 
after  such  non-payment  of  premium,  and  during  such  term  of  insurance,  there 
shall  be  deducted  from  the  amount  payable  the  sum  of  all  the  premiums  that 
would  have  become  due  on  this  policy  if  it  had  continued  in  force. 

The  following  table  shows  the  amount  that  the  company  agrees  to  loan  (being 
one-half  of  the  reserA-e)  upon  a  satisfactory  assignment  of  the  policy  as  collateral 
security;  also  the  additional  time  for  which  the  insurance  will  be  continued  in 
full  force  after  lapse  by  non-payment  of  premium;  or  the  value  of  the  policy 
in  paid-up  insurance  upon  surrender  within  three  months  from  date  of  lapse. 

The  figures  given  are  based  upon  the  assumption  that  the  premiums  (less 
current  dividends)  have  been  fully  paid  in  cash.  If  there  be  any  indebtedness 
upon  the  policy,  the  values  as  stated  in  the  table  would  have  to  be  reduced 
proportionally  upon  the  principles  stated  in  the  policy.  The  indebtedness,  if 
any,  may  be  paid  off  in  cash,  in  which  case  the  figures  in  the  table  will  apply: 


Company  will  Loan 

In  Case  of  Lapse  of  Policy 

Number  of 
Years'  Premi- 

Extended  Insurance 

Paid-up  Policy 

Years 

Days 

$ 

$ 

48 


New  York  Standard  Life  Insurance  Polio/ 

ORDINARY  LIFE 

Amount  $ Age Premiums  $ 

In  consideration  of  the annual  premium  of dollars,  and  of 

the  payment  of  a  like  amount  upon  each day  of hereafter  until 

the  death  of  the  Insured, 

Promises  to  pay  at  the  Home  Office  of  the  Company  in upon  receipt  at 

said  Home  Office  of  due  proof  of  the  death  of of ,  County 

of ,  State  of herein  called  the  insured, dollars,  less  any 

indebtedness  hereon  to  the  Company  and  any  unpaid  portion  of  the  premium  for 
the  then  current  policy  year  upon  surrender  of  this  Policy,  properly  receipted, 
to beneficiary with right  of  revocation. 

Change  of  Beneficiary. — When  the  right  of  revocation  has  been  reserved,  or 
in  case  of  the  death  of  any  beneficiary  under  either  a  revocable  or  irrevocable 


CHAP.  Jl  j      NEW    YORK    ISTA.NDAKD    UFE    INSURANCE   POLICY  701 

designation,  the  Insured,  if  there  be  no  existing  assignment  of  the  Policy  made 
as  herein  provided,  may,  while  the  Policy  is  in  force,  designate  a  new  beneficiary 
with  or  without  reserving  right  of  revocation  by  filing  written  notice  thereof  at 
the  Home  Office  of  the  Company,  accompanied  by  the  Policy  for  suitable  endorse- 
ment thereon.  Such  change  shall  take  effect  upon  the  endorsement  of  the  same 
on  the  Policy  by  the  Company.  If  any  beneficiary  shall  die  before  the  Insured 
the  interest  of  such  beneficiary  shall  vest  in  the  Insured. 

Payment  of  Premiums. — The  Company  will  accept  pajTnent  of  premiums  at 
other  times  than  as  stated  above,  as  follows: 

Except  as  herein  provided  the  payment  of  a  premium  or  instalment  thereoi, 
shall  not  maintain  the  Policy  in  force  beyond  the  date  when  the  next  premium 
or  instalment  thereof  is  payable. 

All  premiums  are  payable  in  advance  at  said  Home  Office  or  to  any  agent  of 
the  Company  upon  delivery,  on  or  before  date  due,  of  a  receipt  signed  by  an 
Executive  Officer  (the  Company  must  here  recite  the  titles  of  the  several  Execu- 
tive Officers)  of  the  Company  and  countersigned  by  said  agent. 

A  grace  of  thirty  days  subject  to  an  interest  charge  at  the  rate  of per 

centum  per  annum  shall  be  granted  for  the  payment  of  every  premium  after  the 
first  year  during  which  time  the  insurance  shall  continue  in  force.  If  death  occur 
within  the  days  of  grace  the  unpaid  portion  of  the  premium  for  the  then  current 
Policy  year  shall  be  deducted  from  the  amount  payable  hereunder. 

Conditions. — (The  policy  may  here  jDrovide  for  restrictions  of  liability  by 
reason  of  travel,  occupation,  change  of  residence  and  suicide.  These  restrictions 
must  be  applicable  only  to  cases  where  the  act  of  the  Insured  provided  against 
occurs  within  one  year  after  the  issuance  of  the  Policy.) 

Incontestability. — (The  Policy  shall  here  provide  that  it  shall  be  incontestable, 
except  for  non-payment  of  premiums,  either  from  its  date  or  after  one  or  two 
years  in  the  following  form) : 

This  Policy  shall  be  incontestable,  except  for  non-payment  of  premiums, 

from  its  date. 

If  the  age  of  the  Insured  has  been  misstated,  the  amount  payable  hereimder 
shall  be  such  as  the  premium  paid  would  have  purchased  at  the  correct  age. 

Participation. — The  proportion  of  the  surplus  accruing  upon  this  Policy  shall 
be  ascertained  and  distributed  annually  and  not  otherwise. 

Dividends. — Dividends  at  the  option  of  the  owner  of  this  Policy  shall  on 
the day  of of  each  year  be  either — 

1.  Paid  in  cash;  or, 

2.  Applied  toward  the  payment  of  any  premium  or  premiums;  or, 

3.  Applied  to  the  purchase  of  paid-up  additions  to  the  Policy;  or, 

[Amount  of  insurance  payable  at  death Premiums  payable 

DURING  life Annual  dividend  period.] 

4.  Left  to  accumulate  to  the  credit  of  the  Policy  with  interest  at per 

centum  per  annum  and  payable  at  the,  maturity  of  the  Policy,  but  withdrawable 
on  any  anniversary  of  the  Policy. 

Unless  the  owner  of  this  Policy  shall  elect  otherwise  within  three  months  after 
the  mailing  by  the  Company  of  a  written  notice  requiring  such  election,  the  div- 
idends shall  be  applied  to  purchase  paid-up  additions  to  the  Policy. 

Loans. — The  Company  at  any  time  will  advance  upon  the  sole  security  of  this 

Policy,  at  a  rate  of  interest  not  greater  than per  centum  per  annum,  a 

sum  not  exceeding  the  amount  specified  in  the  table  of  loan  values  herein  set 


7(32 


APPENDIX   OF   FORMS 


[chap.  H 


forth,  deducting  therefrom  all  other  indebtedness  hereon  to  the  Company.  Fail- 
ure to  repay  any  such  advance  or  interest  shall  not  avoid  this  Policy  unless  thfe 
total  indebtedness  hereon  to  the  Company  shall  equal  or  exceed  the  aggregate 

of  all  unpaid  dividends  and  accumulations  and  of per  centum  (not  less 

than  eighty  per  centum)  of  the  net  value  of  the  Policy  and  all  additions  thereto, 
;md  thirty  days'  notice  shall  have  been  given  by  the  Company. 

Assignment. — No  assignment  of  this  Policy  shall  be  binding  upon  the  Company 
unless  it  be  filed  with  the  Company  at  its  said  Home  Office.  The  Company  as- 
mmes  no  responsibility  as  to  the  validity  of  any  assignment. 

Options  on  Surrender  or  Lapse— Aiter  this  Policy  shall  have  been  in  force  three 
full  years  it  may  be  surrendered  by  the  owner  at  any  time  prior  to  any  default 
or  within  three  months  after  any  default.    Thereupon, 

1.  If  there  be  no  indebtedness  hereon  to  the  Company,  the  owner  may  elect 
either  (a)  to  continue  the  insurance  in  force  for  its  face  amount  and  any  outstand- 
ing dividend  additions,  but  without  future  participation,  and  without  the  right 
to  loans;  or,  (b)  to  purchase  non-participating  paid-up  life  insurance  payable 
at  the  same  time  and  on  the  same  conditions  as  this  Policy.  The  periods  for 
which  the  insurance  will  be  continued  and  the  amounts  of  paid-up  life  insurance 
which  will  be  allowed,  exclusive  of  the  application  of  dividend  additions,  are 
shown  in  the  table  of  surrender  values  herein  set  forth. 


TABLE  OF  LOAN  AND  SURRENDER  VALUES 

(At  the  option  of  the  Company  the  following  clause  may  be  inserted) : 
The  loan  and  paid-up  insurance  values  stated  in  the  following  table  apply  to 
a  Policy  for  $1,000.     As  this  contract  is  for  $ ,  the  loan  or  paid-up  in- 
surance available  in  any  year  will  be ,  the  amount  stated  in  the  table  for 

that  year. 

The  period  of  paid-up  continued  insurance  remains  the  same  for  a  Policy  of 
any  amount. 


After 

Policy  Has 

Been   in 

Force 

Loan  Value 

Paid-up  Life  In- 
surance 

Paid-up  Continued  In- 
surance 

Years      Months      Days 

3 

$ 

$ 

Values  for  later  years  will  be  computed  on  the  same  basis  and  be  furnished 
upon  request. 

2.  If  there  be  an  indebtedness  hereon  to  the  Company,  it  shall  be  deducted 
from  the  amount  which  otherwise  would  be  applicable  as  a  surrender  value  to 
the  purchase  of  temporary  insurance  for  the  period  aforesaid,  and  the  owner  may 
elect  either  to  have  the  remainder  applied  (a)  to  continue  the  insurance  in  force 
without  participation  and  without  the  right  to  loans  for  the  face  amount  of  this 
Policy  and  dividend  additions,  less  the  indebtedness,  or  (b)  to  purchase  a  pro- 
portionate amount  of  non-participating  paid-up  life  insurance. 

If  in  the  event  of  any  default  in  the  payment  of  premium  or  otherwise,  after 
the  Policy  shall  have  been  in  force  three  full  years,  the  owner  shall  not  exercise 


CHAP.  II]      NEW   YORK  STANDARD   LIFE   INSURANCE   POLICY 


763 


either  of  said  options  within  three  months  after  such  default,  the  insurance  shall 
be  continued  as  provided  by  option  (a)  in  either  paragraph  (1)  or  (2). 

In  any  case  of  continued  temporary  insurance  under  any  of  the  above  pro- 
visions this  Policy  upon  evidence  satisfactory  to  the  Company  of  insurability  may 
be  reinstated  within  the  first  three  years  of  the  term  for  which  the  insurance  is 
continued  by  payment  of  arrears  of  premiums  and  of  whatever  indebtedness 
hereon  to  the  Company  existed  at  the  date  of  surrender  or  default,  with  interest 
at  a  rate  not  exceeding per  centum  per  annum. 

Modes  of  Settlement. — The  Insured  or  the  owner,  or  the  beneficiary  after  the 
Insured's  death,  in  case  the  Insured  shall  have  no  made  election,  may  by  written 
notice  to  the  Company  at  its  Home  Office,  elect  to  have  the  net  sum  payable 
under  this  Policy  upon  the  death  of  the  Insured  paid  either  in  cash  or  as  follows: 

1.  By  the  payment  of  an  annuity  equal  to per  centum  of  such  net  sum 

payable  at  the  end  of  each  year  during  the  lifetime  of  the  beneficiary,  and  by 
the  payment  upon  the  death  of  the  beneficiary  of  the  said  net  sum,  together  with 
any  accrued  portion  of  the  annuity  for  the  year  then  current,  unless  otherwise 
directed  in  said  notice,  to  the  beneficiary's  legal  representatives  or  assigns. 

2.  By  the  pajonent  of  equal  annual  instalments  for  a  specified  number  of  years, 
the  first  instalment  being  payable  immediately,  in  accordance  with  the  following 
table  for  each  one  thousand  dollars  of  said  net  sum. 

3.  By  the  payment  of  equal  annual  instalments  payable  at  the  beginning  of 
each  year  for  a  fixed  period  of  twenty  years  and  for  so  many  years  longer  as  the 
beneficiary  shall  survive,  in  accordance  with  the  following  table  for  each  one 
thousand  dollars  of  said  net  sum. 

Any  instalments  payable  under  (2)  or  (3)  which  shall  not  have  been  paid  prior 
to  the  death  of  the  beneficiary  shall  be  paid,  unless  otherwise  directed  in  said 
notice,  to  the  beneficiary's  legal  representatives  or  assigns. 

When  any  option  calling  for  annual  payments  is  elected,  this  Policy  shall  be 
surrendered  upon  its  maturity  and  a  supplementary  non-participating  contract 
shall  be  issued  for  the  option  elected. 

Unless  otherwise  specified  by  the  owner  or  by  the  beneficiary  in  making  such 
election,  the  beneficiary  may  at  any  time  surrender  the  contract  guaranteeing 
the  payment  of  instalments,  for  the  commuted  value  of  the  payments  yet  to  be 
made,  computed  upon  the  same  basis  as  option  (2)  in  the  following  table;  pro- 
vided that  no  such  surrender  and  commutation  will  be  made  under  option  (3) 
except  after  the  death  of  the  beneficiary  occurring  within  the  aforesaid  twenty 
years: 

TABLE  OF  INSTALMENTS  FOR  EACH  $  1 ,000 


Option  (2) 

!                          Option  (3) 

Number 

of 
Annual 
Instal- 
ments 

Amount 
of  Each 
Instal- 
ment 

Number 
of 

Annual 
Instal- 
ments 

Amount 
of  Each 
Instal- 
ment 

Age  of 
Benefi- 
ciary at 
Death  of 
Insured 

Amount 
of  Each 
Instal- 
ment 

Age  of 
Benefi- 
ciary at 
Death  of 
Insured 

Amount 
of  Each 
Instal- 
ment 

1 

764  APPENDIX   (JF   FORMS  [CHAP.  II 

No  person  except  an  Executive  Officer  of  the  Company  as  aforesaid  has  power 
to  modify  or  in  event  of  lapse  to  reinstate  this  Policy  or  to  extend  the  time  for 
paying  a  premium. 

In  Witness  Whereof,  the  Company  has  caused  this  PoUcy  to  be  executed 
this day    of 

49 

A  Form  of  Policy  of  Accident  Insurance.     See  §  38^ 

The Insurance  Company,  in  consideration  of  the  warranties  in  the 

application  for  this  policy  and  of dollars,  does  hereby  insure 

under  classification (being  a by  occupation)   for  the  term  of 

months  from  noon  of ,  189.-  . ,  in  the  sum  of dollars 

per  week  against  loss  of  time  not  exceeding consecutive  weeks,  resulting 

from  bodily  injuries  effected  during  the  term  of  this  insurance,  through  external, 
violent,  and  accidental  means,  which  shall,  independently  of  all  other  causes, 
immediately  and  wholly  disable  him  from  transacting  any  and  every  kind  of 
business  pertaining  to  his  occupation  above  stated.  Or  if  loss  by  severance  of 
one  entire  hand  or  foot  results  from  such  injuries  alone  within  ninety  days,  will 
pay  insured  one-third  the  principal  sum  herein  named,  in  lieu  of  said  weekly 
indemnity,  and  on  such  payment  this  policy  shall  cease  and  be  surrendered  to 
said  company,  or  in  event  of  loss  by  severance  of  two  entire  hands  or  feet,  or 
one  entire  hand  and  one  entire  foot,  or  lo.ss  of  entire  sight  of  both  eyes,  solely 
through  injuries  aforesaid  within  ninety  days,  will  pay  insured  the  full  principal 
sum  aforesaid,  provided  he  survives  said  ninety  days.     Or  if  death  results  from 

such  injuries  alone  within  ninety  days,  will  pay dollars  to if 

surviving;  in  event  of  his  prior  death,  to  the  legal  representatives  or  assigns  of 
insured,  provided — 

1.  If  insured  is  injured  in  any  occupation  or  exposure  classed  by  this  com- 
pany as  more  hazardous  than  that  here  given,  his  insurance  shall  be  only  for 
such  sums  as  the  premium  paid  by  him  will  purchase  at  the  rates  fixed  for  such 
increased  hazard. 

2.  This  policy  shall  not  take  effect  unless  the  premium  is  paid  previous  to 
any  accident  under  which  claim  is  made;  and  the  company  may  cancel  it  at  any 
time  by  refunding  said  premium,  less  a  pro  rata  share  for  the  time  it  has  been 
in  force. 

3.  The  company's  total  liability  hereon  in  any  policy  year  shall  not  exceed 
the  principal  sum  hereby  insured;  therefore,  in  case  of  claim  for  full  principal 
sum,  any  sums  paid  as  indemnity  within  such  policy  year  shall  be  deducted 
therefrom. 

4.  Immediate  written  notice,  with  full  particulars  and  full  name  and  address 

of  insured,  is  to  be  given  said  company  at of  any  accident  and  injury 

for  which  claim  is  made.  Unless  affirmative  proof  of  death,  loss  of  limb  or  sight, 
or  duration  of  disability,  and  of  their  being  the  proximate  result  of  external, 
violent  and  accidental  means,  is  so  furnished  within  seven  months  from  time 
of  such  accident,  all  claims  based  thereon  shall  be  forfeited  to  the  company. 
No  legal  proceedings  for  recovery  hereunder  shall  be  brought  within  three 
months  after  receipt  of  proof  at  this  office,  nor  at  all,  unless  begun  within  one 
year  from  date  of  alleged  accident. 

5.  This  insurance  does  not  cover  disappearances;  nor  suicide,  sane  or  insane; 


CHAP.  II  ]  HEALTH    CLAUai::    L\    ACCIUEMT   POLICY  7t)5 

nor  injuries  of  which  there  is  no  visible  mark  on  the  body  (the  body  itself  in 
case  of  death  not  being  deemed  such  mark);  nor  accident,  nor  death,  nor  loss 
of  limb  or  sight,  nor  disability,  resulting  wholly  or  partly,  directly  or  indirectly 
from  any  of  the  following  causes,  or  while  so  engaged  or  affected:  Disease  or 
bodily  infirmity,  hernia,  fits,  vertigo,  sleep-walking;  medical  or  surgical  treat- 
ment, except  amputations  necessitated  solely  by  injuries  and  matle  within 
ninety  days  after  accident;  intoxication  or  narcotics;  voluntary  or  involuntary 
taking  of  poison  or  contact  with  poisonous  substances  or  inhaling  of  any  gas 
or  vapor;  sunstroke  or  freezing;  dueling  or  fighting,  war  or  riot;  intentional  in- 
juries (inflicted  by  the  insured  or  any  other  person);  voluntary  over-exertion; 
violating  law;  violating  rules  ol  a  corporation;  voluntary  exposure  to  unneces- 
sary danger;  expeditions  into  wild  or  uncivilized  countries;  entering  or  trying 
to  enter  or  leave  a  moving  conveyance  using  steam  as  a  motive  power  (except 
cable  cars),  riding  in  or  on  any  such  conveyance  not  provided  for  transporta- 
tion of  passengers,  walking  or  being  on  a  railway  bridge  or  roadbed  (railway 
employees  excepted). 

6.  No  claim  shall  be  valid  in  excess  of  $10,000  with  $50  weekly  indemnity 
under  accident  policies,  nor  for  indemnity  in  excess  of  money  value  of  insured's 
time.  All  premiums  paid  for  such  excess  shall  be  returned,  on  demand,  to  in- 
sured or  his  legal  representative. 

7.  Any  medical  adviser  of  the  company  shall  be  allowed,  as  often  as  he  re- 
quires, to  examine  the  person  or  body  of  insured  in  respect  to  alleged  injury  or 
cause  of  death. 

8.  Any  claim  hereunder  shall  be  subject  to  proof  of  interest.  A  copy  of  any 
assignment  shall  be  given  within  thirty  days  to  the  company,  which  shall  not 
be  responsible  for  its  validity.  The  company  may  cancel  this  policy  at  any 
time  by  refunding  the  unearned  premium  thereon.  No  agent  has  power  to 
waive  any  condition  of  this  policy. 

In  witness  whereof,  etc. 

50 

A  Health  Clause  in  an  Accident  Policy 

For  the  period  during  which  the  Insured  shall  independently  of  all  other 
causes  be  necessarily  confined  to  the  house  and  wholly  disabled,  and  prevented 
by  bodily  disease  not  hereinafter  excepted,  from  performing  any  and  every  duty 
pertaining  to  his  occupation,  the  Company  will  pay  a  weekly  indemnity  of 

S ,  and  if  following  such  a  period  of  total  disabihty  and  confinement  in 

the  house,  he  shall  be  wholly  disabled  and  prevented  from  performing  any  and 
every  kind  of  duty  pertaining  to  his  occupation,  but  shall  not  be  necessarily 
confined  to  the  house,  one-half  of  said  amount  per  week  will  be  paid  to  the  In- 
sured ;  but  no  payment  shall  be  made  for  disability  of  less  than  seven  consecutive 
days'  or  in  excess  of  twenty-six  consecutive  weeks'  duration. 

Upon  satisfactory  proof  to  the  Company  that  he  has,  as  the  result  of  disease, 
contracted  during  the  term  of  this  Policy,  and  not  hereinafter  excepted,  entirely 
and  irrecoverably  lost  the  sight  of  both  eyes,  or  permanently  and  entirely  lost 
the  use  of  both  hands  or  both  feet,  or  of  one  hand  and  one  foot,  and  also  that  he 
has  been  for  one  year,  and  will  thereafter,  and  during  his  life,  by  reason  thereof 
be  permanently  disabled  from  engaging  in  any  work  or  occupation  for  wages  or 
profit,  the  Company  will  pay  to  him  $..... 


7QQ  APPENDIX   OF   FORMS  [CHAP.  II 

51 

Marine  Policy  Established  by  Statute  of  Florence,  January  2S,  1523 

Be  it  known  and  made  manifest   to   all   persons,  that of 

makes  assurance  on ,  merchandise  belonging  to  him  or  his  friends,  or 

to  whomsoever  the  same  may  belong,  laden  or  to  be  laden  for  [such  or  such  a 

part  or  roadstead  in  such  a  place]  by  the  hands  of ,  or  his  agent,  or 

although  others  have  laden  it  in  the  name  of  the  aforesaid ,  or  m  some 

other  name  designated  or  not  designated  on  board  the  ship  named , 

or  howsoever  named,  commanded  by We  begin  the  said  insurance 

from  the  time  when  the  said  goods  shall  be,  or  shall  have  been,  laden  on  board 
the  said  ship  in  [such  a  place],  to  continue  until  the  said  merchandise  shall  be 
discharged  on  land  or  in  safety  at  [such  a  place],  with  liberty  for  the  ship  to 
touch  at  any  other  place,  and  to  navigate  forwards  or  backwards,  to  the  right 
hand  or  the  left,  at  the  pleasure  of  the  captain,  and  as  he  may  require:  The  said 
assurers  taking  upon  themselves  in  respect  of  the  said  goods  the  risk  of  all  perils 
of  the  seas,  fire,  jettison,  reprisals,  robbery  by  friend  or  foe,  and  every  other 
chance,  peril,  misfortune,  disaster,  hindrance,  misadventure,  though  such  as 
could  not  be  imagined  or  supposed  to  have  occurred,  or  be  likely  to  occur,  to  the 
said  goods,  and  barratry  by  the  master,  except  as  to  stowage  or  customhouse. 
All  the  said  risks  the  said  insurers  are  to  run  and  take  on  themselves  until  the 
said  goods  shall  be  safely  discharged  on  shore  at  [such  a  place];  and  if  they  are 
not  laden,  the  insurers  are  entitled  to  retain  one  and  a  half  per  cent. 

And  if  the  said  goods  shall  sustain,  or  have  sustained,  any  disaster  (which 

God  forbid),  the  insurers  shall  pay  to  the  said the  sum  insured,  within 

two  months  from  the  news  reaching  the  city. 

And  if  within  six  months  there  shall  have  been  no  true  news,  the  insurers 

shall  pay  to  the  said the  sum  insured;  and  in  case  of  subsequent  arrival 

and  safe  discharge  at  the  said  place,  the  aforesaid  shall  pay  back  to  each  the 
sum  he  has  received.  In  the  event  of  shipwreck,  it  is  allowed  to  make  recovery 
without  authority  from  the  insurers,  it  being  stipulated  that  the  said  insurers 
are  not  responsible  for  theft  by  the  captain  of  the  said  ship. 

And  the  insurers  are  bound  first  to  pay  to  the  aforesaid  the  sums  insured,  and 
to  litigate  afterwards.  And  these  are  to  bind  themselves  by  sufficient  sureties 
(one  or  more  as  directed  by  the  fire  official  deputies  on  insurance)  to  pay  back 
to  each  insurer  the  sums  they  have  received,  with  damages  of  twenty  per  cent. 
The  time  allowed  to  the  insurers  for  proving  is  eighteen  months. 

To  the  observance  of  this  the  insurers  bind  themselves  to  the  said , 

themselves,  their  heirs,  and  goods  present  and  future,  submitting  themselves 
to  the  office  aforesaid,  and  to  every  other  judgment  and  court,  whither  the  said 
shall  please  to  summon  them. 


52 

A  Form  of  Marine  Binding  Slip.     See  §  76 

Insurance  is  wanted  by for  account  of loss,  if  any,  payabli 

in  funds  current  in  the  United  States,  or  in  the  City  of  New  York,  to 


CHAP.  II  ]  A    POLICY   OF   MARINE    INSURANCE  767 


Amount  of  Invoice  or  Bill,  $ 
per  cent,  advance 

Sum  Insured $ 


^On. 


on  board  the , Master,  and  to  be  insured  at  and  from 

Bill  of  Lading  dated  )  _ 

y  Premium,         per  cent $ 

Time  of  Sailing:         )  r President. 

)  Binding.  ^ 

New  York, ,  190.  ..  ( Applicant. 

53 

A  Form  of  Policy  of  Marine  Insurance:  Cargo.     See  §  4IO 

By  the Insurance  Company on  account  of In 

case  of  loss,  to  be  paid  in  funds  current  in  the  United  States,  or  in  the  City  of 

New  York,  to ,  do  make  insurance,  and  cause to  be  insured, 

lost  or  not  lost,  at  and  from upon laden  or  to  be  laden  on 

board  the  good ,  whereof «is  master  for  this  present  voyage 

,  or  whoever  else  shall  go  for  master  in  said  vessel,  or  by  whatever 

other  name  or  names  the  said  A^essel,  or  the  master  thereof,  is  or  shall  be  named 
or  called. 

Beginning  the  adventure  upon  the  said  goods  and  merchandises  from  and 

immediately  following  the  loading  thereof  on  board  of  the  said  vessel,  at 

as  aforesaid,  and  so  shall  continue  and  endure  until  the  said  goods  and  mer- 
chandise shall  be  safely  landed  at as  aforesaid.     And  it  shall  and  may 

be  lawful  for  the  said  vessel,  in  her  voyage,  to  proceed  and  sail  to,  touch  and 
Btay  at,  any  ports  or  places,  if  thereunto  obliged  by  stress  of  weather,  or  other 
unavoidable  accident,  without  prejudice  to  this  insurance.  The  said  goods  and 
merchandises,  hereby  insured,  are  valued  (premium  included)  at dollars. 

Touching  the  adventures  and  perils  which  the  said Insurance  Com- 
pany is  contented  to  bear,  and  takes  upon  itself  in  this  voyage,  they  are  of  the 
seas,  men-of-irar,  fires,  enemies,  pirates,  rovers,  thieves,  jettisons,  letters  of  mart 
and  countermart,  reprisals,  taJdngs  at  sea,  arrests,  restraints  and  detainments  of 
all  kings,  princes  or  people,  of  what  nation,  condition  or  quality  soever,  barratry  of 
the  master  and  mariners,  and  all  other  perils,  losses  and  misfortunes  that  have 
or  shall  come  to  the  hurt,  detriment  or  damage  of  the  said  goods  and  merchan- 
dises, or  any  part  thereof.  And  in  case  of  any  loss  or  misfortune,  it  shall  be 
lawful  and  necessary  to  and  for  the  assured,  his  factors,  servants  and  assigns, 
to  sue,  labor,  and  travel  for,  in  and  about  the  defense,  safeguard  and  recovery 
of  the  said  goods  and  merchandises,  or  any  part  thereof,  without  prejudice  to 
this  insurance;  nor  shall  the  acts  of  the  insured  or  insurers,  in  recovering,  saving 
and  preserving  the  property  insured,  in  case  of  disaster,  be  considered  a  waiver 
or  an  acceptance  of  an  abandonment;  to  the  charges  whereof  the  said  Insurance' 
Company  will  contribute  according  to  the  rate  and  quantity  of  the  sum  herein 
insured;  having  been  paid  the  consideration  for  this  insurance,  by  the  assured, 
or  his  assigns,  at  and  after  the  rate  of per  cent. 

And  in  case  of  loss,  such  loss  to  be  paid  in  thirty  days  after  proof  of  loss,  and 
proof  of  interest  in  the  said (the  amount  of  the  note  given  for  the  pre- 


768  APPENDIX   OF   FORMS  [CHAP.  II 

miiim,  if  unpaid,  being  first  deducted),  but  no  partial  loss  or  particular  average 
Kb.ail  in  any  case  be  paid,  unless  amounting  to  five  per  cent.  Provided  always, 
;'kI  it  is  hereby  further  agreed,  That  if  the  said  assured  shall  have  made  any 
(    !ijr  assurance  upon  the  premises  aforesaid,  prior  in  day  of  date  to  this  policy, 

/.,>:!  the  said Insurance  Company  shall  be  answerable  only  for  so  much 

;  ,  the  amount  of  such  prior  assurance  may  be  deficient  towards  fully  covering 

t'.:>  premises  hereby  assured;  and  the  said Insurance  Company  shall 

I  ;turn  premium  upon  so  much  of  the  sum  by  them  assured,  as  they  shall  be  by 
\ch  prior  assurance  exonerated  from.    And  in  case  of  any  assurance  upon  the 

•id  premises,  subsequent  in  day  of  date  to  this  policy,  the  said Insur- 

nce  Company  shall  nevertheless  be  answerable  for  the  full  extent  of  the  sum 
by  them  subscribed  hereto,  without  right  to  claim  contribution  from  such  subse- 
quent assurers,  and  shall  accordingly  be  entitled  to  retain  the  premium  by  them 
received,  in  the  same  manner  as  if  no  such  subsequent  assurance  had  been  made. 
Other  assurance  upon  the  premises  aforesaid,  of  date  the  same  day  as  this  policy, 
shall  be  deemed  simultaneous  herewith;  and  the  said Insurance  Com- 
pany shall  not  be  liable  for  more  than  a  ratable  contribution  in  the  proportion 
of  the  sum  by  them  insured  to  the  aggregate  of  such  simultaneous  assurance. 
It  is  ALSO  AGREED,  that  the  property  be  warranted  by  the  assured  free  from  any 
charge,  damage  or  loss,  which  may  arise  in  consequence  of  a  seizure  or  detention, 
for  or  on  account  of  any  illicit  or  prohibited  trade  or  any  trade  in  articles  con- 
traband of  war. 

Warranted  not  to  abandon  in  case  of  capture,  seizure,  or  detention,  until  after 
condemnation  of  the  property  insured;  nor  until  ninety  days  after  notice  of  said 
condemnation  is  given  to  this  company.  Also  warranted  not  to  abandon  in 
case  of  blockade,  and  free  from  any  expense  in  consequence  of  capture,  seizure, 
detention  or  blockade,  but  in  the  event  of  blockade,  to  be  at  liberty  to  proceed 
to  an  open  port  and  there  end  the  voyage. 

In  Witness  Whereof,  the  President  or  Vice-President  of  the  said 

Insurance   Company   hath   hereunto   subscribed   his   name,   and   the   sum 

insured,  and  caused  the  same  to  be  attested  by  their  Secretary,  in , 

the day  of ,  19.  .. 

Memorandum.  It  is  also  agreed,  that  bar,  bundle,  rod,  hoop  and  sheet  iron, 
wire  of  ail  kinds,  tin  plates,  steel,  madder,  sumac,  wicker-ware  and  willow  (manu- 
factured or  otherwise),  salt,  grain  of  all  kinds,  tobacco,  Indian  meal,  fruits 
(whether  preserved  or  otherwise),  cheese,  dry  fish,  hay,  vegetables  and  roots, 
rags,  hempen  yarn,  bags,  cotton  bagging,  and  other  articles  used  for  bags  or 
bagging,  pleasure  carriages,  household  furniture,  skins  and  hides,  musical  in- 
struments, looking-glasses,  and  all  other  articles  that  are  perishable  in  their 
own  nature,  are  warranted  by  the  assured  free  from  average,  unless  general; 
hemp,  tobacco  stems,  matting  and  cassia,  except  in  boxes,  free  from  average 
under  twenty  per  cent,  unless  general;  and  sugar,  flax,  flax-seed  and  bread,  are 
warranted  by  the  assured  free  from  average  under  seven  per  cent,  unless  general; 
and  coffee,  in  bags  or  bulk,  pepper  in  bags  or  bulk,  and  rice,  free  from  average 
under  ten  per  cent,  unless  general. 

Warranted  by  the  insured  free  from  damage  or  injury,  from  dampness,  change 
of  flavor,  or  being  spotted,  discolored,  musty  or  mouldy,  except  caused  by 
actual  contact  of  sea  water  with  the  articles  damaged,  occasioned  by  sea  perils. 
In  case  of  partial  loss  by  sea  damage  to  dry  goods,  cutlery  or  other  hardware, 
the  loss  shall  be  ascertained  by  a  separation  and  sale  of  the  portion  only  of  the 


CHAP.  II  ]  INCHMAREE   CLAUSE  759 

contents  of  the  packages  so  damaged  and  not  otherwise,  and  the  same  practice 
shall  obtain  as  to  all  other  merchandise  as  far  as  practicable.  Not  liable  for 
leakage  on  molasses  or  other  liquids,  unless  occasioned  by  stranding  or  collision 
with  unother  vessel. 

If  the  voyage  aforesaid  shall  have  been  begun  and  shall  have  terminated 
before  the  date  of  this  policy,  then  there  shall  be  no  return  of  premium  on  ac- 
count of  such  termination  of  the  voyage. 

In  all  cases  of  return  of  premium,  in  whole  or  in  part,  one-half  per  cent,  upon 
the  sum  insured  is  to  be  retained  by  the  assurers. 

$ ,  dollars. 

,  Secretary  ,  President. 

54 

A  Form  of  Collision  Clause.    See  §  4^8 

And  it  is  further  agreed,  that  if  the  vessel  hereby  insured  shall  come  in  collision 
with  another  vessel,  and  the  assured  become  liable  to  pay,  and  shall  pay,  any 
sum  or  sums  for  damages  resulting  therefrom  to  said  other  vessel,  "her  freight 
or  her  cargo,  in  such  case  this  company  will  contribute  towards  the  payment 
of  three-fourths  part  of  the  total  amount  of  said  damages,  in  the  proportion 
that  the  sum  insured  under  this  policy  bears  to  the  total  valuation  of  the  vessel 
as  stated  herein,  provided,  that  this  company  shall  not  in  any  event  be  held 
liable  under  this  agreement  for  a  greater  sum  than  three-fourths  part  of  the 
amount  insured  under  this  policy. 

And  it  is  also  agreed  that  this  insurance  company  will  bear  a  like  proportionate 
share  of  any  costs  and  expenses  that  may  be  incurred  in  contesting  the  liability 
resulting  from  said  collision,  provided,  the  written  consent  of  the  company 
to  such  contest  be  first  obtained. 

But  under  no  circumstances  shall  this  company  be  held  liable  for  any  con- 
tribution in  respect  of  any  sum  that  the  insured  may  be  held  liable  to  pay  by 
reason  of  loss  of  life  or  personal  injury  t9  individuals  from  any  cause  whatso- 
ever, nor  for  any  claim  for  demurrage  or  loss  of  the  use  of  any  vessel,  nor  for 
wages  or  provisions  or  expenses  of  master,  officers  or  crews. 

It  is  further  agreed  to,  that  in  no  event  shall  this  insurance  company  be  liable 
under  this  policy  for  more  than  the  sum  insured  in  any  case,  either  for  claims 
for  loss  and  damage  and  or  charges  to  hull  of  the  vessel  hereby  insured  and  or  for 
claims  of  any  and  all  kinds  arising  under  this  collision  clause,  or  the  policy  to 
which  it  is  attached,  and  all  payments  made  under  this  policy  shall  reduce  this 
policy  by  the  amounts  so  paid,  unless  restored  by  a  new  premium. 

55 

Inchmaree  Clause.     See  §  44^ 

This  insurance  also  specially  to  cover  (subject  to  the  free  of  average  warranty) 
loss  of  or  damage  to  hull  or  machinery  through  the  negligence  of  master,  mariners, 
engineers,  or  pilots,  or  through  explosions,  bursting  of  boilers,  breakage  of 
shafts,  or  through  any  latent  defect  in  the  machinery  or  hull,  provided  such 
loss  or  damage  has  not  resulted  from  want  of  due  diligence  by  the  owners  of 
the  ship  or  any  of  them  or  by  the  manager. 

49 


770  APPENDIX   OF   FORMS  [CHAP.  II 

56 

A  Negligence  Clause.    See  §  4^4 

Including  negligence  and  errors  of  navigation;  including  all  risk  of  negligence, 
default,  or  error  in  judgment  of  the  pilot,  master,  mariners,  engineers,  or  others 
of  the  crew, 

57 

A  Deviation  Clause.    See  §  4^i 

It  is  hereby  agreed  to  hold  the  assured  covered  should  the  vessel  deviate 
from  the  terms  and  conditions  of  this  policy,  at  a  premium  to  be  arranged  as 
soon  as  the  deviation  is  known. 

58 

A  Craft  Clause.    See  §§  419,  4^2 

Including  all  risk  of  craft,  boats,  lighters,  to  or  from  the  vessel  upon  whatever 
terms  as  to  liability  or  otherwise  the  lighterman  may  be  employed:  such  craft, 
boat  or  lighter  being  deemed  a  separate  insurance,  and  loss  in  boat,  craft,  or 
lighter  is  to  be  settled  under  this  policy  without  reference  to  the  liability  or 
non-hability  of  the  lighterman  under  special  agreement  between  assured  and 
lighterman  or  otherwise,  the  assured  transferring  all  rights  against  the  lighter- 
man to  the  underwriters. 

59 

A  Clause  as  to  Loading.     See  §  455 

Warranted  by  the  assured  not  to  be  loaded  in  tons  of  2,240  lbs.  more  than 
the  registered  capacity  under  tonnage  deck,  with  lead,  marble,  stone,  coal, 
sand  or  iron;  also  warranted  not  to  be  loaded  with  lime  under  deck.  Also  if 
loaded  with  grain,  warranted  to  be  loaded  under  the  inspection  of  the  Surveyor 
of  the  Board  of  Underwriters,  and  his  certificate  as  to  the  proper  loading  and 
sea-worthiness  obtained. 

60 

A  Form  of  Fidelity  Bond.     See  §  468 

This  bond,  made  this day  of ,  190.  . ,  witnesseth:    Whereas, 

(hereinafter  called  the  Employer)  has  appointed (hereinafter 

called  the  Employee)  to  the  position  of in  the  service  of  the  Employer, 

now,  therefore,  in  consideration  of  the  premium  paid  or  to  be  paid  and  the 
statements  made  by  the  Employer,  which  are  warranted  to  be  true,  The  Empire 
State  Surety  Company,  a  corporation  organized  under  the  laws  of  the  State  of 
New  York  (hereinafter  called  the  Surety),  hereby  agrees  that  it  will,  at  the 
expiration  of  three  months  after  receipt  of  proof  of  loss  satisfactory  to  the  Surety, 
reimburse  the  Employer  for  pecuniary  loss  not  exceeding Dollars,  sus- 
tained by  the  Employer  by  reason  of  dishonesty  of  the  Employee,  constituting 
larceny  or  embezzlement,  in  connection  with  the  said  position,  during  the  term 
beginning  on  the day  of ,  190.  . ,  and  ending  on  the 


CHAP.  II  ]  A  FIDELITY   BOND  771 

day  of ,  190.  . ,  at  noon,  and  which  loss  shall  be  discovered  during  said 

term,  or  the  sooner  termination  hereof,  or  within  six  months  thereafter. 

This  Bond  is  executed  and  accepted  upon  the  conditions  printed  below. 

In  witness  whereof,  etc. 


CONDITIONS  ON  WHICH  WITHIN  BOND  IS  EXECUTED  AND  ACCEPTED 

1.  The  Surety  shall  not  be  liable  for  any  sum  which  the  Employee  may,  at 
the  commencement  of  the  term  hereof,  owe  the  Employer. 

2.  The  Surety  shall  not  be  liable  to  the  Employer  under  any  previous  Bond 
executed  in  behalf  of  the  Employee,  and  upon  the  execution  by  the  Surety  of 
any  new  Bond  to  the  Employer  on  behalf  of  the  Employee,  this  Bond  and  all 
liability  thereunder  shall  cease,  it  being  the  intention  that  only  the  last  Bond 
shall  be  in  force;  provided,  That  the  Employer  shall  have  the  right,  within  six 
months  after  the  termination  of  any  Bond,  to  make  claim  for  any  loss  occurring 
thereunder.    The  liability  of  the  Surety,  however,  shall  not  be  cumulative. 

3.  If  at  any  time  during  the  term  of  this  Bond  the  Employer  learn  or  be  in- 
formed that  the  Employee  is  unreliable,  dishonest,  intemperate,  gambling  or 
indulging  in  other  vices,  the  Employer  shall  immediately  notify  the  Surety. 

4.  Upon  the  discovery  by  the  Employer  that  loss  has  been  sustained,  or  of 
facts  indicating  that  a  loss  has  probably  been  sustained,  the  Employer  shall 
immediately  notify  the  Surety,  and  shall  within  thirty  days  after  such  discovery 
furnish  to  the  Surety  in  writing,  proof  of  loss  sustained  in  detail  under  oath. 

5.  The  business  of  the  Employer  shall  continue  to  be  conducted,  and  the 
duties  of  the  Employee  shall  remain,  in  accordance  with  the  written  statements 
made  by  the  Employer  to  the  Surety  relative  thereto  and  the  Surety  may  at 
any  time  either  before  or  after  loss  inspect  the  Employer's  books,  papers  and 
accounts. 

6.  The  Employer  will  in  every  way  aid  in  the  apprehension  and  prosecution 
of  the  Employee  for  any  criminal  offense  committed  by  the  Employee  involving 
liability  to  the  Surety. 

7.  The  term  "Employer,"  as  used  in  this  Bond,  shall  include  any  officer, 
or  other  representative  of  the  Employer,  whose  duty  it  may  be  to  supervise 
the  work,  or  to  examine  the  books  or  audit  the  accounts  of  others  in  the  Em- 
ployer's service,  or  to  count  or  examine  the  cash  or  securities  for  which  such 
others  are  responsible. 

8.  If  the  Employer  hold  any  other  security  in  behalf  of  the  Employee,  and 
the  amount  of  loss  be  less  than  the  aggregate  amount  of  all  such  securities,  the 
Surety  shall  be  liable  for  only  such  proportion  of  the  loss  as  the  amount  for 
which  the  Surety  shall  have  become  surety  hereunder,  bears  to  the  total  security 
held  by  the  Employer,  whether  such  other  security  be  available  or  not. 

9.  The  Surety  may  at  any  time  terminate  this  Bond  by  mailing  to  the  Em- 
ployer written  notice  of  its  election  so  to  do  at  the  last  address  given  it  and  the 
Surety  shall  not  be  liable  for  any  act  of  the  Employee  thereafter  committed. 
If  the  Company  subsequently  pay  any  loss  hereunder  the  whole  premium  paid 
shall  be  held  to  have  been  fully  earned,  otherwise,  the  Surety  shall,  upon  de- 
mand and  the  execution  and  delivery  by  the  Employer  of  a  full  release  from 
this  bond,  refund  the  premium  paid,  less  a  pro  rata  part  thereof  for  the  time  this 
obligation  shall  have  been  in  force. 

10.  No  action,  suit  or  proceeding  at  law  or  in  equity  shall  be  had  or  main- 


772  APPENDIX   OF   FORMS  [CHAP.  II 

tained  upon  this  Bond  unless  commenced  within  one  year  from  the  time  of  the 
first  discovery  of  any  loss  hereunder.  •     u     j     v  n  k 

11  None  of  the  conditions  or  provisions  contained  in  this  Bond  shall  be 
deemed  to  have  been  waived  by  or  on  behalf  of  the  Surety,  unless  the  waiver 
be  clearly  expressed  in  writing  over  the  signature  of  its  President,  or  any  of  its 
Vice-Presidents.  ,         •  •       x 

12.  All  notices  and  proofs  of  loss  to  the  Surety  shall  be  given  m  wntmg  to 
its  executive  office,  34  Pine  Street,  New  York  City,  New  York. 

61 

A  Form  of  General  Liability  Policy.     See  §  476 
In  consideration  of  the  premium  as  determined  in  clause  G  of  this  Policy 
and  of  the  statements  herein  made,  the  London  Guarantee  and  Accident  Com- 
pany, Limited,  hereinafter  caUed  the  Company,  subject  to  the  terms  of  this 

policy   as   herein   set   forth,   agrees   to   indemnify of State   of 

hereinafter  called  the  Assured,  against  loss  from  the  liability  im- 
posed by' law  upon  the  Assured  for  damages  on  account  of  bodily  injuries,  in- 
cluding death  resulting  at  any  time  therefrom,  accidentally  suffered  by  any 
person  or  persons  while  within  the  premises  of  the  Assured  as  described  in  the 
Schedule  herein,  or  on  the  premises  or  ways  adjacent  thereto,  when  such  injuries 
or  death  are  suffered  as  the  result  of  accidents  occurring  within  the  period  be- 
ginning the day  of ,  190.  . ,  and  ending  on  the day  of 

,  190.  . ,  at  12  o'oclock  noon. 

LIMITS   OP   LIABILITY 

A.  The  Company's  liability  on  account  of  an  accident  resulting  in  bodily 

injuries  or  death  to  one  person  is  hmited  to Dollars  ($ ),  and, 

subject  to  the  same  limit  for  each  person,  the  Company's  total  liability  on  ac- 
count of  any  one  accident  resulting  in  bodily  injuries  or  death  to  more  than  one 
person  is  limited  to Dollars  ($ ). 

EXTRA   BENEFITS   AND   SXJBGICAL   AID 

B.  In  addition  to  these  limits  the  Company  will  pay  for  the  providing  at  the 
time  of  accident  of  such  immediate  surgical  aid  as  is  imperative,  and  also  will 
pay  all  cost  and  expense  attendant  upon  its  investigation,  adjustment  and 
settlement  of  claims. 

NOTICE   OF   ACCIDENT   AND    CLAIM 

C.  Upon  the  occurrence  of  an  accident  the  Assured  shall  give  immediate 
written  notice  thereof,  with  the  fullest  information  obtainable  at  the  time,  to 
the  Company's  Head  Office,  or  to  the  agent  who  has  countersigned  this  Policy. 
If  a  claim  is  made  on  account  of  such  accident,  the  Assured  shall  give  like  notice 
thereof,  with  full  particulars.  The  Assured  shall  render  to  the  Company  all  co- 
operation and  assistance  in  his  power  in  the  protection  of  his  interests. 

WHEN  ASSURED  IS  SUED 

D.  If  thereafter  any  suit,  even  if  groundless,  is  brought  against  the  Assured 
to  recover  damages  on  account  of  such  injuries  or  deaths  as  are  covered  by  this 
Policy,  the  Assured  shall  immediately  fo^^vard  to  the  Company  every  summons 


CHAP.  II  ]  A  GENERAL   LIABILITY    POLICY  773 

or  other  process  served  upon  him,  whereupon  the  Company  will,  at  its  own 
expense,  defend  against  such  suit  in  the  name  and  on  behalf  of  the  Assured, 
unless  the  Company  shall  eiect  to  settle  the  same  or  pay  to  the  Assured  the 
indemnity  as  provided  for  in  Clause  A  of  this  Policy. 

EXCEPTIONS 

E.  This  Policy  does  not  cover  loss  from  liability  for  injuries  or  death  caused 
to  or  by 

1.  Any  person  engaged  in  the  making  of  additions  or  alterations  of  a  structural 
character,  unless  a  written  permit  therefor  is  granted  by  the  Company  specifically 
describing  the  work  and  an  additional  premium  paid. 

2.  Any  person  employed  by  the  Assured  contrary  to  law,  or  any  person  em- 
ployed under  fourteen  years  of  age  where  no  statute  restricts  the  age  of  employ- 
ment. 

3.  Any  person  in  or  about  any  elevator  while  in  charge  of  any  person  under 
the  age  fixed  by  law  for  elevator  attendants,  or  under  the  age  of  sixteen  years 
where  no  such  age  is  fixed  by  law. 

4.  Any  person  before  the  premises  have  been  fully  completed,  ready  for  oc- 
cupancy, unless  a  written  permit  is  granted  by  the  Company  permitting  same. 

SETTLEMENTS 

F.  The  Assured  may  settle  any  case  at  the  Assured's  own  expense,  giving 
immediate  notice  thereof  in  writing  to  the  Company,  and  the  Assured  may 
fcettle  any  case  at  the  Company's  expense,  if  the  Company  shall  have  previously 
given  its  consent  in  writing. 

PREMIUM 

G.  The  premium  of  this  Policy,  calculated  at  the  rate  or  rates  specified  herein 
in  the  Schedule,  is  based  on  the  information  contained  therein,  and  if  at  the  end 
of  the  Policy  period  the  entire  compensation  earned  by  all  employees  is  greater 
or  less  than  the  sum  set  forth  in  the  Schedule,  or  the  data  otherwise  given  is 
erroneous,  the  premium  charge  shall  be  subject  to  adjustment  on  the  basis  of 
the  rates  set  forth  in  said  Schedule;  but  the  Company  shall  retain  not  less  than 

Dollars  ($ )  it  being  agreed  that  this  sum  shall  be  the  minimum 

earned  premium.    The  adjustment  shall  be  made  as  soon  as  the  correct  premium 
has  been  ascertained. 

CANCELLATION 

H.  This  Policy  may  be  cancelled  by  the  Company  at  any  time  by  giving  five 
days'  written  notice  to  the  Assured,  stating  when  the  cancellation  shall  be  ef- 
fective. It  may  be  cancelled  by  the  Assured  by  like  notice  to  the  Company. 
If  cancelled  by  the  Company  the  Company  shall  be  entitled  to  the  earned  pre- 
mium pro  rata  when  determined.  If  cancelled  by  the  Assured,  the  Company 
shall  be  entitled  to  the  earned  premium  calculated  at  the  customary  short  rates. 
In  either  case  the  earned  premium  shall  be  computed  on  the  basis  of  the  frontage, 
area,  number  of  elevators  and  the  actual  compensation  earned  by  the  employees 
of  the  Assured  during  the  time  the  Policy  shall  have  been  in  force,  but  shall  not 
be  less  than  the  aforesaid  minimum  premium.  The  Company's  check  mailed 
to  the  address  of  the  Assured  as  given  herein  shall  be  a  sufficient  tender  of  any 
unearned  premium. 


774  APPENDIX   OF   FORMS  [CHAP.  II 

AUDIT 

/.  TIk  Company  shall  by  its  authorized  representatives  have  the  right  and 
opportunity  to  examine  the  books  and  records  of  the  Assured  as  respects  com- 
pensation earned  by  the  employees  of  the  Assured,  and  the  Assured  shall  render 
reasonable  assistance;  but  the  Company  waives  no  right  by  failing  to  make  such 
examination.  The  rendering  of  any  estimate  or  statement,  or  the  making  of 
any  previous  settlement,  shall  not  bar  the  examination  herein  provided  for  nor 
the  Company's  right  to  additional  premiums.  Such  examination,  however,  shall 
be  made  within  one  year  of  the  expiration  of  the  Policy. 

WHEN    COMPANY   MAY   BE   SUED 

J.  No  action  shall  lie  against  the  Company  to  recover  for  any  loss  or  expense 
under  this  Policy  unless  it  shall  be  brought  bythe  Assured  for  loss  or  expense 
actually  sustained  and  paid  in  money  by  the  Assured,  nor  unless  such  action 
be  brought  within  ninety  days  after  the  payment  of  such  loss  or  expense. 

SUBROGATION 

K.  In  case  of  payment  of  loss  or  expense  under  this  Policy  the  Company 
shall  be  subrogated  to  the  amount  of  such  payment  to  all  rights  of  the  Assured 
against  any  person,  firm  or  corporation  as  respects  such  loss  or  expense,  and  the 
Assured  shall  do  everything  which  may  be  necessary  to  secure  to  the  Company 
such  rights. 

CO-INSURANCE 

L.  If  the  Assured  carry  a  Policy  of  another  insurer  against  a  loss  covered  by 
this  Policy,  the  Assured  shall  not  be  entitled  to  recover  from  the  Company  a 
larger  proportion  of  the  entire  loss  than  the  amount  hereby  insured  bears  to  the 
total  amount  of  valid  insurance  applicable  thereto. 

INSPECTION 

M.  Any  of  the  Company's  authorized  inspectors  shall  have  the  right  and 
opportunity  whenever  the  Company  so  desires  to  inspect  at  any  reasonable 
time  the  plants,  works,  machinery  and  appliances  of  the  Assured. 

ALTERATIONS   IN   POLICY 

N.  No  change,  waiver  or  extension  of  any  of  the  terms  or  conditions  of  this 
Policy  shall  be  valid,  unless  endorsed  hereon  and  signed  by  the  General  Manager 
of  the  Company  for  the  United  States;  nor  shall  notice  to  any  agent,  nor  shall 
knowledge  possessed  by  any  agent  or  any  other  person,  be  held  to  effect  a  waiver 
or  change  in  any  part  of  the  Policy. 

SCHEDULE 

0.  The  hereinafter  Schedule  of  statements  and  warranties  is  made  by  the 
Assured,  and  by  acceptance  of  this  Policy  the  Assured  warrants  the  same  to  be 
true,  except  such  as  are  matters  of  estimate  only. 

Item  1.  The  name  of  Assured 

Item  2.  The  address  of  the  Assured  is 

(SUt«  street,  town  and  st»te  where  office  is  located.) 


CHAP.  II 


A  GENERAL    LIABILITY    POLICY 


775 


Item  3.  The  Assured  is 

(State  whether  individual,  copartnership,  corporation,  estate  or  trustee.) 
Item  4.  The  location  of  the  building  or  buildings,  the  number  and  kind  of 

elevators,  the  wages  paid  employees,  the  floor  areas  and  frontages 

are  as  follows: 


LOCATIOX 

ELEVATORS 

Esti- 
mated 
Wages 

GliOU.VD 

Floor 

No.    OF 
S-rn. 

Street 
Front- 

STREET 

No. 

No. 

De.scription 

Power 

AKEA        I     RIES 

age 

If    there    is    more 
than    one  build- 
ing, give  location 
of  each. 

State    whether 
Passenger    or 
Freight,  Side- 
wal  k,    One 
Story,     Pri- 
vate House, 
Hand    Hoist, 
Moving  Plat- 
form o  r  E  s  - 
calator. 

State 
wheth- 
er Hy- 
draulic, 
Elec- 
tric, 
Steam 
or  Plun- 
ger. 

State  sepa- 
rately  es- 
tim  a  t  ed 
wages    of 
office  men 
and  those 
of        all 
other  em- 
ployes en- 
gaged   on 
the  prem- 
ises. 

State  area 
of  ground 
floor,  in- 
cl  u  d  i  n  g 
all  parts 
enclosed. 

If  base- 
ment is 
used  as 
sales- 
room, 
include 
it  in 
num- 
ber. 

If  there 
is  front- 
age on 
more 
than 
one 
street, 
state 
each 
s  epa- 
rately, 
naming 
streets. 

Item  5. 


ANALYSIS  OF  PREMIUM 


Number       Kind 


Elevators 

Elevators 

Estimated  wages  of  office  men, 


at  $ for  each, S. 

at  $ for  each, $. 


at 


cents  per  $100 $. 


Estimated  wages  of  all  other 
employees  engaged  on  prem- 
ises, $ at  .  .  cents  per  $100 $ 

Total  floor  area,  all  floors  included, square  feet 

at cents  per  100  square  feet  $ 

Street  frontage,   all  frontages  included, running 

feet  at cents  per  running  foot  $ 

Total  Premium  $ 

Item  6.     The  kind  of  business  done  on  the  premises  is  as  follows: 

Item  7.     The   Assured    manages   the   premises,   except   as   follows: 

Item  8.     The  Assured  occupies  the  premises,  except  as  follows: 

Item  9.     There  is  no  elevator,  escalator  or  moving  platform  on  the  premises, 

except  as  follows: 

Item  10.  All  elevators,  escalators  and  moving  platforms  have  been  accepted 
from  the  builders  as  satisfactory,  except  as  follows: 


776  APPENDIX   Of   FORMS  [CHAP.  II 

Item  11.  No  Company  has  cancelled  liability  insurance  on  this  risk  during 

the  past  three  years,  except  as  follows: 

Item  12.  No  Company  has  insured  this  risk  during  the  past  two  years,  except 

as  follows : 

Item  13.  There  is  no  other  elevator  or  general  liability  insurance  carried  by 

the  Assured  on  the  premises,  except  as  follows: 

Item  14.  Inspection  reports  and  other  notices  and  correspondence  are  to  be 

mailed  to  the  Assured  at  the  address  given  above,  or  to 

at 

If  to  the  latter,  it  is  by  request  of  the  Assured,  who  acknowledges 
such  person  as  the  proper  agent  for  this  purpose. 

Item  15.  The  minimum  premium  for  this  Policy  is  $ 

In  witness  whereof,  etc. 


CBAP.  in]     EXAMPLES  OPERATION   OF  COINSURANCE  CLAUSES      777 


CHAPTER  III 

Relating  to  Adjustment 

1 

Examples  of  the  Operation  of  Coinsurance  Clauses  Prepared  for  This  Book  by 
Willis  0.  Robb,  Esq.,  Secretary  of  the  Loss  Committee  of  the  New  York  Board 
of  Fire  Underwriters.     See  §  S4S 

Companies  Pay 
Under  80%  Clause  Under  100%  Clause 

1.  Value    $10,0001 

Ins.  6,000  I  $  4,500  $  3,600 

Loss  6,000  J 

2.  Value       10,0001 

Ins.  6,000^  6,000  4,800 

Loss  8,000  J 

3.  Value    $10,000] 

Ins.  6,000^  6,000  6,000 

Loss         10,000  J 

4.  Value       10,0001 

Ins.  8,000^  6,000  4,800 

Loss  6,000  J 

5.  Value       10,0001 

Ins.  8,000^  8,000  6,400 

Loss  8,000  J 

6.  Value       10,0001 

Ins.  8,000  >■  8,000  8,000 

Loss        10,000  J 

7.  Value      10,0001 

Ins.         10,000^  6,000  6,000 

Loss  6,000  J 

8.  Value       10,0001 

Ins.    10,000  [-  8,000  8,000 

Loss    8,000  J 

9.  Value      10,000 1 

Ins.         10,000^  10,000  10,000 

Loss        10,000  J 


778  RELATING   TO   ADJUSTMENT  [CHAP.  lU 

10.  Value       10,0001 

Ins.  12,000^  6,000  6,000 

Loss  6,000  J 

11.  Value      10,1 
Ins.  12,000  }"  8,000  8,000 

Loss 

12.  Value       10,000  "I 

Ins.  12,000  y  10,000  10,000 

Loss         10,000  J 

,       ,       „^     ,  6000=  (the  insurance)     - 

Thus  in  the  first  example,  under  the  80%  clause  3Q(jy=  (gQcv  of  value) '^  ^'  °'" 

...        ,.  „  .1     .  ,2000=  (the  deficit)         ,        ,  _„„  ,  „ 

4500,  of  the  loss  falls  on  the  insurers,  and  g(j(jo=  (SU'f  of  value)  ^  *'  °'"  ' 

on  the  insm-ed.     Under  the  100%  clause  ^,  or  3600,  falls  on  the  insurers,  and 
^,  or  2400,  on  the  insured. 


York  Antwerp  Rules,  Adopted  by  the  Association  for  the  Reform  and  Codification 
of  the  Law  of  Nations,  at  Antwerp,  in  1877,  and  Amended  at  Their  Liverpool 
Conference  in  1890.     See  §  S^6 

Rule  I.  Jettison  op  Deck  Cargo. — No  jettison  of  deck  cargo  shall  be  made 
good  as  general  average. 

Every  structure  not  built  in  with  the  frame  of  the  vessel  shall  be  considered 
to  be  a  part  of  the  deck  of  the  vessel. 

Rule  U.  Damage  by  Jettison  and  Sacrifice  for  the  Common  Safety. — 
Damage  done  to  a  ship  and  cargo,  or  either  of  them,  by  or  in  consequence  of  a 
sacrifice  made  for  the  common  safety,  and  by  water  which  goes  down  a  ship's 
hatches  opened,  or  other  opening  made  for  the  purpose  of  making  a  jettison  for 
the  common  safety,  shall  be  made  good  as  general  average. 

Rule  in.  Extinguishing  Fire  on  Shipboard. — Damage  done  to  a  ship 
and  cargo,  or  either  of  them,  by  water  or  otherwise,  including  damage  by  beach- 
ing or  scuttling  a  burning  ship,  in  extinguishing  a  fire  on  board  the  ship,  shall 
be  made  good  as  general  average;  except  that  no  compensation  shall  be  made 
for  damage  to  such  portions  of  the  ship  and  bulk  cargo,  or  to  such  separate 
packages  of  cargo,  as  have  been  on  fire. 

Rule  IV.  Cutting  away  Wreck. — Loss  or  damage  caused  by  cutting  away 
the  wreck  or  remains  of  spars,  or  of  other  things  which  have  previously  been 
carried  away  by  sea  peril,  shall  not  be  made  good  as  general  average. 

Rule  V.  Voluntary  Stranding.— When  a  ship  is  intentionally  rim  on  shore, 
and  the  circumstances  are  such  that  if  that  course  were  not  adopted  she  would 
inevitably  sink,  or  drive  on  shore  or  on  rocks,  no  loss  or  damage  caused  to  the 
ship,  cargo,  and  freight,  or  any  of  them,  by  such  intentional  running  on  shore 
shall  be  made  good  as  general  average.  But  in  all  other  cases  where  a  ship  is 
intentionally  run  on  shore  for  the  common  safety,  the  consequent  loss  or  damage 
shall  be  allowed  as  general  average. 

Rule  VI.  Carrying  Press  of  Sail;  Damage  to  or  Loss  »f  Sails. — Damage 
to  or  loss  of  sails  and  spars,  or  either  of  them,  caused  by  forcing  a  ship  ofif  the 


CHAP.  Ill]  YORK  ANTWERP   RULES  779 

ground  or  by  driving  her  higher  up  the  ground,  for  the  common  safety,  shall  be 
made  good  as  general  average;  but  where  a  ship  is  afloat,  no  loss  or  damage 
caused  to  the  ship,  cargo,  and  freight,  or  any  of  them,  by  carrying  a  press  of 
sail,  shall  be  made  good  as  general  average. 

Rule  VII.  Damage  to  Engines  in  Refloating  a  Ship. — Damage  caused  to 
machinery  and  boilers  of  a  ship,  which  is  ashore  and  in  a  position  of  peril,  in 
endeavoring  to  refloat,  shall  be  allowed  in  general  average,  when  shown  to  have 
arisen  from  an  actual  intention  to  float  the  ship  for  the  common  safety  at  the 
risk  of  such  damage. 

Rule  VIII.  Expenses  Lightening  a  Ship  when  Ashore,  and  Consequent 
Damage. — When  a  ship  is  ashore  and,  in  order  to  float  her,  cargo,  bunker  coals, 
and  ship's  stores,  or  any  of  them,  are  discharged,  the  extra  cost  of  lightening, 
lighter  hire,  and  reshipping  (if  incurred),  and  the  loss  or  damage  sustained 
thereby,  shall  be  admitted  as  general  average. 

Rule  IX.  Cargo,  Ship's  Materials,  and  Stores  Burnt  for  Fuel. — Cargo, 
ship's  materials,  and  stores,  or  any  of  them,  necessarily  burnt  for  fuel  for  the 
common  safety  at  a  time  of  peril,  shall  be  admitted  as  general  average,  when 
and  only  when  an  ample  supply  of  fuel  had  been  provided;  but  the  estimated 
quantity  of  coals  that  would  have  been  consumed,  calculated  at  the  price  current 
at  the  ship's  last  port  of  departure  at  the  date  of  her  leaving,  shall  be  charged 
to  the  shipowner  and  credited  to  the  general  average. 

Rule  X.  Expenses  at  Port  of  Refuge,  etc. — (a)  When  a  ship  shall  have 
entered  a  port  or  place  of  refuge,  or  shall  have  returned  to  her  port  or  place  of 
loading,  in  consequence  of  accident,  sacrifice,  or  other  extraordinary  circum- 
stances, which  render  that  necessary  for  the  common  safety,  the  expenses  of 
entering  such  port  or  place  shall  be  admitted  as  general  average;  and  when  she 
shall  have  sailed  thence  with  her  original  cargo,  or  a  part  of  it,  the  corresponding 
expenses  of  leaving  such  port  or  place,  consequent  upon  such  entry  or  return, 
shall  likewise  be  admitted  as  general  average. 

(6)  The  cost  of  discharging  cargo  from  a  ship,  whether  at  a  port  or  place  of 
loading,  call,  or  refuge,  shall  be  admitted  as  general  average,  when  the  discharge 
was  necessary  for  the  common  safety  or  to  enable  damage  to  the  ship,  caused 
by  sacrifice  or  accident  during  the  voyage,  to  be  repaired,  if  the  repairs  were 
necessary  for  the  safe  prosecution  of  the  voyage. 

(c)  Whenever  the  cost  of  discharging  cargo  from  a  ship  is  admissible  as  gen- 
eral average,  the  cost  of  reloading  and  storing  such  cargo  on  board  the  said  ship, 
together  with  all  storage  charges  on  such  cargo,  shall  hkewise  be  so  admitted. 
But  when  the  ship  is  condemned  or  does  not  proceed  on  her  original  voyage,  no 
storage  expenses  incurred  after  the  date  of  the  ship's  condemnation  or  of  the 
abandonment  of  the  voyage  shall  be  admitted  as  general  average. 

(d)  If  a  ship  under  average  be  in  a  port  or  place  at  which  it  is  practicable  to 
repair  her,  so  as  to  enable  her  to  carry  on  the  whole  cargo,  and  if,  in  order  to  save 
expenses,  either  she  is  towed  thence  to  some  other  port  or  place  of  repair  or  to 
her  destination,  or  the  cargo  or  a  portion  of  it  is  transhipped  by  another  ship, 
or  otherwise  forwarded,  then  the  extra  cost  of  such  towage,  transshipment,  and 
forwarding,  or  any  of  them  (up  to  the  amount  of  the  extra  expense  saved), 
shall  be  payable  by  the  several  parties  to  the  adventure  in  proportion  to  the 
extraordinary  expense  saved. 

Rule  XI.  Wages  and  Maintenance  of  Crew  in  Port  of  Refuge,  etc. — 
When  a  ship  shall  have  entered  or  been  detained  in  an,y  port  or  place  under  the 


780 


RELATING   TO   ADJUSTMENT 


[chap.  IU 


circumstances,  or  for  the  purposes  of  the  repairs,  mentioned  in  Rule  VII,  the 
wages  payable  to  the  master,  officers,  and  crew,  together  with  the  cost  of  main- 
tenance of  the  same,  during  the  extra  period  of  detention  in  such  port  or  place 
vintil  the  ship  shall  or  should  have  been  made  ready  to  proceed  upon  her  voyage, 
shall  be  admitted  as  general  average.  But  when  the  ship  is  condemned  or  does 
not  proceed  on  her  original  voyage,  the  wages  and  maintenance  of  the  master, 
officers,  and  crew,  incurred  after  the  date  of  the  ship's  condemnation  or  of  the 
abandonment  of  the  voyage,  shall  not  be  admitted  as  general  average. 

Rule  XII.  Damage  to  Cargo  in  Discharging,  etc. — Damage  done  to  or 
loss  of  cargo  necessarily  caused  in  the  act  of  discharging,  storing,  reloading,  and 
stowing,  shall  be  made  good  as  general  average,  when  and  only  when  the  cost 
of  those  measures  respectively  is  admitted  as  general  average. 

Rule  XIII.  Deductions  from  Cost  of  Repairs. — In  adjusting  claims  for 
general  average,  repairs  to  be  allowed  in  general  average  shall  be  subject  to  the 
following  deductions  in  respect  of  "new  for  old,"  viz.: 

In  the  case  of  iron  or  steel  ships,  from  date  of  original  register  to  the  date  of 
accident, — 


Up  to 

1  year  old 

(A). 


All  repairs  to  be  allowed  in  full,  except  painting  or  coating 
of  bottom,  from  which  one-third  is  to  be  deducted. 


Between 
1  and  8  years  ■< 
(B). 


Between 


One-third  to  be  deducted  off  repairs  to  and  renewals  of  wood- 
work of  hull,  masts  and  spars,  furniture,  upholstery,  crockery, 
metal  and  glassware,  also  sails,  rigging,  ropes,  sheets,  and 
hawsers  (other  than  wire  and  chain),  awnings,  covers,  and 
painting. 

One-sixth  to  be  deducted  off  wire  rigging,  wire  ropes  and 
wire  hawsers,  chain  cables  and  chains,  donkey  engines,  steam 
winches  and  connections,  steam  cranes  and  connections;  other 
~  repairs  in  full. 

C     Deductions  as  above  under  Clause  B,  except  that  one-sixth 
3  and  6  years  4  be  deducted  off  iron-work  of  masts  and  spars,  and  machinery 
(C.)  I  (inclusive  of  boilers  and  their  mountings). 

r     Deductions  as  above  imder  Clause  C,  except  that  one-third 

,  J  be  deducted  off  iron-work  of  masts  and  spars,  repairs  to  and 

_^.  I  renewal  of  all  machinery  (inclusive  of  boilers  and  their  mount- 

Mngs),  and  all  hawsers,  ropes,  sheets,  and  rigging. 

Between        r     One-third  to  be  deducted  off  all  repairs  and  renewals,  except 

10  &  15  years-^  iron-work  of  hull  and  cementing  and  chain  cables,  from  which 

(E).' 

Over 

tchors  to  be  allowed  in  full.    One-sixth  to  be  deducted  off  chain 
cables. 

The  deductions  (except  as  to  provisions  and  stores,  ma- 
chinery, and  boilers)  to  be  regulated  by  the  age  of  the  ship,  and 
not  the  age  of  the  particular  part  of  her  to  which  they  apply. 
No  painting  bottom  to  be  allowed  if  the  bottom  has  not  been 
painted  within  six  months  previous  to  the  date  of  accident. 
No  deduction  to  be  made  in  respect  of  old  material  which  is 
repaired  without  being  replaced  by  new,  and  provisions  and 
.stores  which  have  not  been  in  use. 


15  years 
(F). 


Generally 
(G). 


,^ .      v..       O...V.      

Lone-sixth  to  be  deducted.    Anchors  to  be  allowed  in  full. 

r     One-third  to  be  deducted  off  all  repairs  and  renewals.     An- 


CHAP.  Ill]  CUSTOMARY    DEDUCTIONS  781 

In  the  case  of  wooden  or  composite  ships: 

When  a  ship  is  under  one  year  old  from  date  of  original  register,  at  the  time 
of  accident,  no  deduction  new  for  old  shall  be  made.    Alter  that  period  a 
deduction  of  one-third  shall  be  made,  with  the  following  exceptions: 
Anchors  shall  be  allowed  in  full.    Chain  cables  shall  be  subject  to  a  deduction 

of  one-sixth  only. 
No  deduction  shall  be  made  in  respect  of  provisions  and  stores  which  had  not 

been  in  use. 
Metal  sheathing  shall  be  dealt  with,  by  allowing  in  full  the  cost  of  a  weight 
equal  to  the  gross  weight  of  metal  sheathing  stripped  off,  minus  the  pro- 
ceeds of  the  old  metal.     Nails,  felt,  and  labor  metaling  are  subject  to  a 
deduction  of  one-third. 
In  the  case  of  ships  generally: 

In  the  case  of  all  ships,  the  expense  of  straightening  bent  iron-work,  including 

labor  of  taking  out  and  replacing  it,  shall  be  allowed  in  full. 
Graving  dock  dues,  including  expenses  of  removals,  cartages,  use  of  shears, 

stages,  and  graving  dock  materials,  shall  be  allowed  in  full. 

Rule  XIV.  Temporary  Repairs. — No    deductions  "new  for  old"  shall  be 

made  from  the  cost  of  temporary  repairs  of  damage  allowable  as  general  average. 

Rule  XV.    Loss  of  Freight. — Loss  of  freight  arising  from  damage  to  or  loss 

of  cargo  shall  be  made  good  as  general  average,  either  when  caused  by  a  general 

average  act,  or  when  the  damage  to  or  loss  of  cargo  is  so  made  good. 

Rule  XVI.  Amount  to  Be  Made  Good  for  Cargo  Lost  or  Damaged  by 
Sacrifice. — The  amount  to  be  made  good  as  general  average  for  damage  or 
loss  of  goods  sacrihced  shall  be  the  loss  which  the  owner  of  the  goods  has  sus- 
tained thereby,  based  on  the  market  values  at  the  date  of  the  arrival  of  the  vessel 
or  at  the  termination  of  the  adventure. 

Rule  XVII.  Contributory  Values. — The  contribution  to  a  general  average 
shall  be  made  upon  the  actual  values  of  the  property  at  the  termination  of  the 
adventure,  to  which  shall  be  added  the  amount  made  good  as  general  average 
for  property  sacrificed;  deduction  being  made  from  the  shipowner's  freight  and 
passage-money  at  risk,  of  such  port  charges  and  crew's  wages  as  would  not  have 
been  incurred  had  the  ship  and  cargo  been  totally  lost  at  the  date  of  the  general 
average  act  or  sacrifice,  and  have  not  been  allowed  as  general  average;  deduc- 
tion being  also  made  from  the  value  of  the  property  of  all  charges  incurred  in 
respect  thereof  subsequently  to  the  general  average  act,  except  such  charges  as 
are  allowed  in  general  average. 

Passengers'  luggage  and  personal  effects,  not  shipped  under  bill  of  lading, 
shall  not  contribute  to  general  average. 

Rule  XVIII.  Adjustment.— Except  as  provided  in  the  foregoing  rules,  the 
adjustment  shall  be  drawn  up  in  accordance  with  the  law  and  practice  that 
would  have  governed  the  adjustment  had  the  contract  of  affreightment  not 
contained  a  clause  to  pay  general  average  according  to  these  rules. 


3 

Customary  Deductions:  England.     See  §  S09 

In  the  adjustment  of  claims  for  particular  average  in  a  policy  on  ship,  in  the 
absence  of  any  special  provisioiis  in  the  policy,  the  following  items  for  repairing 


782  RELATING   TO   ADJUSTMENT  [CHAP.  Ill 

damage  or  making  good  losses  are  recoverable  from  the  insurer  without  deduc- 
tion new  for  old: — 

Graving  dock  expenses. 

Cost  of  removals. 

Use  of  shears,  stages,  and  graving  dock  appliances,  ana  cost  of  cartage  and 
carriage. 

Cost  of  anchors  and  of  provisions  and  stores  which  have  not  been  in  use. 

Cost  of  temporary  repairs. 

Cost  of  straightening  bent  iron-work. 

All  repairs  of  damage  sustained  by  a  vessel  on  her  first  voyage. 

Chain  cables  are  subject  to  a  deduction  of  one-sixth. 

All  other  repairs  of  damage  sustained  after  the  first  voyage  are  subject  to  a 
deduction  of  one-third. 

Metal  sheathing  must  be  dealt  with  by  allowing  in  full  the  cost  of  a  weight 
equal  to  the  gross  weight  of  metal  sheathing  stripped  off,  minus  proceeds  of 
the  old  metal.  Nails,  felt,  and  labor  metaling,  are  subject  to  one-third,  also  the 
cost  of  replacing  metal  lost. 

Chalmers  &  Owen,  Ins.  (1907),  p.  154. 


Illustrative  Statement  of  General  Average  Prepared  for  This  Book  by  Harrington 
Putnam,  Esq.,  of  the  New  York  Bar,  assisted  by  Messrs.  Johnson  &  Higgins, 
average  adjusters,  in  Case  of  the  British  Steamer  "  Vesper."   See  §  2^4 

This  Vessel  sailed  from  Hamburg,  November  18th,  1906,  with  a  cargo  of 
sugar  bound  to  New  York  via  Cardiff,  Wales. 

On  November  22d,  while  proceeding  up  the  Bristol  Channel,  she  was  run 
into  by  the  steamer  Exeter  sustaining  such  damage  as  required  entry  of  port 
of  refuge,  dry  docking,  temporary  repairs  with  partial  discharge  of  cargo,  after 
which  the  cargo  was  replaced  and  the  voyage  resumed,  so  that  she  arrived  in 
New  York,  January  15th,  1907. 

Under  the  terms  of  the  contract  of  affreightment,  the  general  average  is  stated 
in  accordance  with  York- Antwerp  Rules,  1890.  The  eighteenth  of  these  Rules 
provides  that,  as  to  matters  not  covered  specifically  in  the  York-Antwerp  Rules, 
the  adjustment  shall  be  drawn  up  "in  accordance  with  the  law  and  practice 
which  would  otherwise  have  governed  the  adjustment,"  which  refers  to  the 
law  of  the  place  of  destination. 

The  average,  therefore,  is  stated  in  accordance  with  the  York- Antwerp  Rules, 
supplemented  by  the  law  and  usages  of  the  port  of  New  York. 

These  charges  are  borne  by  the  common  interests,  without  recourse  against 
the  Exeter  for  the  reason  that  although  the  fault  of  the  Exeter  was  clearly  es- 
tablished, she  became  a  total  loss. 

While  by  British  law  the  owners  might  still  be  liable  at  the  rate  of  £8  a  ton,* 
yet  as  this  steamer  was  owned  by  a  "single-ship"  limited  company,  no  prop- 
erty was  left  to  answer  for  any  judgment  that  might  be  recovered  against  the 
Exeter  or  its  incorporated  owner. 


1  Mer.  Ship.  Act,  1894,  §  503. 


CHAP.  Ill  ]      ILLUSTRATIVE   STATEMENT  OF  GENERAL   AVERAGE     783 


CHARGES  AND  EXPENSES 

Disbursements  at  Cardiff 

[For  brevity,  some  items  charged  to  owners  are  omitted.j 


Gilbert  Robertson 

For  fees  for  noting  and  extending 
protest 

Lloyd's  Register  of  British  and  Foreign 
Shipping 
For  fees  for  special  damage  survey 
held  on  the  Steamer  Vesper,  3,896 
tons 

John  Bovey  &  Co. 

For  our  time  and  services  reporting 
steamer's  arrival,  surveying  before 
and  after  repairs,  watching  and 
superintending  handling  of  cargo, 
otherwise  looking  after  cargo  in- 
terests, including  Survey  Report, 
examination  of  accounts,  etc.,  ten 
guineas 

Telegrams,   cablegrams  and  petties 

Rea  Transport  Co.,  Ltd. 

For  assistance  in  Roads,  3  tugs 
Note: — All  extra  towages 

John  &  Frank  Davies 

For  tending  hues  and  mooring  ship 

in  Roath  Basin 
Extra  boat,  do.,  do. 

The  Bute  Shipbuilding,  Engineering  and 
Dry  Dock  Co.,  Ltd. 
This  charge  includes  various  repairs 
to  the  vessel  and  other  items  not 
general  average,  from  which  the 
adjusters  have  separated  as  gen- 
eral average  charges,  the  cost  of 
cargo-boxes  made  for  hoisting  out 
the  sugar,  expense  of  removing 
the  cargo  and  replacing  and  re- 
Btowing  the  same  after  the  com- 
pletion of  repairs,  also  for  hire  of 

Forward 


£3    64 


1818  0 


General 
Average 


£364 


6    6    0 


10  10  0 
1    26 


11  12  6 


21    0  0 


15  0 
15  0 


1  10  0 


1112   6 
21    0   0 


110   0 


£43  14  101 


784 


RELATING   TO   ADJUSTMENT 


[chap.  Ill 


Disbursementa  at  Cardiff,  cont'd 


Brought  forward 
watchman,  and  other  Uke  common 
charges,  which,  less  credits,  are      £      72  15  11 
Balance  of  %  5,016  14    1 


5,089  10    0 


The  Bute  Shipbuilding,  Engineering  and 

Dry  Dock  Co.,  Ltd. 
For  vessel  dry  docked  with  full  cargo 

and  specially  shored,  cradled,  etc., 

including  the  first  24  hours'  dock 

dues,  as  agreed  ^ 
50  extra  tides  @  £24  7  0 
Ship's  bottom  painted  from  keel  to 

light  line  with  owner's  material 

iVofe.-— Charge  to  G.  A.  for  extra 
cost  of  dry  docking  vessel,  and 
dock  dues  on  accoimt  of  cargo  on 
board. 

Sydney  D.  Jenkins  &  Son 

For  making  fore  and  main  trysails, 

336  yds.  @  i 
For  making  bridge   and    forecastle 

awnings,  342  yds.  @  i 
Remainder  of  account 

Less  Discount 


Note.— Charge  to  G.  A.  for  replacing 
sails  and  awnings,  used  over  the 
bows  to  stop  leak,  and  damaged. 

The  item  of  £3  18  2  was  for  re- 
placing new  ropes  sacrificed. 

Forward 


200    0  0 
1,217  10  0 

10  10  0 


1,428    0  0 


General  Average 


§Off 


£43  14  lU 
721511 


28    GO 

28  10  0 
133    5  4 


189  15  4 
5    01 


184  15  3  5610  02 


Net 


£  12  12  0 
5,016  14  1 


169   0   0 

608  15    0 


£56100 


Owners 


31    0  0 

608  15  0 

10  10  0 


318   2 


124    7  1 


898    3  11 


5,803  18  2 


ilf  the  Vesper  had  had  no  cargo  on  board,  the  cost  of  docking  her  and  the 
first  24  hours'  dues  would  have  been  but  £31.  The  extra  expense  of  £169,  due 
to  having  cargo  on  board,  is  treated  as  general  average.  The  vessel  was  at  Car- 
diff and  needed  repairs  to  enable  her  to  resume  the  voyage.  The  master  waa 
confronted  with  the  alternative,  either  of  discharging  and  storing  the  cargo 
while  the  vessel  was  being  repaired,  and  then  reloading  it  after  the  repairs  were 
completed,  or  of  dry-docking  the  vessel  with  her  cargo  on  board,  which  in  fact 
was  done.  Had  her  cargo  been  discharged,  the  cost  of  discharging,  and  the  ex- 
pense of  warehousing  and  reloading  it,  would  have  been  treated  as  general 
average. 

'The  Vesper  being  between  one  and  three  years  old,  one-third  is  deducted 
from  her  sails,  etc.,  under  G.  A.  Rule  XIII. 


CHAP.  Ill  ]      ILLUSTRATIVE  STATEMENT  OF  GENERAL  AVERAGE      786 


Disbursements  at  Cardiff,  cont'd 


Brougiit  torward 
William  Jeremy 
For  night  watching 

Hugh  Evans  &  Co. 

For  laborers  employed  in  removing 
all  stores  and  gear  from  fore  peak, 
boatswains  and  sail  lockers  and 
landing  and  stowing  same  in  the 
stores  on  the  quay;  assisting  in 
clearing  out,  etc. 

Note: — Charge  to  G.  A.  for  labor, 
covering  and  securing  with  sails 
and  tarpaulins,  cargo  in  way  of 
repairs,  and  afterwards  replacing 
same. 


>er 


Rea  Transport  Co. 

For  agency  fee  per  steamer  Vespi 

at  Cardiff 
Telegrams,  telephones,  stamps,  etc. 


Josiah  Thomas 

For  professional  attendance  re  the 
above  steamer: 

Proceeding  to  Cardiff  as  per  instruc- 
tions, arranging  to  dry  dock  the 
steamer,  consulting  Lloyd's  Regis- 
try and  Salvage  Association  as  to 
docking  with  cargo  on  board,  call- 
ing surveys  on  ship  and  cargo, 
arranging  docking  terms,  superin- 
tending all  interests  during  re- 
pairs, collecting  survey  reports 
and  examining  all  accounts  for 
adjustment,  etc. 

30  days  @  £2.  2s.  Od.  per  day 

Hotel,  personal  and  traveling  ex- 
penses 


Fon"  coti  of  telegrams,  etc. 
50 


Forward 


56  10  0 


£   6  19    6 


54    9    0 


15  15    0 
10    6 


16    5    6 


General  Average 


iOff 


63     0     0 


31  10    0 


94  10    0 


4  16    5 


Net 


Owners 


898    3  11 
6  19    6 


5,803  18  2 


5    0    0 


10  17    0 


49   9    0 


5   8   6 


£56  10  0 


31  10    0 


3    4    3 


955  14    8 


63   0   0 


112   2 


5,923  7  10 


786 


RELATING   TO   ADJUSTMENT 


[chap.  Ill 


Disbursements  at  Cardiff,  cont'd 


Brought  forward 
The  Salvage  Association 

For  services  of  the  Cardiff  staff,  sur- 
veying damage  and  supervising 
repairs,  etc.,  including  checking 
accounts  and  reporting 

Capt.  E.  Hall,  for  surveying  cargo 
and  supervising  handling  and 
shifting  and  restowage  of  sugar  in 
the  holds  during  repairs 

Expenses 

Photographs 


F.  H.  Smith  <fe  Co. 

For  services  investigating  the  ac- 
coimts  at  Cardiff,  and  obtaining 
information  as  to  items  chargeable 
to  the  general  average,  corre- 
spondence, etc. 


Note: — Charge  to  G.  A.  extra  cost  of 
mending  bags  owing  to  the  hand- 
ling of  the  cargo  at  Cardiff. 

For  Commission 
On   general   average   disbursements 
and  for  advancing  funds  @  2^% 

For  Allowance 

For  replacing  coal  and  engine  stores 
used  during  the  extra  detention  at 
Cardiff 

Forward 


General  Average 


off 


£56  10  0 


£63  0  0 


12  12  0 

10  0 

2    50 


78    7  0 


10  10  0 


@  Exchange  $4.87 


One-third  off  "New  for  Old' 


Thomas  A.  Keyes 
For  repairing  cargo   ex  Vesper  in- 
cluding all  material  used.  $230 


129  68 


142  76 


Net 


£955  14  8 


5,923710 


34  10    6 


Owners 


43  16  6 


10  10    0 


£56  10  0  £1,000  15  2 


$275  16 


91  72 


$183  44 


$4,873  69 


183  44 


General  Average 


$130  00 


129  68 


128  74 


$.5,445  55 


5,967  4  4 


29,060  35 


91  72 


100  00 


14  02 


29,266  09 


CHAP.  Ill  ]      ILLUSTRATIVE  STATEMENT   OF  GENERAL   AVERAGE    787 


Disbursements  at  CardiS,  cont'd 


S34,711  64 

Brought  forward 

1,017  85 

For  Wages  and  Provisions 

Of  ship's  company  dur- 

ing the  extra  detention 

of  the  vessel  at 

Barry 

Roads  and  Cardiff,  one 

month: 

Wages 

Master,  per  mo.  £18 

1st  Mate 

9 

2d     " 

7 

Steward 

6 

Asst.  " 

2.10 

Cook 

5 

Carpenter     " 

4.10 

Boatswain    " 

5 

5  Seamen, 

@  £3.5  ea. 

16.5 

1st  Eng'r      " 

17 

2d      " 

12 

3d      " 

8 

4th    " 

6 

Donkeyman  " 

5 

8  Firemen 

@  £3.10  ea.      " 
per  month  £149.  5 

28 

s.  Od. 

@  Each  $4.87,  $726.85 

for  1  month 

Provisions 

Master,  per  day 

$1.00 

6     Officers     and 

Engineers,  per 

day,  @  50c. 

3.00 

19  men,  per  day 

@  30c. 

per  day 

5.70 

9.70 

for  30  days 

Interest 

259  08     For  interest  i  on  general 

$35,988  57 

Forward 

General  Average 


Owners 


i&5,445  65 


$29,266  09 


$726  85 


291  00 


1017  85 


1,017  85 


$6,463  40 


$29,266  09 


» Interest  is  allowed  in  the  United  States  on  authority  of  the  Mary,  1 
Sprague,  51,  and  by  a  rule  of  the  Association  of  Average  Adjusters  of  the 
United  totates,  adopted  April  21,  1885. 


788 


RELATING  TO   ADJUSTMENT 


[chap,  hi 


Disbursements  at  Cardiff,  cont'd 

Genera;!  Average 

Owners 

$35,988  57 

Brought  torward 
average  disbursements 
and  allowances  during 
probable  outlay  @  6% 
per  annum 

Disbursements  $5,187.13 
for  8  mos.  =  4% 

Allowances  $1,146.59  for 

$207  48 

$6,463  40 

5^29,266  09 

i 

9  mos.=4i% 
Frank  S.  Martin 

51  60 

255  08 

259  08 

20  00 

For  valuation   of   vessel 
John  H.  Ward 

20  00 

20  00 

32  00 

■ 

For  lithographing  state- 

ment 
For  Drawing   Average   A- 

32  00 

32  00 

5  00 

greement 

and  obtaining  signature 

thereto 
For  Extending  Protest 

5  00 

5  00 

15  00 

and   furnishing   certified 

copy  of  same 
For  Services  and  Advice 

15  00 

15  00 

325  00 

For    consultations    with 

agents,      and      corre- 

spondence in  regard  to 

the     repair     accounts 

and   the    expeinses   of 

handling  and  protect- 

ing the    cargo  at  Car- 

diff, for  procuring  and 

verifying  contributory 

value,    and    for    this 

statement 
Commission 

325  00 

325  00 

177  98 

For  commission  for  col- 

lecting and  settling  the 

general      average      @ 

2i%  ' 

$36,563  55 

177  98 

177  98 

Total 


$7,297  46 


$29,266  09 


1  Allowance  of  Commissions  sustained  in  Sturqis  v.  Cary,  2  Curtis.  382:  F.  C. 
13,573. 


CHAP.  Ill  ]      ILLUSTRATIVE  STATEMENT   OF  GENERAL   AVERAGE      789 

CONTRIBUTING  INTERESTS  AND  APPORTIONMENT  OF  GENERAL 

AVERAGE 


Vessel 
Estimated  value  in  her 

damaged  condition 
Add.  amount  made  good 


$120,000  00 
202  46 


Freight 
Amount  at  risk 
Less     wages     and     port 
charges 

Cargo 

Consigned  to 
Arbuckle  Bros. 

50,498  Bags  Sugar 

8,661  08 
3,289  83 

185,031  71 

$120,202 

Pays 

5,371 

<( 

185,032 

<< 
Pays 

$310,605 

$2,824  06 


126  19 


4,347  21 


r,297  46 


At  2.34943  per  cent 

Apportionment  Under  Policies  on  VesseIj 
Underwriters  on  vessel  pay  proportional  general  average,  as  follows: 
Vesper  insured  for  $150,000 


Hudson  Insurance  Company 
Orient  Insurance  Company 
Commercial  Insurance  Company 
Lloyd's,  Individual  Underwriters 


insured 

$50,000 

pay; 

$941  35 

25,000 

(( 

470  68 

25,000 

It 

470  68 

50,000 

ti 

941  35 

$150,000 


$2,824  06 


New  York,  October  1, 1907. 


(Signed)    John  Smith  &  Co., 

Average  Adjusters. 


INDEX. 


INDEX. 

[References  are  to  pages.] 


ABANDONMENT, 

1.  Marine  Insurance. 

as  related  to  actual  and  constructive  total  loss,  2.4.0-2^.1. 

word  used  in  different  sense?,  note,  243. 

a  right  not  an  obligation,  246. 

when  right  of  exists,  243,  244,  248. 

of  ship,  of  cargo,  of  freight,  245. 

not  to  be  confused  with  subrogation,  250,  251. 

right  of,  in  case  of  capture,  609. 

actual  total  loss;  notice  unnecessary,  242,  245. 

what  is  constructive  total  loss,  rule  in  England,  243. 

what  is  constructive  total  loss; -fifty  per  cent  rule  in  U.  S.,  244. 

notice  of,  246. 

object  of  notice,  246. 

notice,  must  be  followed  by  actual,  248. 

when  formal  notice  unnecessary,  246,  247. 

situation  at  time  notice  given;  time  action  brought,  difference  between 

English  and  American  rules,  248,  249. 
form  of  notice,  249. 

acceptance  of  notice  is  a  waiver  of  a  known  forfeiture,  note,  223. 
reasonable  time  for  notice;  mixed  question  of  law  .and  fact,  note,  246. 
acceptance  of,  246,  247. 
when  no  waiver  of,  note,  247. 
effect  of  a  valid  abandonment,  249-251. 
effect  of;  several  underwriters,  249. 

effect  of;  insured  own  insurer,  uninsured  balance;  share  of  salvage,  250. 
insurers'  and  owners'  right  to  freight,  after  casualty;  English  and  American 

rules,  250. 
insurer;  remuneration  for  carrying  owner's  goods  subsequent  to  casualty, 

250. 
acts  of  assured  or  agents,  after  casualty;  at  insurer's  risk  and  for  his  benefit; 

abandonment,  250. 
doctrine  of  abandonment  not  applicable  to  insurance  on  profits,  note,  247. 
warranty  not  to  abandon  in  case  of  blockade,  646. 

2.  Fire  Insurance. 

abandonment  excluded  by  fire  policy,  305. 

whether  allowable  to  insurers  under  fire  policies  on  payment  of  total  loss,  305. 

ABSENCE, 

no  excuse  for  non-payment  of  premium,  496. 

[793] 


794  INDEX 

[References  are  to  pages.J 

ACCEPTANCE, 

closing  contract,  94-1U3. 

not  presumed  upon  neglect  to  reply  to  application,  note,  100. 
See  Abandonment. 

ACCIDENT, 

defined.  538. 

and  "accidental,"  meaning  of;  illustrations,  538-541. 

and  disease;  distinction  between,  562. 

employers'  liability  insurance,  note,  665. 

no  excuse;  inability  to  fulfill  warranty,  note,  145. 

ACCIDENT  INSURANCE, 

branch  of  life,  18. 

contrasted  with  life,  538. 

when  not  to  be  incorporated  in  life  policy  as  subsidiary  feature,  note,  537. 

ACCIDENT  POLICY  AND  CLAUSES, 

meaning  and  legal  effect  of,  537-581. 
introductory  statement,  537. 
contrasted  with  life  insurance,  538. 
but  same  statutes  often  apply,  note,  537. 
meaning  of  contract  how  construed,  537. 

The  Clauses. 

accident  defined;  what  constitutes,  and  instances,  538-541. 

autopsy;  right  of  company  to  make,  557. 

boarding  or  leaving  cars  in  motion  excepted,  578. 

disease;  accidents  caused  by,  etc.,  excepted,  562-565. 

disease  the  result  of  accident  held  to  be  covered,  545,  565. 

disappearance;  this  insurance  does  not  cover,  558. 

due  diligence  for  personal  safety  and  protection  required,  580. 

duelling  or  fighting  excepted,  569. 

examination;  company's  right  to,  when  and  so  often  as  it  requires  in  case  of 

injury,  557. 
exposure  to  unnecessary  danger;  voluntary  excepted,  572-578. 
external,  violent  and  accidental  means,  541-544. 
fighting  excepted,  569. 
gas  or  vapor;  inhaling  excepted,  568. 
hazardous  employment;  exception  of,  552-555. 
"immediately  and  wholly  disable,"  548-551. 
inhaling  gas  or  vapor  excepted,  568. 
injuries  intentionally  inflicted  excepted,  569-571. 
injuries  received  while  traveling;  insurance  against,  581. 
injury;  visible  mark  of,  required,  560-562. 
intentional  injuries  inflicted  by  insured  or  any  other  person  excepted,  569- 

571 
intoxication  excepted,  566. 
loss  of  bodily  member,  551. 
narcotics  excepted,  566. 
notice  and  proof  of  accident  and  injury,  555-557. 


INDEX  ,796 

[References  are  to  pages.] 

ACCIDENT  POLICY  AND  CLAUSES— Continued. 

overexertion;  voluntary  excepted,  571. 

poison;  voluntary  or  involuntary  taking  of,  or  contact  with  poisonous  sub- 
stances excepted,  566-568. 

proximate  and  sole  cause,  544-548. 

"immediately  and  wholly  disable,"  548-551. 

riding  in  or  on  any  such  conveyance  not  provided  for  passengers  excepted, 
579. 

suicide;  sane  or  insane  excepted,  559. 

traveling;  insurance  against  injuries  received  while,  581. 

violation  of  law  excepted,  571. 

visible  mark  of  injury  on  body;  body  itself  in  case  of  death  not  being  deemed 
such  mark,  560-562. 

voluntary  exposure  to  unnecessary  danger  excepted,  572-578. 

voluntary  overexertion  excepted,  571. 

walking  or  being  on  railway  bridge  or  roadbed  excepted,  579. 

"wholly  disable  him  from  transacting  any  and  every  kind  of  business  per- 
taining to  his  occupation,"  548. 

ACCORD  AND  SATISFACTION, 

between  owner  and  insured;  when  payee  of  policy  not  bound  by,  note,  295. 

ACCOUNTING, 

policy  holder  no  right  to  demand  from  company,  88. 

ACCOUNTS, 

of  assured;  examination  of;  waiver  and  estoppel,  183. 

production  by  assured  of  books  of;  personal  examination  under  oath;  loss 
by  fire,  417. 

ACT  OF  GOD, 

inability  to  fulfill  warranty  no  excuse,  145,  496. 

modification  of  rule  as  to  proceedings  after  loss,  178,  402,  410,  414,  418. 

ACTIONS  ON  POLICIES, 

unpaid  premium  should  be  tendered  before  commencing  action,  note,  282. 

in  suit  on  binder  or  oral  agreement;  provisions  of  policy  must  be  observed, 
103. 

form  of  action  upon  binder  or  oral  agreement  where  loss  occurs  before  policy 
is  issued,  104. 

whether  mortgagor,  mortgagee  or  both  should  sue,  400,  and  note,  396. 

action  not  maintainable  by  insured  where  he  refuses  to  permit  replacing 
property,  304. 

effect  of  contribution  clause  of  fire  policy  is  to  prevent  circuity  of  action,  61. 

right  of  subrogation;  how  prosecuted,  71. 

subrogation;  assignment  to  company  of  rights  of,  against  person  causing 
fire,  449-452. 

action  may  be  brought  by  insurer  or  in  name  of  insured  against  wTongdoer 
for  joint  benefit,  450. 

whether  action  lies  against  water  company  for  fire  loss  caused  by  insuffi- 
cient supply,  452. 


796  INDEX 

[References  are  to  pages.] 

ACTIONS  ON  POLICIES— Continued. 

can  insurer  recover  where  buildings  destroyed  to  check  conflagration,  452. 

reasons  why  life  company  not  subrogated  to  right  of  action  against  wrong- 
doer, 65. 

action  of  insured  is  usually  on  contract  not  for  rescission  or  reformation,  161. 

waiver  and  estoppel  allowed  in,  TGl-165. 

pendency  of  action  on  policy  no  bar  to  reformation  sought  by  insurer, 
note,  107. 

judgment  on  contract  is  bar  to  suit  to  reform,  note,  107. 

anticipatory  breach;  action  for  damages,  or  in  equity  to  preserve  contract; 
life,  470. 

action  at  law  before  relief  in  equity  to  compel  levy  of  assessments,  508. 

when  original  insured  can  and  cannot  sue  reinsurer,  445. 

notice  to  reinsurer  to  defend  suit  by  original  insured  against  original  in- 
surer, 446. 

action  between  insured,  insurer,  and  reinsurer,  446. 

partial  loss  recoverable  in  suit  for  total  loss,  note,  242. 

costs  and  expenses  of  accident  suit;  employers'  liability  insurance,  677 

where  suits  may  be  instituted;  statutory  provisions,  689. 
See  Equity;  Judgment;  Limitations. 

ACTUAL  TOTAL  LOSS, 

See  Total  Loss. 

ACTUARIES  TABLE,  note,  19. 

ADDITIONS, 

meaning  of  in  description  of  property;  fire,  289-291, 
permit  or  privilege  to  make,  290. 

alterations  and  repairs;  special  privilege  to  make,  note,  335. 
privilege  to  make  as  affecting  warranty  as  to  description  of  premises,  379. 
construction  of  contract;  separate  buildings;  whether  for  court  or  jury, 
note,  116. 

ADJACENT  BUILDINGS, 

erection  of;  increase  of  risk,  332. 

ADJACENT  PREMISES, 

acts  of  third  parties  on;  increase  of  risk,  328,  329,  331,  332. 
erection  of  factory  on;  increase  of  risk,  334, 

ADJUSTERS, 

See  Adjustment;  Agents. 

ADJUSTMENT, 

taking  part  in,  when  a  waiver,  184,  note  457. 
of  general  average,  271-273. 

place  and  method  of  conducting,  272,  649. 

York-Antwerp  rules,  273. 

rules  given  in  full,  778  et  seq. 

example  of  adjustment  with  explanations,  782  €t  teq. 

foreign  adjustments,  272,  849. 


INDEX  'i^y7 

[Eeferences  are  to  pages.J 

ADJUSTMENT— Continued. 

of  other  losses  under  marine  policy,  251-269. 

rules  are  technical,  252,  628. 

method  of  conducting,  649-651. 

papers  and  materials  for,  note,  650. 

"according  to  usages  of  Lloyds,"  note,  650. 

defenses  to  policy  how  far  merged,  650. 

effect  of  settlement,  note,  650. 

when  premium  is  apportionable  or  returnable,  note,  651. 

whether  insured  must  account  for  subsequent  salvage,  651. 

foreign  adjustments,  650. 

as  between  contributing  insurers,  fire,  other  insurance  marine,  636. 

if  insurance  short,  insured  is  coinsurer,  59,  note  247,  635. 

thus  subject  always  considered  fully  insured,  note,  247. 

exception  of  liability  policy,  note,  634. 
effect  of  original  adjustment  on  reinsurer,  445,  446. 
warranted  same  rate,  terms,  etc.,  as  other  companies,  note,  136. 
See  Apportionment;  Loss;  Measure  of  Indemnity. 

ADMINISTRATORS, 

when  may  impeach  validity  of  assignment;  life,  79. 

designation  of  assured  or  beneficiary,  462. 

devolution  of  interest  to;  :dienation  clause;  New  York  standard  fire  policy, 

348. 
proofs  of  loss  by,  note,  411. 
right  to  collect  insurance,  fire,  457. 

ADVANCES  ON  FREIGHT, 
marine  insurance,  note,  588. 

ADVERTISING, 

for  sale  under  trust  is  notice  under  foreclosure  clause,  note,  342. 

AFFIDAVIT, 

false  in  proofs  of  loss;  perjury,  note,  316. 

of  mailing  notice  that  premium  due,  note,  501. 

AFFIRMATIVE  WARRANTIES, 

See  Warranties. 

AFFRAY, 

or  combat;  injuries  sustamed  during;  accident  policy,  540. 

AGE, 

statement  as  to,  when  warranty,  note,  139. 

statements  as  to;  life  risk,  487. 

fraudulently  misstated  by  soliciting  agent;  life,  190. 

material  misstatement  as  to,  477. 

errors  in  understanding  sometimes  are  to  be  adjusted,  526. 

misstatement  as  to;  provisions  as  to,  in  New.York  and  other  pohcies,  527. 

of  building;  misstatements  as  to,  note,  378. 

See  Representations;  Warranties. 


798  INDEX 

[References  are  to  pages.] 

AGENCY, 

statutes  regulating  agencies,  9. 

requiring  agent  to  have  certificate,  note,  101. 

license  to  procure  outside  insurance,  12, 
when  place  of  contract,  114. 

AGENTS  OF  THE  INSURED, 

insured  liable  for  acts  of  concealment  by,  122,  123. 

for  closing  contracts,  notes,  94,  95. 

method  of  closing  contracts,  94-98. 

negligence  of,  covered  by  policy,  58,  328. 

acts  of,  increasing  the  risk,  327. 

notice  of  cancellation  served  upon,  388-392. 

false  swearing  by,  in  proofs  of  loss,  315. 

proofs  of  loss  by,  note,  411. 

personal  examination  of,  under  fire  policy,  416. 

See  Broker;  Closing  the  Contract;  Waiver  and  Estoppel. 

AGENTS  OF  INSURERS, 

1.  In  General. 

insurance  companies  can  act  only  by  agents,  189. 

the  relationship  is  matter  of  fact,  189,  191,  193. 

stipulations  in  policies  as  to  agency,  not  binding  unless  true,  192. 

may  have  actual  authority  or  may  have  apparent  authority,  189. 

insured  not  bound  by  secret  instructions,  100,  190. 

agent  appointed  upon  whom  papers  may  be  served,  9. 

2.  The  Closing  of  the  Contract. 

the  insurance  contract,  how  closed  in  practice,  93-98. 

policy  must  be  executed  by  one  with  real  or  apparent  authority,  note,  100. 

or  his  unauthorized  act  must  be  ratified,  note,  100. 

effect  of  being  supplied  with  blank  policies,  etc.,  note,  100. 

territorial  jurisdiction  of  agent,  note,  100. 

solicitors  cannot  conclude  or  execute  contracts,  notes,  100,  101. 

exceeding  authority  may  become  personally  liable  in  damages,  note,  101. 

effect  of  issuing  a  policy  of  an  unauthorized  company,  note,  101. 

statutes  require  agent  to  obtain  certificate,  note,  101. 

such  statutes  are  constitutional,  note,  101. 

agent  held  liable  where  company  was  insolvent,  note,  101. 

agent  to  insure  has  apparent  power  to  renew,  note,  101. 

delivery  of  policy  to  agent  whether  effectual  as  delivery  to  insvired,  note,  100. 

cannot  issue  policy  to  himself,  note,  95. 

3.  Different  Classes  of  Agents  and  Their  Powers. 
officers  and  managers,  197,  198. 

superintendent  of  agencies,  526. 

clerks  of  agents,  220. 

countersigning  agents,  fire,  205. 

counter  clerk,  fire,  95. 

solicitors,  fire,  219. 

adjusters  and  other  special  agents,  fire,  219. 

solicitors,  life,  198. 


INDEX  799 

[References  are  to  pages.] 

AGENTS  OF  mSVRERS— Continued. 

at  same  time  broker  and  agent,  notes,  94,  95,  381. 

4.  Policy  Restrictions  as  to  Who  Are  and  Are  Not  Agents. 

fire  policies,  192,  193,  380. 
life  policy,  193,  525,  526. 
when  operative,  if  not  in  application,  197,  206. 

5.  Policy  Restrictions  upon  Method  of  Waiving,  etc. 

fire  policy,  195,  205-218,  458-460. 
Massachusetts,  Wisconsin,  and  South  Dakota,  460. 
life  policy,  202,  203,  526. 
statutes  making  solicitor  agent  of  the  insured,  381,  686. 
See  Waiver  and  Estoppel. 
ALCOHOLISM, 

warranty  not  to  have  been  treated  for,  note,  489. 

ALEATORY, 

to  what  extent  insurance  contract  is,  28,  29. 

ALIENATION  CLAUSE, 

older  forms  of  clause  construed,  note,  343. 

of  standard  fire  policies,  343-352. 

change  in  interest,  title  or  possession,  except  by  death,  change  of  occupants, 
etc.,  343-348. 

prohibition  applies  to  both  real  and  personal  property,  344. 

alienation  by  voluntary  act  of  insured,  343-348. 

giving  a  partnership  interest  avoids  policy,  345. 

pooling  agreement  for  pool  earnings  or  profits  does  not  avoid  use  and  oc- 
cupancy policy,  345. 

invalid  or  ineffectual  sale  or  transfer,  347. 

a  merely  colorable  bill  of  sale,  347. 

sales,  purchases,  and  fluctuation  in  stock  of  goods,  etc.,  347. 

devolution  of  interest  to  heirs,  etc.,  348. 

effect  of  incumbrances  and  liens,  348. 

express  requirement  in  standard  policy  for  written  consent  for  chattel  mort- 
gages and  foreclosure  implies  that  real  estate  mortgages  and  other  liens 
are  not  prohibited,  348. 

executory  contracts  of  sale,  348. 

whether  executory  vendee  must  complete  purchase,  despite  fire  loss,  349. 

joint  owners;  partners;  joint  insured,  350. 

part  owners  jointly  insured  but  not  joint  owners,  351. 

effect  of  legal  process  or  judgment,  351. 

sale;  consent  in  writing  or  print;  Massachusetts  policy,  352. 

temporary  alienation,  note,  352. 

ALIEN  ENEMIES,  note,  584. 

ALL  OTHER  PERILS, 
marine  policy,  614. 

ALTERATIONS, 

material  alterations  pending  negotiations  to  be  disclosed,  121-123,  132. 
permit  to  make,  290. 


800  INDEX 

[References  are  to  pages.] 

ALTERATIONS— Continued. 

alterations  in  the  use  of  property,  326-334. 
whether  material  alterations  increase  the  risk  is  for  jury,  333. 
increase  of  risk;  Massachusetts  policy,  334. 
permit  to  make  ordinary,  or  repairs,  335. 
of  contract;  agent's  authority;  life,  525. 
fire,  458,  459. 

AMERICAN  EXPERIENCE  TABLE,  note,  19. 

AMERICAN  LAW, 

determines  lawfulness  of  American  insurance;  marine  adventure,  238. 

AMERICAN  LLOYD'S,  15. 

AMPUTATIONS, 

necessitated  by  injuries;  accident  policy,  562. 

AMERICAN  EXPERIENCE  TABLE,  20. 

ANCHORS, 

are  part  of  ship,  note,  604. 

ANCIENT  FLORENTINE  MARINE  POLICY,  FORM  OF,  766. 

ANNEX, 

covered  by  policy  on  building,  note,  288. 

ANNUAL  REPORTS, 
requirement  as  to,  8. 

ANNUITIES, 

guaranteed  for  lump  sum,  note,  24. 

ANTICIPATORY  BREACH  OF  CONTRACT, 

rules  where  insurer  repudiates  contract  before  maturity,  468-470, 
remedies  available,  470. 

APARTMENT  HOUSE, 

private  dwelling  converted  into;  more  hazardous  risk,  note,  330. 

APOPLEXY, 

as  contributing  cause  of  fall  and  death;  accident  policy,  564. 

APPENDICITIS, 

operation  for  and  death;  accident  policy,  544. 

APPLICATION  WRITTEN, 

until  accepted,  is  in  effect  an  offer,  note,  476. 

brief  form  usually  employed,  fire  insurance,  19,  note,  139. 

neglect  to  reply,  no  presumption  of  acceptance,  note,  100. 

may  be  admissible  in  evidence,  note,  105. 

policy  rather  than  application  controls,  475. 

may  modify  the  warranty  of  the  policy,  note,  475. 

containing  restrictions  on  agent's  authority,  192,  197. 


INDEX  801 

[References  are  to  pages.] 

APPLICATION  WRITTEN— Continued. 

whether  part  of  the  fire  policy,  377,  notes,  139,  140. 

if  incorporated,  statements  of  fact  are  warranties,  377. 

many  illustrations,  377-379. 

statements  are  representations  unless  incorporated,  377. 

not  binding  on  insured  unless  signed  by  him,  379. 

matters  of  opinion,  belief,  etc.,  149. 

estimate  of  value,  note,  378. 

statements  of  present  use,  150. 

questions  unanswered  or  partially  answered,  151,  380. 
made  part  of  life  policy,  471-476. 

statements  warranted,  471. 

matters  of  opinion,  belief,  etc.,  149. 

matters  of  opinion  require  good  faith,  471. 

statements  regarding  obscure  diseases,  150,  471,  482. 

questions  unanswered  or  partially  answered,  151,  380. 

medical  examiner  incorrectly  transcribing  answers,  note,  202. 

agent  changing  answers,  204. 

containing  stipulation  to  pay  assessments,  505. 

statutory  provisions  as  to,  476. 
illiterate  applicants,  203,  204. 

by  foreigners  not  familiar  with  language,  482. 
form  of,  fire  insurance,  718. 
form  of,  life  insurance,  757. 
See  Agent;  Fire  Policy  and  Clauses;  Medical  Examiner;  Waiver  and 
Estoppel;  Warranties. 

APPLICATION  AND  SURVEY  CLAUSE,   FORM  OF,  727. 

APPORTIONMENT, 

of  marine  losses,  649-651. 

of  valuation;  different  species  under  single  valuation,  257. 
contribution  clause;  meaning  of  "whole  insurance"  as  used  in,  436. 
contribution  clause,  valued  policy  law  may  make  inoperative  the,  note,  437. 
rules  where  non-concurrence  double  or  complex,  439,  440. 
non-concurrent  liability,  435-440. 
if  risk  attaches  premium  is  not  apportionable,  77,  651. 
when  part  of  premium,  is  returnable,  77,  651. 
imder  standard  fire  policies,  393. 

APPRAISAL, 

insurance  disputes  anciently  settled  by  arbitration,  etc.,  13. 
appraisal  clause  of  fire  policy,  418-430. 
importance  of  the  clause  to  the  insurers,  419. 
it  offers  an  option  to  either  party,  419. 
party  claiming  it  must  take  the  initiative,  note,  419. 
not  a  condition  precedent  unless  demand  is  made,  note,  419. 
divergent  views  as  to  condition  precedent,  note,  419,  421. 
demand  may  be  made  by  registered  letter,  note,  419. 

joint  demand  by  several  companies  for  one  appraisal  held  to  be  ineffectual, 
note,  419. 

51 


802  INDEX 

[References  are  to  pages.] 

APPRAISAL— Continued. 

if  insurer  elects  to  reinstate  it  cannot  demand  appraisal,  note,  419. 
disagreement  as  to  amount  of  loss  is  an  essential  factor,  419. 

when  disagreement  will  be  presumed,  note,  419. 
effect  of  valued  policy  laws,  note,  419. 

action  is  brought  on  policy  not  on  the  award,  note,  419,  428. 
calling  for  appraisal  whether  a  waiver  of  known  forfeitures,  183,  note,  419. 

policy  expressly  provides  no  waiver  shall  result,  183,  431. 
awartl  only  prima  facie  evidence,  Michigan,  420. 
application  to  court  for  appraisers,  Massachusetts,  New  Hampshire,  New 

Jersey,  420. 
exception  from  appraisal  of  total  loss  of  buildings  in  certain  states,  420. 
waiver  of  right  for  appraisal  by  delay,  420. 
standard  clause  of  the  fire  policy  is  a  valid  condition,  420. 

but  agreement  to  arbitrate  liability  or  all  matters  would  be  void,  420, 
421. 

referring  simply  question  of  amount  of  loss  is  valid,  421. 
compliance  with  clause  is  a  condition  precedent,  421,  note,  419. 
the  provision  is  constitutional,  421. 
property  must  not  be  removed  by  insured,  note,  421. 
whether  perishable  goods  must  be  kept,  note,  421. 
appraisers  must  be  competent  and  disinterested,  421. 

legal  meaning  of  "disinterested,"  422. 

whether  competent  and  disinterested,  usually  a  question  of  fact,  note, 
422. 

what  amounts  to  a  w-aiver  by  either  party,  422. 

acting  as  appraiser  previously  for  insurers  does  not  disqualify,  note,  422. 

such  relationship,  however,  should  not  be  concealed,  note,  423. 
whether  scope  of  appraisal  covers  entire  loss,  423. 

discussion  of  divergent  authorities,  423. 

better  view  that  property  out  of  sight  is  also  covered,  423. 

written  appraisal  agreement,  note,  424. 

written  agreement  need  not  be  given,  note,  424. 

written  agreement  differing  from  policy,  note,  424 

two  fire  losses  not  adjusted,  note,  424. 
conduct  of  the  appraisal,  424. 
no  very  definite  code  of  regulations,  424. 

rigid  common-law  rules  of  evidence  and  procedure  do  not  apply,  424. 
a  simple,  informal,  and  speedy  remedy,  424. 
appraisers  must  act  fairly  and  in  good  faith,  424. 
whether  personal  inspection  without  evidence  is  enough,  424. 
umpire  examining  only  the  points  of  difference,  note,  424. 
calling  in  an  expert,  424. 

either  party  must  have  opportunity  to  appear,  425. 
duties  of  umpire,  425. 

sound  value  as  well  as  damage  must  be  stated,  425. 
deduction  for  depreciation,  42.5. 
sound  value  and  loss  limit  thi-  scope,  426. 
"the  appraisers  together  shall  estimate,"  426. 


INDEX  803 

[References  are  to  pages.] 

APPRAISAL— Confinwed. 

any  two  may  agree  on  the  award,  426. 

where  the  umpire  simply  splits  the  diflference,  note,  426. 

reasonable  compensation  to  the  appraisers,  note,  426. 

unfinished  appraisals,  427. 

whether  a  second  appraisal  must  be  had,  427. 

divergent  views  as  to  further  duty  of  the  parties,  427,  428. 

view  of  Michigan  court,  428. 
scope  of  the  award  determined  by  submission,  428. 
award  is  in  the  nature  of  evidence,  428. 

suit  to  be  brought  on  policy,  428,  note  419. 
joinder  of  several  insurance  companies  in  appraisal,  429. 
grounds  for  setting  aside  award,  429. 

effect  of  errors  in  mere  discretion,  429. 

effect  of  unjust  or  unlawful  methods,  429. 
presumption  favors  validity  of  award,  430. 
remedies  and  forms  of  action  for  relief,  430. 

whether  one  suit  in  equity  can  be  brought  against  several  insurance  com- 
panies interested,  430. 
whether  mortgagee  is  a  party  to  the  appraisal,  400. 
whether  provision  is  applicable  to  reinsurance,  444. 

APPRAISERS, 

competent,  disinterested;  appraisal  clause,  421. 

APPROVAL, 

of  home  office  as  condition  precedent  to  conclude  contract,  note,  101. 

ARBITRATION, 

See  Appraisal. 

ARBITRATORS, 

See  Appraisal. 

ARREST, 

person  killed  while  resisting;  accident  policy,  539. 

injury  sustained  in  making;  intentional  injury  clause;  accident  policy,  570. 

ARRESTS, 

a  marine  peril,  610,  611. 

ARRIVAL, 

what  is,  marine,  589,  593 

ARSON, 

See  Incendiarism. 

AS  INTEREST  MAY  APPEAR, 
meaning  of  clause,  294,  295. 
payable  as;  fire,  313. 

ASSAULT 

death  in  violation  of  law;  life  policy,  522. 


804  INDEX 

[References  are  to  pages.) 

ASSESSMENT  COMPANIES, 
corporations  classified,  7. 
allowed  to  change  to  old  line  plan,  note,  7. 

ASSESSMENT,  INSTALLMENT,  OR  CREDIT  CLAUSE,  FORM  OF,  730. 

ASSESSMENTS, 

for  what  purpose  and  how  levied,  6. 

in  association  and  societies;  generally,  504-506. 

collection  of;  unlicensed  companies,  11. 

are  practically  deferred  premiums,  etc.,  505. 

whether  they  are  collectible  debts,  505. 

express  promise  to  pay  arises  from  statutes,  by-laws,  etc.,  505. 

must  be  lawfully  and  properly  levied,  506-508. 

proofs  of  death  as  prerequisite  to  le^y  of,  506. 

levy  of;  character  and  by-laws  to  be  observed,  507. 

levy  includes  what  losses  with  relation  to  time  of  membership,  607. 

levy  where  insurer  insolvent,  note,  506. 

power  to  change  rate  of,  508. 

notice  of  assessments  to  insured,  508. 

of  premium  or  deposit  notes,  282. 

method  and  validity  of  assessments  upon  deposit  note,  282. 

payment  by  mail,  note,  498. 

refusal  to  levy;  action  at  law  may  be  brought  before  seeking  relief  in  equity, 

507. 
action  for  damages  for  failure  to  levy,  506. 
collection  of,  with  knowledge;  when  waiver  of  forfeiture  by  conviction  of 

felony,  571. 

See  Premiums. 

ASSETS, 

distribution  of,  after  insolvency;  governing  doctrine,  note,  4. 

ASSIGNEE, 

rights  of  in  policies  assigned,  78. 

for  creditors,  waiver  in  favor  of  enures  to  assured's  benefit,  note,  159. 
of  life  policy,  waiver  and  estoppel  operates  in  favor  of,  note,  159. 
notice  to,  that  premium  due;  statute,  note,  500. 

See  Assignment;  Trustee. 

ASSIGNS, 

beneficiaries,  462. 

ASSIGNMENT, 

fire  policy  not  assignable  before  loss,  78. 

marine  or  life  policy  assignable  at  common  law,  78. 

where  risk  is  thereby  enhanced,  note,  584. 
beneficisries'  rights  in  life  insurance,  how  far  vested,  79-86. 
beneficiaries'  interests,  whether  assignable,  note,  80. 
wife's  interest  in  life  insurance  whether  assignable,  note,  81,  528,  529. 
change  of  beneficiaries,  86-88. 
what  is,  what  is  not;  credit  insvirance,  note,  663. 


INDEX  805 

[References  are  to  pages.] 

ASSIGNMENT— Continued. 

in  bankruptcy  or  insolvency;  alienation  clause,  352. 

voluntary,  for  benefit  of  creditors;  breach  of  alienation  clause,  note,  345. 

for  benefit  of  creditors,  void  as  to  them;  alienation  clause,  note,  348. 

under  assignment  clause  of  fire  policy,  353. 

of  policy  as  collateral,  353,  354. 

of  policy;  acceptance  by  assured  of  bill  of  lading  providing  that  carrier  have 
full  benefit  of  insurance,  354. 

of  policy  after  loss  by  fire  is  permissible  to  extent  of  loss,  355. 

of  policy  requires  consent  in  writing  or  print;  Massachusetts  form,  356. 

subrogation  of  rights  to  extent  of  payment  shall  be  assigned  to  company, 
449-452. 

under  assignment  clause  of  life  policy,  527. 

without  writing;  life  policy,  529. 

no  particular  form  of  words  required,  note,  529. 

generally,  only  insurer  can  object  to,  unless  beneficiaries  have  vested  in- 
terest, 530. 

with  insurer's  consent  is  new  contract;  life  policy,  530. 

delivery  of  life  policy,  when  not  essential,  530. 

by  beneficiaries  of  contingent  or  expectant  interest;  life,  528. 

wife  may  assign  her  interest;  life,  528. 

statutory  provisions;  wife's  interest;  life,  528,  529. 
See  Bankruptcy. 

ASSOCIATIONS, 

or  individuals  who  engage  in  insurance  business,  3,  5,  15. 

See  Benefit  Societies;  Fraternal  Associations;  Lloyd's. 

ASSURED, 

as  coinsurer,  253. 

name  of;  marine  policy,  583. 

See  Insured. 

"AT  AND  FROM," 

distinction  between  insurance  "from"  and  "at  and  from,"  588. 

when  the  risk  attaches,  589. 

seaworthiness;  different  degrees  of,  229. 

and  " at  and  thence; "  deviation,  232. 

an  island  or  other  district  comprising  several  places  of  trade;  marine,  589. 

ATTACHMENT, 

insurance  money  when  not  subject  to;  life,  89. 

of  part  avoids  as  to  all  personalty,  note,  154. 

See  Risk. 
ATTORNEYS, 

presence  of,  at  examination  of  assured  under  oath;  loss  by  fire,  416. 

fees  as  "costs;"  employers'  liability  insurance,  678. 

AUTOMATIC  SPRINKLERS, 

See  Sprinkler  Clause. 

AUTOMOBILE  POLICY, 
employers'  liability,  664. 


806  INDEX 

[References  are  to  page&.] 

AUTOMOBILES, 

permit  for  building;  storing,  form  of,  736 

AUTOPSY, 

right  to;  accident  policy,  557. 

AVERAGE, 

See  General  Average;  Particular  Average, 

AVERAGE  ADJUSTERS, 

See  Adjustment. 

AVERAGE  CLAUSES,  FORMS  OF,  727,  736 

AWARD, 

appraisal  and  arbitration  clauses,  418-430. 

policies  of  Massachusetts  and  other  states,  420. 
scope  of,  428. 
setting  aside  of,  429. 

BAILEES, 

common  carriers,  warehousemen,  etc.,  insuring  in  representative  capacity, 

73,  74. 
when  insuring  their  own  interest  or  liability,  73. 
whether  to  recover  they  must  first  show  a  liability,  notes,  73,  74. 
extent  of  recoveiy  by,  for  themselves  and  owners;  fire,  73. 
insurance  by,  without  authority  of  owner;  owner  may  ratify  after  loss, 

294,  296,  322. 
goods  their  own  or  held  in  trust,  293,  294. 
or  for  which  they  are  liable,  73,  74,  294. 
or  for  whom  it  may  concern,  295,  296. 
other  insurance  whether  fatal,  320-322. 
other  contributing  insurance,  321,  434. 

BANKING, 

business  of,  limited  to  corporations;  statute  constituticmal,  note,  3. 

BANKRUPT, 

creditors'  claims  on  policy,  notes,  91,  92. 
credit  insurance,  663. 

BANKRUPTCY, 

of  insurer,  action  of  insurance  department,  8. 

test  of  solvency,  21. 

creditor's  insurable  interest  survives,  45. 

rights  of  creditors  of  the  insured,  89-92. 

adjudication  in;  alienation  clause,  352. 

insolvency  of  straight  insurer,  effect  on  reinsurance,  446. 
See  Assignment. 
BARRATRY,  611-613. 

what  the  term  includes,  611,  612. 

who  may  commit,  613. 


INDEX  807 

[References  are  to  pages.) 

BARRATRY— Continued. 

examples  of,  notes,  612,  613. 
willful  negligence  as;  indemnity,  note,  58. 
seaworthiness;  underwriters'  liability,  231. 
is  under  "usual  marine  risks,"  note,  614. 
mutiny  and  seizure  is,  638. 

BATTERY, 

death  in  violation  of  law;  life  policy,  522. 

BELLIGERENT, 

See  War. 
BENEFICIARY, 

insured  under  life  policy  may  designate  anyone  as,  though  without  insur- 
able  interest,  50. 
divergent  views,  51. 
appointees,  assignees,  51-54. 
appointment  of,  subject  to  statutory  or  contract  restrictions,  53. 
interest  of,  vested  and  cannot  be  disturbed,  79. 
unless  contract  indicates  different  intent,  80. 
rule  in  Wisconsin  and  England  different,  81. 

rule  as  to  vested  rights  applicable  to  endowment  policy,  note,  80. 
intentionally  causing  death  of  insured  cannot  recover,  81. 
effect  of  suicide  of  insured  without  suicide  clnuse,  81,  511. 
opposing  view,  512. 

suicide,  effect  of  on  third  party  beneficiaries,  80-82,  512-514. 
suicide  clause  is  binding  on  third  party  beneficiaries,  515. 
death  of  all  or  some  donees  before  insured;  new  appointment,  82-85. 
conditionally  vested  or  contingent  interests  of,  85. 

not  beneficial  "survivor"  by  murdering  wife  in  whom  interest  vested,  86. 
right  to  change  ordinarily  revocable  and  not  vested;  fraternal  and  like 
associations,  86. 
right  to  change  expressly  reserved,  86,  87. 
restrictions  as  to  classes  must  be  observed,  86. 

view  that  beneficiary  has  a  mere  expectancy,  no  property  right,  until 
assured's  death,  87. 
mode  of  changing  beneficiary,  87. 
statutory  provisions  permitting  change  of,  709. 

when  statutory  provisions  not  applicable,  88. 
interest  of,  how  far  assignable,  life  policy  clause,  527-530,  note,  80. 
may  assign  contingent  or  expectant  interest,  528. 

unless  interest  of,  vested  company  only  can  object  to  assignment,  530. 
assignment  of  his  life  policy  by  murderer;  no  recovery,  82. 
rights  of  creditors  as  beneficiaries,  92. 
statutes  protecting  wife  and  other  beneficiaries  from  creditors  of  insured, 

89-91,711-713. 
designation  must  be  made  from  classes  specified;  statutes,  charters  and 

by-laws,  463. 
designation  of;  payable  to  insured,  his  heirs,  executors,  administrators,  or 
assigns,  462. 


808  iNDEX 

[References  are  to  pages.] 

BENEFICIARY— Continued. 

other  beneficiaries,  462-464, 
dependency  as  ground  for  appointment,  463 

failure  of  designation;  previous  valid  designation  in  force,  note,  463. 
where  designation  irregular  or  altogether  fails,  464. 
insurance  payable  to  heirs  or  legrd  representatives,  464. 
insurance  payal.b  to  wife,  465. 
rights  of  wife  as  not  affected  by  divorce,  note,  80. 
insurance  payable  to  children,  466. 

insurance  payable  to  family,  dependents,  survivors,  etc.,  466. 
may  sue,  467. 
service  on,  of  notice  that  premium  due,  note,  500. 

See  Insurable  Interest;  Words  and  Phkases. 

BENEFIT  SOCIETIES, 

guilds,  orders,  knights,  unions,  etc.,  3. 
subject  to  charter,  by-laws,  statutes,  etc.,  3. 
both  insurance  and  social  features,  note,  3. 
what  constitutes  the  contract,  note,  3. 

changes  in  by-laws  allowed  and  disallowed,  note,  4. 
right  to  change  constitution,  etc.,  reserved,  note,  4. 
whether  doctrine  of  waiver  and  estoppel  operates  in  case  of,  171. 
statutes  requiring  by-laws,  etc.,  to  be  set  forth  in  policy,  682,  683. 
See  Assessments;  Beneficiary. 

BENZINE, 

kept,  used,  or  allowed;  forbidden  by  fire  policy,  356 

prohibited  use  by  tenant  also  avoids,  356. 

insignificant  quantities  presumably  allowed,  357. 

whether  description  in  policy  impliedly  permits  use  of,  357-360. 

included  in  terms  "drugs"  and  "chemicals,"  note,  289. 

covered  by  words  "stock  of  drugs,"  note,  358. 

when  covered  by  words  stock  "such  as  is  usually  kept  for  sale  in  a  drug 

store,"  note,  358. 
whether  included  as  "stock  usually  kept  in  country  store,"  note,  289,  357, 
"having"  as  meaning  habitual  use  of,  357. 

BILL  OF  LADING, 

stipulation  in,  for  benefit  of  insurance;  subrogation,  69. 
accepted  by  assured  providing  that  carrier  to  have  full  benefit  of  insurance; 
assignment  of  policy  flause,  354. 

BILL  OF  SALE, 

delivered  in  escrow,  within  alienation  clause,  note,  344, 
alienation  clause,  347. 

BILLS  AND  BOOKS  OF  ACCOUNT, 
production  of,  under  fire  policy,  417. 

BILIOUSNESS, 

slight  attack;  statements  as  to  health,  note,  480, 


INDEX  809 

[References  are  to  pages.) 

BINDER, 

See  Binding  Slip. 
"BINDER  FOR  SURVEY," 

pending  examination  for  increase  of  risk,  332. 

BINDING  SLIP, 

contract  closed  by,  95,  96,  97,  103. 

same  in  effect  as  usual  policy,  97. 

is  not  a  valid  marine  contract  in  England,  note,  97,  note,  582. 

usual  policy  terms  as  governing  in  suit  on,  104. 

admissible  to  explain  ambiguity,  note,  105. 

as  affecting  date  of  contract  and  representations  or  concealment,  132. 

loss  before  policy  issued;  form  of  action,  104. 

See  Closing  of  Contract;  Forms. 
BLACKSMITH  SHOP, 

added  to  printing  office;  not  increase  of  risk,  note,  330. 

BLANKET  POLICY, 

what  is;  as  contrasted  with  specific  form,  22. 

BLINDNESS, 

totally  blind;  accident  policy,  551. 

BLOCKADE, 

may  be  valid  ground  for  abandonment,  244, 

deviation;  departure  to  learn  whether  port  blockaded,  note,  233. 

voyage  in  breach  of;  illegality,  239. 

loss  by,  when  recoverable,  611. 

warranted  not  to  abandon  in  case  of,  etc.,  646. 

liberty  to  proceed  to  open  port  and  there  end  voyage,  647. 

BLOOD  POISONING, 

accident  policy,  539,  542. 

following  injury;  independent  cause;  accident  policy,  547. 

from  altercation  and  injury;  accident  policy,  547. 

when  an  accident,  562. 

from  dog  bite,  accident  and  not  disease;  accident  policy,  563,  564. 

intentional  injury  clause;  accident  policy,  570. 

BLOOD  SPITTING,  481. 

BODILY  INFIRMITY, 

as  contributing  cause  of  accident,  562. 

BODILY  INJURIES  OR  INFIRMITIES, 
statements  about,  494,  495. 

BOILER, 

and  furnace,  part  of  house  insured,  note,  288. 

BOILER  EXPLOSIONS, 

whether  covered  by  marine  policy,  607,  615,  note,  625. 
insurance,  note,  652. 


810  INDEX 

[References  are  to  pages.] 

BOND, 

general  average  bond  as  security,  271. 
fidelity  and  guarantee  insurance,  G54,  655. 

of  surety  company  differs  from  simple  obligation  of  individual  surety, 
655,  656. 

See  Fidelity  Bond. 

BOOKS, 

of  assured,  examination  of;  waiver  and  estoppel,  183,  note,  184. 

examination  of;  to  adjust  premium;  liability  policies,  665. 

of  account,  vouchers,  etc.;  production  of  when  required;  loss  by  fire,  417. 

Massachusetts  policy,  418. 
memorandum  articles,  376. 

See  Iron  Safe  Clause. 
BOWELS, 

inflammation  of,  whether  chronic  disease,  note,  480. 

BREACH, 

See  Anticipatory  Breach;  Construction  of  Contract;  Forfeiture; 

Warranties. 

BREAKAGE, 

cargo  on  deck,  646. 

BREAKING  GROUND, 

to  sail,  note,  589. 

BRIGHT'S  DISEASE,  note,  480. 

BROKER, 

closing  contract  through;  fire,  94-96. 

closing  marine  contract  through,  97. 

as  such  is  agent  for  insured,  note,  94. 

is,  however,  a  middleman  between  insured  and  company,  note,  94. 

payment  of  premium  to,  not  payment  to  company,  note,  94. 

unless  made  so  by  statute  or  custom,  note,  94. 
receives  commission  out  of  premium,  note,  94. 
whether  earns  full  commission  despite  cancellation,  note,  94, 

custom  to  return  commission  pro  rata,  note,  94. 
a  general  agent  or  to  fill  specific  order,  note,  94. 
extent  of  his  rights  and  obligations,  note,  94. 

damages  for  failure  to  procure  intiurance,  notes,  93,  94. 

must  furnish  authorized  and  solvent  companies,  note,  94. 
sometimes  agent  for  both  parties,  notes,  94,  95. 

whether  he  can  make  valid  contract,  note,  95. 

cannot  issue  valid  policy  to  self,  note,  95. 

representing  one  party  for  one  purpose,  other  party  for   another  pur- 
pose, note,  95. 

either  principal  with  knowledge  is  estopped,  note,  95. 
underwriter's  right  to  knowledge  of  sub-agent  and  of  principal;  conceal- 
ment, note,  123. 
notice  to,  of  cancellation  by  insurer,  388-390. 
See  Agents;  Statutes. 


tx\DEX  811 

[References  are  to  pages.] 
BROKER'S  CLERK, 

oral  representation  by,  where  application  written,  note,  311. 

BRONCHITIS,  note,  480. 

BROOM  CORN, 

in  bales  as  included  in  term  "grain,"  description  in  policy,  note,  288. 

BUILDER'S  RISK, 

special  clause  sometimes  given  for,  note,  335. 

BUILDING  LAWS, 

necessitating  increased  cost  of  rebuilding;  "indemnity;"  fire,  298. 

BUILDINGS, 

description  of  in  policy,  288,  289. 

age  of;  misdescription,  note,  378. 

false  description  of  material  of  which  constructed,  note,  378. 

separate  whether   "additions;"   construction   whether  for  court  or  jury, 

note,  116. 
misdescriptions  as  to  distances  between  and  exposures,  note,  378. 
on  ground  not  owned  in  fee  simple;  leased  ground,  440. 
on  leased  ground,  when  breach  as  to  contents,  308. 
"occupied  as  tannery"  does  not  cover  machinery  and  engine,  note,  289. 
ordinance  or  law  regulating  repair  or  construction  of;  excepted  loss,  375. 
operations;  increase  of  risk;  permit,  335. 
blown  up  to  stay  conflagration,  285. 

damaged  or  destroyed;  "indemnity;"  increased  cost  of  rebuilding,  298. 
fall  of,  or  of  parts  thereof,  285. 

fallen,  burden  of  proof  when  on  insurer,  note,  155. 
total  loss  of;  measure  of  damages,  299,  300. 
plans  and  specifications  to  be  furnished;  proofs  of  loss,  413. 
See  Additions;  Alterations;  Apartment  House;  Dwellings;  Repairs. 

BULLION, 

should  be  insured  specifically;  marine,  587. 

BURDEN  OF  PROOF, 

how  far  on  insurer,  154-156. 

where  insured  and  beneficiary  die  in  common  disaster,  note,  86. 

BURGLARY, 

insurance,  note,  652. 

BURNT, 

meaning  of  in  memorandum  clause,  marine,  645. 

BUSINESS, 

interruption  of;  excepted  loss,  375. 

BY-LAWS, 

as  part  of  contract,  notes,  3,  4. 

right  to  change  may  be  reserved,  note,  4. 


gl2  *  INDEX 

[References  are  to  pages.] 

BY-LAWS — Continued. 

reasonable  and  unreasonable  changes  in,  considered,  note,  4. 

of  mutual  companies  as  part  of  contract,  fire  policy,  458. 

adopting  suicide  provision  after  issuance  of  certificate,  note,  509. 

cannot  change  rule  that  agent's  acts  bind  within  scope  of  actual  authority, 

191. 
express  promise  to  pay  assessments,  505. 
to  be  observed  in  levying  assessments,  507. 

See  CHARTEa. 


c 

CAMPHENE, 

use  of  prohibited,  356, 

but  may  be  impliedly  covered  by  description,  358. 

memorandum  clause  of  Massachusetts  policy,  360. 

CANCELLATION, 

failure  to  cancel  no  sufficient  ground  for  waiver  and  estoppel;  fire,  177. 
failure  to  cancel,  etc.,  as  evidence  of  intention  to  waive,  note,  178. 
and  issuance  of  new  policy;  no  breach  of  warranty;  other  insurance,  320. 
after  loss  and  return  of  unearned  premium  no  waiver  of  known  forfeiture, 

note,  365. 
clause  of  fire  policies,  383. 

notice  of,  must  be  peremptory,  explicit,  unconditional,  384. 
return  of  policy  and  physical  cancellation,  not  essential,  386. 
request  or  notice  does  not  become  operative  or  time  begin  to  run  imtil 

actually  received,  386. 
by  insured,  386. 

by  insured;  surrender  of  policy,  386. 

by  insurer;  return  or  tender  of  unearned  premium,  387,  388,  392. 
by  insurer;  notice  of,  to  whom  given,  388,  389. 

cannot  serve  on  broker  unless  general  agent,  389. 
notice  by  insurer;  computation  of  time,  388. 
or  attempted  cancellation  and  substitution  or  attempted  substitution;  what 

policies  in  force,  389. 
by  insurer;  mortgagee;  Massachusetts  clause,  392. 
by  insurer;  New  Hampshire  and  Wisconsin  clauses,  note,  393. 
and  surrender  of  wrong  policy,  note,  392. 
of  charter  clause  in  marine  policies  on  freight,  649. 
in  ignorance  of  loss  not  binding,  note,  650. 
"upon  notice;"  employers'  liability  insurance,  note,  666. 

CAPTAIN, 

See  Master  of  Ship. 

CAPTURE, 

defined,  607. 

rumor  of  not  disclosed;  marine,  note,  121, 
ransom  from;  general  average,  267. 
insurance  against;  illegality;  marine,  note,  238. 


INDEX  •  Hi'^ 

[References  are  to  pages.) 

CAPTURE— Corrfinuerf. 

arrest  and  restraints  distinguished;  marine  policy,  610. 
or  seizures;  illustrations;  marine  policy,  notes,  609,  610. 
warranted  free  from  expense  in  consequence  of,  646. 

CARE, 

See  Negligence. 

CARGO, 

insurance  upon;  marine  risk,  586. 
what  is  and  what  is  not  included,  587. 
shifting  or  successive  cargoes,  587. 
stowed  on  deck,  whether  covered,  587,  614. 

on  deck,  inland  voyages,  note,  266,  614. 

on  deck,  general  average,  266. 
on  deck  not  covered  "unless  specially  indorsed;"  clause  in  policy,  646. 
part  stowed  on  deck;  clearance  certificate;  legality  of  insurance,  note,  240. 
commencement  of  risk,  590. 
duration  and  termination  of  risk,  593,  596-598. 

whether  liberty  to  call  at  port  gives  liberty  to  land  and  load  cargo,  598. 
loss  by  fire;  sinking  of  vessel;  proximate  cause,  618. 
duty  to  transship,  when,  245,  246. 
actual  total  loss,  241. 

arrival  in  specie;  memorandum  articles  no  actual  total  loss,  note,  643. 
perishable  goods;  absolute  total  loss,  242,  note,  643. 
sale  of;  total  loss,  note,  245. 
See  Abandonment;  General  Average;  Goods;  Jettison;   Seaworthiness. 

CARLISLE  TABLE, 
generally,  note,  19. 


CARPENTERS, 
CARRIER, 


See  Mechanics. 
See  Common  Carrier, 


CARS, 

in  motion;  boarding  or  leaving;  accident  policy,  578. 

riding  in  or  on  any  such  conveyance,  not  provided  for  transportation  of 
passengers;  accident  policy,  579. 

CASUALTY, 

insurance;  when  must  contain  element  of  indemnity,  note,  27. 

CASUALTY  COMPANIES, 

may  carry  on  business  in  other  States  than  that  of  organization,  note,  664. 

CASUALTY  INSURANCE,  652. 

CAUSE, 

See  Proximate  Cause. 

CAVEAT  EMPTOR, 

principle  of,  not  applicable  to  the  insurance  contract,  121. 


gl4  INDEX 

[References  are  to  pages.] 

CERTIFICATE, 

as  part  of  contract  of  fraternal,  etc.,  organizations,  note,  3. 
superintendent  compelled  by  mandamus  to  file,  note,  8. 
similarity  of  names  as  ground  of  refusal  of,  note,  8. 
express  promise  to  pay  assessments,  505. 
subsequent  by-law  adopting  suicide  provision,  note,  509. 
renewal;  construction  as  to  losses;  credit  insurance,  note,  663. 
See  Assessments;  Magistrate's  Certificate;  Policy. 

"CHAMBER  OF  ASSURANCE," 
established  in  Bruges,  note,  12. 

CHANGE, 

See  Alterations. 

CHANGE  OF  INTEREST,  TITLE  OR  POSSESSION, 
clause  in  fire  policy  considered,  343-352. 

CHANGE  OF  VOYAGE 

distinguished  from  deviation,  233,  234. 
forfeits  the  marine  policy,  234,  592. 

"CHARRING," 

something  more  necessary  under  clause  as  to  loss  by  fire,  note,  284. 

CHARTER, 

of  benefit,  etc.,  societies  as  part  of  contract,  note,  3. 

how  far  provisions  of  charter  and  by-laws  are  binding  upon  corporation, 

168,  169. 
how  far  upon  outsiders,  168,  169. 
to  be  observed  in  le\'ying  assessments,  507. 

See  By-L.-vws. 

CHARTERED  FREIGHT, 

insured  "at  and  from,"  when  risk  attaches,  note,  589. 

CHASTITY, 

of  females;  insurance  of,  note,  652. 

CHATTEL  MORTGAGE, 
clause  of  fire  policy,  340. 
mortgages  on  realty  are  not  prohibited,  340. 
no  particular  form  of  words  necessary  to  create,  note,  341. 
when  real  estate  mortgage  is  a,  341. 
never  delivered  will  not  avoid  policy,  note,  341. 
on  both  fixtures  and  personalty,  note,  341. 
paid  but  unsatisfied  of  record  does  not  avoid  policy,  note,  341 
not  an  increase  of  risk,  331. 

on  part  of  property,  divisibility  of  contract,  note,  341. 

on  part  of  property;  to  what  extent  contract  voided,  note  306,  307,  note,  308. 
when  does  and  does  not  avoid  policy;  illustrations,  note,  341, 
does  not  avoid  policy;  alienation  clause,  note,  343. 
written  consent;  alienation  clause;  standard  policy,  348. 


INDEX  $14 

[References  are  to  psiges.] 

CHATTEL  MORTGAGE— ConiMiued. 

by  partner  upon  firm  property;  alienation  clause,  note,  350. 

clause  not  in  Massachusetts  policy,  341. 

See  Mortgage;  Warranties. 
CHECK, 

in  payment  of  premium,  498. 

CHILDREN, 

insurance  payable  to,  466. 

CHOKING  TO  DEATH, 
accident  policy,  542. 

CIRCULAR, 

not  admissible  to  vary  terms  of  policy,  note,  106. 

CIVIL  AUTHORITY, 

order  of;  excepted  loss,  368,  369. 

order  of;  blowing  up  buildings  to  stay  conflagration;  subrogation,  453. 
CIVIL  CODES, 

See  Statutes. 
CLASSIFICATION  OF  RISKS,  18. 

CLAUSES, 

clauses  of  fire  policies  treated  in  sequence,  277-460, 

clauses  of  life  policies  treated  in  sequence,  461-536. 

clauses  of  accident  policies  treated  in  sequence,  537-581. 

clauses  of  marine  policies  treated  in  sequence,  582-651. 

title  insurance,  653-654. 

fidelity  insurance,  654-662. 

credit  insurance,  662-664. 

employers'  liability  insurance,  664-678. 

See  Accident  Policy  and  Clauses;  Fire  Policy  and  Clauses;  Forms; 

Life  Policy  and  Clauses;  Marine  Policy  and  Clauses;  Words  and 

Phrases. 

CLEARANCE  CERTIFICATE, 

sailing  without;  part  of  cargo  stowed  on  deck;  legality  of  insurance,  note,  240. 

CLEAR-SPACE  CLAUSE,  FORM  OF,  735. 

CLERK, 

of  agents, 

See  Agents. 
of  broker;  oral  representation  of  where  application  written,  note,  311. 

CLOSING  OF  CONTRACT, 

course  of  business  often  sui  generis,  93. 
fixe  insurance  as  closed  by  broker,  94. 

rights,  duties,  obligations  of  broker,  notes,  93,  94. 

application  slip  becomes  a  binder,  95,  96. 

broker  prepares  "the  forms,"  note,  95. 


816  INDEX 

[References  are  to  pages.] 

CLOSING  OF  CONTRACT— Continued. 

credit  for  premium  often  given,  96. 

daily  report,  note,  96. 
delivery  of  policy  not  essential,  96. 
binder  equivalent  to  a  policy,  97. 
rate  and  term  often  understood  by  usage,  97. 
marine  insurance  how  closed,  97. 
life  insurance  how  closed,  98. 

binding  receipt,  98. 

delivery  to  companies'  agent  for  insured,  98,  note,  100. 

contract  closed  by  letter,  98. 
application  is  an  offer,  note,  476. 

neglect  to  reply,  note,  100. 

unreasonable  delay,  note,  100. 
essentials  of  a  complete  contract,  99. 

English  act  omits  rate  as  an  essential,  note,  98. 
there  must  be  mutual  assent,  99. 
mailing  of  acceptance,  note,  99. 

delivery  of  policy  and  liability  for  premium  concurrent,  note,  99. 
contract  made  for  another,  ratification  after  loss,  note,  99 

whether  affected  by  lack  of  mutuality,  note,  99. 
time  is  of  the  essence  of  the  contract,  100. 
retention  of  premium  as  evidence  of  closing,  note,  100. 
authority  of  agents  to  execute,  note,  100,  101. 

how  far  agent  personally  responsible,  note,  101. 
particulars,    form  of  policy,  rate,  etc.,  sometimes  understood,  101. 

prior  course  of  dealing,  102. 

a  renewal  means  upon  same  terms,  note,  102. 

COAL  GAS, 

whether  a  poison,  when  question  for  jury;  accident  policy,  note,  567. 

CODES, 

See  Statutes. 

COINSURANCE  CLAUSES, 

and  other  special  clauses  modifying  measure  of  liability,  301,  302. 
when  insurer  cannot  insert,  note,  301,  302. 
lower  rate  of  premium,  note,  301,  302. 
and  other  limited  consent;  effect  of,  324. 
policies  with  non-concurrent  terms,  436. 

examples  of  operation  of  coinsurance  clauses,  with  explanation,  777,  778. 
statutes  prohibiting  or  modifying,  699. 

See  Forms. 

COINSURER, 

insured  as,  marine,  59,  60,  note,  247,  253. 

subrogation;  marine,  note,  64. 

insured  as  coinsurer  may  be  entitled  to  his  share  of  net  salvage,  635. 

COLD, 

slight  attack;  statements  as  to  health,  note,  480. 


INDEX  817 

tReferences  are  to  pages,] 

COLLATERAL  SECURITY, 

assignment  of  life  policy  as,  529. 

conveyance  absolute  in  form  but  intended  as;  alienation  clause,  note,  348. 

policy  pledged  as;  assignment  clause,  353,  354. 

COLLISION, 

a  marine  peril,  603. 

what  constitutes,  note,  603. 

whether  limited  to  impact  between  vessels,  notes,  603,  604. 

impact  with  wharves,  wreckage,  ice,  etc.,  notes,  603,  604. 

dictum  in  New  York  extends  the  term,  605. 
damage  to  subject  of  insurance  is  covered,  603. 
whether  liability  to  other  vessel  is  covered,  603,  604. 
special  collision  or  running  down  clause,  604. 

meaning  and  effect  of  the  clause,  notes,  604,  605. 

costs  of  the  accident  suit,  notes,  604,  605. 

COLLISION  OR  RUNNING  DOWN  CLAUSE,  FORM  OF,  769. 

COMBAT, 

injuries  sustained  during;  accident  policy,  540. 

COMMENCEMENT  OF  RISK, 

See  Fire  Policy  and  Clauses;  Marine  Policy  and  Clauses. 

COMMISSIONED  AGENTS, 

See  Agents. 

COMMISSIONER  OF  INSURANCE, 

power  as  to  refusal  of  license  to  foreign  company,  note,  8. 

COMMISSION  MERCHANT, 

extent  of  recovery  by;  fire,  73. 

fire;  clause,  held  on  commission,  etc.,  293,  294. 

COMMISSIONS, 

broker  entitled  to  though  policy  is  canceled,  note,  94. 

COMMON  CARRIERS, 

rights  against,  under  subrogation,  62,  note,  63. 

stipulation  in  bill  of  lading  for  benefit  of  insurance;  subrogation,  69, 
special  clause  in  policy  to  preserve  subrogation,  70. 

acceptance  from,  by  assured  of  bill  of  lading  providing  that  insurance  for 
benefit  of,  354. 

See  Bailees. 

COMMON  CARRIERS'  LIABILITY  POLICY,  678. 

COMPANY, 

See  Insurance  Companies. 

COMPASS, 

seaworthiness,  226. 

COMPROMISE, 

See  Employers'  Liability  Tnsttrance;  Settlement. 

62 


gig  INDEX 

[References  are  to  pages.] 

COMPUTATION  OF  TIME, 

See  Limitations;  Time. 

CONCEALMENT, 

doctrine  of,  how  came  to  be  adopted,  117-119. 

subject  of  insurance  is  a  chance,  118. 

facts  bearing  upon  the  hazard  better  known  to  insured,  119. 

insurance  a  contract  of  highest  good  faith,  120. 

duty  rests  on  both  parties,  120. 
strict  doctrine  of,  in  marine  insurance,  120. 

non-disclosure  of  material  facts  whether  innocent  or  fraudulent  avoids, 

120. 
contrasted  with  rule  applicable  to  other  contracts.  122. 
definition  of  material  circumstances,  120. 
opinion  or  belief  usually  need  not  be  stated,  131. 
test  of  materiality  of  fact,  131. 
if  material  is  fatal,  though  not  connected  with  the  loss,  132. 

question  of  materiality  is  for  jury,  133. 
illustrations  of  doctrine  of  concealment,  120. 
failure  to  disclose  ship's  papers,  note,  120. 
failure  to  disclose  name  of  leaky  ship,  note,  120. 

failure  to  disclose  limitation  of  carriers'  liability,  note,  121,  note,  354, 
failure  to  disclose  imperfect  condition  of  hull,  121. 
■what  circumstances  need  not  be  disclosed,  122. 

as  to  newspaper  information,  Lloyd's  lists,  etc.,  note,  122. 
at  what  point  of  time  duty  to  disclose  ends,  132. 
responsibility  for  neglect  of  agent  to  disclose,  123. 
who  are  agents  for  such  a  purpose,  123. 
modified  doctrine  of  concealment  in  fire  and  life,  124. 
to  be  fatal  must  be  intentional,  124. 
English  rule,  125. 

different  versions  of  the  American  rule,  126-128. 
the  specific  inquiries  of  application  or  policy  as  limiting  the  scope  of  dis- 
closure, 127. 
policy  provisions  amount  to  specific  inquiry,  339. 
cases  contra,  note,  339. 
non  disclosure  waived  if  question  is  unanswered,  128,  151,  380,  474. 
fir?  policy  clause  as  to  concealment,  310,  311. 

construed  to  forbid  an  intentional  non  disclosure,  310,  311. 
whether  incumbrances  need  be  disclosed,  338,  340,  note,  378. 
on  renewal  increase  of  risk  must  be  disclosed,  382. 
doctrine  applicable  to  reinsurance,  445. 
doctrine  applicable  to  credit  insurance,  note,  662. 
doctrine  applicable  to  fidelity  insurance,  658. 

CONCURRENT  INSURANCE,  431-441. 

CONCUSSION, 

loss  by,  under  fire  policy,  369-374,  618,  622. 

CONDITION  AND  USE  OF  PROPERTY, 

statements  regarding,  as  representations,  129. 


INDEX  819 

[References  are  to  pages.] 

CONDITION   AND   USE  OF   PROPERTY— Con<muerf. 

promissory  representations,  innocent,  fraudulent,  notes,  130,  131. 

change  of  situation  pending  negotiations,  note,  132. 

statements  held  descriptive,  not  warranties,  note,  139. 

"used  for  storage  of  ice,"  145. 

warranted  unincumbered,  notes,  146, 147, 153, 154. 

warranted  sprinkled,  147,  note,  215. 

warranted  detached,  148. 

warranty  of  present  use,  150. 

smoking  not  allowed,  150. 

winding  and  storing  yarn,  150. 

clerk  sleeps  in  store,  note,  150. 

kiln  for  com  in  use,  note,  151. 

occupied  by  tenants,  note,  151. 
warranty  to  keep  iron  safe,  etc.,  154,  note,  459. 
warranted,  house  of  stone,  151. 
warranted  a  dwelling  or  occupied,  151. 
statement  as  to  ownership,  note,  156. 
clear  space  warranty,  note,  207. 
watchman  warranty,  326. 
as  related  to  increase  of  risk,  326-334. 
use  of  prohibited  articles,  356-360. 
as  vacant  or  occupied,  361-368. 

statements  regarding  in  application,  survey,  etc.,  377-380. 
whether  application  is  warranted,  377. 

CONDITIONAL  OWNERSHIP, 

See  Interest. 
CONDITIONAL  SALE, 

part  of  property  held  under;  severable  policy;  fire,  306. 
See  Alienation  Clause. 

CONDITIONS  PRECEDENT, 

to  attaching  of  the  risk,  142,  221. 

affirmative  warranties  of  this  nature,  142. 
to  right  of  recovery,  142. 

both  affirmative  and  promissory  warranties  of  this  nature,  142. 
both  affirmative  and  promissory  classified  as  promissory;  England,  137. 
promissory  warranties  sometimes  called  conditions  subsequent,  344. 
the  provisions  of  standard  fire  policy  classified,  137,  280. 
See  Accident  Policy  and  Clauses;   Fire  Policy  and  Clauses;   Life 
Policy  and  Clauses;  Marine  Policy  and  Clauses;  W.\ivek  and  Es- 
toppel; Warranties;  Words  and  Phrases. 

CONFEDERATE  CRUISER, 
disclosure  of  fact,  note,  121. 

CONFLAGRATION, 

buildings  blown  up  to  stay,  285,  369. 

blowing  up  buildings  to  stay;  civil  authorities;  subrogation,  453. 

proximate  cause,  284-287,  372,  618,  622. 

explosion  as  resulting  incident,  370,  618,  622. 


820  INDEX 

[References  are  to  pages.] 
CONFLICT  OF  LAWS,  113,  114,  238. 

CONGRESS, 

no  jurisdiction  to  regulate  the  business  of  insurance  generally,  note,  8. 
issuance  of  policy  to  citizen  of  another  state  is  not  interstate  commerce 
note,  8. 

CONSENT  OF  INSURED, 

statutes  requiring,  life  policy,  702. 

CONSENT  OF  INSURER, 

See  Permits. 

CONSENT  OF  PARTIES, 

an  essential  of  the  contract,  99. 

CONSIDERATION, 

immoral  or  illegal;  life  policy;  impeaching  assignment,  79. 
whether  new  one  required;  waiver  and  estoppel,  159,  160. 
assessments  as,  for  insurance,  505. 

See  Premium. 

CONSTABLE, 

injured  in  serving  process  or  making  arrest;  intentional  injury  clause;  acci- 
dent  policy,  570. 

CONSTITUTION, 

as  part  of  contract  of  fraternal  organizations,  note,  3. 
right  to  change,  may  be  reserved,  note,  4. 

of  United  States;  precluding  restrictions  on  Lloyd  associations,  10. 
See  Charter;  Congress;  By-Laws. 

CONSTITUTIONALITY, 

of  law  allowing  counsel  fee,  etc.,  to  plaintiff,  note,  10. 
of  law  as  to  rebates  by  agents  on  premiums,  note,  10. 
of  valued  policy  laws,  note,  31. 

of  statutes  making  warranties  representations  and  providing  against  for- 
feiture, etc.,  157. 
of  statutes  making  agent  insurer's  agent,  note,  194. 
See  Congress;  Statutes. 

CONSTRUCTION  OF  THE  CONTRACT, 
indemnity  the  underlying  principle,  27. 
full  indemnity  often  not  allowed,  57. 
results  of  negligence  without  fraud  are  covered,  58. 
measure  of  recovery  allowed,  72  el  seq. 
contract  whether  personal,  76. 

premium  when  returnable  or  apportionable,  76,  77,  note,  651. 
policies  whether  assignable,  78. 
interests  of  beneficiaries  to  what  extent  \  ested,  life,  79-86 

right  and  method  of  changing  beneficiaries,  86-88, 
insurer  not  a  trustee  for  policyholder,  88. 
rights  of  creditors,  89-92. 


INDEX  821 

[References  are  to  pages.] 

•CONSTRUCTION   OF  THE  CONTRACT— Continued. 

contract  valid  though  closed  orally  or  by  binder,  93-98. 

governed  by  terms  of  usual  policy,  102-104. 
requisites  of  complete  contract,  98,  99. 

time  is  of  the  essence  of  the  contract,  100. 

offer,  acceptance,  etc.,  note,  99. 

particulars  understood  by  usage,  101. 
statute  of  frauds  is  not  applicable,  102. 
general  rules  apply,  105. 
policy  best  evidence,  105. 
all  parts  to  be  harmonized,  note,  105. 

what  papers  constitute  the  contract,  notes,  105,  106,  138,  139,  377,  471. 
written  language  of  subject-matter  as  identified  by  extraneous  evidence, 

note,  106. 
court  may  look  at  situation,  subject-matter,  and  surrounding  circumstances, 

note,  106. 
court  must  not  make  new  terms,  108. 
reformation  or  rescission  of,  108. 
special  terms  prevail  over  general  form,  108. 
special  clauses  or  riders;  when  prevail,  109. 
words  on  margin  of  policy,  note,  109. 
parol  to  explain  ambiguity,  109. 
trade  custom,  109. 

trade  usage  to  explain  technical  words  or  phrases,  note,  HO. 

trade  usage  in  marine  insurance.  111. 
intent  of  one  party  only  not  to  be  shown  by  extrinsic  testimony,  note,  110. 
interpretation  put  upon  contract  by  parties;  intention,  note,  110. 
always  liberal  to  insured.  111. 

landlord's  policy  on  profits;  open  and  not  valued,  note,  111. 
where  assured  furnishes  description  of  property,  note,  111. 
forfeitures  not  favored,  112. 

standard  policies  have  not  changed  the  rule,  note,  112. 
what  law  governs,  113. 

place  where  made;  place  of  performance,  113. 
statutes  no  extraterritorial  effect,  114. 
who  construes;  court  or  jury,  114-116. 
uberrimos  fidei,  note,  120. 
definition  of  warranties,  136. 
what  sufficient  to  constitute  a  warranty,  137-139. 
statements  held  descriptive  and  not  warranties,  note,  139. 
warranty  must  be  exactly  true  or  fully  performed,  140-145. 

though  unconnected  with  the  loss,  142,  472. 

breach  by  tenant  fatal;  fireworks  on  the  Fourth,  144. 

marine  insurance  contrasted  with  fire  and  life,  note,  140. 
inability  to  fulfill,  no  excuse,  145,  496. 

rule  modified  as  to  provisions  relating  to  proceedings  after  loss,  178, 
402,410,414,418. 
warranties  are  conditions  precedent  to  right  of  recovery,  142. 
warranties  contrasted  with  representations,  129,  145-148. 


822  INDEX 

[References  are  to  pages.) 
CONSTRUCTION   OF  THE  CONTRACT— Continued. 

construction  favorable  to  the  insured,  illustrations,  148,  149. 

rules  of  construction  given,  note,  475. 
statements  of  opinion  expectation,  belief,  149,  150. 

existence  of  obscure  diseases  whether  opinion  or  fact,  150,  note,  471, 482. 
estimates  of  value,  note,  378. 
statements  of  present  use,  150, 151. 
questions  unanswered  or  partially  answered,  151,  380,  474, 

good  faith  is  always  required,  151. 
temporaiy  breach  unconnected  with  loss,  151. 
under  the  fire  policies,  309. 

liberal  provisions  of  certain  standard  policies,  310. 
certain  liberal  statutes,  692,  693. 
severable  contract  to  avoid  foifeiture,  152-154. 

whether  severable  under  standard  fire  policies,  305. 
non-waiver  agreement  after  loss  construed  liberally  in  favor  of  assured, 

note,  184. 
restricted  meaning  of  "additions,"  applied  to  a  single  building,  290. 
whether  omission  to  make  affirmative  inquiry  abrogates  warranty  regard- 
ing interest  and  title,  notes,  312,  339,  341. 
factories  clause  strictly  construed  against  insurer,  note,  325. 
instrument  creating  lien  when  not  construed  as  chattel  mortgage,  note,  341. 
deed  of  trust  construed  as  chattel  mortgage,  note,  341. 
favorable  to  insured;  alienation  clause,  347. 

express  inclusion  in  standard  policy  of  chattel  mortgages  and  foreclosure 
implies  exclusion  of  real  estate  mortgages   and  other  liens;  alienation 
clause,  348. 
meaning  of  "premises;"  memorandum  clause;  fire  policy,  356. 
memorandum  clause;  fire  policy;  to  receive  reasonable  construction,  356. 
memorandum  clause;  fire  policy;  certain  modifications  to  be  read  into  it, 

357. 
"having"  as  meaning  habitual  use  of  benzine,  note,  357. 
memorandum  clause  in  fire  policy;  as  affected  by  the  subject  and  written 

description,  357-360. 
"keeping,  using,  and  allowing"  explosives;  whether  painters  are  "mechan- 
ics," 359. 
privilege  to  make  repairs  allows  them  to  be  made  in  reasonable,  proper,  and 

usual  way,  359. 
implied  consent  to  photographer  to  sell  flashlight  powder  does  not  permit  its 

manufacture,  360. 
"patterns"  covered  by  "tools,"  note,  360. 

stock  of  railroad  contractors  held  not  to  cover  dynamite,  note,  360. 
"patterns"  covered  by  "tools,"  note,  360. 
of  vacancy  clause,  361-365. 

"occupied;"  "unoccupied;"  "vacant"  in  vacancy  clause,  361,  note,  362. 
permit  for  vacancy  for  certain  number  of  days  strictly  limited,  note,  365. 
permit  for  vacancy  for  summer,  liberally  construed,  366. 
application,  survey,  plan,  or  description  of  property,  referred  to  in  policy,  a 
part  of  contract  and  a  warranty,  377-380. 


INDEX  823 

[References  are  to  pages.] 

CONSTRUCTION   OF  THE  CONTRACT— Continued. 

phraseology  of  application,  when  part  of  contract,  may  limit  conditiona  of 

policy  in  favor  of  assured,  note,  377. 
as  representation  rather  than  warranty,  note,  377. 
statutes  making  warranties  representations,  note,  378,  683,  706. 
warranty  that  force  pump  on  premises  implies  power  to  work  it,  note,  378. 
of  warranty  that  stove  pipe  well  secured,  note,  379. 
of  standard  mortgagee  clause,  396,  397,  398. 
notice  and  proofs  of  loss  clause,  401-404. 
of  "immediate  notice; "  loss  by  fire,  404. 
of  "satisfactory  proof"  of  loss,  412. 

of  "whole  insurance"  as  used  in  apportionment  clause,  436. 
of  limitation  clause,  456. 
designation  of  beneficiaries,  462. 
tendency  of  courts  to  make  statements  or  answers  binding  only  so  far  aa 

material  to  risk,  notes,  475,  476. 
other  parts  of  policy  or  application  may  modify  warranty,  note,  475. 
liberal  in  favor  of  assured;  strictly  against  insurer,  note,  475. 
clearest   and   most    unequivocal    language    required    to   create   warranty, 

note,  475. 
when  application  does  not  correspond  in  terms  with  policy,  latter  governs, 

475. 
of  statements,  as  to  medical  attendance  and  consultation  with  physicians, 

is  liberal  to  assured,  482. 
of  "accidental"  in  accident  policy;  illustrations,  538-541. 
of  clause  requiring  visible  mark  of  injury;  strictly  against  company;  accident 

policy,  560. 
of  words  "  voluntary  exposure  to  unnecessary  danger,"  573. 
rule  of  liberal;  title  insurance,  note,  654. 
statutes  making  warranties  representations  apply  to  fidelity,  etc.,  insurance, 

note,  657. 
liberal  rule  of;  credit  insurance,  note,  663. 

of  employers'  liability  policy;  gives  indemnity  for  what  liability,  668. 
list  of  liberal  statutes,  683  et  seq. 
See  Accident  Policy  and  Clauses;  Closing  of  Contract;  Fike  Policy 

.-iND  Clauses;  Life  Policy  and  Clauses;  Marine  Policy  and  Clauses; 

Waiver  and  Estoppel;  Warranty;  Words  and  Phrases. 

CONSTRUCTIVE  TOTAL  LOSS,  243,  244,  642. 

articles  warranted  free  of  particular  average,  note,  643. 
See  Abandonment;  Total  Loss. 

CONSUMMATION  OF  CONTRACT, 

See  Closing  of  Contract. 

CONSUMPTION, 

breach  of  warranty  of  good  health,  480,  481. 

warranty  that  no  brother  had  died  of;  question  for  jury,  note,  115. 

CONTINGENT  OR  VESTED  RIGHTS  OR  INTERESTS, 

See  Beneficiary. 


324  INDEX 

(References  are  to  pages.) 

CONTRABAND, 

goods;  illegality;  marine,  note,  238,  239,  638. 
persons  are  not,  note,  638. 

CONTRACT  OF  INSURANCE, 

definitions  and  purposes  of,  1  et  seq. 

as  made  with  insurance  companies  and  societies,  2-7. 

as  guarded  by  statutes,  5-10. 

made  with  unlicensed  companies,  10-12. 

as  one  of  indemnity,  27-31. 

how  far  aleatory  or  speculative,  28,  29. 
how  far  a  personal  contract,  76. 
how  far  assignable,  78. 
how  closed  in  practice,  93-98. 

orally  and  by  binder,  93-98,  102,  103. 
terms  which  must  be  agreed  upon,  98-100. 

terms  understood  by  usage,  97,  101. 

agreement  for  insurance,  104. 
rules  of  construction,  105-112. 

law  of  what  place  governs,  113. 

whether  court  or  jury  construes,  114. 
warranty  must  be  part  of,  138. 
what  papers  form  the  contract,  notes,  105,  106,  138,  139. 

of  benefit  societies,  note,  3. 

application  whether  incorporated,  fire  policy,  377,  380. 

apphcation  incorporated,  471,  476. 
reformation  or  rescission  of,  108. 

statutes  that  policy  must   contain  entire  or  that  application  or  by-laws 
must  be  incorporated,  682,  683,  685,  691,  701,  711. 

providing  what  policy  must  specify,  681. 
as  affected  by  representations  and  concealments;  generally,  117  et  aeq. 
life  policy;  agent's  authority,  525. 

modification  of;  court  must  not  make  new  terms,  108. 
general  average;  claim  rests  upon  law  rather  than  on,  262. 
to  rebuild  or  repair  is  a  new  and  independent  one  from  time  of  election,  304. 
executory,  for  purchase;  vendee  as  unconditional  and  sole  owner,  336. 
executory  of,  of  sale;  alienation  clause,  348. 
subrogation  by,  399. 
See  Clauses;  Closing  of  Contract;  Construction  of   Contract;  Defini- 
tions; Insurance;  Statutes. 

CONTRACTORS, 

insurable  interest  in  building  erecting,  note,  38. 

moving  house;  insurable  interest,  note,  38. 

stock  of  railroad;  held  not  to  cover  dynamite,  note,  360. 

CONTRIBUTING  POLICIES, 

equitable  doctrine  of  contribution,  common  law,  60,  61. 
apportionment  of  fire  losses,  431-440. 
marine  losses,  636. 


INDEX  82o 

[References  are  to  pages.] 

CONTRIBUTION  CLAUSE, 

See  Pro  Rata  Clause. 

CONTRIBUTORY  NEGLIGENCE, 

on  part  of  insured  or  agents  no  defense  to  insurer,  58. 
See  Negligence. 

"CONTROL," 

and  "knowledge"  of  insured;  increase  of  risk,  331. 

CONVEYANCE, 

traveling  by  public  or  private,  what  is,  581. 

CONVOY, 

representation  that  ship  will  sail  with,  is  material,  130. 
warranty  to  sail  under,  649. 

CONVULSIONS, 

answer  as  to;  when  representation  not  warranty,  474,  475. 

CORPORATE  NAME, 

similarity  of  names  as  ground  of  refusal  to  grant  certificate,  note,  8. 

CORPORATIONS, 

insurers  usually  are,  2-5. 

classified;  stock,  mutual,  and  mixed  companies,  6. 
business  of  fire,  life,  and  marine,  kept  somewhat  distinct,  7. 
statutes  confining  business  of  insurance  to;  constitutional,  note,  3, 
are  governed  by  statutory  provisions,  7-9. 
must  not  act  ultra  vires,  168. 
license  to  procure  risks  from  non-admitted,  12. 
can  act  only  by  agents,  189. 

stockholders'  interest  in;  interest  or  ownership  clause,  note,  336. 
See  Foreign  Corporations. 

COSTS, 

of  suit  of  which  reinsurer  had  no  notice,  note,  446. 
of  accident  suit;  employers'  liability  insurance,  677. 

COUNSEL  FEE, 

statute  allowing  to  plaintiff  where  "total  loss,"  constitutional,  note,  300. 
See  Attorneys. 

COUNTERSIGNING, 

of  policy  necessary  to  its  validity;  but  contract  may  be  closed  by  oral  or 

written  binder,  460. 
may  determine  the  place  of  the  contract,  460. 

COUNTERSIGNING  AGENT, 

See  Agents  of  Insttreb. 

COURTS, 

jurisdiction  of  Federal;  removal  of  causes;  foreign  corporations,  note,  9. 
for  trial  of  marine  insurance  cases  in  early  times,  13. 
arbitration  clause;  ousting  courts  of  jurisdiction,  420,  421. 


825  INDEX 

[References  are  to  pages.J 

COURTS— Continued. 

when  cannot  interfere;  refusal  to  reinstate;  life,  503. 

may  order  production  of  books;  adjustment  of  premium;  employera'  lia- 
bility insurance,  665. 

COURT  OR  JURY, 

which  of  these  construes  the  contract,  114-116. 
importance  of  the  distinction,  146,  147. 

distinction  illustrated  by  representations  and  warranties,  146,  147. 
legal  distinction  disturbed  under  doctrine  of  waiver  and  estoppel,  161,  213. 
whether  statement  is  representation  or  warranty,  note,  141. 
relationship  of  agency  whether  question  of  law  or  fact,  191. 
abandonment;  reasonable  time;  mixed  question  of  law  and  fact,  note,  246. 
issues  relating  to  the  material  alteration  of  risk,  334. 

question  as  to  meaning  of  "vacant"  or  "unoccupied;"  vacancy  clause,  365. 
whether  written  proofs  of  loss  comply  with  warranty,  412. 
issues  under  statutes  making  warranties  representations,  477. 
whether  death  result  of  accident,  natural  causes,  or  wrongful  intent;  suicide, 
517,  518. 

See  Equity. 
CRAFT, 

insurance  on;  marine,  590. 

See  Lighters. 

CRAFT  CLAUSE,  FORM  OF,  770. 

CREDIT, 

See  Premium. 

CREDIT  INSTALLMENT  OR  ASSESSMENT  CLAUSE,  730. 

CREDIT  INSURANCE,  662-664. 
policy  covers  what,  662. 
debtor  of  insured,  when  insolvent,  663. 
rights  of  insured  when  insurer  becomes  insolvent,  664. 

CREDITORS, 

simple  contract;  insurable  interest,  37. 
rights  of,  as  the  assured;  life,  92. 

and  others;  the  clause,  as  interest  may  appear;  fire,  294. 
right  of  in  insurance  money,  89,  90. 

rights  of,  to  life  in.surance  premiums  paid  by  insolvent  debtors^  90,  91. 
amount  of  recovery;  life,  92. 

insurance  on  debtor's  goods;  "other  insurance,"  note,  319. 
See  Assignment;  B.\nkruptcy. 

CREW, 

wages  and  provisions;  general  average,  267. 

who  mutiny  are  "pirates,"  note,  608. 

See  Seamen. 
CRIMES, 

death  in  violation  of  law;  life  policy,  520-524. 


INDEX  a'Z'i 

[References  are  to  pages.] 

CROMIE  RULE, 

applied  in  adjustments  under  partially  concurrent  policies,  439. 

CROPS, 

expected;  insurable  interest  in,  note,  33. 

insurance  guaranteeing  returns,  note,  652. 

growing,  insured  against  hail;  indemnity,  note,  297. 

of  different  years  insured,  divisibility  of  contract  to  avoid  forfeiture,  307. 

CUSTOM  OR  USAGE, 

See  Usage. 

CUSTOMARY  DEDUCTIONS,  780,  781. 

See  Deductions. 


D 

DAILY  REPORT, 

what  is,  in  fire  insurance,  96. 

DAMAGE, 

See  Loss;  Measxire  of  Indemnity. 

DANGER, 

voluntary  exposure  to  imnecessary;  accident  policy,  572-578. 

DATE, 

policy  antedated;  effect  upon  payment  of  premium;  life,  496. 

DEATH, 

insurance  against  loss  by,  16-18. 
not  excuse  for  violation  of  condition;  warranties,  145. 
of  brother  by  consumption;  question  for  jury,  note,  115. 
change  other  than  by;  alienation  clause;  fire,  343. 

of  insured  and  delay  in  appointing  representative;  effect  upon  time  limita- 
tion for  suing,  note,  454. 
of  insured  intentionally  caused  by  beneficiary,  81. 

of  all  or  some  donee  beneficiaries  before  insured;  new  appointment,  82-85. 
proofs  of;  prerequisite  to  levy  of  assessments,  506. 
proofs  of;  effect  of  denial  of  all  liability,  179. 
from  accidental  drowning;  accident  policy,  541. 
by  accidental  inhaling  of  gas;  accident  policy,  542. 
by  choking;  accident  policy,  542. 

whether  result  of  fall,  or  fall  result  of  death;  accident  policy,  544. 
from  freezing;  accident  policy,  542. 
by  fright;  accident  policy,  542. 
by  heart  trouble  or  accident;  accident  policy,  543. 
from  insect  bite;  accident  policy,  542. 
hanging  by  mob,  note,  539,  542. 
murder  for  robbery,  note,  539. 
by  blow  of  third  person,  note,  539. 
of  officer  during  arrest,  note,  539. 
by  shooting  by  third  party,  note,  540. 


828  ^^^^^^ 

[References  are  to  pages.] 

DE  AT  H — Continued . 

hemorrhage  while  dressing,  540. 

fatal  fall  against  locomotive,  542. 

whether  from  bruise  or  disease,  543. 

from  accident  or  heart  disease,  543. 

from  disease  or  accident,  544. 

from  fit  or  droT\Tiing,  545. 

from  fit  or  wheels  of  locomotive,  545. 

whether  accident  or  rheumatism,  note,  546, 

accident  and  apoplexy,  note,  546. 

accident  and  pneumonia  or  pleurisy,  note,  546,  547. 

poison,  note,  546. 

fall  and  peritonitis,  note,  546. 

bruise  and  septic  poisoning,  547, 

bruise  and  pleurisy,  547. 

blood  poisoning,  547. 

falling  of  crate  of  glass  upon  insured,  550, 

bite  of  rattlesnake,  553. 

presumption  of,  from  absence,  or  when  unheard  of,  558, 

how  to  prove  fact  of  death,  559. 

how  to  establish  identity  of  body,  notes,  558,  559. 

of  live  stock,  note,  652. 

See  Accident  Policy;  Life  Policy. 

DEATH  BY  THE  HANDS  OF  JUSTICE  OR  IN  VIOLATION  OF  LAW, 
life  policies,  520-523. 

suicide  not  a  crime,  523. 

death  must  be  caused  by  unlawful  act,  524, 
accident  policies,  571. 

DEBT, 

assessments  whether  collectible,  505. 
premium  when  a,  collectible  by  company,  503,  504. 
distinctions;  fire  and  life  policies,  503,  504, 

DECAY, 

as  affecting  seaworthiness,  226. 

as  constituting  actual  total  loss,  241,  242. 

as  constituting  constructive  total  loss,  243-246. 

ordinary  or  by  inherent  defect  or  vice,  not  covered,  602,  62dr 

DECK, 

cargo  on  deck  whether  covered  by  policy,  587,  614,  646. 

warranty  as  to  loading  under;  marine,  640. 

See  Cargo. 
DECLARATIONS, 

under  running  or  floating  policies,  591. 

subject  to  ratification  to  accord  with  sequence  of  actual  shipments,  591. 

DECORATIONS, 

to  walls  and  ceilings  will  not  cover  painting  of  outside  walis,  note,  289. 
proportionate  value;  excepted  liability,  375. 


iXDEX  829 

(References  are  to  pages.] 

DEDUCTIONS, 

for  depreciation;  measure  of  damages  clause,  296-299. 

partial  loss  of  ship,  254. 

partial  loss  of  goods,  257. 

general  average  contribution  and  salvage  charges,  258. 

one-third  off,  new  for  old,  259. 

customary,  in  average  on  ship,  780,  781. 

See  Depreciation. 

DEED, 

of  gift;  interest  or  ownership  clause,  note,  337,  338. 

intended  as  mortgage  does  not  avoid;  interest  or  ownership  clause,  note,  139. 

of  trust  construed  as  chattel  mortgage,  note,  341. 

to  son  to  avoid  judgment;  breach  of  alienation  clause,  note,  345. 

DEFECT,  INHERENT, 

loss  by,  not  covered,  marine,  626. 

DEFENSES, 

lack  of  insurable  interest,  32. 

fraud  or  bad  faith,  120. 

concealment  of  material  facts,  120-128. 

misrepresentation  of  material  facts,  128,  129. 

breach  of  express  warranty,  140. 

breach  of  implied  warranty,  220. 

remoteness  of  damage,  57. 

contributory  negligence,  58 

special  provisions  of  the  contract  govern,  128,  136. 

of  original  insurer  available  by  reinsurer,  445. 

notice  to  reinsurer  to  defend  suit  by  original  insured  against  original  insurer, 

446. 
under  policy  are  merged  in  settlement  of  loss,  650. 
employers'  liability  policy;  "to  defend"  construed,  670. 
in  accident  suit;  insurer  conducts;  employers'  liability  insurance,  674,  675. 
effect  of  insurer's  breach  of  agreement  to  defend;  employers'  liability  insur- 
ance, 676,  677. 

DEFINITIONS, 

automobile  policy,  664. 

blanket  policy  or  compound  and  specific  policy,  note,  22. 

disbursement  policy,  notes,  22,  60. 

employers'  liability  policy,  664. 

endowment  policy,  23. 

excess  policy,  22. 

floating  policy,  22. 

general  liability  policy,  664. 

insurance,  note,  1. 

insured  or  assured,  note,  1. 

insurer  or  underwriter,  note,  1. 

joint-life  policy,  23. 

life  policy,  23. 


830  INDEX 

[References  are  to  pages.] 

DEFI NITIONS— Confiuued. 
limited  payment  policy,  23. 
"open  policy"  or  "running  policy;"  fire,  22. 
open  or  unvalued  policy,  21. 
policy,  note,  1. 
rent  policy,  22. 

"running  policy"  or  "open  policy;"  fire,  22. 
semi-tontine  policy,  24. 
"  surrender  value  "  20. 
survivorship  policy,  23. 
teams  liability  policy,  664. 
term  policy;  life,  23. 
time  policy;  marine,  21. 
tontine  policy,  24. 
use  and  occupancy  policy,  23. 
unvalued  policy,  21. 
valued  policy,  21. 
voyage  policy,  22. 
see  also  separate  headings. 

See  Words  and  Phrases. 

DELAY, 

in  complying  with  requirement  as  to  notice  of  loss,  404,  405. 
in  rendering  or  serving  sworn  statements  or  proofs  of  loss,  407-410. 
in  giving  notice  or  proofs  of  death;  accident  policy;  illustrations,  555-557. 
loss  from;  marine,  when  not  covered,  600,  624,  626. 
when  covered,  608-611. 

See  Deviation;  Notice. 

DELEGATION  OF  POWER, 

officials  intrusted  with  duty  to  levy  assessments  cannot  delegate  power,  506 

DELIRIUM, 

caused  by  grip,  as  contributing  cause  of  fall;  accident  policy,  564. 

DELIRIUM  TREMENS, 

See  Habits. 

DELIVERY, 

of  policy  not  essential  to  validity  of  contract,  93. 

completion  of  contract;  deposit  of  policy  in  post  office,  note,  99. 

transmission  of  policy  to  agent  of  insurer,  good  delivery,  note,  100. 

of  policy  conditional,  note,  100. 

conditional;  provable  by  parol,  note,  106. 

chattel  mortgage  never  delivered  does  not  avoid  policy,  note,  341. 

of  chattel  mortgage  may  be  shown  to  be  conditional,  note,  341. 

DEMAND, 

See  Notice. 

DEPARTMENT,  INSURANCE,  8. 

DEPARTMENT  STORE,  FORM  OF  CLAUSE,  723. 


INDEX  831 

[References  are  to  pages.] 

DEPENDENTS, 

insurance  payable  to,  466. 

DEPOSIT, 

with  insurance  department  is  trust  fund,  note,  8. 

intereet  on  deposited  securities  follows  principal;  receiver  cannot  take  it, 
note,  8. 

DEPOSIT  NOTES, 

See  Premium;  Notes. 

DEPRECIATION, 

clause  as  to  deduction  for;  damages;  fire,  296-299. 
natural,  not  covered,  marine,  625-627. 

DESCRIPTION  OF  PROPERTY  INSURED, 

extrinsic  evidence  admissible  to  identify  and  describe  the  subject-matter, 

note,  106. 
written  language  must  be  considered  with  respect  to  the  description  of  the 

subject-matter,  note,  106. 
courts  look  at  surrounding  circumstances,  note,  106. 
reformation  in  case  of  mutual  mistake,  106,  note  107. 
reformation  and  recovery  allowed  in  same  action,  note,  107. 
written  or  special  terms  override  the  printed  form,  108. 
usage  of  trade  when  may  be  shown,  109. 
rule  of  construction  is  inclusive  rather  than  exclusive,  117. 

rule  where  insured  or  broker  prepares  description,  note,  117. 
descriptive  phrase  whether  warranties,  151,  note,  138. 
new  subject  cannot  be  introduced  by  waiver,  170. 
covers  what  is  included  or  reasonably  appurtenant,  288. 
many  instances  referred  to,  note,  288. 
furnace  and  boiler  part  of  house,  note,  288. 
annex,  sheds,  whether  covered,  note,  288. 
broom  com  included  in  the  term  grain;  flaxseed  included  in  the  term  grain 

and  seed,  note,  288. 
"decorations  to  walls  and  ceilings"  covers  what,  note,  289. 
"machinery  used"  does  not  cover  machinery  kept  for  sale,  note,  289. 
whether  building,  etc.,  includes  engine  and  machinery,  note,  289. 
whether  description  of  character  of  building  is  a  warranty,  151,  note,  289. 
evidence  of  usage  admissible  to  explain  ambiguity,  note,  289. 
instances  where  oral  evidence  received  to  identify  the  subject-matter,  note, 

289. 
description  of  granite  building,  note,  289. 
description  of  "stock  in  trade,"  note,  289. 
"watches  and  watch  trimmings,"  note,  289. 
"merchandise,"  "property,"  note,  289. 
hotel  not  a  dwelling  house,  note,  289. 

the  following  described  property;  meaning  and  legal  effect,  fire,  288. 
additions,  alterations,  etc.;  meaning  and  legal  effect,  288-291. 
fluctuating  stock;  meaning  and  legal  effect,  291-292. 
held  in  trust,  etc.;  meaning  and  legal  effect,  293. 


832  INDEX 

[References  are  to  pages.] 

DESCRIPTION  OF  PROPERTY  INUVRED— Continued. 

as  interest  may  appear;  meaning  and  legal  effect  of,  294. 

for  whom  it  may  concern;  meaning  and  legal  effect  of,  295. 

distinction  between  statements  antecedent  to  contract  and  those  afte''  loss, 
316. 

"  stock  of  cloth  .  .  .  and  all  other  articles  usual  in  merchant  tailor's  estab- 
lishment;" no  recovery  for  "patterns,"  360. 

stock  of  railroad  contractors  held  not  to  cover  dynamite,  note,  360. 

"patterns"  covered  by  "  tools,"  note,  360. 

in  policy  amounts  to  wTitten  permit;  memorandum  clause,  357,  note,  358. 

reference  in  policy  to  application  survey,  plan  or  description  of  property; 
warranty,  377-380. 

of  property  referred  to  in  policy  is  part  of  contract,  377. 

of  property  referred  to  in  policy,  a  warranty,  377. 

"  dwelling  house  "  effect  when  only  such  in  part,  or  a  hotel,  377. 

"woodhouse"  insured  as  such;  effect  when  only  so  used  in  part,  378. 

illustrations  and  effect  of,  note,  378. 

misdescription  of  division  walls,  note,  378. 

misdescription  as  to  distances  between  buildings  and  exposures,  note,  378. 

effect  of  phrase  "as  per  plan  on  file"  or  "as  per  survey  on  file,"  379. 

subject  of  insurance;  marine  policy;  ship,  cargo,  freight,  etc.,  586-590. 

when  plain,  cannot  be  contradicted  by  usage,  note,  599. 

See  Cargo;  Condition  of  Property;  Freight;  Profits;  Ship. 

DETENTION, 

warranted  free  from  expense  in  consequence  of,  646. 

See  Delay. 
DETERIORATION,  ORDINARY, 

not  covered  by  marine  policy,  624-627. 

DEVIATION, 

implied  warranty  against,  231-238. 

what  constitutes,  231. 

fatal  though  risk  is  not  increased,  231. 

fatal  though  not  contributing  to  loss,  231. 

"port"  specified,  not  "ports,"  231,  232. 

to  realize  success  of  adventure  is  no  justification  for,  232. 

to  or  from  district  with  several  ports,  sequence  of  visitation,  233. 

contrasted  with  change  of  voyage,  233. 

course  defined  by  names  and  places  in  bill  of  lading,  note,  233. 

effect  when  temporary,  note,  152. 

repairs;  selecting  nearest  port,  note,  233. 

departure  to  learn  whether  port  blockaded,  note,  233. 

stopping  at  intermediate  ports,  note,  233. 

overt  act  necessary;  plan  or  intention  insufficient,  233,  234. 

place  of  departure  or  destination  other  than  that  specified,  234. 

by  delay,  234,  235. 

delay  reasonable  or  unreasonable,  note,  234. 

sea  transit  and  land  transit;  attachment  of  risk,  note,  334. 

what  justifies,  235-238. 


INDEX  8^ 

[References  are  to  pages.] 
DEVIATION— Continued. 

when  cause  excusing  ceases  to  operate,  237. 

time  policies;  inland  waters,  whether  deviation  suspends  or  avoids,  238. 

liberty  to  deviate;  independent  voyage  for  different  object,  note,  233. 

when  barratry,  note,  613. 

privilege  of,  649. 

DEVIATION  CLAUSE,  FORM  OF,  770. 

DEVISE, 

conditional;  does  not  meet  interest  or  ownership  clause,  note,  336. 
a  change  of  interest  or  title,  note,  343. 

DEVISEES, 

partition  conveyance  between;  breach  of  alienation  clause,  note,  345. 
devolution  of  interest  to;  alienation  clause;  New  York  standard  fire  policy, 

348. 
proofs  of  loss  by,  note,  411. 

DIRECTORS, 

or  officials;  discretion  of;  levy  of  assessments,  507. 

DISAPPEARANCES, 

not  covered;  accident  policy,  558. 

DISBURSEMENT  POLICY, 
what  it  is,  note,  60. 
entitled  to  share  of  salvage,  note,  250. 

DISCLOSURE, 

of  increase  of  risk  at  time  of  renewal,  382. 

See  Concealment;  Representations. 

DISCRIMINATIONS, 

statutes  prohibiting,  in  rates,  692,  703. 

statutes  prohibiting,  against  colored  persons,  705. 

DISEASE, 

whether  statements  regarding,  are  warranties,  142,  147,  148,  472,  474. 
statements  as  to  freedom  from,  478-482. 
illustrations  as  to,  what  is  and  is  not,  479-482. 
statements  regarding,  construed  as  mere  opinion,  149,  150,  482. 
statements  regarding,  construed  under  liberal  statutes,  476-478. 
as  functional  or  organic  derangement,  479. 
sunstroke  as,  rather  than  accident,  541. 

dormant  but  made  active  by  exertions  of  assured;  accident  policy,  542. 
germs  of  hidden,  lurking;  policy  not  avoided,  note,  478. 
as  factor;  operation  for  appendicitis;  accident  policy,  544. 
and  accident;  distinction  between,  562. 
accidents  caused  by  disease,  accident  policy,  562-565. 
disease  as  a  result  of  accident,  562-565. 

See  Disease;  Health;  Insanity;  Concealment;  Representations; 
Warranties. 

53 


834  INDEX 

[References  are  to  pages.] 

DIVIDENDS, 

policyholder  cannot  demand  account  of  his  share  of;  life,  88. 
deductions  from  premiums,  496. 

DIVORCE, 

insurable  interest  survives;  Ufe,  note,  43. 

of  wife;  rights  as  beneficiary  not  affected,  note,  80. 

insurance  against,  note,  652. 

DOMESTIC  RELATIONS  LAW, 

See  Statutes. 

DONEE  BENEFICIARIES, 

See  Beneficiakies. 

DOUBLE  INSURANCE, 

See  Other  Insurance. 

DRAFT, 

on  third  party;  payment  of  premium,  note,  498. 

DROWNING, 

death  by  accidental,  covered  by  accident  policy,  541. 

evidence  of,  by  eyewitnesses  of,  or  by  body;  accident  policy,  562. 

DRUGGISTS, 

See  Drug  Store. 

DRUGS, 

"stock  of  drugs"  covers  gasoline,  benzine,  and  ether;  memorandum  clause, 
note,  358. 

DRUG  STORE, 

stock  "such  as  is  usually  kept  for  sale"  in,  when  covers  benzine,  note,  358. 

DUE  DILIGENCE, 

for  personal  safety  and  protection,  580. 

DUEL, 

intent  of  applicant  to  fight  a,  must  be  disclosed;  life,  note,  128. 

DUELLING, 

or  fighting;  accident  policy,  569. 
shooting  in  self-defense  when  not,  572. 

DURATION  OF  RISK, 

See  Fire  Policy  and  Clauses;  Marine  Policy  and  Clauses;  Employers 
Liability  Insurance;  Fidelity  Insurance. 

DWELLING  HOUSE, 

is  not  a  hotel,  note,  289. 

use  of,  for  boarders  or  liquor  store;  increase  of  risk,  note,  330. 
vacancy  clause,  note,  362. 
insured  as;  effect  when  a  hotel,  377. 

insured  as;  effect  when  in  part  such  and  in  part  store,  377. 
See  Apartment  House. 


INDEX  835 

[References  are  to  pages.) 

DWELLINGS,  FORM  OF  DESCRIPTION  OF,  726. 

DWELLING  WARRANTIES,  FORM  OF,  726. 

DYNAMITE, 

storage  of,  "  material  to  risk; "  matter  of  law,  note,  334. 
kept,  used ,  or  allowed ;  memorandum  clause,  356. 
covered  by  words  "  retail  hardware  store,"  note,  358. 
held  not  covered  by  stock  of  railroad  contractors,  note,  360. 

DYSPEPSIA, 

temporarily  connected  with  an  abscess,  note,  479. 
when  answer  as  to,  does  not  avoid,  479. 
touch  of,  consistent  with  good  health,  note,  480. 
severe  attack;  statements  as  to  health,  note,  480. 

E 

EARTHQUAKE  CLAUSE, 
purpose  of,  375. 
cases  under,  459,  734 
form  of,  734. 

EGYPTIAN  OBELISK, 

salvage  reward  not  recoverable  back  under  sue  and  labor  clause,  note,  632, 

EIGHTY  PER  CENT  CLAUSE, 

effect  of  as  permit  for  other  insurance,  324. 
examples  of  operation  of  coinsurance  clauses,  777. 

ELECTRICITY  CLAUSE, 
forbidding  use  of, 

ELECTRIC  LIGHTING, 

whether  an  increase  of  risk,  note,  330. 

ELEVATORS, 

vacancy  clause,  note,  368. 

EMBARGO, 

a  peril  under  marine  policy,  611. 
justifies  abandonment  for  total  loss,  611. 
unless  temporary  or  resting  in  rumor,  611 

EMBEZZLEMENTS, 

need  not  be  disclosed  as  "  an  occupation" ;  life  policy  note,  491. 
but  in  procuring  fidelity  insurance  employee's  bad  character,  if  known, 
must  be  disclosed,  658. 

EMPLOYEES, 

proofs  of  loss  by,  note,  411. 

fidelity  and  guarantee  insurance,  654,  655. 

fidelity  bonds, 

See  Fidelity  Insurance;  Employers'  Liability  Insurance. 


836  INDEX 

[References  are  to  pages.5 

EMPLOYERS'  LIABILITY, 

not  covered  by  marine  policy,  602. 

EMPLOYERS'  LIABILITY  INSURANCE,  664-666. 
purposes  of,  664,  665. 

liability  on  claims  for  personal  injuries,  664-666. 
forms  of  varieties  of  accident  insurance,  665. 

right  of  examining  books  of  insured  to  finally  adjust  premium,  665. 
rule  of  construction  favorable  to  insured,  note,  665. 

in  general;  same  doctrines  of  law  apply  as  in  other  branches  of  insurance,  666. 
employer  not  injured  person,  is  insured,  666-668. 

employer  may  settle  with  insurer  without  consent  of  injured  claimant,  667. 
insolvent  employer's  rights,  667. 
claimant's  or  employee's  rights,  667,  668. 

whether  policy  is  indemnity  against  liability  or  satisfied  liability,  668-671. 
period  of  risk,  668. 

immediate  notice  of  injury  with  full  particulars  required,  671-674. 
rules  laid  down  by  New  York  court,  672. 

employer  must  not  settle  claims  without  insurer's  consent,  674 
employer  must  show  a  liability  insured  against,  674. 
insurer  conducts  compromise  or  defense  in  accident  suit,  674,  675. 
judgment  in  accident  suit  conclusive,  675. 
effect  of  insurer's  breach  of  agreement  to  defend,  676,  677. 
costs  and  expenses  of  accident  suit,  677,  678. 
carriers'  liability  policy,  678. 

EMPLOYERS'  LIABILITY  POLICY,  FORM  OF,  772. 

EMPLOYMENT, 

statements  as  to;  life,  491,  492. 
statements  as  to;  accident,  552,  555. 

See  Hazardous  Employment;  Increase  of  Risk. 

ENDOWMENT  POLICIES, 

what  are,  23. 

general  rule  as  to  vested  rights  applicable,  note,  80. 

ENEMIES, 

unlicensed  trade  with;  illegality;  marine,  239. 
goods,  insurance  on;  marine;  illegality,  note,  238,  239. 
See  Alien  Enemies;  War. 

ENGINE, 

and  machinery  not  included  as  "building  occupied  as  tannery,"  note,  289. 

ENGLISH  CODE, 

marine  insurance,  care  in  its  preparation,  note,  278. 

cited  at  notes  77,  96,  97,  98,  130,  137,  138,  231,  234,  238,  243,  247,  251,  253, 
256,  260,  582,  583,  587,  588,  591,  592,  603,  608,  612,  614,  616,  629,  630, 
640,641,642,643,644. 

ENGLISH  LLOYD'S  POLICY, 

adopted  by  Parliament,  582,  not*,  14. 


INDEX  837 

[References  are  to  pages.] 

ENGLISH  LLOYD'S  POLICY— Continued. 
its  phraseology  criticised,  note,  14. 
its  stability  contrasted  with  fire  policy,  note,  14. 
the  first  clause  of  the  policy,  notes,  14,  584. 

ENTIRETY  OR    DIVISIBILITY  OF  CONTRACT, 

if  risk  attaches  premium  in  general  is  not  apportionable  or  returnable  ex- 
cept by  agreement,  77. 
premium  when  apportionable,  marine,  77,  78. 
insured  when  has  a  right  to  recover  back  premium,  651. 
to  prevent  forfeiture  as  to  part,  contract  made  severable  or  divisible,  fire, 
152-154. 

object  of  rule,  to  mitigate  harsh  doctrine  of  warranties,  147. 

various  rules  and  decisions  applying  the  doctrine,  152-154. 
doctrine  of  entirety  or  divisibility  under  standard  fire  policies,  305-309. 

effect  of  the  word  *' entire,"  306-309. 
many  illustrations  of  the  doctrine,  305-309. 

divergent  views  of  the  courts,  305-309. 

if  no  separate  apportionment  of  amounts  contract  is  entire,  308. 

fraud  as  to  part  vitiates  the  whole,  309. 

the  word  "entire"  is  omitted  from  the  Massachusetts  form,  309. 

decisions  of  Massachusetts  court,  309. 

EQUITY, 

proceedings  in  may  reach  insurance  money;  life,  89,  90. 

relief  in;  mutual  mistake  of  fact  or  fraud,  105-108. 

reformation  of  policy  in,  106,  notes,  107,  199. 

reformation  in,  for  failure  to  renew  an  agreed,  107,  582. 

rescission  of  contract,  108. 

power  of,  to  grant  relief  in  case  of  fraud  or  deceit  by  agent;  or  mutual  mis- 
take, 213. 

right  in,  to  fee  simple;  effect  of  though  no  permit,  340. 

cancellation  rescinded  where  both  parties  ignorant  of  loss,  392. 

action  in,  to  preserve  contract;  anticipatory  breach,  470. 

may  compel  levy  of  mortuary  a.ssessments,  506. 

refusal  to  levy  assessments;  action  at  law  may  be  brought  before  seeking 
relief  it,  508. 

power  of,  to  order  exhumation  of  body  of  deceased  insured,  558. 

when  claimant  no  remedy  in,  to  enforce  poUcy;  employers'  liability  insur- 
ance, 667. 

ESCROW, 

bill  of  sale  delivered  in;  within  ali6nation  clause,  note,  344 

"  ESTATE," 

construed,  note,  296. 

ESTOPPEL, 

doctrine  of,  treated  at  length,  158-220. 

extrinsic  evidence  of,  note,  106,  161. 

doctrine  of,  how  far  at  variance  with  common-lftw  rules,  161-16T 


838  INDEX 

[References  are  to  pages.] 

ESTOPPEL— Continuerf. 

doctrine  of,  under  standard  fire  policies,  206-220. 

doctrine  of,  under  life  policies,  198-205. 

future  representations;  when  create  an,  note,  131. 

insured  may  be  estopped  to  take  advantage  of  breach,  154. 

by  insurer's  misleading  conduct;  temporary  breach;  revival  of  contract,  309. 

in  favor  of  assignee  by  insiu-er's  consent  to  assignment  with  knowledge  of 

past  forfeiture,  355. 
when  carried  over  to  successive  renewals,  383. 
against  insurer;  agent's  acts;  renewal  premiums,  note,  498. 
See  Waiver  and  Estoppel. 

ETHER, 

kept,  used,  or  allowed;  memorandum  clause,  356. 
covered  by  words  "stock  of  drugs,"  note,  358. 

EVIDENCE, 

written  contract  or  policy  is  best  and  only,  105. 

reformation  or  rescission  in  cases  of  fraud  or  mutual  mistake  of  fact,  105-108. 

parol  inadmissible  to  change,  vary,  or  contradict  written  contract,  105,  203, 
206,207,209,211-213. 
a  party  cannot  state  his  intention,  note,  110. 

parol  inadmissible  to  show  property  covered  which  is  not  specified  in  policy, 
note,  105. 

inadmissible,  of  correct  answers  and  failure  to  read  application,  note,  203. 

pamphlet,  circular  or  pro.spectus  inadmissible  to  vary  terms  of  policy,  note, 
108. 

parol  admissible  to  explain  ambiguity,  109. 

extraneous,  admissible  to  identify  subject-matter,  note,  105  et  seq.,  288,  289. 

parol  admissible  to  show  what  articles  usually  appertain  to  property  in- 
sured, note,  3.58. 

conditional  delivery  provable  by  parol,  note,  106. 

conditional  delivery  of  chattel  mortgage  provable  by  parol,  note,  341. 

parol  admissible  to  arrive  at  insured's  meaning;  designation  of  beneficiaries, 
463. 

parol  admissible  to  show  parties  intended ,  under  clause  for  whom  it  may 
concern,  296. 

other  instances  when  parol  admissible  and  inadmissible,  notes,  105  et  seq. 

extrinsic,  of  agency  and  scope  of  authority  is  admissible,  193,  194. 

of  agency  relation;  insurer's  agent,  381. 

agency  determined  by  facts  and  provable  by  parol,  191,  note,  193. 

disturbance  of  contract  by  parol;  waiver  or  estoppel,  161. 

agent's  knowledge  of  facts  constituting  forfeiture;  doctrine  of  parol  waiver 
discussed;  fire,  206-214. 

when  extrinsic,  admissible  of  authority  of  agent  to  waive  forfeiture,  note,  194. 

when  oral,  admissible  to  show  agent's  knowledge  of  facts,  although  misstate- 
ments in  application,  161,  162. 

parol  to  establish  waiver  or  estoppel  admissible  in  certain  jurisdictions, 
note.  106. 

effect  of  doctrine  on  cx)mmon-law  rules  of,  162. 


INDEX  ii3y 

[References  are  to  pages.'] 

EVIDENCE— Continued. 

waiver  and  estoppel;  rule  in  federal  courts,  Massachusetts,  and  New  Jersey, 

176. 
failure  to  cancel,  etc.,  as  evidence  of  intention  to  waive,  note,  178. 
whether  fraudulent  promissory  representations  are  admissible,  note,  130. 
expert  testimony  inadmissible  to  show  whether  certain  situation  increases 

risk,  note,  333. 
as  to  prevailing  rates  of  premium  bears  upon  increase  of  risk,  note,  333. 
of  custom  in  case  of  same  or  similar  property  inadmissible;  vacancy  clause, 

365. 
competent,  of  decrease  of  risk,  note,  327. 

when  inadmissible  of  trade  usage  to  go  to  two  ports;  deviation,  232. 
of  custom  or  usage. 

See  Usage. 
application  or  binder  admissible  to  explain  ambiguity,  note,  105. 
unattached  application  inadmissible  under  statute  but  may  be  used  to  re- 
fresh memory,  note,  476. 
part  of  application  in  evidence  unattached  part  of  copy  of  inadmissible, 

note,  476. 
award  being  evidence  suit  is  on  policy,  428. 
how  to  prove  fact  of  death,  559. 

how  to  establish  identity  of  body,  558,  559. 
statements  in  proofs  of  loss  are;  against  but  not  in  favor  of  claimant,  186. 
burden  of  proof  heavily  on  plaintiff  in  suit  to  reform  contract,  213. 
what  plaintiff  must  prove  in  action  on  policy,  notes,  155,  156. 
plaintiff  need  only  prove  certain  essential  affirmative  conditions,  188. 

divergent  views,  188. 
burden  of  proof  on  plaintiff;  accident  policy,  note,  541. 
burden  of  proof  as  to  misrepresentation  or  concealment,  note,  131. 
insurer  must  prove  fraud;  not  sufficient  to  show  concealment  of  fact  would 

have  influenced  him;  marine,  note,  121. 
of  breach  of  warranty;  burden  on  insurer,  exceptions,  154-156. 
burden  of  proof  on  issue  of  unseaworthiness,  222. 

many  decisions  -pro  and  con,  notes,  223. 
when  burden  on  payee  to  show  his  interest,  note,  295. 
burden  on  underwriter  to  show  increase  of  risk,  note,  333. 
what  must  be  shown  by  insurer  to  justify  forfeiture  for  increase  of  risk,  327. 

whether  testimony  as  to  ruling  rates  is  admissible,  note,  333. 
increase  of  risk;  matters  of  common  knowledge,  note,  333. 
burden  to  show  falsity  of  statement,  on  defendant,  note,  472. 
burden  of  proof  on  company  to  show  statements  false  as  to  age,   note. 

488. 
method  of  proving  decedent's  age,  note,  488. 
burden  of  proof;  suicide;  insanity,  517-520. 
burden  on  insurer  to  prove  compliance  with  statute  as  to  non-payment  of 

premium,  501. 
accident;  when  burden  of  proof  on  insurer,  544. 
preponderance  of;  "reasonable  doubt;"  mistake  of  fact,  note,  106. 
valued  policy  conclusive  in  absence  of  fraud  or  intent  to  evade  law,  30,  299. 


840  INDEX 

[References  are  to  pages.] 

EVIDENCE— Continued. 

purchase  price  when  relevant;  measure  of  damages;  fine,  296. 

proof  of  value;  measure  of  damages;  fire,  note,  296. 

expert  and  non-expert,  as  to  values;  measure  of  damages;  fire,  note,  298. 

values  as  matter  of  opinion;  measure  of  damages;  fire,  note,  296. 

inspection  of  property  by  agent;  amount  as  evidence;  measure  of  damages, 
note,  297. 

purchase  price  of  property  as,  of  value;  measure  of  damages,  297. 

as  to  selUng  price  of  property;  measure  of  damages;  fire,  297. 

visible  mark  of  injury;  accident  policy,  560. 

body  of  insured  in  case  of  death  not  deemed  visible  mark  of  injury;  accident 
policy,  560. 

of  drowning;  eyewitnesses  or  body;  accident  policy,  562. 

of  financial  condition  of  assured  bears  upon  fact  whether  his  injuries  self- 
inflicted;  accident  policy,  note,  570. 

employer  must  show  a  liability  insured  against;  employers'  liability  insur- 
ance, 674. 

See  Experts;  Presumptions. 

EXAMINATION, 

insurers  entitled  to  examine  damaged  property,  415. 

of  insured  under  fire  policy,  415. 

fulfillment  of  provision  if  practicable  is  condition  precedent,  415. 

the  insurer's  demand  must  be  clear  and  distinct,  415. 

notice  must  designate  reasonable  time  and  place,  415. 

also  the  person  by  whom  examination  is  to  be  conducted,  415. 
assured  cannot  be  compelled  to  leave  the  state,  note,  416. 
what  is  proper  place  for  examination,  note,  416. 
company  must  not  postpone  option  until  action  brought,  416. 
personal  oath  of  the  insured  must  be  furnished,  416. 

where  insured  is  incompetent  or  absent,  416. 

whether  agent  or  receiver  may  be  substituted,  416. 
whether  voluntary  absence  amounts  to  refusal,  416. 
insurer  is  not  entitled  to  open  a  concluded  examination,  416. 
the  insured  is  entitled  to  the  presence  of  his  attorney,  416. 
evidence  which  should  be  elicited,  note,  416. 
what  questions  are  material  and  proper,  note,  416. 
proper  scope  of  examination,  417. 

whether  non-compHance  is  for  court  or  jury,  note,  417. 
as  to  signing  the  examination  after  it  is  written  out,  417. 
as  to  false  swearing,  31.3,  note,  417. 

requiring  examination  and  books  is  not  waiver  of  forfeiture,  182-184. 
under  oath;  enforcing  requirement  no  waiver,  431. 
of  person  in  case  of  injury;  accident  policy,  557. 
right  to  make,  does  not  include  right  to  treat  medically;  accident  policy, 

note,  558. 

EXCEPTED  RISK, 

See  Accident  Policy  and  Clauses,  etc.;  Fire  Policy  and  Clauses;  Life 
Policy  and  Clauses,  etc.;  Marine  Policy  and  Clauses. 


INDEX  ^1 

[References  are  to  pages.) 

EXCESS  FLOATER, 

when  it  will  attach,  734. 

EXCESS  POLICY, 
what  is  an,  22. 

EXCHANGE, 

New  York  fire;  purposes  of,  718. 

EXCUSES, 

inability  to  fulfill  warranty  is  no  excuse,  145. 

modification  of  strict  rule  as  to  proceedings  after  loss,  178,  402,  410 
414,  418. 
what  are  not,  for  non-payment  of  premium,  496. 
financial  inability  to  pay  premium  and  that  insured  would  derive  no  benefit 

from  notice,  501. 
loss  of  policy  as,  for  non-surrender  of,  note,  502. 
See  Defenses. 

EXECUTION, 

insurance  money  when  not  subject  to;  life,  89. 
seizure  under;  disclosure  as  to;  fire,  312. 

EXECUTORS, 

when  may  impeach  validity  of  assignment;  life,  79. 

devolution  to,  of  interest;  alienation  clause;  New  York  standard  fire  poUcy, 

348. 
proofs  of  loss  by,  note,  411. 
right  to  collect  insurance,  457. 
designation  of  beneficiary,  462. 

EXECUTORY  CONTRACT  OF  SALE, 
as  related  to  subrogation,  67,  68. 
under  alienation  clause,  348. 

EXEMPTIONS, 

from  liability;  excepted  risks. 

See  Accident  Policy  and  Clauses;  Fire  Polict  and  Clauses;  Life 
Policy  and  Clauses;  Marine  Policy  and  Clauses. 

EXHIBIT  REMAINS, 

loss  by  fire,  406. 

of  property  insured;  loss,  415. 

EXHUMATION, 

of  body  of  deceased  insured;  autopsy;  right  to;  power  of  equity  court,  558. 

EXPECTATION  OF  LIFE,  20. 

EXPENDITURE, 

See  General  Average;  Sue  and  Labor  Clause. 

EXPENSES, 

mutual  companies;  assessment  of  premium  or  deposit,  notes  for,  282. 
constructive  total  loss,  243,  244,  245. 


842  INDEX 

[References  are  to  pages.] 

EXPENSES— Continued. 

salvage  charges,  252. 

expenditure  for  sacrifice;  general  average  loss,  252,  253. 

repairs;  partial  loss  of  ship,  254. 

See  Deductions. 

on  redemption  or  recovery  of  property;  marine  policy,  609. 

sue  and  labor  clause,  629. 

under  suing  and  laboring  clause;  English  marine  code,  note,  629,  642. 

warranted  free  from,  in  case  of  capture,  seizure,  detention,  or  blockade,  646. 

of  accident  suit;  employers'  liability  insurance,  677. 
See  General  Average. 
EXPERTS, 

testimony  as  to  materiality  of  representation,  notes,  131,  133. 

evidence,  as  to  values;  measure  of  damages;  fire,  note,  298. 

as  to  increase  of  risk,  note,  333. 

as  to  increase  of  risk;  when  admissible,  note,  333. 

inadmissible  to  show  whether  risk  increased  by  unoccupancy,  365. 

EXPLOSION, 

to  stay  conflagration,  285. 

by  gunpowder  or  steam;  loss  by  fire,  286. 

and  concussion;  loss  by  fire,  note,  286. 

imless  fire  ensues;  excepted  loss,  368,  369-374,  618. 

proximate  cause,  618,  622,  623. 

under  marine  policy,  607. 

EXPLOSIVES, 

prohibition  against  keeping;  increase  of  risk,  note,  333. 

storage  of  fireworks;  increase  of  risk;  question  of  law,  334. 
See  Memorandum  Clause. 
EXPOSURES, 

duty  of  insured  as  to  disclosing,  127. 

misdescription  as  to,  note,  378. 

free  from  loss  by ;  cargo  on  deck,  646. 

under  standard  fire  policies,  326-334. 

See  Condition  of  Property. 
EXTENDED  OR  PAID-UP  INSURANCE,  502. 

statutory  policy  of  New  York;  options  on  surrender  or  lapse  of  policy,  502. 

EXTERNAL,  VIOLENT,  AND  ACCIDENTAL  MEANS, 

accident  policy,  541-544. 

See  Death. 
EYE, 

loss  of;  accident  policy,  551. 

F 

FACT, 

questions  of, 

See  Court  or  Jury;  Jury. 
FACTOR, 

extent  of  recovery  by;  fire,  73. 


INDEX  843 

[References  are  to  pages.] 

FACTORIES, 

clause;  fire  policies,  324-326, 

temporary  cessation  of  operations,  325. 

consent  to  work  overtime,  325. 

erected  on  adjacent  premises  by  insured  avoided  policy;  increase  of  risk,  334 

change  in  materials  or  equipment;  alienation  clause,  348. 

memorandum  clause;  gasoline  kept  outside  but  brought  into,  note,  357. 

fixtures;  not  included  in  "fixtures"  under  memorandum  articles  clause, 
note,  376. 

vacancy  clause,  367. 

See  Waiver  and  Estoppel. 
FAINTING, 

due  to  indigestion  not  "bodily  infirmity;"  accident  policy,  563. 

FALL, 

and  subsequent  death;  accident  policy,  542,  544. 

disease  or  bodily  infirmity  as  contributing  causes;  accident  policy,  564. 

FALLING  BUILDING, 

except  as  result  of  fire;  excepted  loss,  374. 

Massachusetts  policy  contains  no  such  clause,  375. 

FALLING  WALLS, 

proximate  cause,  618. 

FALSE  SWEARING, 

by  agent  in  proofs  of  loss,  315. 

before  or  after  loss;  clause  as  to;  fire,  313-316. 

See  Fraud  or  False  Swearing. 
FAMILY, 

insurance  payable  to,  466. 

FAMILY  PHYSICIAN  OR  USUAL  MEDICAL  ATTENDANT, 

statements  as  to,  485. 

FAMILY  RELATIONSHIP, 

statements  as  to,  488. 


FEDERAL  COURTS, 


See  Courts. 


FEE  SIMPLE, 

title,  disclosure;  fire,  312  and  note. 

building  on  ground  not  owned  in;  leased  ground,  340. 

equitable  right  to;  effect  of  though  no  permit,  340. 

FEET, 

loss  of;  accident  policy,  551. 

FELONY, 

conviction  of;  forfeiture;  subsequent  collection  of  dues;  waiver,  571. 

FEMALE  CHASTITY, 
insurance  of,  note,  652. 


344  INDEX 

[References  are  to  pages.] 

FIDELITY  INSURANCE, 

different  classes  of  fidelity  bonds,  654. 

usually  aimed  at  loss  by  dishonesty,  655. 

not  invalid  on  grounds  of  public  policy,  657. 

not  within  statute  of  frauds,  note,  103. 

contract  one  of  insurance  rather  than  suretyship,  655-657. 

a  contract  of  highest  good  faith,  658. 

period  of  risk,  6.58. 

stipulation  to  give  immediate  notice  of  misconduct,  659. 

knowledge  of  what  agents  is  imputed  to  employer,  660-662. 

FIDELITY  BONDS, 

See  Fidelity  Insurance;  Forms. 

FIGHTING, 

or  duelling;  accident  policy,  569. 

FINANCIAL  CONDITION, 

of  insured  bears   upon   question  whether  injiu-ies  self-inflicted;  accident 
policy,  note,  570. 

FIRE, 

heat  without  ignition  is  not,  284. 
there  must  be  flame  or  glow,  note,  284. 

FIRE  BUCKETS, 

failure  to  keep,  note,  152. 

FIRECRACKERS, 

See  Fireworks. 

FIRE  ENGINE, 

loss  by  water  from,  as  fire  loss,  285. 
damage  by,  on  way  to  fire,  note,  286. 

FIRE  EXCHANGE, 

New  York;  purposes  of,  718. 

FIRE  INSURANCE, 
origin  of,  16. 

as  contract  of  indemnity,  note,  28,  30. 
remarks  upon  risk  or  hazard,  117,  118. 
a  personal  contract,  76,  78. 
contract;  how  closed,  94-97. 
when  contract  of,  complete,  96,  97. 

FIRE  LOSS, 

what  constitutes  under  fire  policy,  284-288, 
hostile  and  friendly  fires,  284. 
"direct"  means  what,  284. 
heat  without  combustion,  note,  284. 
boiler  damaged  by  overheating,  note,  284. 

resulting  fall,  damage  by  water,  firemen,  exposure,  theft,  removal,  etc., 
notes,  285. 


INDEX  94^ 

[References  are  to  pagea.l 

FIRE  LOSS— Continued. 

buildings  blown  up  to  stay  conflagrations,  285. 
express  exceptions  of  fire  policy,  note,  285. 

illustrative  cases,  285,  286. 

explosions,  wind,  lightning,  etc.,  286. 

explosions  governed  by  special  clause,  369,  618,  622. 

where  combustion  does  not  reach  insured  premises,  286. 

concussion  only,  smoking  lamp,  soot,  note,  286. 

damage  by  fire  engine  on  way  to  fire,  note,  286. 

walls  falling  several  days  after  fire,  286,  note,  286. 

incendiarism  by  insured,  agents,  and  third  parties,  287. 
word  "direct"  omitted  in  Massachusetts  policy,  287, 

decisions  under,  notes  287,  288. 
what  constitutes;  marine  policy,  600,  606,  607. 

marine  may  follow  terms  of  fire  policy,  note,  600. 
marine  policy  may  cover  only  loss  by  fire,  note,  600. 
a  peril  under  marine  policy,  606. 
held  within  clause  "  all  other  perils,  losses,  and  misfortunes; "  marine  policy, 

607. 
proximate  cause,  286,  287,  617,  618,  622,  623. 
whether  the  spread  of  fire  is  a  proximate  result,  451,  452. 
See  Fire  Policy  and  Clauses;  Loss. 

FIRE  POLICIES,  FORMS  OF,  719  et  seq. 

FIRE  POLICY  AND  CLAUSES, 

meaning  and  legal  effect  of,  277-460. 
introductory  statement,  277-280. 
history  of  adoption  of  standard  forms,  277,  278. 
rule  of  construction,  279. 

attitude  of  courts  towards,  280,  notes,  140, 141. 
whether  the  clauses  of  the  fire  policies  are  reasonable,  note,  141. 
The  Clauses. 

abandonment  to  insurer  excluded,  305. 

additions,  alterations,  etc.;  meaning  and  legal  effect,  289-291. 

agents  of  company;  who  are,  380. 

agent's  authority  to  waive,  limited  to  writing,  458. 

alienation;  change  in  interest,  title,  or  possession,  etc.,  343-348. 

alienation;  change  in  interest,  etc.;  incumbrances,  348. 

alienation;  change  in  interest,  etc.;  executory  contracts  of  sale,  348-350. 

alienation;  change  in  interest,  etc.;  joint  owners;  partners;  joint  insured,  350. 

alienation;  change  in  interest,  etc.;  legal  process  or  judgment,  351. 

application,  plan,  etc.,  whether  part  of  policy  and  warranted,  377. 

court  construes  as  representation  rather  than  warranty,  note,  377. 

cost  of  house  misstated,  policy  avoided,  143. 

"dwelling-house,"  in  fact  part  stores,  note,  377. 

description  "woodhouse"  incorrect,  378. 

description  "occupied  as  hotel"  incorrect,  note,  378. 

misdescription   of   materials,   division   walls,   exposures,   age,   incum- 
brances, note,  378. 


846  INDEX 

[References  are  to  pages.] 

FIRE  POLICY  AND  CLAVSES— Continued. 

estimate  of  value  is  opinion,  note,  378. 

description  "two  stories  high,"  note,  378. 

warranty  of  force  pump  impUes  power  to  work  it,  note,  378. 

"stove  pipe  well  secured,"  note,  379. 

"as  per  plan  on  file,"  "as  per  survey  on  file,"  379. 

answer  as  to  title  not  correct,  note,  378. 

statements  as  to  present  use,  150. 

"clerk  sleeps  in  store,"  not  a  future  warranty,  note,  150. 

"kiln  for  drying  corn  in  use,"  not  a  future  warranty,  note,  151. 
appraisal  or  arbitration  clause;  loss,  418-420. 

standard  clause  a  valid  condition,  420. 
appraisal;  scope  of;  entire  loss,  422. 
appraisal;  conduct  of;  loss,  424-426. 
appraisals,  unfinished,  426-428. 
appraisal;  loss;  enforcing  contract  no  waiver,  430. 
appraisers  competent  and  disinterested;  loss,  421. 
assignment  of  policy,  353-356. 
award,  scope  of,  428. 
award;  setting  aside,  429. 
benzine,  etc.,  forbidden,  356-360. 

books  of  account;  vouchers,  etc.;  production  of;  loss,  417. 
building  on  ground  not  owned  in  fee  simple;  leased  ground,  340. 
building  be  or  become  vacant  or  unoccupied  and  so  remain,  etc.,  360-368. 
breach;  temporary  breach,  .309. 
cancellation  by  demand  of  insured,  383-386. 

cancellation;  notice  must  be  peremptory,  explicit,  unconditional,  384-386. 
cancellation  by  the  company,  386-392. 
chattel  mortgage,  340. 

civil  authorities'  order;  loss  by,  excepted,  369. 

coinsurance  and  other  special  clauses  modifying  measure  of  liability,  301. 
coinsurance  clause  and  other  limited  consent,  effect  of,  324. 
concealment;  misrepresentation,  310. 
consideration  of  the  stipulations  and  premiums,  280-283. 
contribution  clause;  loss,  431-440. 
countersigning  clause;  vaUdity  of  policy,  460. 
damaged  and  undamaged  goods;  separation  of;  loss,  406. 
damages;  measure  of;  not  liable  beyond  actual  cash  value,  etc.,  296-299. 
damages;  measure  of,  as  affected  by  provision  as  to  repairing,  300. 
description;  the  following  described  property,  288-292. 
direct  loss  by  fire;  insures  against  all,  except  as  provided,  284-288. 
earthquake  and  volcano  clause,  375. 
entire  policy  .shall  be  void,  305-309. 
examination;  submission  to;  loss,  406,  415. 
exhibit  remains;  submit  to  examination;  loss,  406,  415-417. 
explosion;  loss  by,  excepted,  unless,  etc.,  369-374,  618,  622. 
factories;  operated  after  certain  hours;  ceasing  operations,  324-326. 
falling  building,  374. 
fire,  what  is,  284-288. 


INDEX  847 

[References  are  to  pages.] 

FIRE  POLICY  AND  CLAVSEQ— Continued. 
fluctuating  stock,  etc.,  291-292. 
foreclosure  proceedings,  341. 
for  whom  it  may  concern,  295. 
fraud  or  false  swearing,  313-316. 
held  in  trust,  etc.,  293. 
increase  of  risk,  326-334. 
"insvired"  includes  legal  representatives,  457. 
insui'es  against  all  direct  loss  by  fire,  except  as  provided,  284-288. 
as  interest  may  appear,  294. 

interest  of  insured  not  truly  stated  in  policy,  311-313. 
interest  of  insured;  unconditional  and  sole  ownership,  335-339. 
interest  or  ownership  clause;  Massachusetts  policy,  339. 
inventory  to  be  made,  etc.;  loss,  406. 

leased  ground;  building  on  ground  not  owned  by  insured  in  fee  simple,  340. 
limitation  of  time  to  sue,  453. 

when  period  begins  to  run,  454. 
commencement  of  action,  456. 
construction  of  limitation  clause,  456. 
waiver  of  limitation,  457 
location,  essential,  292. 

loss;  certain  causes  of  excepted,  invasion,  theft,  explosion,  etc.,  368. 
loss;  forthwith  separate  damaged  and  undamaged;  put  in  best  possible  order; 

make  complete  inventory;  exhibit  remains,  406.   . 
loss,  or  measure  of  damage,  296-299. 

See  Proofs  of  Loss. 
mechanics  employed  in  building,  altering,  etc.,  334. 
memorandum  clause,  certain  uses  and  articles  forbidden,  356-360. 

right  to  use  benzine,  etc.,  implied  from  description  of  property,  357-360. 
memorandum  articles  excepted,  accounts,  bills,  etc.,  375. 
mortgagee  clause,  393-396. 

standard  mortgagee  clause,  396-399. 
mortgagee  party  to  appraisal,  400. 
mutual  companies;  regulations  as  part  of  poUcy,  458. 
neglect  of  insured  after  fire,  369. 

non-concurrent  terms;  policies  with;  how  to  contribute;  loss,  435. 
notice  and  proofs  of  loss,  401-404. 

immediate  written  notice,  404-406. 
duty  to  protect  from  further  damage,  406. 
other  insurance,  warranty  against,  317-322. 
other  insurance;  pro  rata  clause;  loss,  431-433. 
other  contributing  insurance;  loss,  433-435. 
payable  sixty  days  after  satisfactory  proofs,  302. 
premium,  the  consideration,  280-283. 
premium;  to  whom  payable,  283. 

premium;  return  of  unearned  when  policy  becomes  void,  393. 
proofs  of  loss;  form  of  action,  mortgagee  clause,  400. 
proofs  or  statement  of  loss,  407-410. 

excusable  failure  in  strict  compliance,  410-412. 


848  INDEX 

[References  are  to  pages.J 

FIRE  POLICY  AND  CLAVSES— Continued. 

where  served,  412. 

plans;  magistrate's  certificate,  413-415. 
f,.o  rata  clause;  other  insurance,  431-440. 
regulations  as  part  of  pohcy;  mutual  companies,  458-460. 
reinstatement  clause,  option  to  insurer  to  replace,  302-305. 
reinsurance;  UabiUty  as  specifically  agreed  upon,  441-446. 

usual  reinsurance  rider,  446-448. 

special  contracts  of  reinsurance,  448. 
removal  of  property  to  place  of  safety,  401. 
renewals,  382. 

sprinkler  clause  whether  warranty,  147. 
subrogation  by  mortgagee  clause,  399. 

subrogation  to  extent  of  payment  shall  be  assigned  to  company,  449. 
subrogation;  tortious  fires,  451. 
subrogation;  neghgence  of  water  company,  452. 
subrogation;  order  of  civil  authority,  453. 
survey,  etc.,  when  a  warranty,  377-380. 
temporary  breach,  309. 

term;  from  the day  of ,  at  noon,  283. 

theft;  loss  by,  excepted,  369. 

total  loss  of  building,  299. 

trust;  held  in,  etc.,  293. 

vacancy  clause,  360-368. 

valid  or  invalid;  effect  of  words,  322-324,  436. 

void;  this  entire  policy  shall  be,  305-309. 

waiver,  enforcing  contract  is  not,  430. 

waivers  must  be  by  written  agreement,  317,  458-460. 

watchman,  326. 

FIREWORKS, 

forbidden  use,  etc.;  when  policy  void,  144. 

kept,  used,  or  allowed;  forbidden  use,  356. 

covered  by  words  "  stock  usually  kept  in  country  store,"  note,  357. 

whether  description  of  the  stock  insured  impliedly  allowed  fireworks,  358. 

FINN  RULE, 

apportionments,  note,  441. 

FIRST  VOYAGE, 

deduction  new  materials  for  old,  259. 

FITS, 

answer  as  to;  when  representations,  447,  475. 
as  contributing  cause  of  accident,  562,  564. 

See  Death. 

FIXTURES, 

office  or  store;  memorandum  articles,  375, 

term  not  extended  to  factory  fixtures;  memorandum  articles,  note,  376. 

plans,  etc  .  to  be  furnished;  proofs  of  loss,  413. 


INDEX  949 

[References  are  to  pages.] 

"FLAME  OR  A  GLOW," 

loss  by  fire;  "luminosity,"  note,  284. 

FLASHLIGHT  POWDER, 

implied  consent  to  sell  does  not  permit  photographer  to  manufacture  it,  360. 

FLAXSEED, 

covered  by  words  "grain  and  seed,"  note,  288. 

FLOATER, 

See  Excess  Floater. 
FLOATING  POLICY, 
what  is  a,  22. 
defined,  note,  591. 
marine;  shipments;  declarations  under,  591. 

See  Forms;  Open  or  Floating  Polict. 

FLORENTINE  ANCIENT  MARINE  POLICY,  766. 

FORCED  DISCHARGE, 

in  general  average,  267,  270. 
by  York-Antwerp  rules,  779. 

FORECLOSURE, 

clause;  fire  policy,  341. 

not  in  Massachusetts  poHcy,  342. 
clause;  when  proceedings  are  deemed  commenced,  note,  342. 
sale  but  deed  not  delivered  not  within  alienation  clause,  note,  343. 
proceedings;  written  consent;  standard  policy;  aUenation  clause,  348. 

FOREIGN  CORPORATIONS, 

superintendent  compelled  by  mandamus  to  hcense,  or  to  file  certificate, 

note,  8. 
Ucense;  extent  of  power  of  insurance  commission  as  to  refusal  of  license, 

note,  8. 
similarity  of  name  as  ground  of  refusal  of  certificate,  note,  8. 
prerogatives  of  insurance  department,  8. 
statutory  safeguards  for  insured,  8-10. 
deposit  with  department,  note,  8. 
representative  for  service  of  papers,  9. 
"transacting  business;"  sending  imficensed  agent  to  adjust  loss  is  not, 

note,  10. 
state's  right  to  control,  regulate,  or  exclude,  10. 
as  to  removal  of  causes  to  federal  court,  9,  10. 
unauthorized;  insurance  contract  with,  by  mail,  note,  10. 
contracts  with  unlicensed  companies,  10,  11. 
not  admitted  to  state;  agents  licensed  to  protect  deficit,  12. 
license  to  procure  risk  from  non-admitted  companies,  12. 
when  subject  to  New  York  statute  as  to  notice  when  premium  due,  601. 

FOREIGN  GENERAL  AVERAGE,  272,  649. 

See  General  Averaqb, 

54 


850  INDEX 

[References  are  to  pages.] 

FORFEITURES, 

not  favored;  construction  of  contract,  112,  note,  475. 

necessary  and  should  be  fairly  enforced,  note,  495. 

for  breach  of  warranty  express  or  implied,  134-145. 

for  failure  to  pay  premium;  life,  495-500. 

for  non-payment  only  where  policy  so  stipulates;  life  risk,  496. 

for  non-payment  of  assessments;  generally,  504. 

may  be  waived,  154. 

collection  of  dues  after;  conviction  of  felony;  waiver,  571. 

not  waived;  by  requirement  as  to  appraisal,  etc.,  430. 

See  Construction  op  Contract;  Defenses;  Warranties. 

FORMS, 

accident  insurance  policy,  764. 
accident;  special  clauses,  765. 
application  and  survey  clause,  727. 
application  for  fire  policies,  718. 
application  for  life  insurance,  757. 
assessment,  installment,  or  credit  clause,  730. 
automobiles;  form  of  permit  for  buildings  storing,  736. 
average  clauses,  727,  732. 
binding  slip;  fire;  for  New  York  City,  718. 
binding  slip;  fire;  used  elsewhere,  719. 
binding  slip;  marine  form  of,  766. 
clear-space  clause,  735. 
collision  or  running  down  clause,  769. 
coinsurance  clauses,  727-729,  7.34,  774. 
craft  clause;  marine,  770. 

department  store;  clause  for  policy  on  stock  of,  723. 
deviation  clause,  770. 
dwelling  and  furniture,  725. 
dwelling  warranties,  726. 
earthquake  clause,  734. 
.    electricity,  clause  forbidding  use  of,  727. 
employers'  liability  policy,  772. 
fidelity  bond,  770. 
fire  policies, 

See  Standard  Fibe  Policies  under  this  heading, 
fire  policy ;  Missouri,  7.38. 
floating  policy,  734. 
Florentine  ancient  marine  policy,  766. 
furniture  and  dwelling,  725. 
health  clause ;  accident  policy,  765. 
Inchmaree  or  machinery  clause,  769. 
incumbrances;  clause  as  to,  730. 
iron-safe  clause,  733. 
liability  policy,  772. 
life  insurance  policies,  759. 

life  policies;  standard  life  policy  of  New  York,  760. 
lightning  clause,  730. 


INDEX  851 

[References  are  to  pages.] 

FORMS— Continued. 

loading  clause;  marine,  770. 

machinery  or.  Inchmaree  clause,  769. 

marine;  Florentine  ancient  policy,  766. 

marine  form  of  binding  slip,  766. 

marine  policy,  767. 

marine;  special  clauses,  769,  770. 

Missouri  fire  policy,  738. 

mortgagee  clauses,  730-732. 

negligence  clause;  marine,  770. 

open  or  running  policy,  734. 

permit  for  buildings  storing  automobiles,  736. 

policy;  ancient  Florentine  marine,  766. 

policy;  fine-print  conditions  and  legible  type  discussed,  notes,  140,  141. 

policy  of  accident  insurance,  764. 

policy  of  fire  insurance,  719,  738,  739,  741,  745,  749,  752. 

policy  of  life  insurance,  759,  760. 

pohcy  of  marine  insurance,  582,  766,  767. 

policy. 

See  Standard  Policy  under  this  heading, 
proofs  of  loss,  737. 
reinsurance  clause,  736. 
rent  clause,  735. 
retainer  clause,  736. 
running  down  or  collision  clause,  769. 
running  or  open  policy,  734. 
standard  fire  policies  for  New  York,  719. 
same  form  for  Connecticut,  Louisiana,  New  Jersey,  North  Carolina,  North 

Dakota,  Oregon,  Rhode  Island,  and  West  Virginia, 
standard  fire  policies;  Iowa,  742. 

Maine,  741. 

Michigan,  738. 

Massachusetts,  739. 

Minnesota,  741. 

New  Hampshire,  745. 

South  Dakota,  749. 

Wisconsin,  752. 
standard  life  policy  of  New  York,  760. 
survey  and  application  clause,  727. 
three-fourths  value  clause,  733. 
use  and  occupancy  clause,  734. 
warehouse  clause,  726. 
warranties;  dwelling,  726. 
"FOR  WHOM  IT  MAY  CONCERN," 

who  are  covered  by  the  phrase,  295,  584  and  notes, 
when  covers  belligerent  property,  note,  240. 

FOUNDERING, 

at  sea;  when  included  in  perils  of  the  sea,  603. 
when  presumed,  note,  603. 


852  INDEX 

[References  are  to  pages.] 

FRATERNAL  ASSOCIATIONS, 

in  general  are  life  insurance  companies,  5. 
corporations  classified,  7. 

contract  embodies  constitution,  by-laws,  etc.,  note,  3. 
right  to  change  beneficiary,  86. 

FRAUD  OR  FALSE  SWEARING, 
bad  faith  forfeits  all  rights,  120. 
insurance  contract  one  of  highest  good  faith,  120. 
as  to  part  vitiates  the  whole,  154,  309. 

reformation  or  rescission  of  contract  allowed  to  innocent  party,  106-108. 
whether  premium  returnable  in  case  of  fraud,  77. 
fraud  of  insured  prevents  recovery  back  of  the  premium,  283. 

but  standard  fire  policy  provides  for  return  of  premium,  393. 
when  premium  is  and  is  not  returnable,  651. 
insurer  cannot  offset  the  cost  of  insurance  against  the  premium  returnable, 

471. 
fraud  as  bearing  on  the  doctrine  of  concealment,  120,  125. 
collusion  or  fraud  on  the  part  of  the  assured  prevents  benefit  of  estoppel,  201. 
fraud  permits  opening  of  valuation  in  valued  policy,  30,  31,  299. 
clause  as  to  fraud  and  false  swearing  in  fire  policy,  313. 
statement  must  be  intentionally  false  to  avoid  policy,  313. 
various  illustrations,  313. 

an  overvaluation  to  be  fatal  must  be  intentionally  excessive,  314. 
immaterial  whether  prejudice  was  occasioned  by  fraudulent  statements,  314. 
immaterial  that  actual  loss  exceeds  the  amount  of  insurance,  314. 
if  statements  are  designedly  false,  motive  is  presumed,  314. 
whether  insured  is  responsible  for  false  statements  of  agent,  315. 
question  of  fraud  or  false  swearing  usually  for  jury,  note,  315. 
many  instances  given  of  false  swearing  in  proofs  of  loss,  note,  315. 
when  the  court  will  recognize  the  discrepancy  as  matter  of  law,  note,  315. 
false  statement  in  proofs  of  loss  is  not  perjury  at  common  law,  note,  316. 

may  be  made  perjury  or  other  crime  by  statute,  316. 
fraud  vitiates  claim  already  matured,  note,  316. 

status  of  parties  determined  at  time  of  commencement  of  suit,  note,  316. 
misstatement  as  to  irrelevant  matter,  note,  316. 
misstatement  regarding  value  under  valued  policy  loss,  note,  316. 
corresponding  clause  in  Massachusetts  policy,  note,  316. 

decision  construing  the  clause,  note,  316. 
whether  incontestable  clause  of  life  policy  covers  fraud,  632. 

incontestable  from  date,  534. 

FRAUDS,  STATUTE  OF, 

oral  contract  of  insurance  not  within,  102. 

reinsurance  not  within,  102. 

fidelity  and  guarantee,  not  within,  note,  103. 

"FREE  OF  AVERAGE," 

warranty  of  explained,  137. 

effect  of  warranty  in  marine  policy,  640-642. 


INDEX  863 

[References  are  to  pages.] 

"FREE  OF  CAPTURE," 

warranty  of  explained,  138. 

effect  of  warranty  in  marine  policy,  637. 

FREEZING, 

death  from;  accident  policy,  542. 

FREIGHT, 

canceling  clause  in  charter;  disclosure  required,  note,  122. 
total  loss  of,  note,  242,  245. 
constructive  total  loss,  245. 

earned  and  to  be  earned,  insurers'  and  owners'  rights  after  casualty,  250. 
insurable  value,  how  estimated,  note,  254. 
partial  loss  of;  measure  of  indemnity,  255. 
contributory  value  of;  adjustment;  general  average,  273. 
as  insured  by  the  marine  policy,  586. 
three  different  meanings  of  the  word,  588. 
must  be  insured  eo  nomine,  588. 
does  not  include  passage  money  of  passenger,  588. 
commencement  of  the  risk  upon,  588,  597,  598. 
charterer  may  insure  advances  on,  note,  588. 
effect  of  words  "from  the  loading  thereof"  in  freight  policy,  598. 
chartered  freight  insured  "at  and  from,"  note,  589. 
freight  other  than  chartered  insured  "at  and  from,"  notes,  589,  590. 
when  policy  on  freight  attaches,  note,  590. 
termination  of  risk  on,  597. 

termination  of  risk  on  cargo  and  freight  simultaneous,  597. 
See  Abandonment;  Insurable  Interest. 

FRIGHT, 

death  by;  accident  policy,  542. 

FUEL, 

cargo  consumed  as  when  allowed  in  general  average,  779. 

FURNITURE,  FORM  OF  DESCRIPTION  FOR,  725. 

G 

GAMBLING, 

See  Wagers. 

GARNISHEE,  .^  ,  ...  ,.,.. 

insurer  cannot  be  gamisheed  untU   judgment   paid;  employers    habihty 

policy,  note,  669. 

GAS, 

under  fire  policy,  356. 
explosion  by,  under  fire  policy,  369. 
accidental  inhaling;  accident  policy,  note,  539,  542. 
or  vapor;  inhaling;  accident  policy  exception,  568. 
See  Coal  Gas. 


854  INDEX 

[References  are  to  pages.] 

GASOLINE, 

prohibition  against  keeping;  increase  of  risk,  note,  333. 

kept,  used,  or  allowed ;  memorandum  clause,  356. 

kept  outside  but  brought  into  factory;  memorandum  clause,  note,  357. 

kept  in  shed  and  carried  through  store  for  immediate  delivery,  note,  357. 

kept  for  twenty-four  days  and  used  by  painters  to  burn  off  old  paint  on 

building;  memorandum  clause,  358. 
covered  by  w^ords  "stock  of  drugs,"  note,  358. 

use  of  may  be  necessitated  although  hazard  temporarily  increased,  369. 
used  as  necessary  incident  to  plating  process,  359. 

GASTRITIS, 

whether  a  disease,  note,  480. 

GENERAL  AGENT, 

See  Agents. 

GENERAL  AVERAGE, 

obligation  belongs  to  law  of  admiralty  and  of  insurance,  260. 
obligation  to  pay  is  implied  by  the  marine  policy,  253,  260. 
distinction  between  English  and  American  decisions  regarding  the  amount 

of  recovery,  258,  260. 
basis  of  the  doctrine  of  general  average,  260. 
general  average  loss  and  contribution  defined,  261. 
distinction  between  general  and  particular  average,  261. 
if  all  interests  are  insured  the  question  is  usually  between  underwriters, 

note,  261. 
illustrations  of  general  average,  262. 
doctrine  of  general  aA'erage  imposed  by  law  without  special  stipulations,  262. 

doctrine  exists  without  any  insurance,  262. 
origin  of  general  average,  262. 
requisites  to  justify  a  general  average  contribution,  263. 

sacrifice  voluntary',  authorized,  necessary,  and  successful,  263,  264. 

expenses  after  landing  or  for  reshipping,  note,  264. 

English  and  American  practices,  note,  264. 

much  is  deferred  to  the  judgment  of  the  master,  note,  264. 
effect  of  negligence  of  one  of  the  parties,  264. 

illustration  of  master's  negligence,  265. 
many  instances  of  general  average  losses,  265-270. 
whether  deck  load  is  allowed  in  general  average,  266. 

effect  of  custom,  266. 
port  of  refuge  and  other  expenses,  266,  267. 

American  and  English  practice,  267. 

duty  of  master  to  communicate  with  owners,  267. 
whether  voluntary  stranding  is  a  general  average  act,  266. 

American  and  English  practice,  266. 

illustrative  cases,  267,  270. 
the  lien  for  contribution,  271. 

general  average  bond,  271. 

the  practice  in  New  York,  271. 
duty  of  shipowner  and  agents  wHth  regard  to  adjustment,  271. 


INDEX  «05 

[References  are  to  pages.] 

GENERAL  AVERAGE— Continued, 
method  of  adjustment,  271. 
proper  time  and  place  of  adjustment,  272. 

contributory  value  in  general  a\'erage  and  insurable  value  may  differ, 
note,  272. 
adjustment  with  explanations  prepared  by  Mr.  Putnam  and  Johnson  & 

Higgins,  782  et  seq. 
York-Antwerp  rules  for  adjustment,  273. 

policy  often  states  by  what  rules  adjustment  may  be  made,  note,  272 
rules  given  in  full,  778  et  seq. 
contributory  value  of  freight,  273. 
different  rules,  273. 

arbitrary  rule  adopted  in  New  York  for  convenience,  273. 
adjustment  in  general  average  incorporated  into  final  adjustment  unde. 

policies,  273,  649,  650. 
whether  general  average  losses  are  recoverable  under  sue  and  labor  clause, 
630. 
distinction  between  English  and  American  view,  630. 
warranty  "free  from  average  unless  general,"  640,  642. 

GIESE, 

and  Morristown  Rules,  note,  443. 

GIFT, 

as  valid  transfer  of  life  policy,  529. 

"GOOD  FAITH," 

required  as  to  every  insurance  contract,  120. 
doctrine  of,  applicable  to  both  parties,  120. 
clause  in  fire  policy  relating  to,  313. 

See  Fraud. 

GOOD  SAFETY, 

implies  both  physical  and  political  safety  of  ship,  594. 
warranty  of,  note,  148. 

GOODS, 

of  owner;  insurer's  remuneration  for  carrying;  abandonment,  250. 
or  merchandise;  insurable  value;  indemnity,  note,  254. 
merchandise  or  other  movables;  partial  loss;  indemnity,  255-257. 
arrival  in  specie;  particular  average,  note,  257. 
fraudulently  removed  after  fire,  note,  314. 
"on  storage"  must  be  separately  and  specifically  insured,  321. 
and  fixtures,  policy  on;  another  on  goods;  only  first  policy  void,  note,  320 
and  merchandise;  insurance  upon;  marine  policy,  586,  587. 
what  is  and  what  is  not  included,  587. 

stowed  on  deck;  should  be  insured  specifically;  marine  insurance,  587. 
not  insured  until  loaded  aboard  ship,  590. 

in  lighters  covered  by  clause  "to  include  all  risk  of  craft  whilst  loading,"  590. 
shipped  at  other  than  port  of  departure;  marine,  590. 
See  Caego;  Enemies, 


856  INDEX 

[References  are  to  pages.] 

GRACE, 

payment  of  premium,  499-500. 

for  payment  of  premium;  New  York  standard  policies,  499. 

days  of,  do  not  affect  proper  date  of  notice  that  premium  due,  note,  500. 

statutes  allowing,  703. 

"GRADUAL  REDUCTION"  RULE,  note,  441. 

GRANTORS, 

See  Alienation. 

GRIPPE, 

not  necessarily  an  illness,  note,  480. 

and  delirium  as  contributing  cause  of  fall;  accident  policy,  564. 

GRISWOLD  RULE, 

apportionments,  note,  441. 

GROUNDING, 

whether  a  peril  of  the  sea,  600,  601 ,  603. 

GUARANTEE  INSURANCE,  654  et  seq. 

GUNPOWDER, 

explosion  by,  is  loss  by  fire,  unless  excepted,  286. 

hence  the  explosion  clause  of  fire  policy,  note,  286. 
loss  by  explosions  excepted,  fire  policy,  369,  618. 
keeping  and  use  of  prohibited,  fire  policies,  356-360. 


H 

HABITS, 

future  warranty  as  to,  473. 

statements  as  to,  life  insurance,  489. 

statements  as  to,  fidelity  insurance,  notes,  658,  659. 

HAIL, 

insurance,  note,  652. 

growing  crops  insured  against;  indemnity,  note,  297. 

HAND, 

loss  of  entire  hand;  accident  policy,  551. 

HANGING, 

death  by  hand  of  justice,  520-524. 
by  mob;  accident  poUcy,  note,  539,  542. 

HAZARD, 

See  Risk. 

HAZARDOUS  EMPLOYMENT, 

statements  as  to,  life  policy,  491. 
excepted;  accident  policy,  552-555. 


INDEX  857 

[References  are  to  pages.] 

HEADACHES, 

periodically,  may  not  avoid   policy  though   answer  denies  difficulty  with 

head  or  brain,  479. 
warranty  as  to,  not  having;  effect  of,  481. 

HEALTH, 

persons  of  unsound,  insured  in  some  cases,  18. 

of  applicant;  question  for  jury,  note,  115. 

latent  disease;  statements  as  to  if  opinions  call  only  for  good  faith,  note, 
149,  150,  482. 

misstatement  that  insured  had  "never  been  sick;"  policy  avoided,  472. 

or  freedom  from  disease;  statements  as  to,  478-482. 

meaning  of  sound  health  under  the  warranty,  478-482. 

effect  of  liberal  statutes,  476-478. 

See  Disease;  Statutes. 
HEALTH  CLAUSE,  FORM  OF,  765. 

HEALTH  INSURANCE, 

accident  policy  often  covers,  note,  545. 

when  not  to  be  incorporated  into  life  policy  as  subsidiary  feature,  note,  537. 

HEART, 

dilated  unusually  by  exertion;  accident  policy,  539. 
*    trouble,  as  affecting  question  of  accidental  injury,  543- 

HEART  DISEASE, 

as  contributing  cause  of  accident,  565. 

HEAT, 

results  of,  under  clause  as  to  loss  by  fire,  284. 

HEIRS, 

devolution  of  interest  to;  aUenation  clause;  New  York  standard  fire  policy, 

348. 
proofs  of  loss  by,  note,  411. 
insurance,  when  payable  to,  464. 

"HELD  IN  TRUST," 

meaning  of;  fire,  293,  294. 

HERNIA, 

as  contributing  cause  of  accident,  562,  565. 
See  Rupture. 

HOME  OFFICE, 

approval  of,  as  prerequisite;  completion  of  contract,  note,  101. 
when  place  of  contract,  114. 

HONOR  CLAUSES,  649. 

HOTEL, 

property  insured  as  dwelling  house;  effect  where  a,  377. 

insured  as  so  occupied  but  U'^od  as  house  of  ill-fame;  effect,  note,  378. 


858  INDEX 

[References  are  to  pages.] 

HOUSE  OF  ILL-FAME, 

so  used  when  insured  under  description  as  "  occupied  as  hotel,"  note,  378. 

HULL, 

as  the  subject  of  insurance;  marine,  587. 
original  defect;  marine,  625. 

HUSBAND, 

insuring  life  for  benefit  of  wife;  premiums  paid  with  embezzled  money, 

note,  79. 
policy  on  life  of,  payable  to  wife,  when  subject  to  wife's  debts,  note,  90. 
when  title  in  him  and  wife;  interest  or  ownership  clause,  note,  338. 
proofs  of  loss  by,  note,  411. 
assignment  by,  of  his  interest ;  life  policy,  note,  528. 

I 

ICE, 

warranty  that  building  used  for  storage  of,  145. 

ICE  CLAUSE, 

construed  in  a  marine  case,  621. 

ICE  FACTORY, 

vacancy  clause,  note,  368.  , 

IDIOT, 

whether  in  sound  health,  note,  479. 

IGNITION, 

necessary  under  clause  as  to  loss  by  fire,  284. 

KiNORANCE, 

of  insured  as  to  facts,  immaterial  where  warranty  broken,  482. 

ILLEGALITY, 

implied  warranty;  marine,  238-240. 

insured's  knowledge  or  concurrence  as  affecting;  marine,  238-240. 

mere  knowledge  as  to  some,  in  voyage;  effect  of,  238. 

as  to  illicit  voyages,  note,  238. 

in  part  of  integral  voyage;  effect  of,  238. 

illustrations  of;  marine,  notes,  238,  239,  240. 

war;  prohibitions;  marine,  note,  238,  239. 

"for  whom  it  may  concern;"  when  covers  belligerent  property,  note,  240. 

ILLEGITIMATE  CHILDREN, 

when  within  term  "adopted  children,"  note,  466. 

ILL-FAME, 

See  House  of  Ill-fame. 
ILLICIT. 

See  Illegality. 
ILLNESS, 

See  Health. 


INDEX  869 

[References  are  to  pages.] 

"IMMEDIATELY  AND  WHOLLY  DISABLE" 
accident  policy,  548-55  L 

IMPLIED  WARRANTY, 

See  Warranties. 
INCENDIARISM, 

by  intentional  act  of  insured  avoids  policy,  287. 
when  threats  of,  need  not  be  disclosed;  fire,  note,  128. 
misstatements  as  to;  severable  contract,  154. 
by  act  of  insured  if  insane,  loss  covered,  287. 
by  act  of  wife  or  husband  of  insured,  287. 

other  third  party,  287. 

agent  of  insured,  note,  287. 

officer  or  agent  of  corporation,  note,  287. 

where  all  the  stock  was  in  one  family,  note,  287. 
special  clause  of  fire  policy  regarding  fraud,  313. 

INCHMAREE  OR  MACHINERY  CLAUSE,  FORM  OF,  769. 

INCONTESTABLE  CLAUSE, 
in  life  poUcies,  531-536. 
as  applied  to  insurable  interest,  534. 
as  applied  to  policy  procured  by  fraud,  532,  534. 

incontestable  from  date,  534. 
as  applied  to  suicide,  535. 

suicide ;  recovery  by  widow  where  contract  ambiguous,  149. 
as  applied  where  death  is  at  hands  of  justice,  536. 

INCORPORATION, 

of  extrinsic  papers,  note,  105,  139. 

See  Contract. 

INCREASE  OF  RISK, 

may  avoid  policy,  without  express  provision,  326. 

question  often  for  jury,  note,  115. 

clause  in  standard  fire  policies,  326-334. 

trivial  or  incidental;  effect  of,  328,  329. 

by  acts  of  others,  326. 

alterations  and  changes  in,  or  use  of,  property,  329,  330. 

erection  of  new  buildings,  330. 

other  buildings;  Massachusetts  statute,  note,  378. 

use  of  dwelling  house  for  boarders  or  liquor  store,  note,  330. 

permit  should  be  obtained  for  electricity,  note,  330. 

change  of  occupancy,  331. 

vacancy  not  -per  se,  331. 

other  insurance  not  per  se,  330,  331. 

removal  of  part  of  goods,  note,  331. 

incumbrances,  331. 

chattel  mortgage,  331. 

chattel  mortgage;  when  not  necessary  to  state  existence  of,  340. 

new  or  more  hazardous  employment,  or  machinery,  330. 


860  i^^'DEx 

[References  are  to  pages.] 

INCREASE  OF  RISK— Continued. 
acts  of  adjacent  owners,  332. 
immaterial  whether  the  cause  of  loss,  332. 
temporary  increase;  effect  of,  332. 

whether  the  alteration  is  material  is  usually  for  the  jury,  333, 
expert  testimony,  note,  333. 
knowledge  of  assured;  hazard  must  have  contributed  to  loss;  Iowa  policy, 

note,  334. 
clause  in  Massachusetts  policy  as  to,  334. 

policy  may  be  vitiated  although  risk  may  not  in  fact  have  been  increased,  335. 
change  of  occupants  without;  exception  to  alienation  clause,  343. 
effect  of  temporary;  memorandum  clause;  inflammable  substances,  356-360. 
temporary,  by  use  of  gasoline,  359. 
at  time  of  renewal,  should  be  disclosed,  382. 
See  Court;  Jury. 

INCUMBRANCES, 

failure  to  fill  out  statement  in  application  as  to,  128. 
omission  to  state;  where  there  is  a  warranty,  notes,  144,  344. 
express  warranty  against;  breach,  146. 

where  disclosure  expressly  called  for  by  application,  notes,  146,  147. 
clause  as  to  fraud  or  false  swearing;  fire,  313. 
whether  an  increa.se  of  risk,  331. 

sometimes  required  by  application  to  be  disclo.sed,  note,  338. 
need  not  be  disclosed ;  interest  or  ownership  clause,  338. 
chattel  mortgage,  clause  of  fire  policy,  340. 
involuntary  liens,  note,  344. 

without  written  consent,  as  ground  of  forfeiture,  note,  344. 
standard  policy  does  not  forbid  incumbrances  in  general,  348. 
See  Chattel  Mortgage. 

INDEMNITY, 

how  far  the  basis  of  insurance,  27-32. 

how  far  the  measure  of  recovery,  notes,  27-29. 

life  insurance  as  contract  of,  or  investment,  40. 

modifications  of  strict  doctrine,  30,  31  and  notes. 

insurance  does  not  always  grant  full  indemnity,  57. 

granted  for  results  of  negligence,  58. 

negligence  of  master  and  mariners,  note,  58. 

double  insurance  contribution,  60,  61. 

rule  of,  qualified  in  marine;  insured  when  coinsurer,  59,  60. 

doctrine  of  subrogation  founded  upon,  64  et  seq. 

extent  of  recovery  as  related  to;  fire,  72-76. 

recovery  of  cash  or  market  value;  fire,  72,  73. 

insurance  for  own  benefit  or  benefit  of  owners;  recovery;  fire,  73. 

recovery  by  mortgagee,  carrier,  warehouseman,  or  other  bailee,  or  factor  or 

commission  merchant,  73. 
recovery  by  lessee,  life  tenant,  lessor,  vendee,  or  vendor,  74. 
recovery  by  reinsured,  75. 


INDEX  8^1 

[References  are  to  pages.] 
INDEMNITY— Conftnwed. 

doctrine  of,  enforced  against  landlord  in  favor  of  insurer  where  tenant  re- 
pairs, note,  297. 
beneficiary's  right  to  recover, 

See  Measure  of  Indemnity  or  Recovery. 
INDORSEMENTS, 

on  back  as  part  of  contract,,  note,  106. 

when  and  when  not  part  of  contract,  note,  106. 

payee  clause;  mortgagee,  394. 

or  declarations  under  floating  policy,  591. 

INDUSTRIAL  INSURANCE, 

issued  by  some  companies,  note,  7,  204  and  note, 
issued  by  certain  governments,  note,  7. 

INFANT, 

bound  by  clause  as  to  limitation  of  time  to  sue,  454. 

INFIRMITIES, 

See  Bodily  Injuries  or  Infirmities. 

INFLAMMATION  OF  BOWELS, 

whether  chronic  disease,  note,  480. 

INHALING  GAS  OR  VAPOR, 
accident  policy  exception,  568. 

INHERENT  VICE, 

not  covered  by  marine  policy,  626-628. 
loss  by,  includes  what,  626. 

INJUNCTION, 

does  not  prevent  operation  of  limitation  clause  for  suing,  note,  456. 
insured  should  interpose  cross  bill,  note,  456. 

INJURIES, 

bodily  injuries  or  infirmities;  statements  as  to,  494,  495. 

from  stabbing  by  insane  man;  accident  policy,  note,  538. 

self-inflicted  while  insane;  accident  policy,  539. 

caused  by  affray  or  combat;  accident  policy,  540. 

from  blows;  accident  policy,  542. 

from  blow  from  pitchfork  v/hile  loading  hay;  accident  policy,  539. 

effected  through  external,  violent,  and  accidental  means,  541-544. 

when  insured  subject  to  preexisting  disease;  accident  policy,  543. 

followed  by  disease;  proximate,  sole,  or  independent  cause;  accident  policy, 

546-548. 
proof  of  accident,  555-557. 
visible  mark  of,  on  body,  required,  body  itself  in  case  of  death  not  evidence 

of  such  mark;  accident  policy,  560. 
intentional,  inflicted  by  insured  or  any  other  person,  569-571. 
in  violation  of  law,  571,  572. 
or  death  by  voluntary  exposure  to  unnecessary  danger;  construction  of 

words;  illustrations;  accident  policy,  572-578. 


862  INDEX 

[References  are  to  pages.] 

mJlTRIES— Continued. 

boarding  or  leaving  cars  in  motion,  578. 
due  diligence  for  safety  and  protection,  580. 
received  while  traveling;  insurance  against,  581. 
notice  of;  employers'  liability  policy,  671. 
See  Accident  Policy;  Death;  Employers'  Liability  Insurance;  Notice. 

INQUIRY, 

effect  of  failure  of  insured  to  make,  as  to  interest,  title,  incumbrances,  etc., 

339,  notes,  175,  312,  441. 
whether  specific  inquiry  waives  right  to  other  information,  127,  128,  339. 
the  terms  of  the  fire  policy  amount  to  an  inquiry,  note,  311. 

INSANITY, 

no  excuse  for  violation  of  conditions;  warranties,  145. 

of  insured;  loss  by  incendiary  act  of,  287. 

burning  of  property  during,  note,  327. 

warranty  that  "  never  had  the  disease  of  insanity,"  statement  untrue,  policy 

avoided,  473. 
whether  insane  person  in  sound  health,  note,  479. 
suicide,  511. 
imder  suicide  clauses. 

See  Suicide. 
injuries  by  acts  during,  or  caused  by  acts  of  insane  man,  note,  538,  539. 
act  of  insane  man  in  stabbing  another,  as  accident,  note,  538. 
act  of  insane  person;  intentional  injury  clause;  accident  policy,  570. 

INSECT  BITE, 

causing  death;  accident  policy,  542. 

not  within  poison  clause  of  accident  policy,  note,  567. 

INSOLVENCY, 

test  of  solvency  of  company;  life,  21. 

rights  of  creditors  to  life  premiiuns  paid  by  insolvent  debtors,  90,  91. 

obligation  for  premium  when  company  insolvent,  note,  282. 

of  insurer  as  affecting  obhgation  to  pay  premium;  life,  note,  495. 

of  insurer;  levy  of  assessments,  note,  .506. 

of  original  insurer;  liability  of  reinsurer,  446. 

credit  insurance,  663. 

what  is;  credit  insurance,  note,  663. 

of  insurer;  losses  sustained  after;  credit  insurance,  note,  663. 

rights  of  insolvent  employer;  employers'  hability  insurance,  667. 

employer;  employers'  liability  policy,  649,  670. 

See  Assignment;  Bankrupt;  Bankruptcy. 

INSPECTION, 

of  property  by  agent  before  issuing  policy;  amount  as  evidence;  measure  of 

damages,  note,  297. 
of  books, 

See  Books. 
INSTALLMENT,  ASSESSMENT,  OR  CREDIT  CLAUSE,  FORM  OF,  730. 

See  Forms. 


INDEX  863 

[References  are  to  pages.] 

INSURABLE  INTEREST, 

1.  In  General. 

rule  requiring,  is  based  on  doctrine  of  indemnity,  27. 

insurance  a  contract  of  indemnity  means  what,  note,  27. 

measure  of  recovery  is  rarely  exact  indemnity,  note,  28. 

whether  life  insurance  is  contract  of  indemnity,  notes,  27,  28. 
actual  or  presumed  pecuniary  interest  reciuired,  29. 

interest  presumed  from  near  relationship,  life,  29. 
sum  named  is  not  measure  but  limit  of  recovery;  fire  and  marine,  30. 
modifications  of  doctrine  of  strict  indemnity,  30-31. 

valued  policy  conclusive  unless  fraudulent,  31. 

and  if  statute  so  provides,  note,  31. 

life  policy  akin  to  valued  policy,  31. 

valued  policy  laws  not  to  be  commended,  note,  31. 
rule  requiring,  is  grounded  on  public  policy,  32. 

exists  independent  of  wager  statutes,  32. 

contra  in  some  states;  life,  note,  32. 

English  statutes,  note,  32. 
as  related  to  the  measure  of  recovery,  72, 
whether  absence  of,  can  be  waived,  168. 

2.  Insurable  Interest;  Fire. 
definitions  and  descriptions  of,  32-34. 

late  decisions  in  line  of  expansion,  note,  33. 
that  other  sources  of  indemnity  are  available  is  immaterial,  33. 

owner  of  unused  stamps  redeemable  from  government,  if  lost,  note,  33. 

mortgagee  regardless  of  other  security,  note,  33. 

owner  of  buildings  though  restorable  without  expense  to  him,  note,  33. 
defeasible,  contingent,  inchoate,  or  partial  interest,  33. 
mere  expectancy  held  insufficient,  33. 

late  views  raise  doubt,  note,  33. 
has  toll  turnpike   company,  in  connecting   bridge   owned  exclusively  by 
county,  34. 

toll  company  should  have  taken  valued  policy  on  use  or  profits,  34. 
salaried  superintendent  has,  in  employer's  goods,  34. 

engineer,  mechanic,  or  chauffeur  in  employer's  machine,  note,  34. 
stockholder  has  in  corporate  property,  34. 
legal  title  affords  basis  for,  34. 

curtesy,  dower,  life  tenancy,  note,  34. 

tenants,  subtenants,  tenant  at  will,  note,  34. 

trustees,  assignees,  executors,  etc.,  note,  35. 

curtesy  initiate,  dower  inchoate,  note,  35. 

bankrupt  or  insolvent,  note,  35. 

mortgagor's  or  judgment  debtor's  interest,  when  ceases,  note,  35. 
equitable  title  affords  basis  for,  35. 

executory  vendee,  35. 

beneficiary  of  trust,  note,  35. 

judgment  debtor  after  sale,  note,  35. 
illegal  or  defective  title,  36. 

deeds  or  transfers  void  or  defective,  note,  36. 


864  INDEX 

[References  are  to  pages.] 

INSURABLE  INTEREST— Continued. 

representative  capacity,  carriers,  warehousemen,  agents,  bailees,  etc.,  36. 

may  cover  interests  of  insured  or  owners  or  both,  36. 

interest  intended  must  be  properly  described,  36. 
lien  upon  property,  36. 

general  lien  of  judgment  creditor  sufficient,  36. 

simple  contract  creditor  without  lien  no  insurable  interest,  37. 

various  lienors,  note,  37. 
possession  with  claim  of  title,  37. 

or  with  beneficial  use,  37. 
trespasser  without  color  of  title  has  none,  37. 

tenant  at  sufferance  in  possession,  notes  37,  38. 
whether  husband  or  wife  has  in  other's  property,  36. 

furniture  used  in  common,  36. 

homestead,  etc.,  note,  36.  • 

contract  rights. 

patentee,  contractor,  superintendent,  note,  38. 

future  or  expected  profits  or  crops,  note,  33,  57. 

one  with  right  to  share  in  profits,  note.  38. 

contract  unenforceable  in  law  or  equity  gives  none,  note,  38. 
mere  responsibility  or  liability  affords,  38. 

carriers,  bailees,  etc.,  note,  38. 

mortgagor  retains,  39. 

executory  vendee  has,  note,  39. 

liability  affords,  for  reinsurance,  39. 
3.  Insurable  Interest;  Life. 

primary  purpose  in  life  insurance  is  protection  against  premature  death,  39. 

but  in  some  respects  an  investment,  39. 
is  actually  or  presumptively  of  a  valuable  character,  40. 
without  insurable  interest,  business  of  insurance  thrown  into  confusion, 
note,  40. 

striking  instances  in  the  past  in  England,  notes,  652,  653. 
court  will   not  enforce   void   contract,  though   illegality   be   not   pleaded, 
note,  40. 

required,  in  spite  of  incontestable  clause,  .534. 
one  has  insurable  interest  in  his  own  life  to  any  amount,  40. 
definitions  of  insurable  interest,  note,  41. 

test  of  "good  faith"  is  unsatisfactory,  note,  41. 
doctrine  adopted  not  to  benefit  insurer  but  public,  41. 
ties  of  affection,  blood,  marriage,  42. 

husband,  wife,  parent,  child,  brother,  sister,  notes,  42-44. 

friend,  stepson,  nephew,  niece,  aunt,  son-in-law,  cousin,  fianc6,  notes, 
42-44. 

effect  of  divorce  or  illegal  marriage,  notes,  43,  44. 
relationship  coupled  with  dependency,  44. 
creditor  in  life  of  debtor,  45,  46. 

to  what  amount,  46. 

Texas  rule,  47. 

United  States  Supreme  Court  rule,  47. 


INDEX  855 

[References  are  to  pages.] 

INSURABLE  INTEREST— Con<inwerf. 

moral  claim  is  not  a  basis  for,  note,  45. 
other  business  relations,  48. 

employers'  liability,  note,  48. 

partner,  clerk  in  life  of  employer,  note,  48. 

master  in  life  of  servant  or  slave,  note,  48. 

surety  in  life  of  principal,  note,  48. 

beneficiary  in  life  of  promoter  or  manager,  note,  48. 

in  life  of  king  of  England,  etc.,  note,  48. 

denominational  college  none  in  life  of  church  member,  note,  48. 

assignee  has  none  in  life  of  insolvent,  note,  49. 
as  related  to  incontestable  clause,  534. 

4.  Insur.^ble  Interest;  Marine. 
same  general  principles  as  in  fire,  49. 

owners  or  others  pscuniarily  interested  in  vessel,  cargo,  freight,  etc.,  49. 
lender  on  bottomry,  note,  49. 

holder  of  bottomrj'  bond  insures  eo  nomine,  note,  49. 
different  interests  each  to  full  value,  note,  49. 
mortgagor,  executory  vendor,  and  vendee,  stockholders,  note,  49. 

vendees  "no  arrival  no  sale,"  note,  49. 
surety,  master,  supercargo,  etc.,  to  extent  of  interest,  note,  50. 
carrier,  charterer,  agent,  etc.,  for  self  and  others,  50. 

agent  without  personal  interest,  note,  50. 
independent  insurable  interests  at  the  same  time,  note,  50. 

5.  Payees,  Assignees;  Life. 

whether  third  party  beneficiary  must  have,  50-54. 

divergent  views  and  decisions,  50-54. 

United  States  Supreme  Court,  53,  54. 

effect  of  insured  joining  in  application  of  third  party  for  insurance, 
note,  50. 

statutory  or  contract  provisions  prevail,  53. 
whether  assignee  of  policy  must  have,  51-53. 
divergent  views  and  decisions,  51-53. 

United  States  Supreme  Court,  53,  54. 

statutory  or  contract  provisions  prevail,  53. 

Produce  Exchange  gratuity  fund,  note,  53. 

6.  When  Must  Insurable  Interest  Exist. 

not  essential  at  time  of  making  contract;  marine,  54. 

policy  does  not  attach  until  interest  acquired.  55. 
whether  essential  at  time  of  making  contract;  fire  and  life,  55,  56. 

rule  in  fire  insurance  should  be  the  same  as  marine,  note,  55. 
must  exist  at  time  of  loss;  fire  and  marine,  notes,  55. 
need  not  exist  at  time  of  death;  life,  56,  57. 

reasons  for  the  rule,  56,  57. 
temporary  suspension  of  interest  suspends  but  does  not  avoid  contract,  57. 

express  provisions  of  policy,  like  alienation  clause,  prevail,  57. 

INSURANCE, 

nature  and  description  of,  I. 

a  system  for  distributing  losses,  1. 

55 


866  INDEX 

[References  are  to  pages.J 

INSURANCE— Continued, 
kinds  of,  1,  2. 

conditions  necessary  to  operation  of  system  of,  2. 
origin  of,  and  of  law  of,  12,  13  et  seq. 
classification  of  risks,  18,  19. 

See  Contract. 

INSURANCE  COMPANIES, 
as  insurers,  2,  3. 

fraternal  organizations,  benefit  societies,  etc.,  2,  3. 
what  are  and  what  are  not,  4. 
classified,  6. 

are  governed  by  statutory  provisions,  7-9. 
associations  of  individuals,  note,  3,  13-15. 

See  Corporations;  Foreign  Corporations. 

INSURANCE  DEPARTMENT, 

functions  of,  8. 

deposit  with,  is  trust  fund,  note,  8. 

INSURED, 

definition  of,  note,  1. 

who  may  become  the,  32-49. 

alien  enemy  cannot  be,  583. 

must  have  insurable  interest,  28. 

contract  with,  Avhen  personal,  76. 

must  be  named  or  described  in  policy,  98. 

must  act  with  utmost  good  faith,  120. 

relations  between  him  and  insurer;  life,  88. 

rights  of  creditors  as  the;  life,  92. 

when  holds  proceeds  of  policy  as  trustee;  fire,  note,  296. 

duties  of,  in  case  of  loss,  fire  policy,  401-418. 

word  includes  legal  representatives,  fire  poUcy,  457. 

INSURERS, 

See  Insurance  Companies. 
INTEMPERANCE, 


INTENTIONAL  INJURIES. 


See  Habits. 
See  Injuries. 


INTEREST  OF  INSURED, 
change  of;  permits,  333. 

unconditional  and  sole  ownership,  fire,  335-339. 
clause  has  reference  to  time  when  contract  made,  336. 
vendee  when  sole  and  unconditional  owner,  336. 
what  is  meant  by  sole  and  unconditional  ownership,  note,  336. 
beneficial  owner  is  real  ownc",  337. 
chattel  mortgage  not  a  change  of,  340. 
change  of  interest,  title  or  possession;  fire,  343-352. 

making  no  affirmative  inquiries  whether  waiver,  notes,  175,  312,  339,  441. 
See  Alienation;  Tt^surable  Interest. 


INDEX  667 

[References  are  to  pages.] 
INTERIM  RECEIPT,  98. 

INTERPRETATION, 

See  Construction  of  Contract 

INTESTINAL  INFLAMMATION, 
accident  policy,  542. 

INTOXICANTS, 

answers  as  to  use  of  when  not  literally  or  substantially  true;  effect  of;  stat- 
ute, 477. 
false  statement  as  to  use  of,  478. 
warranty  as  to  use  of,  489-490. 

as  contributory  cause;  excepted  risk;  accident  policy,  566. 

See  Habits. 
INVENTORY, 

duty  of  insured  to  make,  in  case  of  loss,  406,  407. 
See  Iron-Safe  Clause. 
IRON-SAFE  CLAUSE, 
form  of,  733. 

violated;  severable  contract,  note,  153,  154. 
recent  decisions  construing,  note,  459. 

IRON  SHIPS, 

adjustment  of  loss,  259. 

York- An  twerp  rules,  778  et  seq. 

English  practice,  deductions  for  repairs,  781. 


JETTISON, 

definition  of,  614. 

as  an  absolute  total  loss,  note,  242. 

whether  a  general  average  act,  262-265,  614. 

general  average  contributions  as  to  goods  jettisoned;  rule,  note,  272. 

of  deck  load,  266. 

as  a  peril  insured  against,  614. 

for  inherent  vice,  626. 

cargo  on  deck,  646. 
"free  from  mortality  and; "  proximate  cause,  620,  621. 
See  General  Average. 

JOINT  INSURED, 

alienation  clause,  350. 

JOINT-LIFE  POLICY, 
what  is  a,  23. 

JOINT  OWNER, 

not  sole  and  unconditional  owner,  note,  338. 

JOINT  OWNERS, 

alienation  clause,  350. 


868  INDEX 

[References  are  to  pages.] 

.rUDGMENT, 

on  contract  a  bar  in  action  to  reform,  note,  107. 

on  property;  disclosure;  fire,  312. 

under  alienation  clause,  343-352. 

in  favor  of  owner  against  original  insurer  binds  reinsurer,  note,  446. 

in  accident  suit,  conclusive;  employers'  liability  insurance,  675,  676. 

JUDGMENT  SALE, 

under  foreclosure  clause,  341,  342. 
alienation  clause,  351. 

JURISDICTION, 

of  federal  courts;  foreign  corporations,  note,  9. 
ousting  courts  of;  arbitration  clause,  420. 

JURY, 

or  court;  who  construes  contract,  114-116. 

illustrations  of  questions  for,  note,  115. 

materiality  of  non-disclosure  of  provision  in  lease;  when  a  question  for, 

note,  122. 
questions  as  to  representations  when  for;  under  liberal  statutes,  156,  477, 

478. 
materiality  of  representation,  when  question  for,  note,  131,  146. 
materiality  and  substantial  truth;  questions  of  fact,  133,  146. 
materiality  of  warranty  a  question  neither  for  court  or  jury,  note,  141,  142. 
distinction  between  representations  and  warranties,  146,  147. 
relationship  of  agency,  extent  of  authority,  etc.,  questions  of  fact,  191. 
abandonment;  reasonable  time,  mixed  question  of  fact  and  law,  note,  246. 
question  for,  whether  benzine,  "usually  kept  in  country  store,"  note,  289. 
seaworthiness  ordinarily  question  of  fact,  222. 
"  total  loss  "  of  building  as  question  for,  notes,  299,  300. 
question  for,  whether  repairing  or  rebuilding  properly  done,  or  done  within 

reasonable  time,  304. 
material  alteration  of  risk,  question  of  fact,  333. 
fraud  or  false  swearing,  question  for,  note,  315. 
use  of  naphtha  torches  in  making  repairs;  increase  of  risk;  question  for, 

note,  331. 
increase  of  risk;  matters  of  common  knowledge,  note,  333. 
increase  of  risk;  removal  of  property;  question  for,  334. 
to  say  whether  risk  increased  by  non-disclosure  of  serious  disease,  478. 
whether  slight  attack  of  pneumonia  or  sunstroke  is  a  disease,  is  for;  unless 

attack  too  shght,  480. 

when  error  to  submit  question  of  disease  to,  481. 
truth  of  statements,  as  to  family  physician  or  usual  medical  attendant,  for, 

485. 
non-disclosure  of  provision  in  lease  depriving  subrogation;  policy  not  avoided, 

note,  354. 
whether  building  occupied  may  be  question  for;  vacancy  clause,  363,  365. 
whether  appraisers  competent  and  disinterested,  question  for,  note,  422. 
question  of  correctness  of  statement  as  to  habits,  when  for,  489,  490. 


INDEX  869 

[References  are  to  pages.] 

JURY— Continued. 

when  question  for,  whether  notice  of  assessment  received,  509. 

when  issue  for,  whether  death  result  of  accident,  natural  causes,  or  wrongful 

intent;  suicide,  518. 
issue  of  suicide  when  for;  accident  policy,  560. 
whether  injuries  sustained  by  external,  etc.,  means  when  for,  564. 
intoxication,  question  for,  note,  566. 
whether  coal  gas  a  poison,  when  is  for,  note,  567. 

intentional  injuries;  accident  policy;  intention  is  question  of  fact,  569. 
"  voluntary  exposure  to  unnecessary  danger,  "  often  for,  note,  578. 
negligence,  is  question  for;  marine  risk,  note,  639. 

what  constitutes  "general  woodwork,"  is  for;  employers'  liability  insurance, 
note,  666. 

See  Court  or  Jury. 
JUSTICE, 

death  by  the  hands  of;  life  pohcy,  520. 
death  at  hands  of;  incontestable  clause,  536. 
accident  policy,  520,  571. 

K 

KEROSENE, 

use  prohibited,  except,  356. 

trivial  quantities,  357. 

use  of,  whether  an  increase  of  risk,  327. 

KIDNEY  DISEASE, 

statute  converting  warranties  into  representations;  effect  of  warranty  that 

insured  had  no  such  disease,  477. 
warranty  against,  note,  480. 

KINNE  RULE, 

apportionments,  note,  441. 

KNEE, 

twisted;  accident  policy,  note,  549. 

KNOWLEDGE, 

of  facts;  information  need  not  be  voluntereed;  concealment,  note,  125. 

what  each  party  is  bound  to  know;  concealment,  note,  125. 

of  breach,  when  a  waiver,  175,  176,  202,  206-215,  525,  526. 

or  concurrence  of  insured  as  affecting  illegality  of  insurance;  marine,  238-240. 

as  to  increase  of  risk,  326. 

of  insured;  increase  of  risk;  hazard  must  have  contributed  to  loss;  Iowa 

policy,  note,  334. 
of  insured  of  acts  of  tenant;  increase  of  risk,  327. 
and  "control"  of  insured;  increase  of  risk,  331. 
of  assured;  foreclosure  clause,  341. 

of  assured  as  to  unoccupancy;  vacancy  clause,  note,  362. 
insurer  presumed  to  know  what  belongs  to  business  insured,  note,  358. 
by  what  agents  is  imputed  to  employer;  fidelity  and  employers'  liability. 

660-662,  672. 

See  Waiver  and  Estoppel. 


870  INDEX 

[References  are  to  pages.] 

L 

LAND, 

risk  on,  sometmes  covered  by  marine  policy,  24, 

LANDLORD, 

with  lien  for  rent;  insurable  interest,  note,  37. 
life  of,  may  be  insured  by  tenant  with  life  interest,  note,  48. 
policy  on  profit;  construed  as  open  and  not  valued,  when,  note,  111. 
doctrine  of  indemnity  enforced  against,  in  favor  of  insurer  where  tenant 
repairs,  note,  297. 

See  Rent  Policy. 

LAPSED  POLICY, 

See  Forfeiture. 

LAW, 

death  in  violation  of;  life  policy,  520,  523,  524. 
injuries  in  violation  of:  accident  policy,  571,  572. 
See  Court  or  Jury. 

LAW  OF  PLACE, 

construction  of  contract,  113. 

LEAKAGE, 

cargo  on  deck,  646. 

LEASE, 

measure  of  recovery  under,  74. 

provisions  in,  excluding  right  of  subrogation;  concealment,  note,  127. 
from  insured  need  not  be  mentioned ;  interest  or  ownership  clause,  note,  338. 
provision  in  depriving  of  subrogation;  policy  not  avoided;  issue  for  jury, 
note,  354. 

LEASED  GROUND, 

building  on  .ground  not  owned  by  insured  in  fee  simple,  340. 

LEG, 

amputated;  accident  policy,  note,  551. 

LEGAL  PROCESS, 

alienation  clause,  351. 

LEGAL  REPRESENTATIVES, 
construed,  note,  296. 
"insured  "  includes,  457. 
loss  when  payable  to,  464. 

LEGALITY, 

See  iLLEQALmr. 

LEGATEES, 

proofs  of  loss  by,  note,  411. 

LEGISLATURE, 

control  over  corporations,  7-11. 


INDEX  871 

[References  are  to  pages.] 

LEGISLATURE— Coniinwerf. 

power  to  prescribe  form  of  policy,  278. 

power  in  relation  to  copies  of  papers  referred  to  in  policy,  278. 
See  Regulation  and  Control;  State;  Statutes. 
LESSEE, 

recovery  by;  fire,  74. 

See  Tenant. 
LESSOR, 

under  rent  policy;  recovery  by;  fire,  74. 

See  Landlord. 

LETTERS  OF  MART  AND  COUNTERMART, 
marine  risk,  608. 

LEVY, 

by  sheriff;  alienation  clause,  352. 

LEVY  OF  ASSESSMENTS, 

See  Assessments. 

LIABILITY  OF  INSURER, 

See  Measure  of  Indemnity  or  Recovery. 

LIABILITY  POLICY,  FORM  OF,  772. 

LIBERTY  TO  CALL,  598. 

LICENSE, 

superintendent  of  insurance  may  be  compelled  to  license,  or  to  file  certifi- 
cate, note,  8. 

to  foreign  company;  extent  of  power  of  insurance  commissioner  as  to  re- 
fusal, note,  8. 

certain  prerequisites  for,  unconstitutional;  foreign  corporations,  note,  9. 

non-resident  individuals,  note,  10. 

contracts  with  unlicensed  companies,  10,  11. 

to  procure  risk  from  aon-admitted  companies,  12. 

sailing  under  British;  illegality,  note,  239. 

ship  carrying  passengers  without;  legality  of  insurance,  note,  240. 

bowling  alley  and  pool  table  business  conducted  without,  for  short  time; 
policy  suspended,  note,  334. 

LIENS, 

misrepresentation  as  to,  146,  note,  147. 

for  contribution;  general  average,  271. 

premium  notes  as,  in  mutual  companies,  note,  283. 

need  not  be  disclosed;  interest  or  ownership  clause,  338. 

instrument  creating;  not  a  chattel  mortgage,  note,  341. 

foreclosure  of  vendor's,  mechanic's,  or  statutory,  not  within  foreclosure 

clause,  note,  342. 
incurring  additional,  does  not  avoid  policy;  alienation  clause,  note,  343. 
involuntary,  note,  344. 
alienation  clause;  standard  policy,  348. 

See  Chattel  Mortgage;  Incumbrances;  Mortgage. 


872  INDEX 

[References  are  to  pages, 3 

LIFE  INSURANCE, 

definition  of,  note,  462. 

origin  of,  16. 

relative  importance  in  this  country,  17. 

evils  resulting  from  magnitude  of  the  business,  18. 

whether  a  contract  of  indenanity,  28-31. 

insurable  interest  required,  39-48. 

the  contract  is  a  property  right,  89. 

application  for, 

See  Forms. 
relations  between  insurer  and  insured,  88. 
how  closed,  98. 

contract  may  be  closed  by  letter,  98. 

double  insurance  contribution  not  applicable  generally,  61. 
neither   accident   or   health   policies   incorporated   as  subsidiary  feature, 
note,  537. 

LIFE  INSURANCE  POLICIES, 
diflferent  kinds  of,  23,  24. 

See  Forms. 

LIFE  POLICY   AND   CLAUSES, 

meaning  and  legal  effect  of,  461-536. 
introductory  statement,  461. 
The  Clauses. 

age;  statements  as  to,  487. 
age;  errors  in,  526. 
agents;  authority  of,  525. 
anticipatory  breach,  468-470. 

remedies,  470. 
application  incorporated,  471-476. 

statement  as  to  cause  of  father's  death,  142. 

statement  that  beneficiaiy  husband  or  wife  of  insured,  143. 

statements  as  to  health,  physician,  other  insurance,  age,  142,  478-488. 

statements  to  medical  examiner,  199-204. 

statements  as  to  obscure  diseases,  note,  149,  150,  note  471,  482. 

statement  "never  been  sick,"  472. 

statement  "never  inmate  of  hospital,"  142. 

statement  "never  had  disease  of  insanity,"  473. 

guarantee  of  no  vicious  habit,  473,  489. 

"declared"  that  he  would  practice  no  vicious  habit,  473 

statements  as  to  occupation,  residence,  injuries,  491-493. 

answer  held  to  be  surplasage,  474. 

questions  unanswered,  474. 

answer  construed  as  representation,  475. 

policy  being  later  overrides  application,  475. 

application  is  an  offer,  476. 

liberal  statutory  provisions,  476.  • 

assessments,  504-506. 

must  be  lawfully  and  properly  levied,  506-508. 


INDEX  Ji7; 

[References  are  to  pages.] 

LIFE  POLICY  AND  CLAUSES— Continued, 
power  to  change  rate  of,  508. 
notice  of  to  insured,  508. 
assignments,  527-530. 
beneficiary;  designation  of;  payable  to  insm-ed,  etc.,  462. 

other  beneficiaries;  heirs  or  legal  representatives;  wife;  children;  fam 
ily;  dependents;  survivors,  etc.,  462-467. 
beneficiaries  may  sue,  467. 
bodily  injuries  or  infirmities,  493, 
breach;  anticipatory  breach,  468-470. 

remedies,  470. 
death  at  hands  of  justice;  incontestable  clause,  536. 
death  by  hands  of  justice  or  in  violation  of  law;  exception  of,  520-522. 
death;  in  violation  of  law,  522. 
death  suicide  not  a  crime,  523. 
death;  must  be  caused  by  unlawful  act,  524. 
disease;  statements  as  to  freedom  from,  478-482. 
extended  or  paid-up  insurance,  502. 
family  or  relatives;  hi.story  of,  486. 
family  relationship;  statements  as  to,  488. 
family  physician  or  usual  medical  attendant,  485. 
habits;  statements  as  to,  489. 

health  or  freedom  from  disease;  statements  as  to,  478-482. 
history  of  family  or  relatives,  486. 
incontestable  clause,  531. 

policy  procured  by  fraud,  532. 

incontestable  from  date;  policy  procured  by  fraud,  534. 
insurable  interest,  534. 
•  suicide,  535. 
death  at  hands  of  justice,  536. 
insurable  interest;  incontestable  clause,  534. 
medical  attendance;  statements  as  to,  482. 

medical  attendance  or  consultation;  what  constitutes,  483-485. 
notice  under  statutes  of  premiums  due,  500. 
occupation;  statements  as  to,  491. 
other  insurance ;  statements  as  to,  486. 
paid-up  or  extended  insurance,  502. 
payable  to  children,  466. 

payable  to  family,  dependents,  survivors,  etc.,  466. 
payable  to  heirs  or  legal  representatives,  464. 
payable  to  insured,  his  executors,  administrators,  and  assigns,  462. 
payable  to  wife,  465. 
premiums;  pajinent  of,  495-500. 
premiums  due;  statutory  notice  of,  500. 
premium;  extended  or  paid-up  insurance,  502. 
premium;  when  a  debt  collectible  by  company,  503. 
relationship;  family;  statements  as  to,  488. 
relatives;  history  of,  486. 
residence  and  travel;  statements  or  requirements  as  to,  492. 


874  INDEX 

[References  are  to  pages.] 

LIFE  POLICY  AND  CLAUSES— Continued. 
statutory  provisions,  476-478. 
suicide;  exemption  from  liability  for,  509-514. 

degree  of  insanity  required  to  save  the  insurance,  514. 
suicide  and  self-destruction,  sane  or  insane,  excepted,  515-517. 
suicide,  insanity;  burden  of  proof,  517-520. 
suicide  not  a  crime,  523. 
suicide;  incontestable  clause,  535. 

See  Standard  Life  Policies. 

LIFE  TENANT, 

recovery  by;  fire,  74. 

LIGHTERS, 

employed  by  insured  ship;  seaworthiness,  228. 

risk  of  goods  in;  marine,  590. 

protection  of  goods  in;  trade  custom;  marine  risk,  596. 

LIGHTNING, 

when  a  loss  by  fire,  when  not,  286. 
unless  fire  ensues;  excepted  loss,  368,  373. 

LIGHTNING  CLAUSE,  FORM  OF,  730. 

LIMITATION  OF  TIME  FOR  SUIT, 
clause  is  condition  precedent,  453. 

clause  supersedes  statute  of  limitations  in  absence  of  waiver,  453. 
infant  assured  bound  by  clause,  454. 
mortgagee  also  bound,  under  mortgagee  clause,  454. 
this  limitation  imported  into  oral  or  written  binder,  454. 
one  year  limit  void  in  Nebraska,  note,  454. 
what  is  not  an  excuse  for  non-compliance,  note,  454. 
when  second  suit  allowed  under  certain  statutes,  note,  454. 
when  independent  promise  to  pay  not  governed  by  limitation,  454. 
one-year  limitation  inapplicable  to  reinsurance,  444,  454. 
effect  of  delay  in  appointing  representative  of  deceased  insured,  note,  454. 
compromise  agreement  after  loss  not  controlled  by  clause,  note,  454. 
when  period  of  begins  to  run,  454. 

whether  from  fire  or  maturity  of  liability,  455. 
commencement  of  action,  456. 

what  amounts  to,  456. 
when  complaint  in  equity  amended  to  allow  continuance  as  action  on  policy, 

456. 
construction  of  clause,  456. 

relation  to  appraisal,  etc.,  456. 
effect  of  Lloyd's  provision  as  to  suit  against  one  underwriter,  456. 
limitation  under  Massachusetts  policy,  457. 
when  provision  waived,  457. 

waiver  readily  inferred,  457. 

negotiations  for  adjustment,  184,  220,  457. 
waiver  by  agents  or  representatives  of  mutual  companies,  171. 
permit  to  extend  time  for  suing,  binding,  note,  160 


INDEX  875 

[References  are  to  pages.] 

LIMITATION  OF  TIME  FOR  SUIT— Continued, 
clause  as  to  in  accident  policy,  764. 
time  limitation  for  suit;  marine,  note,  451. 
statutory  provisions  as  to  limitation  of  time  for  suit,  689. 

LIMITS,  SETTLED,  493. 

LIQUOR, 

warranty  that  not  engaged  in  sale  of,  144. 

See  Intoxicants;  Habits. 

LIQUOR  STORE, 

See  Saloon. 

LIVE  STOCK, 

and  supplies  for  them  should  be  insured  specifically;  marine  policy,  587. 
insurance  against  death  of,  note,  652. 

LIVER,  CONGESTION  OF, 

not  necessarily  a  disease  of  the  liver,  480. 

LLOYD'S, 

associations;  precluding  restrictions  upon;  federal  constitution,  10. 
and  Lloyd's  usages,  13,  14. 
origin  and  rise  of  English  Lloyd's,  note,  14. 
American  Lloyds,  15. 
form  of  a  policy,  note,  15. 
legal  effect  of  policy,  notes,  15,  16. 

agents  when  not  agents  of  individual  underwriters;  concealment,  123. 
liability  of  each  underwriter  separate  and  distinct,  433. 
provision  for  action  against  one  underwriter  only;  time  for  suing  other  un- 
derwriters, 457. 

See  English  Lloyd's  Policy. 

LLOYD'S  AGENTS,  note  14 

LLOYD'S  LISTS, 

contents  of,  etc.,  note,  117. 

amalgamated  with  Shipping  Gazette,  note,  117. 

insurer's  knowledge  of  contents  of,  not  presumed,  122. 

LLOYD'S  REGISTERS, 

gives  certain  details,  etc.  ,  note,  117. 

LOADING, 

or  margin  is  what,  life,  20. 

vessel;  warranty  as  to;  capacity;  cargo,  640. 

LOADING  CLAUSE, 
marine,  form  of,  770. 

LOAN, 

assignment  of  life  policy  as  collateral  for,  529. 

LOCAL  AGENT, 

See  Agents. 


876  INDEX 

[References  are  to  pages.! 

LOCATION, 

usually  of  the  essence  of  the  fire  risk,  292. 
clause,  standard  policy,  legal  effect  of,  292,  293. 
change  of  location  within  the  premises  insured,  293, 

LOCKJAW, 

from  self-inflicted  wound;  accident  policy,  542. 

LOMBARDS, 

as  connected  with  origin  of  marine  insurance,  12. 

LOSS, 

word  equivalent  to  loss  or  damage,  457. 
under  fire  policy  means  what,  284-288,  296-302. 
under  marine  policy,  253  et  seq.,  600  et  seq. 
in  general  average,  265  et  seq. 
title  insurance,  653. 
fidelity  insurance,  654. 
credit  insurance,  662. 
employers'  liability  insurance,  664. 
See  Fire  Loss;  Measure  of  Indemnity;  Partial  Loss;  Total  Loss. 

LOSS  OF  BODILY  MEMBER, 
accident  policy,  551. 

LOST  OR  NOT  LOST, 
marine,  584. 
marine;  applicable  to  reinsurances,  585. 

"LUMINOSITY," 

under  clause  as  to  loss  by  fire,  note,  284. 

M 

MACHINERY, 

included  in  "steam  saw  mill,"  note,  289. 

and  engine  not  covered  by  "  building  occupied  as  tannery,"  note,  289. 
used;  term  not  extended  to  "  machinery  kept  for  sale,"  note,  289. 
when  may  be  run  after  prohibited  hours,  325. 
increase  of  risk  by  introduction  of,  330. 

plans  and  specifications  of,  to  be  furnished;  proofs  of  loss,  413. 
when  not  covered  under  marine  policy,  note,  625,  627. 
"hull  and  machinery"  may  not  cover  coals  and  stores,  note,  254. 
included  in  term  steamship,  under  English  statute,  note,  587. 
damage  to;  marine  policy,  notes,  614,  615,  625,  627. 
damage  to,  in  refloating  ship;  York-Antwerp  rules,  779. 
deductions  from  cost  of  repairs;  York-Antwerp  rules,  780. 
deductions  by  English  practice,  782. 

MACHINERY  OR  INCHMAREE  CLAUSE,  FORM  OF,  769. 

MAGISTRATE'S  CERTIFICATE, 

insured  must  furnish  if  required,  413. 


INDEX  877 

[References  are  to  pages.] 

MAGISTRATE'S  CERTIFICATE— Continued, 
meaning  and  effect  of  the  clause,  413-415. 

not  in  Massachusetts  policy,  415. 
statutes  forbidding  the  requirement,  697. 

MAILING, 

policy  may  complete  contract,  note,  99. 

contract  may  be  made  by  mail  with  unauthorized  foreign  corporation, 

note,  10. 
home  office  is  place  of  contract  when  policy  mailed  there,  114. 
notice  of  cancellation  must  be  actually  received,  386. 

computation  of  time,  day  of  service  excluded,  388. 
notice  of  loss  raises  presumption  of  receipt,  405. 
whether  proofs  of  loss  must  be  received  or  whether  mailing  them  sufficient, 

410. 
demand  for  appraisal  is  refused,  if  party  refuses  to  receive  registered  letter, 

note,  419. 
life  insurance  may  be  closed  by  letter,  98. 
custom  to  use  mails;  payment  of  premium;  life,  note,  498. 
statutory  notice  of  premiums  due  may  be  sufficient;  life,  note,  501. 
notice  of  assessment  may  under  contract  be  sufficient  service,  50. 
computation  of  time;  day  of  mailing  notice  excluded;  life,  note,  501. 
evidence  as  to  mailing  notice  that  premium  due;  life,  note,  501. 
service  of  notice;  affidavit  of  mailing;  life,  note,  501. 
loss  of  packages  in;  insurance  for,  note,  652. 

MANAGER, 

authority  of,  as  to  waiver,  198. 

MANDAMUS. 

superintendent  compelled  by,  to  license  or  to  file  certificate,  note,  8. 

MANSFIELD, 

Chief  Justice,  shaped  early  law,  13,  583. 

MANUFACTORY, 

use  of  gasoline  as  necessary  incident  to  plating  process;  memorandum  clause, 

359. 
vacancy  clause,  note,  367. 

See  Factories. 

MANUFACTURE, 

of  flashlight  powder  not  given  by  implied  consent  to  photographer  to  sell,  360. 

MAPS, 

showing  risks,  19. 

MARGIN  OF  POLICY,  notes,  106,  109,  139. 

MARGIN  OR  LOADING,  20. 

MARINE  INSURANCE, 
what  is,  221. 

origin  and  early  history,  12, 13. 


878  INDEX 

[References  are  to  pages.J 

MARINE  INSURANCE— Continued. 
early  usages  of,  13,  14. 
as  contract  of  indemnity,  note,  28. 

rule  of  indemnity  qualified;  insured  when  coinsurer,  59,  60. 
American  insurance  governed  by  American  law,  238. 
mixed  risks,  sea  and.  land,  24. 
when  not  double  insurance  with  fire  policy,  320. 
contract,  how  closed,  97. 
return  of  premium,  when,  76-78,  note,  651. 
attitude  of  courts  towards  underwriters,  583. 
contrasted  with  other  kinds  of  insurance,  notes,  140,  141. 

MARINE  POLICY,  FORM  OF,  767. 

MARINE  POLICY  AND  CLAUSES, 

meaning  and  legal  effect  of,  582-651. 
introductory  statement,  582. 

in  contrast  with  other  classes  of  policies,  582,  notes,  140,  141. 

which  explains  the  different  attitude  of  the  courts,  583,  note,  140. 
The  Clauses. 

adjustment,  649-561. 

all  other  perils,  losses,  or  misfortune,  614. 

anchor;  moored  at  in  good  safety,  593-598. 

ancient  Florentine  policy,  form  of,  766. 

arrests,  restraints  of  kings,  princes,  or  people,  etc.,  610. 

assured's  name,  583. 

"at  and  from,"  229,588. 

attachment  of  risk. 

See  Commencement  of  Risk,  under  this  heading, 
average;  warranted  free  from,  etc.,  640-645. 
binding  slip,  form  of,  766. 
barratry,  611-613, 
blockade,  646. 
care;  want  of  ordinary,  638. 
cargo;  subject  of  insurance,  587, 
cargo  on  deck,  646. 
cargo;  commencement  of  risk,  590. 
capture,  insured  against,  607-609. 
capture;  warranted  free  of,  etc.,  637. 

coals  and  stores  may  not  be  covered  by  "hull  and  machinery,  '  note,  254. 
collision,  603-605. 
collision  clause,  form  of,  769. 
commencement  of  risk;  ship;  freight,  688-590. 

cargo,  590. 

indorsements;  declarations,  591. 
constr\ictive  total  loss  whether  satisfies  warranty  free  from  average,  etc.,  642. 
convoy,  649. 

craft  clause,  form  of,  770. 
deck  cargo,  646. 
declarations;  indorsements;  risk,  591. 


INDEX  ^^ 

[References  are  to  pages.] 

MARINE  POLICY  AND  CLAUSES— Continued, 
deviation  clause,  form  of,  770. 
disbursement  policy;  share  of  salvage,  note,  250. 
duration  and  termination  of  risk,  593-598. 
fire,  606. 

fire  loss;  policy  may  cover  only,  note,  600. 
foundering  at  sea,  603. 
free  from  average;  warranted,  etc.,  640-645. 
free  of  capture;  warranty,  637. 
free  of  mortality  and  jettison,  639. 
freight;  subject  of  insurance,  588. 
freight;  ship;  commencement  of  risk,  588-590. 
good  safety;  moored  at  anchor  in,  593-598. 

grounding,  603.  ,         .    ^  „*^  of;i; 

"hull  and  machinery"  may  not  cover  coals  and  stores,  note,  255. 

indorsements;  declarations;  risk,  59 L 

inherent  vice,  626-628. 

jettison,  614. 

loading,  warranty  as  to,  640. 

loading  clause,  form  of ,  770. 

losses;  all  other  perils,  losses,  or  misfortunes,  614. 

m«."'un'and  machinery"  may  not  cover  coals  and  stores,  note,  254. 
machinery  or  Inchmaree  clause,  769. 

master's  name;  ship's  name,  585.  «.a  fiA= 

memorandum  clause;  warranted  free  from  average,  etc.,  640-b4o. 

whether  constructive  or  only  actual  total  loss  will  satisfy  the  warranty. 

642. 
total  loss  of  part,  643. 
unless  ship  be  stranded,  644. 
what  constitutes  stranding,  645. 
„.oor"d  at  anchor  in  good  safety;  duration  and  termmation  of  nsk,  593-598 

name  of  ship,  585. 

nationality,  warranty  of,  notes,  138,  b4S. 

negligence  clause,  form  of,  770. 

neutrality;  warranty  of,  647. 

ordinary  care  and  skill;  want  of,  exception,  638. 

original  defect,  625. 

other  insurance,  636. 

other  perils  sometimes  excepted,  639. 

particular  average  or  partial  loss.  251,  254,  255^ 

particular  average;  application  of  principles,  628 

particular  average;  exemption  under  fij^.^^^^^^^.' f  ^"j  g20-623 

peril  insured  against  and  perU  excepted;  joint  action  of.  620-623. 

perils  of  the  sea,  600-003. 

perils;  all  other  perils,  losses,  or  ™^«f°^^^^^' ^J^;^^^^  ^^^^^,  letters  of  ma 

-rLrt;=:tsrri^^-'-^^^^^^ 

607-611. 


ggO  INDEX 

[References  are  to  pages.] 

MARINE  POLICY  AND  CLAUSES—Continwed. 
perils;  other,  sometimes  excepted,  639. 
policy,  form  of,  767. 

policy  may  cover  only  fire  loss,  note,  600. 
port,  588-598. 

premium;  return  of,  when,  77,  note,  651. 
premium, 

See  Premixtm 
prohibited  waters,  598,  639. 
proximate  cause,  615. 

when  nearest  antecedent  cause  held  responsible,  616. 

how  far  followed  in  its  results,  617. 

an  independent  or  intervening  cause,  019. 

joint  action  of  peril  insured  against  and  peril  excepted,  620-623. 

independent  causes,  producing  distinguishable  damages,  623. 
proximate  cause  as  limiting  insurer's  liability,  624. 
restraints  of  kings,  princes,  or  people,  etc.,  610. 
riders,  648. 
risk;  commencement  of;  ship,  freight,  588-590. 

cargo,  590. 

indorsements;  declarations,  591. 
risk;  duration  and  termination  of;  moored  at  anchor  in  good  safety,  693-598. 
sailing,  warranty  to  sail  on  certain  date,  143,  648. 

to  sail  imder  convoy,  649. 
salvage, 

See  Salvage. 
ship;  freight;  commencement  of  risk,  588-590. 
ship;  subject  of  insurance,  587. 
ship's  name,  585. 
skill;  want  of  ordinary,  638. 

stores  and  coal  may  not  be  covered  by  "  hull  and  machinery,"  note,  254. 
stranding;  unless  ship  be  stranded;  memorandum  clause,  644. 

what  constitutes  stranding,  645. 
stress  of  weather,  605. 
sue  and  labor,  628-635. 
subject  of  insurance;  upon  body,  tackle,  apparel,  etc.,  586. 

ship,  587. 

cargo,  587. 

freight,  588. 
tear,  wear  and,  625. 

termination  of  risk;  moored  at  anchor  in  good  safety,  593-598. 
thieves,  611. 

total  loss  of  part,  642,  643. 

total  loss;  whether  will  satisfy  warranty  free  from  average,  640-646. 
touch  and  stay,  598. 
uninsured:  warranted,  637. 

beyond  specified  amount,  637. 
voyage,  592-593. 
warranted  free  from  average,  etc.,  640-646. 


INDEX  881 

[References  are  to  pages.] 
MARINE  POLICY  AND  CLAUSES— Continued. 

warranted  not  to  abandon  in  case  of  blockade,  etc.  646. 

warranted  free  of  capture,  etc.,  637. 

warranty  of  condition  or  location  on  date  specified,  648. 

warranty  of  good  safety  on  certain  date,  note,  148. 

warranty  of  neutrality,  647. 

warranted  uninsured,  637. 

beyond  specified  amount,  637. 
waters;  prohibited,  598. 


wear  and  tear,  625. 
weather;  stress  of,  605. 


See  Policy. 


MARINERS, 

negligence;  indemnity,  note,  58. 

MARKET  VALUE, 

recovery  of;  fire,  72,  73,  296-299. 

MARRIAGE, 

illegality  of  will  not  defeat  insurance  interest;  life,  note,  44. 

MARRIED  WOMAN, 

policy  for  benefit  of,  assignable,  note,  80. 

MASTER  OF  SHIP, 

name  of  in  policy,  585. 
changing  or  substituting,  585. 

effect  of  such  substitution,  585. 
a  competent  and  skillful,  as  requisite  of  seaworthiness,  222,  227. 

insurer  liable  for  injudicious  acts  of,  in  rendering  vessel  unseaworthy, 
227. 
negligence  of  does  not  prevent  recovery  where  loss  by  peril  insured  against, 
note,  58,  231. 

negligence  of,  etc.,  excepted,  638. 

negligence  of  mate  where  master  incompetent;  insurer  liable,  note,  639. 

negligence  clause  in  favor  of  insured,  649. 

when  negligence  of  may  constitute  wiLful  breach  of  duty,  note,  612. 
when  willful  act  of,  causing  loss  exonerates  insurers,  63. 
whether  is  bound  to  imperil  crew  to  save  vessel,  note,  639. 
when  illegal  act  of  does  not  prevent  recovery,  240. 
barratry  by  includes  what,  611-613. 

instances  of,  611-613. 

barratrous  act  of,  need  not  enure  to  benefit  of,  61. 

breaking  up  sea  damaged  ship  by,  before  survey,  not  barratry,  note,  612. 

complicity  between,  and  owner  not  barratry,  613. 

such  complicity  may  be  inferred,  note,  613. 

as  sole  owner  cannot  commit  barratry  against  himself,  613, 

but  may  against  his  co-owners,  613. 

when  charterers  may  be  regarded  as  owners  in  relation  to,  note,  613 

when  deviating  from  course  for  his  private  adventure  is  barratry, 
note,  613. 


gg2  INDEX 

[References  are  to  pages.! 

MASTER  OF  SHIP.— Continued. 

when  deviation  proper  on  account  of  barratry,  237. 
need  not  abandon  voyage  because  of  threat  of  illegal  capture,  note,  609. 

abandonment   of  voyage   by,   because   of  hostilities,  not   capture  or 
seizure,  note,  609. 

not  to  abandon  voyage  in  case  of  blockade  but  to  proceed  to  nearest 
port,  etc.,  647. 

presumed  to  have  done  duty  in  ordering  sale,  note,  245. 

but  should  consult  owners  if  practicable,  note,  245. 

master  no  right  to  sell  wrecked  vessel  and  make  total  loss,  245. 

duty  of,  to  transship  cargo,  246. 
sue  and  labor  clause,  expenditure  incurred  by  direction  of,  when  recover- 
able, 630. 

discussion  of  doctrine  as  to  extraordinary  expenses,  630  et  seq. 

is  agent  under  this  clause  if  no  other  agent  appointed,  note,  631. 
jettison;  judgment  and  decision  of,  264. 

jettison  by,  not  necessarily  for  common  safety,  614. 
what  acts  of  constitute  general  average  act,  261. 

sacrifice  must  be  made  by  or  by  authority  of,  note,  264. 

negligence  of,  as  cause  of  sacrifice,  note,  265. 
advertising  for  bids  for  repairs  of  ship;  adjustment,  650. 

MASTER'S  NAME, 
marine  pohcy,  585. 

MATERIALITY, 
test  of,  131,  132. 
question  of,  usually  for  jury,  133. 

question  of,  eliminated  by  warranty,  135,  136,  141  et  seq. 
statutes  relieving  from  technical  forfeitures,  683  et  seq. 

MATERIALS,  OLD, 

See  Deductions. 

MEASURE  OF  INDEMNITY  OR  RECOVERY, 

amount  underwritten  is  in  general  extreme  limit  of  recovery,  30,  72. 

successive  losses,  marine,  may  furnish  exception,  258,  298. 

exceptions  under  sue  and  labor  clauses,  629. 
recovery  also  must  not  exceed  the  actual  loss,  30,  72. 
imderwriters  share  liability  pro  rata,  fire,  marine,  60,  61,  253. 
agreed  value  in  valued  policy  as  basis  of  adjustment,  30,  31. 

valuation  conclusive  unless  fraudulent,  note,  31,  254,  298. 

partial  losses,  how  adjusted,  255. 
under  subrogation  recovery  limited  to  recoupment,  251. 

only  reimbursement  from  proceeds  collision  suit,  note,  249. 

special  provisions  of  policy  govern,  449. 

abandonment,  a  cession  of  all  interest,  marine,  250. 

agreed   value  in  valued  policy  applies  for  purposes  of  subrogation, 
note,  63. 
1,  Fire  Insurance. 
cardinal  doctrine  of  indemnity  often  controls,  27,  72. 


INDEX  88a 

[References  are  to  pages.] 

MEASURE  OF  INDEMNITY  OR  RECOVERY— Con<int*«i. 
recovery  limited  to  actual  loss,  72. 
recovery  also  limited  by  terms  of  the  policy,  72. 
owner  entitled  to  cash  or  market  value,  72. 
no  deduction  for  mortgage  or  other  incumbrance,  72. 
mortgagee  recovers  amount  of  mortgage  debt  at  time  of  loss,  73. 
no  deduction  for  collateral  security,  73. 
recovery  by  carrier,  bailee,  agent,  etc.,  insuring  for  self  and  others,  73. 

balance  of  recovery  beyond  his  own  interest  held  as  trustee  for  owners, 
73. 
lessee  or  life  tenant  recovers  actual  value  of  his  term,  74. 

the  opposing  view,  note,  74. 

value  of  life  term,  how  computed,  note,  74. 

as  to  dower  interest,  note,  74. 
lessor  under  rent  policy  recovers  value  of  rent,  valued  policy,  74. 
tenant  may  insure  loss  of  rent  without  use  of  premises,  note,  74. 
"as  interest  may  appear,"  note,  295. 
inchoate  right  of  curtesy,  note,  74. 
vendee  under  executory  contract  of  purchase,  74. 

when  limited  to  actual  loss,  note,  74. 
executory  vendor  recovers  full  value,  74. 

divergent  views  as  to  whether  vendor  must  account  to  insurers  for  pur- 
chase price  paid,  67,  68,  75. 
as  to  whether  vendor  holds  insurance  money  as  trustee  for  vendee,  75. 
measure  of  recovery  by  reinsured,  75,  444-448. 
special  provisions  of  the  fire  policy  govern,  296. 

remote  damages,  profits,  pretium  affedionis,  etc.,  excluded,  57-58,  296. 
actual  cash  or  market  value  at  time  of  fire  governs,  296. 
purchase  price  how  far  relevant,  296. 
market  value  means  what,  296. 

best  proof  obtainable  is  allowed  though  vague  and  indefinite,  note,  296. 
immaterial  that  insured  has  paid  nothing  for  property,  297. 
selling  price  at  a  forced  sale  is  not  the  criterion,  note,  297. 
manufactured  articles  in  process  of  manufacture,  297. 
selling  price,  not  the  criterion,  297. 
cost  of  replacing  as  the  criterion  for  estimate,  297. 
original  cost  not  conclusive,  297. 
depreciation  must  be  allowed  for,  297. 
selling  price  of  damaged  goods  after  fire  as  a  test,  297. 
actual  cash  value  before  and  after  fire,  298. 

as  to  increased  cost  of  rebuilding  necessitated  by  building  laws,  298. 
aggregate  recovery  for  several  losses  limited  to  face  of  policy,  298. 

different  doctrine,  marine  insurance,  258,  298. 
word  "cash"  omitted  in  Massachusetts  form,  298. 

omission  probably  immaterial,  298. 
valued  policy  laws  prevail  if  loss  is  total,  298. 

depreciation  allowed  for  since  date  of  insurance,  note,  298. 

valued  policy  law  held  bmding,  contract  made  in  another  state,  note, 
299. 


S84  INDEX 

[References  are  to  pages.] 

MEASURE  OF  INDEMNITY  OR  RECOVERY— Continued. 

policyholder  may  not  waive  the  benefit  of  the  law,  299. 

valuation  opened  in  case  of  fraud,  299. 

aggregate  of  several  valued  policies  on  risk  indicates  whole  insurable 
value,  299. 

what  is  "total  loss"  under  valued  policy  laws,  299,  300. 

definition  of  words  "wholly  destroyed,"  note,  299. 

several  standard  policies  contain  valued  policy  provisions,  300. 

total  loss  allowed  where  reconstruction  forbidden  by  city  ordinance, 
note,  300. 

test  of  total  loss  defined  by  Minnesota  court,  300. 

question  of  total  loss  when  for  jurj',  note,  116. 

plaintiff  may  allege  total  loss  and  recover  partial  loss,  note,  300. 

statutes  allowing  counsel  fee  to  successful  plaintiff,  note,  300. 

total  loss  construed  under  use  and  occupancy  policy  on  hotel,  note,  300. 

insurance  on  profits  usually  is  valued,  note,  58. 

whether  necessary  to  prove  that  there  would  have  been  profits,  note,  31. 

valued  policy  laws  not  unconstitutional,  notes  10,  31. 

list  of  valued  policy  laws,  695. 
measure  of  recovery  as  affected  by  rebuilding  and  repairing  clause,  300,  301. 
effect  of  coinsurance  and  other  special  clauses,  302. 
such  clauses  govern  if  not  forbidden  by  statute,  301. 

list  of  statutes  forbidding  or  modifying  coinsurance  clauses,  699. 

decisions  of  the  courts  relating  to  them,  note,  301. 

option  to  submit  to  co-insurance  clause  with  lower  rate,  302. 

examples  of  operation  of  coinsurance  clauses,  777-778. 

where  some  contributing  policies  contain  coinsurance   clause,  others 
do  not,  436. 
value  as  fixed  by  appraisal  clause,  418-429. 

for  breach  of  substituted  contract  upon  election  to  rebuild  or  restore,  304. 
contributions  as  between  contributing  policies,  431-440. 

2.  Life  and  Accident  Insurance. 
policy  in  effect  valued,  31. 

statutes  fixing  measure  of  indemnity,  711. 
various  rules  applied  to  creditor's  insurance,  46,  47,  92. 
total  disability  under  accident  policy,  548,  551. 
loss  of  entire  hand,  foot,  etc.,  551. 

3.  M.\RiNE  Insurance. 

measure  of  indemnity  defined,  253. 

distinction  between  valued  and  unvalued  policies,  253. 

contribution  between  insurers,  253. 

if  not  fully  insured  the  assured  is  a  coinsurer  as  to  deficiency,  59,  253,  635. 

except  in  ca.se  of  liability  policy,  634. 

thus  on  adjustment  property  is  considered  fully  covered,  note,  247. 

as  coinsurer,  insured  shares  in  salvage,  635. 
measure  of  recovery  in  case  of  total  loss,  253,  254. 

valued  policy  fixes  the  value,  254. 
loss  of  profits  presumed  from  loss  of  property,  note,  254. 

statutory  provisions,  717. 


INDEX  885 

[References  are  to  pages.] 

MEASURE  OF  INDEMNITY  OR  RECOVERY— Continued, 
hull  and  machinery  separately  valued,  note,  254. 
a  total  loss  of  part  is  a  partial  loss,  unless,  643,  644,  notes  254,  641. 

cargo  lemons  and  oranges,  note,  644. 
method  of  ascertaining  insurable  value  for  unvalued  policies,  note,  254. 
insurable  value  of  ship,  note,  254. 
insurable  value  of  freight,  note,  254. 
insurable  value  of  goods,  note,  254. 
prime  cost  or  value  at  lading  is  the  test,  note,  254. 
what  expenses  and  charges  are  to  be  added,  note,  254. 
partial  loss  of  ship,  the  rules  for  computing,  254,  255. 
partial  loss  of  freight,  255. 

partial  loss  of  goods  or  other  movables,  255-257. 
practical  method  of  ascertaining,  note,  256. 
illustrations,  note,  256. 
distinction  between  particular  average  loss  and  salvage  loss,  256,  257. 
description  of  method  of  computing  particular  average  loss,  257. 
apportionment  of  valuation  over  different  species  of  property,  257. 
underwriters  liable  for  general  average  and  salvage  charges,  252,  253,  257, 

258. 
difference  in  English  and  American  rules  regarding  effect  of  valuation  m 

valued  policy,  note,  258. 
liability  for  successive  losses  may  exceed  amount  underwritten,  258. 
customary  deductions  new  materials  for  old,  259. 
deductions  in  England,  781,  782. 
deductions  by  York- An  twerp  rules,  780. 
recovery  under  sue  and  labor  clause  may  exceed  face  of  policy,  629. 

measure  of  recovery  under  the  clause,  629,  635. 
special  clause  exempting  liability  under  five  per  cent,  635. 
4.  Special  Classes  of  Insurance. 
title  insurance,  653. 
fidelity,  655. 
credit,  662. 
employers'  liability,  668. 

'  See  Adjustment;  Fibe  Loss;  General  Average;  Loss. 

MECHANICS, 

clause  of  fire  policy,  334. 

whether  painters  are,  note,  335 

builder's  risk,  note,  335. 

or  workmen;  use  by,  of  gasoUne  or  naphtha  in  making  repairs;  memorandum 

clause,  358,  359. 

impliedly  allowed,  by  express  privilege  for  repairs,  to  make  them  in  a  rea- 
sonable, proper,  and  usual  way,  359. 

whether  painters  are;  use  of  gasohne;  memorandum  clause,  359. 

MECHANIC'S  LIEN, 

foreclosure  not  within  foreclosure  clause,  note,  342. 

MEDICAL  ATTENDANCE,  .  .  .     ^,t 

when  answers  though  false  do  not  avoid  pobcy:  under  statute,  477. 


886  INDEX 

[References  are  to  pages.] 

MEDICAL   ATTENDANCE — Continued. 
statements  as  to,  life  policy,  482,  483. 
what  constitutes,  483-485. 

MEDICAL  ATTENDANT, 

statements  as  to  who  is  usual,  485. 

MEDICAL  EXAMINATION, 

before  issuing  life  policy,  98. 

answer  to,  often  matter  of  opinion,  note,  471. 

MEDICAL  EXAMINER, 

relationship  of  agency;  stipulations,  193. 

incorrectly  transcribing  true  answers,  note,  202. 

written  answers  to  questions  of;  breach  of  warranty,  202-204. 

MEDICAL  TREATMENT, 

or  surgical,  as  contributing  cause  of  accident,  562. 

MEDICINE, 

mistake  in  taking;  accident  policy,  note,  539. 

MEMBERSHIP, 

in  associations  or  benefit  societies, 

See  Assessments;  Mutual  Companies. 

MEMORANDUM  CLAUSE, 

1.  Fire  Policy. 

generating  gas,  keeping  benzine,  etc.,  prohibited,  356. 

is  an  absolute  warranty,  356. 

whether  increasing  the  risk  or  causing  the  loss  is  immaterial,  356. 

breach  of,  by  tenant  is  fatal,  144,  356. 

use  of  fireworks  on  Fourth,  policy  avoided,  144,  357. 
"premises,"  how  construed,  356. 

insignificant  quantities  of  benzine,  ether,  gasoline,  etc.,  effect  of,  357. 
description  of  subject  insured  may  impliedly  permit  the  prohibited  articles 
357,  note,  109. 

illustrations,  camphene,  gasoline,  naphtha,  etc.,  357-360. 
"any  usage  or  custom  of  trade  to  the  contrary,"  358. 
certain  causes  of  loss  excepted,  368-373. 

invasion,  theft,  explosion,  etc.,  368,  373. 

illustrations  of  explosion,  370-373. 

proximate  cau.se,  618,  622. 
certain  articles  excepted,  accounts,  currency,  etc.,  375. 

"patterns"  though  part  of  usual  "stock,"  360,  376. 

meaning  of  ".storage,"  376. 

2.  Marine  Policy. 

"free  from  average  unless  general,"  640. 
meaning  and  effect  of  the  warranty,  641. 
how  percentage  computed,  note,  641. 
provisions  of  the  English  code,  642. 


INDEX  887 

[References  are  to  pages.] 

MEMORANDUM  CLAVSE— Continued. 

whether  constructive  or  only  actual  total  loss,  will  satisfy  the  warranty,  642 

total  loss  of  part,  643,  644,  notes,  254,  641. 

cargo  lemons  and  oranges,  note,  644. 

effect  of  average  clauses,  note,  644. 

"payable  on  every  ten  bales,"  note,  644. 
unless  the  ship  be  stranded,  644. 

whether  stranding  effaces  the  exception,  644. 

what  constitutes  stranding,  645. 

"sunk  or  burnt"  or  damage  by  collision,  note,  645. 

meaning  of  these  terms,  note,  645. 

MERCHANDISE, 

fluctuating  stock,  etc.,  fire  policy,  291,  292. 
marine  policy  covers  what,  587. 

See  Cargo;  Goods. 

MERGER, 

of  prior  agreement  after  policy  accepted,  note,  104. 
of  all  prior  negotiations  in  policy,  note,  105,  106. 
of  defenses  in  the  settlement,  650. 

MILL, 

or  factory  clause;  fire  policy,  324-326, 
vacancy  clause,  367. 

MISCONDUCT, 

See  Contract;  Barratry. 

MISREPRESENTATION, 

See  Representation, 

MISSING  SHIP,  note,  603. 

MISTAKE, 

relief  in  equity  for  mutual,  105-108. 
character  of  evidence  to  prove,  notes,  106,  107. 
and  fraud;  evidence  of,  in  equity  to  reform,  106,  107. 
of  law;  whether  ground  for  reformation  of  contract,  note,  107. 
no  excuse;  inabihty  to  fulfill  warranty,  note,  145. 
innocent,  under  clause  as  to  fraud  and  false  swearing,  313,  314. 

See  Equity. 

MOB, 

acts  of,  in  hanging  person;  accident  policy,  note,  539,  542. 
unauthorized  seizure  or  detention  by;  marine,  610. 

MONEY, 

whether  insurable  as  goods,  marine,  587,  588. 

MORPHINE, 

taking  larger  dose  than  intended;  accident  policy,  note,  539. 
hypodermically  administered  by  physician;  accident  policy,  note,  566. 


888  INDEX 

[References  are  to  pages.] 

MORRISTOWN, 

and  Giese  Rules,  note,  443. 

MORTALITY, 

free  of;  peril  excepted;  marine,  639. 

MORTALITY  TABLES,  19,  20. 

MORTGAGE, 

disclosure  as  to;  fire,  312. 

disclosure  as  to  chattel  or  real  estate  mortgage,  note,  127. 

of  real  estate;  when  considered  a  chattel  mortgage,  341. 

no  deduction  for  amount  of  from  loss;  fire,  72. 

prohibited:  severable  contract,  153,  154. 

whether  an  increase  of  risk,  331. 

foreclosure  clause;  sale,  341. 

real  estate,  does  not  avoid  policy;  alienation  clause,  note,  343. 

alienation  clause;  standard  policy,  348. 

See  Chattel  Mortgage;  Incumbrances. 

MORTGAGEE, 

amount  of  recovery  by,  73. 

sufficiency  of  other  security  immaterial,  73. 
no  interest  in  policy  by  mortgagor;  except  agreement,  73,  394. 
rebuilding  clause,  305. 

under  interest  and  ownership  clause,  note,  338. 
assignment  by,  of  policy  and  interest,  note,  353. 
cancellation  by  insurer;  Massachusetts  policy,  392. 
clause  fire  policy,  393-396. 

standard  mortgagee  clause,  39<i-399. 
is  an  independent  contract,  397. 
methods  of  insurance  availablo  to,  393,  394. 
simple  payee  clause,  394. 
"loss,  if  any,  payable  to,"  not  an  independent  contract,  395. 

no  suitable  protection,  395. 
relations  between  insured,  first  and  second  mortgagees  and  their  infurers 

397,  398. 
clause;  Massachusetts  policy,  399. 
party  to  appraisal,  400. 
proofs  of  loss;  form  of  action,  400. 

whether  mortgagor,  mortgagee,  or  both  should  sue,  note,  396,  400. 
under  mortgagee  clause;  effect  of  limitation  of  time  to  sue,  clause,  454. 
subrogation,  65. 

subrogation  under  fire  policy,  399. 
barratry  against,  note,  613. 

See  Mortgagor. 

MORTGAGEE  CLAUSES,  FORM  OF,  730-732. 

MORTGAGOR, 

mortgagee  no  interest  in  mortgagor's  policy;  except  by  agreement,  73. 
and  mortgagee's  interest;  not  "other  insurance,"  319 


INDEX  889 

[References  are  to  pages.] 
MORTGAGOR — Continued. 

when  sole  and  unconditional  owner,  note,  338. 

relations  between  first  and  second  mortgagees  and  insurers,  397,  398. 

subrogation,  65,  399. 

See  Mortgagee 

MORTUARY  TABLES,  19,  20. 

MUNICIPALITY, 

order  of;  blowing  up  buildings  to  stay  conflagration;  subrogation,  453. 

MURDER, 

insured  committing,  cannot  recover  on  life  policy,  81,  82,  510,  511. 

committed  by  insured  and  subsequent  assignment  of  policy;  no  recovery,  82. 

of  wife  in  whom  interest  vested;  insured  not  beneficial  "survivor,"  86. 

death  in  violation  of  law;  life  policy,  522. 

death  in  violation  of  law;  accident  policy,  520-522,  539. 

of  insured  relieves  insurer  under  intentional  injuries  clause,  accident  policy, 

569,  570. 
insured  was  executed  for;  no  stipulation  as  to  violation  of  law  or  death  at 

hands  of  justice;  recovery  allowed,  572. 

MUTINY, 

passengers  or  crew  who,  are  "pirates,"  note,  608. 

and  seizure  not  within  warranty  "free  from  capture,  seizure,"  etc.,  638. 

MUTUAL  BENEFIT  SOCIETIES, 

See  Benefit  Societies. 

MUTUAL  COMPANIES, 
corporations  classified,  6. 
regulations  or  by-laws  as  part  of  policy,  458. 
regulations  or  by-laws  of,  to  be  written  or  attached  to  the  fire  policy,  458. 

not  in  Massachusetts  policy,  458. 
premium  or  deposit  notes  in  payment  of  premium;  assessment  of,  282. 
waiver,  170,  171. 

MUTUAL  MISTAKE, 

reformation  for,  106-108. 

N 

NAME, 

similarity  of  corporate,  ground  refusal  to  grant  certificate,  note.  8. 

a  requisite  of  complete  contract,  98. 

of  wrong  owner;  mistake;  evidence  to  show,  note,  107, 

of  assured;  marine  policy,  583. 

of  master;  marine  policy,  585. 

of  ship;  marine  policy,  585. 

of  copartnership  changed;  forfeiture;  credit  insurance,  note,  663. 

NAPHTHA, 

torches  used  in  making  repairs;  increase  of  risk,  note,  331. 
\ised  in  making  repairs;  memorandum  clause,  359. 


890  INDEX 

[References  are  to  pages.l 

NARCOTICS, 

as  contributory  cause;  excepted  risks;  accident  policy,  566. 

NATIONALITY, 

or  neutrality;  warranty;  seaworthiness;  necessary  documents  required,  231. 
warranty  of,  648. 

construction  of  descriptive  phrases,  notes,  138,  139. 

NAVIGATION, 

statutes  regulating;  legality  of  insurance;  marine,  240. 
want  of  ordinary  care  and  skill  in,  note,  638,  649. 

NECESSITY, 

no  excuse  for  breach  of  warranty,  145,  496. 
justifies  a  deviation,  marine,  235. 

NEGLECT, 

of  insured  to  use  reasonable  means  to  save  property;  excepted  loss,  368,  369. 

NEGLIGENCE, 

of  assured  or  his  agents  does  not  prevent  recoverj',  58,  287,  notes,  288,  328. 
unless  there  is  fraud,  evil  design,  or  breach  of  contract  obligations,  59. 
special  clauses  of  policy  prevail,  59. 
examples  of  contract  obligations,  59. 

loss  must  also  be  proximate  result  of  perils  insured  against,  59,  616. 
policy  covers  unintentional  or  careless  acts  of  third  persons  whether  agents 

or  not,  287. 
of  third  persons  causing  fires;  insurer's  right  to  become  subrogated,  62,  63, 
451. 
common  carrier's  negligence;  subrogation,  62,  63,  451. 
doctrine  of  proximate  cause  discussed  in  this  connection,  451  et  seq. 
insufficient  water  supply;  whether  water  company  liable,  452. 

if  liable  insurer  becomes  subrogated,  453. 
as  basis  of  subrogation,  insured  need  not  always  show  actual  negli- 
gence of  third  party,  63. 
use  of  unsafe  stove  by  third  party;  increase  of  risk;  policy  not  avoided,  334. 
of  insured  in  failing  to  protect  property  from  further  damage,  59,  406. 
neglect  of  insured  to  read  his  application;  when  company  not  estopped,  200, 
203. 
views  of  different  courts,  200. 
voluntary  exposure  to  unnecessary  danger,  59,  572-578. 

courts  do  not  construe  these  words  as  meaning  same  as  contributory 
negligence,  573. 
unseaworthiness  caused  by;  when  precludes  recovery,  59,  225. 

time  policy;  ship  not  properly  refitted  at  intermediate  port;  effect,  224. 
insurers  may  be  liable  for  injudicious  acts  of  master  and  crew  causing 

unseaworthiness,  227. 
express  exception  of  want  of  ordinary  care  or  skill  in  navigating,  note, 
615,  638. 
clause  in  favor  of  assured,  649,  770. 
as  cause  of  sacrifice;  general  average,  264. 

See  Master  of  Ship. 


INDEX  891 

[References  are  to  pages.] 
NEGLIGENCE  CLAUSE, 

negligence  as  excepted  in  marine  policy,  638. 
negligence  as  expressly  covered,  649,  770. 

NEUTRAL, 

transportation  of  goods  contraband  of  war-  marine,  note,  238. 

NEUTRALITY, 

warranty  of,  647. 

or  nationality;  warranty;  seaworthiness;  necessary  documents  required,  231. 
NEW  FOR  OLD, 

See  Deductions. 

NEWSPAPERS, 

information;  concealment,  note,  122. 

NEW  YORK  FIRE  EXCHANGE, 
purposes  of,  718. 

NEXT  OF  KIN, 

proofs  of  loss  by,  note,  411. 

NIECE, 

as  beneficiary,  463. 

NON-CONCURRENT  LIABILITY,  435-440. 

NON-FORFEITABLE  POLICY, 

incontestable  provisions,  531-536. 
non-forfeiture  statutes,  694,  705,  706. 

"  NOON," 

in  term  clause  means  solar  not  standard  time,  unless,  283. 

NORTHAMPTON  TABLE, 
a  mortuary  table,  note,  19. 

NOTARY  PUBLIC, 

certificate  of  as  to  loss,  413-415. 

NOTES, 

for  premium,  fire  policy,  281. 

for  premium,  negotiable,  note,  281. 

premium  or  deposit,  for  premium,  282. 

for  premium  binding  when  risk  attaches,  note,  281. 

assessments  upon  premium  notes,  282  and  note. 

for  premium  collectible  through  insurance  suspended  for  default,  note,  281. 

premium  notes  as  lien,  note,  283. 

standard  policy,  Iowa;  default  in  payment,  premium,  or  assessment  notes, 

note,  283. 
for  premium,  life  policy,  497,  499. 

premium  paid  by;  forfeiture;  no  relief  for  breach;  life  risk,  496. 
for  payment  of  premium;  express  provision  in,  for  forfeiture,  497- 


892  INDEX 

[References  are  to  pages.] 

NOTES — Continued . 

accepted  in  lieu  of  cash  payment  of  premium;  no  forfeiture  if  not  paid  unless 

expressly  so  provided,  497. 
for  premium;  notice  that  premium  due  need  not  be  repeated  on  maturity  of 

note,  note,  500. 
assessments  upon  premium  notes,  506,  507  and  notes. 

NOTICE, 

of  objections  to  proof  of  loss,  187. 

of  restrictions  upon  the  authority  of  agents,  202. 

of  abandonment",  marine,  246-248. 

of  insurer's  election  to  repair,  fire  policy,  302,  303. 

of  sale  under  the  foreclosure  clause,  341. 

of  cancellation,  fire  policy,  notice  by  assured,  384-386. 

notice  by  company,  384-392. 
immediate  notice  of  loss  under  fire  policy,  401-405. 
of  demand  for  plans,  magistrate's  certificate,  etc.,  413. 
of  demand  for  production  of  books,  bills,  etc.,  or  personal  examination 

415-418. 
of  demand  tor  an  appraisal,  418-420. 

to  reinsurer  to  defend  suit  brought  by  original  insured,  446. 
statutory  notice  required  before  maturity  of  premiums,  500,  501. 

list  of  such  statutes,  705. 
to  insured  of  assessments  levied,  508. 

whether  notice  must  be  actually  received,  509. 
of  assignment  of  life  policy,  527. 
of  accident  and  injury,  555-557. 
of  dishonesty  under  fidelity  policy,  659. 
of  injury  under  employers'  liability  policy,  671. 

of  balance  of  premiums  due  required  where  premiums  reduced  by  dividends. 
496. 
See  Abandonment;  Cancellation;  Notice  of  Loss;  Premiums;  Proofs 

OF.  Loss. 

NOTICE  AND  PROOF  OF  ACCIDENT  OR  INJURY, 
of  accident  or  injury;  accident  policy,  555-557. 
and  proof  of  accident  and  injury;  delay;  illustrations,  555-557. 
immediate,  of  injury,  etc.;  employers'  liability  policy,  671-674, 

NOTICE  OF  ABANDONMENT, 

See  Abandonment. 
NOTICE  OF  LOSS, 

immediate  notice  of  any  loss  required  by  fire  policy,  401. 

immediate  notice  of  loss,  meaning  of,  note,  402. 

"immediate  notice"  means  with  due  diligence,  404,  659,  671. 

question  often  for  jury,  404. 

when  a  question  of  law,  404. 

instances  of  fatal  delay  in  giving,  note,  405. 

condition  must  be  complied  with  unless  waived,  404. 

meaning  of  terms  "forthwith"  and  "as  soon  as  possible,"  note,  404. 


INDEX  i^6 

[References  are  to  pages.] 

NOTICE  OF  LOSS— Continued. 

whether  clause  applies  to  lightning  and  tornado  rider,  note,  405. 

notice  should  be  in  name  of  the  insured,  405. 

where  service  should  be  made,  405. 

death  of  insured  does  not  dispense  with  requirement,  note,  405. 

notice  must  be  actually  received,  405. 

mailing  in  due  course,  presumption  of  receipt,  405. 

requirement  of  Massachusetts  policy,  405. 

decisions  under  it,  note,  405. 
Iowa,  South  Dakota,  and  New  Hampshire  policies,  405,  406. 
statutory  provisions,  list  of,  697. 

See  Proofs  of  Loss;  Waiver  and  Estoppel. 

0 

OBVIOUS  RISK, 

under  accident  policy,  577,  578. 

OCCUPANCY, 

change  of;  increase  of  risk,  331. 

change  of,  without  increase  of  risk;  alienation  clause,  434. 

See  Condition  op  Property:  Use  and  Occupancy;  Vacanct 

OCCUPANCY  CLAUSE,  FORM  OF,  734. 

OCCUPATION, 

means  usual  vocation,  not  occa.sional  or  casual  acts,  note,  491,  552 
statements  as  to,  491,  492. 

illustrations,  491  and  note,  492, 
under  accident  policy,  552-555. 
See  Condition  of  Property;  Hazardous  Employment;  Possession. 

OFFICERS, 

of  company  often  sign  policies  in  blank,  note,  100. 

of  company,  authority  of,  to  contract  and  waive,  197. 

whether  policy  restrictions  on  agents  include  officers,  193,  197,  198. 

whether  officers  of  mutual  companies  can  waive,  170,  171. 

of  insured  corporation;  arson  or  fraud  by;  loss  by  fire,  note,  287. 

reinstatement  subject  to  approval  of,  and  refusal;  when  courts  will  not  mter- 

fere;  life,  503. 
when  cannot  delegate  power  to  levy  assessments,  506. 
or  directors;  discretion  of;  levy  of  assessments,  507. 

See  Agents;  Waiver  and  Estoppel. 

OIL  TANK,  ^     .,Q^ 

carried  away  by  flood;  location  and  description  of  property,  note,  Jy^. 

OPEN  OR  FLOATING  POLICY, 

what  is  a,  22,  591. 

excess  floater,  when  attaches,  734. 

description  in;  chattel  mortgage,  note,  340 

OPEN  OR  RUNNING  POLICY, 
declarations  under,  591. 
form  of  policy,  734, 


894  INDEX 

[References  are  to  pages.] 

OPEN  POLICY, 

what  is  an,  21,  22. 

or  valued;  subrogation  applies,  note,  63. 

OPERATION, 

of  factories;  limited  hours;  ceasing  to  operate,  324-326. 

OPINION, 

misstatements  of,  not  usually  fatal,  131. 
statement  of,  not  usually  a  warranty,  149. 
statements  as  to  obscure  diseases  regarded  as,  150,  482. 
statements  as  to  habits  are  of  fact,  489. 

OPTION, 

cancellation  clause,  383  et  seq. 

reinstatement  clause,  302-305. 

to  purchase;  interest  or  ownership  clause,  note,  337. 

on  surrender  or  lapse  of  policy,  502. 

"ON  ACCOUNT  OF  WHOM  IT  MAY  CONCERN," 

fire  policy,  295. 
double  insurance,  322. 
marine  policy,  584. 

ONE-THIRD  NEW  FOR  OLD, 

adjustment  of  partial  loss  on  ship,  259. 

exceptions  to  this  rule,  note,  259. 

modification  of  indemnity  doctrine,  30,  note,  31. 

ORAL  CONTRACT, 

closing  of  contract,  93. 

of  insurance  or  to  issue  policy,  valid  if  no  statute  prohibits,  102. 

usual  policy  terms  as  governing,  104. 

action  on;  usual  terms  of  policy  govern,  104. 
See  Contracts. 
ORAL  EVIDENCE, 

See  Evidence. 
ORIGINAL  DEFECT, 

marine,  625. 

OTHER  OR  DOUBLE  INSURANCE, 

not  per  se  an  increase  of  risk,  330. 

1.  St.\tements  Regarding  Other  Insurance. 

no  implied  obligation  to  maintain  other  contributing  insurance,  notes,  318 

433. 
non-disclosure  of,  life,  note,  121. 

2.  Express  Warranty  Against  Other  Insurance. 
in  fire  policies,  317-322. 

what  constitutes  other  insurance,  317,  note  61. 
unaccepted  or  rejected  policy,  note,  318. 
inchoate  arrangement,  note,  318. 
without  authority  of  insured,  note,  318. 


INDEX  895 

[References  are  to  pages.] 

OTHER  OR  DOUBLE  INSURANCE— Continued. 

unless  ratified,  note,  318. 

renewal  of  permitted  policy,  note,  318. 

insurance  by  different  creditors,  note,  319. 
illustrations  of  the  rule,  319,  320. 
whether  provision  is  reasonable,  318,  note,  208. 
where  policies  are  canceled  and  others  substituted,  320. 
there  may  be  different  policies  on  different  interests,  320. 
carrier's  and  bailee's  policies,  "held  in  trust"  whether  other  insurance  with 

owner's,  320-322. 
whether  marine  is  double  with  fire,  320. 
written  permit  for,  often  given,  78,  note,  318. 
permit  must  be  in  writing,  322. 

may  be  attached  to  policy  any  time,  note,  322. 

need  not  be  written  on  binder,  note,  322. 
effect  of  the  words  "valid  or  invalid,"  322-324. 

which  policy,  if  either,  shall  be  avoided,  without  these  words,  322. 

irreconcilable  views,  322,  323. 
insurance  taken  out  simultaneously,  323. 
insurance  absolutely  null  and  void,  323. 
insurance  canceled,  323. 
Massachusetts  and  other  policies,  323,  324. 
effect  of  coinsurance  clause  or  other  limited  consent,  324. 

permit  sometimes  for  other  concurrent  insurance,  note,  324. 

what  constitutes  "concurrent,"  note,  324. 
warranted  no  insurance  e.xcept  as  stated,  life  policy,  486,  487. 

ignorance,  or  good  faith  immaterial,  note,  486. 

what  amounts  to  application  and  rejection,  note,  487. 

when  breach  result  of  company's  fraud,  note,  487. 
effect  of  liberal  statutes,  477. 
whether  applications  and  certificates  in  beneficiary  associations  count,  487 

decisions  not  harmonious,  487. 
warranted  uninsured  or  beyond  certain  amount,  marine,  637. 
warranted  same  terms  as  other  insurance,  note,  136. 
3.  Other  Contributing  Insurance. 

common  law  doctrine  of  contribution,  60,  61. 
pro  rata  clau.se  of  fire  policies,  431. 
purpose  and  effect  of  clause,  432,  433. 

each  contract  separate  and  independent,  note,  433. 
immaterial  that  others  have  paid  the  whole  loss,  note,  433. 
whether  joint  action  in  equity  will  lie,  433. 

under  Lloyd's  policy,  433. 
what  constitutes  other  insurance,  433. 

mortgagor  policy  and  mortgagee  clause  separate,  434. 

carrier  or  bailee  insurance  and  owner's,  434,  note,  321. 

effect  of  coinsurance  clause,  note,  435. 

different  policies  in  part  concurrent,  435. 
method  of  apportionment,  policies  non-concurrent,  435. 

some  policies  with,  some  without  coinsurance  clause,  436. 


896  INDEX 

[References  are  to  pages.] 

OTHER  OR  DOUBLE  INSURANCE— Continued. 

whether  marine  is  double  with  fire,  320. 
partially  concurrent  apportionments,  437. 

various  views  and  rules  of  courts  and  experts,  438-440. 
treatise  by  Willis  O.  Robb,  expert  adjuster,  notes,  440-443. 
clause  of  marine  policy,  636. 

history  and  object  of  clause,  note,  636. 

decisions  construing,  notes,  636,  637. 
creditor's  life  insurance  policies  as  contributing,  61. 

OVEREXERTION, 

voluntary;  accident  policy,  571. 

OVERINSURANCE, 

temptation  to  commit  fraud,  317,  318. 

effect,  when  temporary,  note,  152. 

reason  for  rule  of  standard  policy,  notes,  141,  318. 

See  Other  or  Double  Insurance. 

OVERVALUATION, 

disclosure  as  to;  when  material,  note,  121. 

not  disclosed;  marine,  note,  121. 

innocent  mistake  in,  313,  314. 

under  clause  as  to  fraud  or  false  swearing;  fire,  313,  314. 

must  be  intentional  to  avoid  policy,  313-316. 

See  Fraud  and  False  Swearing;  Proofs  of  Loss. 

OWNER, 

and  others;  the  clause,  as  interest  may  appear;  fire,  294. 

of  undivided  interest;  interest  or  ownership  clause,  note,  338. 

different  part  owners  jointly  insured  but  not  joint  owners;  alienation  clause, 
,351. 

acts  of,  when  and  when  not  to  invalidate  insurance  as  to  interest  of  mort- 
gagee, 397,  398. 

extent  of  recovery;  fire,  72. 

under  clause  held  in  trust,  etc.;  right  to  benefit  of  insurance;  fire,  294. 

when  may  take  benefit  of  insurance  though  ignorant  of  issue  of  policy;  ratifi- 
cation after  loss,  note,  296. 

ratification  by,  of  insurance  after  loss,  notes,  99,  322. 
See  Ownership. 

CV/NERSHIP, 

the  policy  does  not  pass  with  change  of,  76. 
of  policy  where  premium  paid  with  embezzled  funds,  note,  79. 
effect  of  temporary  su.spension  of  interest  within  term  of  policy,  54,  55,  57. 
misstatement  as  to,  when  materiality  for  jury,  statute,  note,  156. 
1.  Interest  Clause  Standard  Fire  Policy. 
interest  of  insured  must  be  truly  stated,  311. 
without  policy  clause  any  interest  sustains  insurance,  311. 
under  policy  clause  the  character  of  interest  whether  owner,  truBtee,  mort- 
gagee, lessee,  etc..  must  he  disclosed,  311. 


INDEX  897 

[References  are  to  pages.] 

OWNERSHIP— Continued. 

whether  omission  of  insurer  to  inquire  amounts  to  waiver,  notes,  175,  311, 

312,  339,  341. 
need  not  state  value  of  interest  or  that  insured  is  part  owner,  312. 
need  not  state  incumbrances  under  this  clause,  312. 
effect  of  words  "as  interest  may  appear,"  313. 
clause  not  in  Massachusetts  form,  313. 
decisions  under  Massachusetts  policy,  313. 
application  may  call  for  disclosure  as  to  title,  note,  313. 

2.  Unconditional  and  Sole  Ownership  Clause. 
fulfil'ment  is  a  condition  precedent,  336. 
refers  to  the  time  when  contract  is  made,  336. 

means  that  substantial  burden  of  fire  loss  will  fall  exclusively  upon  assured, 

336. 
definitions  of  the  clause,  note,  336. 

several  parties  together  may  be  sole  and  unconditional  owner,  note,  336. 
conditional  devise  does  not  meet  the  requirements,  note,  336. 
stockholders'  interest  in  corporate  property,  note,  336. 
vendee  under  executorj^  contract  of  purchase,  336. 
vendor  after  executory  contract  made,  336. 
conditional  or  contingent  agreement  to  purchase,  337. 
effect  of  possession  and  use  under  claim  of  right,  337. 
many  decisions  under  the  clause,  notes,  337,  338. 
effect  of  incumbrances  or  liens,  338. 
whether  insurer's  omission  to  make  inquiries  operates  as  waiver,  notes,  311, 

312,339,341. 

3.  Alienation  Clause. 

change  in  interest,  title  or  possession,  343,  352. 

See  Alienation;  Chattel  Mortgage;  Interest  of  Insured. 


PAID-UP  INSURANCE, 

See  Extended  or  Paid-up  Insurance. 

PAINTERS, 

See  Mechanics. 

PAINTINGS, 

fraudulent  statement  as  to  artist,  note,  378. 

PAMPHLET, 

not  admissible  to  vary  terms  of  policy,  note,  106. 

PARALYSIS, 

no  excuse  for  non-payment  of  premium,  490. 

warranty  as  to;  effect  of  agent's  knowledge;  waiver,  525. 

PAROL,  ^  _ 

See  Agents;  Contract;  Construction  of  Contract;  Evidence;  Oral 
Contract;  Waiver  and  Estoppel. 

57 


898  INDEX 

[References  are  to  pages.] 

PARTIAL  LOSS, 

losses  are  total  or  partial,  240. 
of  ship,  how  adjusted,  254,  255. 
of  freight,  how  adjusted,  255. 

of  goods,  merchandise,  or  other  movables,  how  adjusted,  255-257. 
total  loss  of  part  is  only  a  partial  loss  unless,  notes,  254,  643. 
repaired  or  adjusted;  subsequent  loss;  recovery,  258. 
one-third  new  for  old,  259. 
term  "  average  unless  general "  640-645. 

See  Adjustment;  Measure  of  Indemnity;  Particular  Average;  Total 

Loss. 

PARTIALLY  CONCURRENT  APPORTIONMENTS,  437-440. 

PARTICULAR  AVERAGE, 
what  is,  251. 

means  partial  loss,  251,  261. 

and  general  average;  distinction  between,  251,  261. 
salvage  charges;  contradistinction,  251. 
particular  charges;  contradistinction,  251. 

loss  and  salvage  loss  on  goods;  important  to  discriminate,  256,  257. 
expenses  not  for  common  safety,  chargeable  to,  267. 
liability  under  sue  and  labor  clause  is  not,  629. 
exemption  under  five  per  cent,  635. 
warranted  free  from  average  unless  general,  640-642. 
effect  of  agreement  as  to;  statutes,  716. 
See  Adjustment;  Measure  of  Indemnity;  Partial  Loss;  Warranties. 

PARTIES, 

names  or  description  of,  as  essential  to  complete  contract,  98. 
mortgagees  to  appraisal,  400. 

action;  proofs  of  loss;  mortgagee  and  insured  as,  400. 
See  Insured;  Insurance  Companies. 

PARTITION, 

conveyance  between  devisees:  breach  of  alienation  clause,  note,  345. 
to  widow  for  life  constitutes  change;  alienation  clause,  352. 

PARTNERS, 

sole  and  unconditional  ownership  clause,  note,  337,  338. 

chattel  mortgage  from  one  to  another  on  firm  property  when  does  not  avoid 

policy,  note,  341. 
alienation  clause,  shifting  of  interest  among,  350. 
appointment  of  one  as  receiver  of  firm;  alienation  clause,  352. 

PARTNERSHIP, 

new  member  taken  in  avoids  policy  under  alienation  clause,  345. 
addition  in  policy  of  words  "  as  now  or  hereafter  may  be  constituted  "  to  pro- 
tect, note,  351. 
change  of  name;  forfeiture;  credit  insurance,  note,  663. 
death  of  partner;  credit  insurance,  note,  663. 


INDEX  899 

[References  are  to  pages.] 

PASSAGE  MONEY, 
total  loss,  note,  241. 

not  included  in  "freight"  but  usually  insured  under  distinct  name;  marine, 
588. 

PASSENGERS, 

luggage;  contribution;  general  average;  adjustment,  note,  271. 

riding  in  or  on  steam  cars  not  provided  for  transportation  of  passengers,  579. 

who  mutiny,  as  "pirates,"  note,  608. 

PATTERNS, 

covered  by  "tools,"  360. 

no  recoveiy  allowed  for  "patterns,"  though  part  of  a  tailor's  "stock  and 
other  articles,"  360. 

PAYEE, 

clause;  mortgagee,  394-396. 

PAYMENT, 

sixty  days  after  satisfactory  proofs,  clause  as  to,  302. 
of  insurance;  who  entitled ;  life  risk,  462-467. 

production  of  policy  and  receipt  made  evidence  of  payment  by  insurer, 
note,  462. 

See  Beneficiary;  Liability;  Loss;  Premium. 

PENALTY, 

contract  with  unlicensed  corporations,  11. 

for  non-observance  of  certain  regulations  as  to  form  of  policy,  copies  of 
papers,  etc.,  278. 

PERILS  INSURED  AGAINST;  MARINE, 

perils  of  the  seas  distinguished  from  wear  and  tear  and  incidental  delay,  600. 

illustrations,  600-602. 

perils  clause  of  the  policy  given  in  full,  note,  600. 

definitions  of  sea  perils,  notes,  600. 

peril  of  the  sea  not  merely  peril  on  the  sea,  note,  600. 

damage  to  cargo  of  cheese  by  rats  not  covered,  note,  600. 

striking  rock  on  a  calm  day  a  sea  peril,  note,  600. 

striking  an  iceberg,  note,  600. 

fire  may  be  the  only  peril,  note,  600. 

ship  moored  as  hospital,  note,  600. 

sea  water  entering  hole  eaten  by  rats  covered,  note,  601. 

"perils  of  the  sea"  in  policy  and  bill  of  lading  compared,  note,  601. 

many  instances  of  sea  peril,  note,  601. 

closing  in  of  a  port  by  ice,  601. 

meat  becoming  putrid  on  account  of  long  voyage,  602. 

collapse  of  temporary  awning  on  deck,  602. 

damage  by  worms,  climate,  extra  expenses  for  delay,  note,  602. 

damage  to  chronometer  dropped  in  fit  of  giddiness,  note,  602, 

definition  of  "maritime  perils,"  note,  603. 

a  broader  phrase  thaij  "perils  of  the  seas,"  603; 
foundering  at  sea,  603, 


900  INDEX 

[References  are  to  pages.] 

PERILS  INSURED  AGAINST;  MARINE— Continued, 
presumption  of  loss  of  vessel,  note,  603. 
posted  at  Lloyd  s  as  missing,  note,  603 
grounding  of  vessel,  603. 
running  on  a  shoal,  note,  603. 
malposition  on  bottom  of  tidal  harbor,  note,  603. 
coUision  as  a  peril,  603. 
loss  to  insured  ship  covered,  603. 

whether  damages  paid  to  other  ship  are  covered,  603,  604. 
different  views  as  to  what  constitutes  collision,  notes,  603,  604. 
forcing  vessel  through  the  ice  not  a  collision,  note,  604. 
anchor  is  part  of  the  ship,  note,  604. 
tug  and  ship  regarded  as  one,  note,  604. 
special  clause,  risk  of  striking  wharf,  ice,  etc.,  note,  604. 
what  amount  of  impact  required,  note,  604. 
damages  caused  by  two  collisions,  dock  dues,  etc.,  note,  604. 
special  coUision  or  running  down  clause,  604. 
decisions  under  this  clause,  notes,  604,  605. 
insured  assumes  part  of  the  risk,  note,  605. 
rule  as  to  costs  of  collision  suit,  note,  605. 
liability  under,  not  particular  average,  note,  605. 
construction  of  word  "ship"  under  the  clause,  note,  605. 
removal  of  obstruction  provision,  note,  605. 
what  losses  are  recoverable,  note,  605. 
damages  for  loss  of  life  not  recoverable,  note,  605. 
New  York  dictum  as  to  meaning  of  collision,  605. 
form  of  the  clause,  769. 
damage  from  stress  of  weather,  769. 
illustration  where  wind  was  not  unusually  heavy,  606. 
damage  from  fire,  606. 
what  constitutes  fire  loss,  284-288. 
in  danger  of  fire,  note,  606. 
slacking  of  lime  is  a  fire,  note,  606. 
damage  to  boiler  from  lack  of  water,  note,  606. 
fire  from  inherent  defect,  606. 
risk  on  shore  during  an  entire  voyage,  607. 
loss  from  explosion  of  boiler,  607. 

whether  loss  by  fire  covered  by  term  "sea  peril,"  607. 
perils  of  war  include  violence  at  hands  of  men,  607. 
capture  frequent  cause  of  loss,  607. 
"capture,"  "takings  at  sea,"  "seizure,"  607. 
instances  of  loss,  608. 
seizure  by  government  of  the  insured,  608. 
many  instances  of  capture,  etc.,  notes,  609. 

"men  of  war,"  "enemies"  distinct  from  pirates,  rovers,  thieves,  608. 
letters  of  mart  and  counter-mart,  608. 
capture  ground  of  abandonment,  609. 

right  to  recover,  facts  at  date  of  abandonment  determine,  609. 
English  rule  otherwise,  609. 


INDEX  901 

[References  are  to  pages,] 

PERILS  INSURED  AGAINST;  MARINE— Continued, 
arrest,  restraint  of  kings,  etc.,  610. 
embargo  a  frequent  species  of  arrest,  611. 
decisions  under,  611. 
loss  by  thieves,  611. 

whether  limited  to  persons  who  enter  and  commit  robbery,  611. 
barratry,  what  the  term  includes,  611. 
numerous  instances  of  barratiy,  notes,  612,  613. 
though  not  intended  to  prejudice  the  owner,  612. 
complicity  between  owTier  and  the  master,  613. 
sole  owner  cannot  commit  barratry  against  himself,  613. 
jettison,  definition  of,  614. 
instances  of,  614. 

jettison  of  deck  load,  note,  614. 
all  other  perils,  losses,  etc.,  614. 
limited  construction  of  clause,  614,  615. 
discussion  of  proximate  cause,  615-624. 
wear  and  tear  ordinary  defect  and  inherent  vice  not  covered  by  policy,  625- 

628. 
special  risks  sometimes  assumed,  648-649. 
list  of  statutory  provisions  regarding  effect  of  special  exceptions,  688. 

PERILS  OF  WAR, 

clause;  marine  policy,  G07-609. 

PERIOSTEUM, 

of  certain  bones  of  fingers  and  consequent  amputation;  "violent  means;" 
accident  policy,  543. 

PERJURY, 

submitting  false  affidavit  in  proofs  of  loss,  not,  at  common  law,  note,  316. 

PERMITS, 

commissioned  agents;  as  to  authority  to  waive  without  written,  205. 
when  waivers  limited  to  written;  effect  of  agent's  knowledge  of  forfeiture,  212. 
must  be  in  writing  or  print  under  most  fire  policies,  317,  322,  323,  458. 

often  attached  to  policy,  459. 

may  be  attached  at  any  time,  note,  317. 
by  parol,  intended  to  be  precluded  by  requiring  waivers  in  writing,  317. 

certain  policies  providing  for  assent  do  not  mention  writing,  317. 
necessary  for  other  insurance,  317,  459. 

"other  insurance  without  notice"   indorsed  without  additional  pre- 
mium, note,  318. 

privilege  is  usually  granted  by  special  clause  in  "the  forms,"  note,  318. 

special,  when  granted,  supersedes  prohibition,  note,  318. 

must  be  in  writing,  322. 

promise  by  agent  to  indorse  in  future,  not  sufficient,  215,  216,  322. 

must  be  indorsed  or  attached,  322. 

telegraphic  consent  binding,  322. 

writing  or  print  required  under  Massachusetts  policy,  323. 


902  INDEX 

[References  are  to  pages.] 

PERMITS— Continued. 

this  requirement  not  in  certain  other  standard  policies  providing 
for  assent,  324. 

effect  of  coinsurance  clause  and  limited  consent,  324. 

inferred  in  case  where  average  clause  applicable,  note,  324. 

sometimes  worded  "privilege  for  other  concurrent  insurance,"  note,  324. 
to  work  overtime  in  factories,  325,  459. 
to  increase  hazard;  effect  of  acts  of  contiguous  owners,  332. 

for  hazardous  use,  etc.;  insured  entitled  to  full  benefit  of,  33? 

clause  as  to,  in  Massachusetts  policy,  334. 
to  make  additions,  alterations,  and  repairs,  290,  459. 

to  make  ordinary  alterations  and  repairs,  335. 
for  builder's  risk,  note,  335. 
to  cover  though  on  leased  ground,  340,  459. 

equitable  right  to  fee  simple;  effect  of  though  no  permit,  340. 
alienation  or  sale  without;  early  forms,  343. 

consent  of  insurer  necessary  to  introduce  new  party  into  contract,  344 

prohibited  change  of  interest  without;  effect  of,  348. 

necessary  to  foreclosure,  if  known  to  insured,  348. 

necessarj'^  to  transfer  or  assignment  in  bankruptcy  or  insolvency,  352. 

necessary  to  sale;  Massachusetts  policy,  352. 

necessary  to  sale  of  all  insurable  interests;  South  Dakota  policy,  note, 
353. 
consent  necessary  to  assignment  of  policy,  353. 

such  consent  implies  consent  to  transfer  of  interest,  353. 

effect  of  assignnunit  by  mortgagee  of  mortgage,  and  "as  his  interest 
may  appear,"  note,  353. 

policy  transferred  as  collateral,  with  or  without  assent;  effect,  354. 

to  assignment  makes  new  contract  with  assignee,  354. 

to  assignment;  effect  as  to  prior  breaches,  354,  355. 

to  assignment;  only  insurer  can  object  to  want  of  consent,  355. 

unnecessary  to  assignment  of  claim  after  loss,  355. 

otherwi.se  as  to  balance  of  policy  remaining  after  loss,  355. 

in  writing  or  print  necessary  to  assignment;  Massachusetts  policy,  356 
to  use  prohibited  articles,  4.59. 
when  implied  from  written  description;  use  of  prohibited  articles,  357-360. 

repairs  may  be  made  in  reasonable,  etc.,  way,  though  prohibited  arti- 
cle used,  359. 

implied  to  sell  flashlight  powder  does  not  warrant  its  manufacture,  360- 
to  remain  unoccupied,  or  for  vacancy,  301,  note,  362,  366,  459. 

whether  required,  temporary  unoccupancy,  361. 

period  of  unoccupancy  as  expressly  permitted,  limited  by  standard 
policy,  361. 

to  employ  mechanics  for  fifteen  days  does  not  impliedly  allow  unoc- 
cupancy, note,  364. 

allowing  vacancy  for  certain  number  of  days,  strictly  limited,  note,  36^ 

to  leave  house  vacant  for  summer,  liberally  construed,  366, 

for  winter  season,  construed,  note,  366. 

for  vacancy  does  not  impliedly  include  permit  for  repairs,  note,  366. 


IKDEX  903 

[References  are  to  pages.] 

PERMITS— Continued. 

Soith  Dakota  policy  prohibits  vacancy  for  more  than   thirty  days 
without,  note,  367. 
solicitors  no  express  authority  to  grant;  life,  198. 
Ufe  policies  often  provide  that  agents  may  not  grant,  193,  525. 
to  travel  by  particular  route  or  to  stay  in  hazardous  region,  493. 
marine  policies  assignable  at  common  law  without  consent,  note,  353. 
character  of  assignee  of  marine  policy  increasing  risk,  note,  584. 
employer  must  not  settle  claims  without  insurer's  consent;  liability  insur- 
ance, 674. 

See  Waiver  and  Estoppel. 

PERSONAL  EXAMINATION, 

of  assured  under  oath;  loss  by  fire,  415-417. 

Massachusetts  policy,  417. 
of  assured  under  oath;  right  to  have  attorney  present,  416. 

books  of  accounts,  vouchers,  etc.;  production  of,  417. 

enforcing  requirement  no  waiver,  431. 

PERSONAL  PROPERTY, 

interest  or  ownership  clause,  336,  337. 
chattel  mortgage  clause,  340. 
embraced  by  alienation  clause,  344. 

PETROLEUM, 

trivial  quantities,  357. 

use  of,  whether  increase  of  risk,  329. 

PHARYNGITIS, 

whether  a  disease,  480. 

PHOTOGRAPHER, 

business  of;  covers  all  stock  and  materials  ordinarily  used  in,  note,  358. 
implied  consent  to  sell  flashlight  powder  does  not  permit  its  manufacture, 
360. 

PHYSICIAN, 

incomplete  answer  as  to  name  and  address  of;  life;  when  a  representation, 

149. 
examining;  no  authority  to  receive  payment;  assessments,  note,  505. 
See  Family  Physician;  Medical  Examiner. 
PILOT, 

necessity  of;  seaworthiness,  226. 

PIRATES,  608. 

PLACE  OF  CONTRACT, 

laws  of  place  where  contract  made  ordinarily  control,  113. 

rule  particularly  appropriate  to  insurance  contracts,  113. 

what  is  u.sually  regarded  as,  note,  113. 

qualification  of  rule  as  to,  113. 

place  of  mailing  as,  note,  113. 

where  policy  mailed  from  home  office,  114. 


904  INDEX 

[References  are  to  pages.] 

PLACE  OF  CONTRACT— Continued. 

when  policy  not  binding  until  countersigned  at  certain  agency,  114. 

where  policy  sent  to  agent  for  delivery  on  receipt  of  premium,  114. 

place  where  last  act  done,  as,  114. 

place  of  countersigning  under  terms  of  fire  policy,  460. 
PLAN, 

if  referred  to  in  fire  policy  is  a  warranty,  377. 

and  specifications  of  buildings,  etc.,  to  be  furnished;  proofs  of  loss,  413. 

PLATE  GLASS, 

insurance  of,  note,  652. 

PLEADING, 

what  plaintiff  must  allege,  note,  155. 

how  far  burden  on  insurer  as  to  breach  of  warranty,  154-156. 

general  denial;  breach  of  warranty,  note,  155. 

waiver  or  estoppel  must  be  pleaded,  187. 

plaintiff  must  allege  and  prove  certain  essential  affirmative  conditions,  188. 

and  proof  of  statutory  notice  that  premium  due,  note,  501. 

PLEDGES, 

of  pohcy  as  collateral;  assignment  of  policy  clause,  353,  354. 
authority  of  master  to  pledge  cargo,  267. 

PLEURISY, 

following  injury;  what  is  sole  cause  of  death;  accident  policy,  547. 

PNEUMONIA, 

following  injury;  what  is  sole  cause  of  death;  accident  policy,  547. 
whether  a  disease,  is  for  jury,  480. 

POISON, 

unintentionally  or  inadvertently  taken;  accident  policy,  539,  note,  542. 
voluntary  or  involuntary  taking  of  poison  or  contact  with  poisonous  sub- 
stances; accident  policy;  excepted  risks,  566-568. 

POLICY, 

derivation  of  word,  12. 

is  written  instrument  embodying  contract,  note,  1. 
different  kinds  of  policies,  21-24. 

See  AcciDEXT  Policy  and  Clauses;  Clauses;  Fire  Policy  and  Clauses; 
Life  Policy  and  Clauses;  Marine  Poucy  and  Clauses. 

POLICY;  ACCIDENT  INSURANCE,  FORM  OF,  764. 

POLICY;  FIRE  INSURANCE, 

See  Forms. 

POLICY;  FLORENTINE  ANCIENT  MARINE,  766. 

POLICY;  LIFE  INSURANCE,  FORMS  OF,  759,  760. 

POLICY;  MARINE  INSURANCE,  FORM  OF,  767. 


INDEX  'JOO 

[References  are  to  pages.] 

POOLING  AGREEMENT, 

for  earnings  or  profits  does  not  avoid  use  and  occupancy  policy;  alienation 
clause,  345. 

POOLS, 

ouster  of  insurance  companies  for  violation  of  statutes  against,  note,  10. 

PORT, 

risk  at,  588,  589. 

specified,  not  "ports;"  deviation,  231,  232. 

of  refuge  and  other  expenses;  general  average,  266. 

expenses  of  entering,  unloading,  warehousing,  and  reloading  cargo;  general 

average,  267. 
whether  Uberty  to  call  at,  gives  liberty  to  land  and  load  cargo,  598. 

PORTS, 

warranty  not  to  visit  certain,  639. 

PORTS  OR  PLACES, 

privilege  to  sail  to,  touch  and  stay  at,  598. 

POSSESSION, 

change  of,  whether  avoids  fire  policy,  343-352. 
change  of;  chattel  mortgage,  340. 

See  AuENATioN. 

POWER  OF  ATTORNEY, 

to  insurance  conmiissioner;  discontinuance  of  business  does  not  revoke, 
note,  9. 

PREGNANCY, 

non-disclosure  of,  note,  480. 

need  not  be  disclosed;  life,  note,  128. 

consistent  with  "  sound  health,"  note,  482. 

PREMISES, 

meaning  of  in  memorandum  clause;  fire  policy,  356. 
means  what;  vacancy  clause,  note,  362. 

See  Adjacent  Premises;  Description;  Location. 

PREMIUM, 
1.  In  General. 
a  proportionate  contribution  upon  many,  1. 
the  insurer's  compensation,  note,  1. 

exchanges  or  associations  whether  trusts  by  fixing  rates,  note,  10. 
unlicensed  companies  not  in  position  to  collect,  11 
dependent  upon  average  results,  18,  19. 
when  and  when  not  returnable,  76,  77,  283,  651. 
when  not  apportionable,  77 
rate  of,  essential  to  complete  contract,  98. 
retention  of,  as  evidence  that  contract  closed,  note,  100. 
failure  of  agent  to  transmit  to  insurer,  completion  of  contract,  note,  100. 
rate  of,  proportioned  to  character  and  extent  of  hazard,  119. 


906  INDEX 

[References  are  to  pages.J 

FREMIVM— Continued. 

as  affected  by  representations  and  concealment;  generally,  119. 
2.  Fire  Insurance. 

market  or  reasonable  rate  in  closing  contract,  96 

credit  for  given;  closing  contract,  96.  281. 

liability  of  broker  for,  notes,  96,  97. 

effect  of,  upon  contract  as  severable,  note,  152,  154. 

estoppel  to  set  up  vUra  vires  against  premium  note;  when  exists,  159. 

failure  to  cancel  and  return  unearned,  whether  evidence  as  to  intent  to 
waive,  note,  178. 

agent  may  be  shown  to  have  authority  to  waive  forfeiture  for  non-payment 
of,  note,  194. 

commissioned  agent's  authority  to  fix  rates,  205. 

payment  of,  not  a  condition  precedent  under  policy  in  common  use,  205,  281. 

where  credit  given,  custom  is  for  agent  to  do  so  on  own  responsibility,  205. 

party  taking,  and  delivering  policy  presumed  to  be  agent,  205. 

insurer  only  can  raise  point  that  note  for,  is  without  consideration  or  policy 
void,  note,  205. 

collection  of,  estops  claiming  prior  known  forfeiture,  217,  218. 

where  premium  not  collected  until  after  loss;  estoppel,  note,  217. 

agent's  collection  of,  with  knowledge,  permits  recovery,  note,  217. 

authority  of  soliciting  agents  as  to  payment  of,  219. 

insurer  entitled  to  payment  on  delivery  of  policy,  or  closing  of  contract, 
unless,  281. 

ordinarily  non-payment  not  a  ground  of  forfeiture,  281. 

how  paid,  281. 

payment  by  note,  281. 

promise  to  pay  implied  by  acceptance  of  policy,  281. 

delivery  of  policy  and  payment  of,  declared  reciprocal  or  concurrent  con- 
siderations, note,  281. 

credit  presumed  allowed  where  policy  delivered  without  requiring  prepay- 
ment, 281. 

company  may  accept  payment  by  giving  credit  to  broker,  note,  281. 

if  company  accepts  credit  with  agent,  transaction  is  equivalent  to  payment, 
281. 

company  often  cancels  for  non-payment,  note,  281. 

mutual  companies  often  require  prepayment,  note,  281. 

note  taken  for,  a  binding  obligation  when  risk  attaches,  note,  281. 

note  may  be  collected  though  insurance  suspended  for  default  in  its  pay- 
ment, note,  281. 

note  given  for,  is  negotiable,  note,  281. 

voidable  policy  is  sufficient  consideration  for  note  for,  note,  281. 

in  mutual  companies  payment  often  by  premium  or  deposit  notes  in  whole 
or  part,  282. 
assessment  o  i  such  notes,  282. 
such  notes  generally  made  a  lien,  on  insured's  property,  note,  283. 

provisions  in  Iowa  standard  policy  as  to  default  in  payment  of  premium 
notes,  note,  283. 

if  agent  pays  company  latter  cannot  forfeit  policy,  note,  282. 


INDEX  907 

[References  are  to  pages.] 

VREMllFM—ConHnued. 

even  though  provision  that  company  not  Uable  "until  the  premium 
be  actually  paid,"  note,  282. 
if  poHcy  delivered  without  payment,  non-payment  no  defense  against  loss, 
note,  282. 

unless  liability  repudiated  on  other  grounds,  note,  282. 
if  unpaid,  should  be  tendered  before  action  commenced,  note,  282. 
unearned,  need  not  be  tendered  back  as  condition  of  defending  action  un- 
less, note,  282. 
retained,  forfeiture  not  waived,  note,  282. 
insured  seeking  rescission  liable  for  premium  until  time  of  rescission,  note, 

282. 
obligation  for,  when  insurer  insolvent,  note,  282. 
to  whom  payable,  283. 
general  or  local  agent  with  power  to  countersign  has  apparent  authority  to 

collect,  283. 
option  to  choose  eighty  per  cent  or  full  coinsurance  clause,  latter  carries 

lower  rate  of,  note,  283. 
separate  or  gross  rates,  as  bearing  on  divisibility  of  contract,  305. 
return  or  tender  of  unearned;  cancellation,  387,  388,  392,  692. 
return  of,  when  policy  becomes  void,  393. 
may  be  paid  by  mortgagee,  on  policy  for  own  benefit,  393. 
3.  Life  Insurance. 

law  against  rebates  on,  by  agents,  constitutional,  note,  10. 

are  based  upon  mortality  tables,  19. 

net,  is  what,  20. 

gross  or  office,  is  what,  20. 

"reserve,"  is  what,  20. 

paid  in  whole  or  part  with  embezzled  money;  to  whom  proceeds  of  policy 

belong,  notes,  79,  80. 

to  what  extent  insured  is  debtor  for,  89. 

paid  by  insolvent  debtors,  rights  of  creditors,  90,  91. 

paid  out  of  wife's  separate  estate;  insured's  creditors  no  claim,  note,  91. 

usually  necessary  that  first  be  paid  to  complete  contract,  98. 

local  agent  not  infrequently  collects  first,  provisionally,  98. 

agent's  authority  as  to  non-cash  payments,  525. 

when  local  agent  has  implied  authority  to  determine  how  first  shall  be 

paid;  cash  or  credit,  198,  199,  497. 
effect  where  application  or  policy  gives  notice  of    agent's  limited  au- 
thority, note,  196,  199,  497. 
soliciting  agent  no  implied  authority  to  take  personal  property  in  payment, 

199. 
effect  of  notice  of  restriction  upon  solicitor's  authority,  202. 
tender  of  and  action  on  policy;  anticipatory  breach,  469,  470. 

measure  of  recovery;  anticipatory  breach,  469-471. 
insurer  cannot  offset  against,  the  cost  of  carrying  insurance  to  time  of  re- 
scission for  insurer's  fraud,  note,  471. 
payment  of;  clause  as  to,  495-500. 
time  of  payment,  495. 


908  i^DEX 

[References  are  to  pages.] 

PRE  MI  UM — Continued . 

necessity  of  punctuality  in  payment,  495. 
place  of  payment,  495. 

policy  not  to  take  effect  until  first  premium  paid,  495. 
duty  of  insured  to  seek  out  designated  place  or  agent  and  pay,  note,  495. 
effect  of  antedating  policy,  496. 
what  are  not  excuses  for  non-payment,  496. 

when  company  not  required  to  give  notice  that  premium  due,  496. 
when  company  not  required  to  give  notice  of  election  to  forfeit  for  non- 
payment, 496. 
set-off  of  earnings  not  declared  as  dividends  cannot  be  claimed  by  insured, 

496. 

effect  of   payment  by  note   and   policy  provision   for  forfeiture   for  non- 
payment, 496,  497. 

where  falls  due  on  Sunday,  note,  496. 

as  to  holidays,  note,  496. 

custom  or  mode  of  dealing  as  affecting  mode  of  payment,  498. 

payment  by  check  or  other  equivalent  instead  of  cash,  498. 

receipt  and  retention  of  at  home  office  as  a  waiver,  498,  499. 

grace  for  payment  of,  499,  500,  703. 

statutory  notice  required  that  due,  500,  705. 

when  and  upon  whom  notice  served,  notes,  500,  501. 

non-payment  of;  extended  or  paid  up  policy,  502,  503. 

non-payment  of,  reinstatement  of  assured  on  conditions,  503. 

may  be  exacted  simultaneously  with  delivery  of  policy,  503. 

entire  annual,  due  when  risk  attaches,  note,  503. 

when  a  debt  collectible  by  company,  503. 

distinctions  as  to  first,  between  fire  and  life  policies,  503. 

4.  Marine  Insurance. 
when  apportionable,  77. 

necessary  to  disclose  facts  affecting  rate;  caveat  emptor  not  applicable,  120, 

121. 
fraud  of  insurer;  rescission  and  return  of,  note,  651. 
where  insured  interest  short,  insured  entitled  to  proportionate  return  of, 

note,  651. 
when  and  when  not  returnable;  instances  given,  note,  651. 
returnable  if  risk  does  not  attach,  note,  651. 
not  apportionable  or  returnable  where  risk  attaches,  unless  express  pro* 

vision  to  contrary,  note,  651. 

5.  Liability  Insurance. 

upon  what  based,  under  different  classes  of  policies,  664,  665. 
production  and  inspection  of  books  to  adjust,  665. 

See  Assessments;  Notes;  Waiver  and  Estoppel. 

PRESUMPTION, 

that  notice  of  loss  received  when  mailed  in  due  course,  405. 

insurer  presumed  to  know  what  belongs  to  business  insured,  note,  358. 

against  suicide  and  insanity,  517. 

favors  accident  rather  than  murder  or  suicide,  note,  541. 


INDEX  909 

[References  are  to  pages.] 
PRESUMPTION— Continued. 

of  death  from  absence,  or  when  unheard  of,  or  disappearance,  558,  note,  650. 
of  loss  of  ship,  note,  603. 

See  Evidence. 
"PRIME  COST," 

the  test  of  value,  adjustment  on  goods;  marine,  254,  255. 

PRINTING  OFFICE, 

blacksmith  shop  added  to;  not  increase  of  risk,  note,  330. 
privilege  to  keep  camphene  in,  358. 

PRIVATEER. 

rumor;  proximity  of,  not  disclosed;  marine,  note,  121. 

PRIVILEGE, 

to  touch  and  stay;  marine  risk,  598. 
to  deviate,  649. 

See  Consent;  Permits. 

PROCESS, 

change  in  interest,  title,  or  possession  by  legal,  343. 
legal  proceedings;  alienation  clause,  351. 

PROFITS 

must  be  specifically  insured,  57,  58,  586. 

policy  on,  is  valued,  note,  58. 

policy  holder  cannot  demand  account  of  his  share  of;  life,  88. 

landlord's  policy  on;  construed  as  open  and  not  valued,  when,  note,  111. 

total  loss  of.  note,  242. 

no  basis  for  abandonment,  note,  247. 

valued,  loss  of;  adjustment  of,  note,  254. 

PROHIBITED  WATERS,  598,  note,  143. 

PROMISSORY  NOTE, 

See  Note. 

PROOF  OF  ACCIDENT, 

or  injury;  accident  policy,  555-557. 

PROOFS  OF  DEATH, 

as  prerequisite  to  assessment  levy,  506. 

to  be  furnished  notwithstanding  incontestable  clause,  532. 

under  the  accident  policy,  555-557. 

PROOFS  OF  LOSS, 

good  faith  demands  their  production  without  policy  provision   note,  180. 

payment  of  insured  sixty  days  after  satisfactory,  302. 

provisions  of  standard  policy  more  liberal  than  former,  401. 

importance  of  clause  to  the  insurers,  402. 

compliance  a  condition  precedent  to  right  of  recovery,  402. 

a  condition  precedent  also  under  binding  slip,  note,  402. 
liberal  nile  of  construction  regarding  matters  of  technicalities,  402. 


910  INDEX 

[References  are  to  pages.] 

ftOOFS  OF  LOSS— Continued. 

proofs  irregularly  verified,  note,  402. 

tardy  service  of  proofs,  note,  402. 

relating  to  magistrate's  certificate,  note,  402. 

examination  of  insured  under  oath,  note,  402. 

wife  of  insured  allowed  to  verify,  note,  402. 

need  not  fulfill  literally,  note,  403. 

courts  are  astute  to  infer  waivers,  178  et  seq.,  note  403. 

interest  held  to  run  from  date  of  fire,  note,  403. 
clause  in  Massachusetts  standard  policy,  403. 

mortgagor  and  not  mortgagee  under  mortgagee  clause  is  proper  party  to 
make,  403. 

if  mortgagor  refuses,  mortgagee  can  make,  400. 

decisions  of  Massachusetts  court,  403. 
provisions  of  other  standard  policies,  note,  403. 
requirements  of  fire  policy  clause  considered  in  detail,  406-430. 
details  of  Massachusetts  policy  differ,  407. 
the  sworn  statement  of  loss,  407. 
inventory  usually  incorporated  or  attached,  407. 
inventory  must  contain  what,  407. 
as  to  property  totally  destroyed,  note,  407.  « 

the  insured  need  not  use  the  company's  blanks,  note,  407. 
as  to  the  removal  by  insured  of  damaged  property,  note,  407. 
until  statement  received  the  insurer  need  not  examine  loss,  note,  407. 
statements  in  proofs  are  admissions  but  not  evidence  for  insured,  186,  note, 

407. 
sworn  notice  without  particulars  held  sufficient,  total  loss,  note,  407. 
must  be  served  within  sixty  days,  407,  408. 

contrary  rule  and  reasons  of  certain  courts  for  it,  408. 
reasons  in  favor  of  the  prevailing  view,  409. 
period  runs  from  fire,  410. 

date  when  damaged  property  can  be  inspected,  410. 

whether  proofs  must  be  actually  received  within  sixty  days,  410. 

if  times  expires  Sunday,  whether  Monday  will  answer,  note,  410. 

mailing  creates  a  presumption  of  receipt,  410. 

conflict  in  decisions  as  to  mailing,  410. 
binder  governed  by  usual  terms  of  policy,  note,  410. 
what  will  excu.se  failure  in  strict  compliance,  410,  411. 

insanity,  sickness,  death,  absence,  etc.,  note,  411. 
insurer  entitled  to  personal  oath  of  insured,  411. 
oath  of  one  insured  sufficient,  411. 

one  proof  held  sufficient  for  several  policies  in  same  company  411. 
proofs  by  agents  and  third  parties,  note,  411. 
a  mere  payee  is  not  the  insured,  note,  411. 
reasonable  compliance  with  particulars  required,  411. 
statements  in  proofs  rcfiT  to  date  of  fire,  note,  411. 
method  of  giving  past  inventory  with  subsequent  purchases  and  sales  less 

profits,  note,  412. 
need  not  disclose  an  interest  acquired  after  loss,  note,  412. 


INDEX  911 

[References  are  to  pages.] 

PROOFS  OF  LOSS— Continued. 

as  to  disclosing  cause  of  fire,  note,  412. 

cost  price  need  not  be  given,  note,  412. 

other  insurance,  etc.,  to  be  given,  note,  412. 

other  insurance  need  not  be  apportioned,  note,  412. 

proof  where  goods  totally  destroyed,  note,  412. 

defects  in  proofs  must  be  pointed  out  definitely,  note,  412. 

as  to  carrier's  insurance,  his  own  or  for  others,  note,  412. 

"satisfactory  proof,"  means  which  ought  to  be  considered  satisfactory,  412. 

proofs  where  to  be  served,  412. 

service  upon  local  agent,  413. 

authority  of  countersigning  agent,  etc.,  to  waive  proofs,  218-220,  note,  413. 

magistrate's  certificate,  plans,  etc.,  if  required,  413. 

no  such  clause  in  Massachusetts  policy,  413. 

objections  to  papers  must  be  promptly  made,  note,  413. 

whether  plans  can  be  required  under  valued  policy  laws,  note,  413. 

certificate  of  magistrate  not  interested  in  the  claim  nor  related  to  insured, 

etc.,  413. 
sixty-day  limit  not  applicable  to  additional  proofs,  413. 
additional  proofs  must  be  called  for  within  reasonable  time,  413. 

notice  for,  must  be  explicit,  414. 
magistrate  nearest  the  fire  means  what,  414. 
magistrate  when  disqualified,  414. 
effect  of  failure  to  get  magistrate's  certificate,  414. 
as  to  contents  of  the  certifieate,  415. 
assured  not  concluded  by  statements  contained  in,  415. 
insured  must  exhibit  remains  of  propertj^,  415. 

insured  must  submit  to  personal  examination  under  oath  if  required,  415. 
must  not  remove  or  dispose  of  property,  415. 
demand  for  examination  must  be  clear  and  distinct,  415. 
reasonable  time  and  place  must  be  named,  415. 
place  named  out  of  county  held  unreasonable,  note,  415. 
what  is  a  proper  place,  note,  416. 

insurer  must  exercise  option  within  reasonable  time,  416, 
insurer  is  entitled  to  personal  oath  of  the  assured  unless,  416. 
effect  of  absence,  incompetence,  etc.,  416. 
what  inquiries  are  material  and  proper,  note,  416. 
on  completion  of  examination  insurer  cannot  have  new  hearing,  416. 
insured  entitled  to  presence  of  his  attorney,  416. 
proper  scope  of  the  examination,  417. 
question  of  compliance  when  for  jury,  note,  417. 
effect  of  willful  misstatement,  417. 
production  of  books,  bills,  etc.,  may  be  required,  417. 
whether  personal  examination  and  calling  for  books  amount  to  waiver, 

182-184,  note,  417. 
notice  within  reasonable  time  and  appoint  reasonable  time  and  place,  417. 
too  late  after  action  begun,  note,  417. 
reasonable  compliance  required  from  insured,  418. 
foiin  of  Massachusetts  clause,  418. 


912  INDEX 

[References  are  to  pages."] 

PROOFS  OF  LOSS— Continued. 

appraisal  may  be  required,  418-430. 

retention  of  proofs  waives  defects  that  might  have  been  iremedied,  186,  187. 

objections  must  be  promptly  made,  187. 

insured  to  be  allowed  reasonable  time  for  corrections,  187, 

refusal  by  company  to  furnish  proofs,  not  a  waiver,  note,  187. 

adjustment  as  to  amount  of  loss  waives  proofs,  note,  187. 

marine  insurance,  note,  650. 

credit  insurance,  note,  663. 

statutes  affecting  proofs  of  loss,  697. 

form  of  proofs  of  loss,  737. 

See  Appraisal;  Fraud  or  False  Swearing;  Notice  of  Loss;  Waiver  and 

Estoppel. 
PROPERTY  INSURED, 

under  fire  policy,  288-292. 

under  marine  policy,  586-588. 

protection  of,  by  insured  in  case  of  loss;  fire  policy,  401,  403,  406. 

PRO  RATA  CLAUSE, 

to  prevent  circuity  of  action,  61. 
contributing  policies;  fire,  431-440. 
what  is  other  contributing  insurance,  433-435. 
reinsurance  rider,  446,  447. 

PRO  RATA  ITINERIS, 
freight  pending,  250. 

PROSPECTUS, 

not  admissible  to  vary  terms  of  policy,  note,  106. 
though  insured  has  been  misled,  note,  106. 

PROTECTION  OF  PROPERTY, 

in  case  of  loss  or  exposure  to  loss;  duties  of  insured,  401,  403,  406. 

PROXIMATE  CAUSE, 

only  proximate  results  of  the  peril  insured  against  are  covered,  57,  58, 

note,  616. 
more  remote  results  must  be  specifically  insured,  57,  58. 

loss  of  prospective  profits,  57. 

loss  of  trade,  57. 

loss  of  use  and  occupancy,  57. 

loss  of  freight,  57. 
proximate  cause  is  not  always  nearest  in  time  or  place,  note,  288. 
definition  and  description  of,  284,  615,  616,  note,  619. 
fire  as,  covers  what  in  fire  policj'^,  284-280. 
includes  more  than  mere  combustion,  285. 

fall  of  walls,  water  loss,  exposure  of  property,  theft,  etc.,  285. 
issue  of  proximate  cause  often  for  jury,  note,  285. 
fall  of  walls  several  days  after  fire,  notes,  285,  286. 
effect  of  word  "direct,"  standard  fire  policy,  284. 
where  combustion  is  altogpthor  outside  of  premises  insured,  286. 


INDEX  913 

[References  are  to  pages.] 

PROXIMATE  CAUSE— Continued. 

fire  followed  by  falling  walls  after  fire,  notes,  286,  287. 

word  "direct"  omitted,  Massachusetts  policy,  287. 

decisions  under  Massachusetts  policy,  287,  288. 

fire  conjoined  with  explosion,  explosion  clause  cf  fire  policy,  369-374,  620- 

623. 
important  test  whether  fire  or  explosion  is  the  primary  catastrophy,  369. 
natural  results  of  primary-  cause  not  deemed  causes,  370. 
immaterial  that  conflagration  starts  outside  the  premises,  371. 
where  loss  is  solely  by  concussion,  371. 
uncertainty  may  raise  question  of  fact,  371. 
where  fire  causes  incidental  explosions,  notes,  370,  371. 
where  fire  causes  gasoline  explosion,  loss  by  concussion,  372. 
where  fire  causes  dynamite  explosion  and  loss  by  concussion,  373. 
loss  by  tornado  followed  by  loss  by  lightning,  373. 
where  fire  in  vessel  caused  explosion  causing  loss  on  shore  by  concussion 

only,  373. 
whether  spread  of  fire  is  proximate,  under  subrogation,  451. 
under  the  terms  of  the  accident  policy,  544-548. 
whether  accident  or  disease  is  the  significant  cause,  540,  542,  545-548,  562- 

565. 
general  discussion  of  proximate  cause  under  marine  policy,  615-625. 
full  discussion  profitable  under  marine  policy,  615. 
when  nearest  antecedent  cause  held  responsible,  616. 
the  law  does  not  look  backward  indefinitely  for  original  cause,  616. 
when  negligent  navigation  is  not  regarded  as  predominant  cause,  617. 
how  far  responsible  cause  is  followed  in  its  results,  617,  618. 
illustration  of  the  Tarrant  case,  618,  note,  371. 
issue  when  for  jur>',  619. 

independent  intermediate  cause  may  break  the  chain,  619. 
illustrative  cases,  619,  620. 

joint  action  of  peril  insured  against  and  peril  excepted,  620. 
difficult  questions  presented,  note,  620. 

mere  natural  incident  or  concomitants  not  to  be  accounted  cause,  620. 
many  illustrative  cases,  620-623. 
hostile  agency  first  in  operation  gives  character  to  the  whole,  623. 

stranding  not  insured  followed  by  capture,  616. 

hole  gnawed  by  rats  followed  by  sea  water,  616. 

unseaworthiness  and  stress  of  weather,  time  policy,  616. 

stranding  not  insured  followed  by  fire,  617. 

negligent  navigation  followed  by  sea  peril,  617. 

fire  followed  by  loss  from  sinking,  618. 

fire  in  other  premises  followed  by  explosion  and  concussion  loss,  618. 

collision,  subsequent  loss  in  handling  goods  for  reshipment,  620. 

animals  insured  "free  from  mortality"  injured  by  storm,  620. 

ventilators  closed  for  storm,  injury  from  lack  of  ventilation,  621. 

stranding  followed  by  ice  detention,  ice  clause,  621. 

explosion  followed  by  in-rushing  sea,  622. 

derangement  of  machinery,  delay  and  sea  peril,  622. 

58 


914  INDEX 

[References  are  to  pages.] 

PROXIMATE  CAVSE— Continued. 

fire  followed  by  destructive  acts  of  mob,  plate  glass  insurance,  note,  622. 

explosion  followed  by  fire  extending  through  intermediate  building, 
note,  623. 

capture  and  subsequent  wreck,  638. 

wreck  and  subsequent  capture,  638. 
independent  cause  producing  distinguishable  damages,  623. 

light  in  lighthouse  extinguished  in  war,  vessel  striking  on  reef,  624. 

damages  by  fire  and  collision  apportionable,  note,  624. 
the  rule  as  limiting  marine  insurers'  liability,  624. 

loss  of  freight  from  delay,  624. 

loss  for  wages  and  food  during  delay,  624. 

loss  of  perishable  articles  from  delay,  624. 

loss  of  profit,  625. 

PROXIMATE  AND  SOLE  CAUSE, 

independently  of  all  other  causes;  accident  policy,  544-548. 

PUBLIC  POLICY, 

ousting  courts  oi  jurisdiction,  note,  9,  420. 

valued  policy  laws  whether  against,  note,  31. 

doctrine  of  insurable  interest  based  upon,  32. 

prevents  recovery  by  assignee  of  policy  of  insured  murderer,  82. 

as  related  to  the  doctrine  of  waiver  and  estoppel,  163-166,  213,  214. 

as  related  to  the  warranty  of  seaworthiness,  222. 

RAILWAY  BRIDGE, 

walking  or  being  on;  accident  policy,  579. 

RAILWAY  RELIEF  DEPARTMENT, 

not  insurance  company,  nor  contract  an  insurance  contract,  5. 

RATIFICATION, 

of  agent's  unauthorized  acts;  completion  of  contract,  note,  100. 
even  after  loss,  under  clause,  "held  in  trust,"  294. 
after  loss  under  clause,  for  whom  it  may  concern,  note,  296,  584. 

RATING, 

as  affecting  issue  of  increase  of  risk,  note,  334. 

RANSOM, 

covered  by  marine  policy,  609. 
allowed  in  general  average,  267. 

RATS, 

direct  damage  by  rats  or  vermin  not  covered,  notes,  600,  602,  626. 
damage  by  sea  water  rushing  in  through  rat  hole  covered,  616,  note,  626, 

READING  RULE, 

apportionment,  note,  441. 

REAL  PROPERTY, 

and  personal,  embraced  by  alienation  clause,  344, 


INDEX  915 

[References  are  to  pages.] 

REBUILDING, 

increased  cost  of;  "indemnity,"  298. 
reinstatement  clause  of  fire  policies,  302-305. 

valued  policy  laws  as  affecting  the  clause,  note,  303. 
election  to  rebuild  once  made  is  final,  303. 

makes  new  contract,  304. 

measure  of  damages  for  default,  304. 

jury  decides  reasonable  performance,  304. 
insured  cannot  maintain  action  where  he  refuses  to  permit  replacing  prop- 
erty; fire,  304. 
improperly  done,  or  not  done  in  reasonable  time;  fire,  304. 
prevented  by  public  authorities,  304. 
property  again  burned  during,  304. 
clause  does  not  apply  to  full  mortgagee  clause,  305. 
increase  of  risk;  permits,  333. 

RECEIVERS, 

cannot  take  interest  on  deposited  securities;  insurance  department,  note,  8. 
change  of;  alienation  clause,  note,  348. 

holds  other  interests  than  insured's;  interest  or  ownership  clause,  note,  338. 
appointment  of  partner  as,  of  firm;  alienation  clause,  352. 
insurance  as;  new  appointment  does  not  avoid,  352. 

oath  of;  not  a  substitute  for  that  of  assured's  personal  examination  under 
oath;  loss  by  fire,  416. 

RECOVERY, 

by  beneficiary;  vested  rights, 

See  Beneficiaky. 
under  fire  policies;  amount  of,  72. 
See  Adjustment;  Apportionment;  Loss;   Measure  of  Indemnity. 

REFORMATION, 

See  Equity. 

REGISTERED  CAPACITY, 

of  vessel;  warranty  as  to  loading,  640. 

REGULATION  AND  CONTROL, 

every  state  has  system  of  statutory  law  for  organization  and  government 
of  insurance  companies,  7. 
New  York  general  insurance  law,  note,  7. 
insurance  departments  and  prerogatives,  8,  9. 
deposits  of  assets,  annual  reports,  etc.,  8. 
insolvent  corporations,  8. 

Congress  has  no  authority  to  manage  business,  note,  8. 
issuing  policy  to  citizen  of  another  state  not  interstate  commerce, 
note,  8. 
as  to  investments,  expenses,  commissions,  amount  at  risk,  reserve,  etc  ,  9. 
representative  of  foreign  company  for  service  of  papers,  9. 
state  cannot  prevent  its  citizen  from  making  valid  contract  outside  the 
state,  note,  9. 


916  INDEX 

[References  are  to  pages.] 

REGULATION  AND  CONTROL— Continued. 

prohibiting  removal  of  causes  to  federal  courts,  9. 
courts  cannot  be  ousted  of  jurisdiction,  note,  9. 
but  revocation  of  license  may  be  imposed  as  penalty,  note,  9 
state  may  capriciously  exclude  foreign  corporation  or  impose  conditions 
of  admission,  10. 
foreign  corporation  if  admitted  must  have  equitable  treatment,  note,  10 
ousting  for  violating  anti-trust  laws,  note,  10. 
restrictions  upon  Lloyd's  whether  constitutional,  10. 

non-resident  individuals  must  procure  license,  note,  10. 
laws  prohibiting  rebates,  note,  10. 

underwriters'  associations  whether  in  restraint  of  trade,  note,  10. 
legislature  has  power  to  prescribe  form  of  insurance  policy,  278. 
See  Statutes. 
REGULATIONS, 

of  mutual  companies  as  part  of  policy,  458. 

REINSTATEMENT, 

or  rebuilding,  increased  cost  of;  "indemnity,"  298. 
of  assured  on  lapse  for  non-payment  of  premium;  life,  503. 
See  Rebuilding. 

REINSTATEMENT  CLAUSE,  302-305. 

REINSURANCE, 
what  is,  24,  25. 
special  contracts  of,  448. 

running  contracts  called  "treaties"  described,  449. 
clause;  meaning  and  legal  effect,  441-446. 
usual  rider;  pro  rata  and  retainer  clauses,  446-448. 

origin  of  new  reinsurance  clause,  447. 
what  provisions  of  policies  or  rules  are  and  are  not  applicable,  444,  445. 
"  lost  or  not  lost "  applicable  to,  585. 
statute  of  frauds  inapplicable  to  contract  of,  102,  444. 
time  hmitation  for  suing  clause  inapplicable  to,  454. 
when  avoided  by  representation  as  to  amount  retained,  132. 
must  not  be  confounded  with  a  renewal,  443. 
adjustments  by  original  insurer  and  effect  of,  445. 
liability  as  specifically  agreed  upon,  449. 
actions  between  insured,  insurer,  and  reinsurer,  446. 
when  original  insurer  can  and  cannot  sue  reinsurer,  445. 
defenses  available  to  original  insurer  available  to  reinsurer,  445. 
judgment  in  favor  of  owner  against  original  insurer  binds  reinsurer,  note,  446. 

REINSURANCE  CLAUSE,  FORM  OF,  736. 

REINSURED, 

recovery  by;  fire,  75. 

See  Reinsurance. 

REJECTION, 

by  other  companies;  false  statement  as  to,  478. 


INDEX  917 

[References  are  to  pages.] 

RELATIONSHIP, 

statements  as  to,  of  family,  354. 

RELEASE, 

of  party  primarily  liable;  subrogation,  71. 

of  liability  of  lighterman;  non-disclosure  of;  policy  avoided,  note,  354. 
RELIEF  DEPARTMENT, 

of  railway;  held  not  insurance  company,  5. 

REMEDIES, 

of  insurer  under  doctrine  of  subrogation,  61  et  seq.,  399. 

proceeding  in  equity  may  reach  insurance  money,  89,  90. 

by  suit  for  specific  performance,  or  for  damages  for  breach,  note,  104,  105. 

in  equity  to  compel  insurer  to  live  up  to  contract,  note,  103. 

in  equity  to  compel  issuance  of  paid  up  life  policy,  note,  105. 

in  equity  in  case  of  mistake  or  fraud,  106,  107,  213. 

reformation  of  contract  to  correspond  with  real  agreement,  107. 

court  must  not  use  its  discretion  to  modify  contract  or  to  make  new  terms, 

108. 
whether  right  of  action  suspended  by  war,  145. 
insurer  cannot  insist  on  breach  where  conduct  amounts  to  confirmation  or 

estoppel,  159. 
usually  on  contract  not  for  rescission  or  reformation,  161. 
power  of  equity  to  grant  relief  for  fraud  or  deceit  of  agent,  or  mutual  mis- 
take, 213. 
when  insured  may  recover  back  premium;  fire,  283,  note,  651. 
no  remedy  by  action  on  policy  when  insured   refuses  to  allow  insurer  to 

replace;  fire,  304. 
rescinding  cancellation  when  both  parties  ignorant  of  loss;  fire,  note,  392. 
subrogation  by  contract;  fire,  399. 

when  original  insurer  can  and  cannot  sue  reinsurer;  fire,  445. 
between  insured,  insurer,  and  reinsurer;  fire,  446. 
insured  has  option  between  two  forms  of  remedy;  subrogation,  449. 

may  sue  wrongdoer  or  insurer,  449. 
limitation  of  time  to  sue;  fire,  453. 

anticipatory  breach,  what  remedies  available;  life,  470. 
relief  in  case  of  breach  where  policy  provides  for  non-payment  of  premium; 

life,  note,  496. 
collection  of  note  or  other  instrument  given  in  payment  of  life  premium,  499. 
where  officers  refuse  approval  of  application  for  reinstatement,  503. 
of  insurer  where  default  in  payment  of  premium  on  regular  life  policy,  503. 
insured  no  claim  in  case  of  non-payment  of  premium;  life,  504. 
equity  may  compel  levy  of  mortuary  assessment;  suit  for  damages,  506-508. 
power  of  equity  to  order  exhumation  of  body  of  deceased  member,  558. 
where  contract  is  void  for  fraud  of  insured  premium  not  recoverable,  note, 

651. 
where  insurer  guilty  of  fraud,  insured  may  rescind  and  recover  premiums, 

note,  651. 
where  both  parties  in  pari  delicto,  court  will  not  assist,  note,  651. 
injured  employee  cannot  enforce  policy  of  employer,  667. 

See  Accounting;  Actions;  Defenses;  Equity;  Injunction. 


918  INDEX 

[References  are  to  pages.] 

REMOTE  CAUSE, 

See  Proximate  Cause. 

REMOVAL, 

of  causes  to  federal  court,  9. 

of  property  deprives  it  of  protection  of  policy,  292-293. 

under  permit  for  new  location  not  protected  in  transit,  292. 

of  property  to  new  location;  increase  of  risk;  question  for  jury,  334. 

of  property  for  safety;  fire,  401. 

clause;  not  in  Massachusetts  policy,  401. 
See  Location. 

RENEWAL, 

of  policy;  agent's  authority  as  to,  note,  101. 

contract;  statute  of  frauds  not  applicable,  102. 

description  of  "forms;"  phrases  in  "as  per  plan  on  file"  or  "as  per  survey 

on  file;"  effect,  .379. 
waivers  and  estoppels  when  carried  by  successive,  383. 
clause  providing  for,  fire  policies,  382,  383. 
constitutes  new  contract,  unless,  382. 
modification  of  contract,  382,  383. 
by  parol,  382. 
by  renewal  receipt,  382. 

reformation  in  equity  for  failure  to  comply  with  agreement  for,  382. 
clause  not  in  Massachusetts  poUcy,  383. 

RENEWAL  CERTIFICATES, 

construction  as  to  losses;  credit  insurance,  note,  663. 

RENEWAL  RECEIPT, 

sometimes  used  for  renewal,  382. 

RENT  CLAUSE,  FORM  OF,  735. 

RENT  POLICY, 

what  is  a,  22. 

recovery  by  lessor  under;  fire,  74. 

REPAIRS, 

clause  as  to  additions,  alterations  and,  289-291. 

permit  to  make,  290. 

permit  to  make  ordinary  alterations  or,  335. 

by  tenant,  doctrine  of  indemnity  enforced  in  England  against  landlord  in 

favor  of  insurer,  note,  297. 
provision  as  to,  as  affecting  measure  of  recover^',  300. 
on  building  prevented  by  public  authorities,  note,  300,  304. 
election  by  in.surer  as  to,  on  giving  notice,  302-305. 
valued  policy  laws  not  necessarily  inconsistent  with  election  to,  in  standard 

policy,  note,  303. 
improperly  made  or  not  made  in  reasonable  time,  304. 
property  again  burned  during,  304. 
insured  cannot  maintain  suit  where  he  refuses  to  permit  replacing  property, 

304. 


INDEX  919 

[References  are  to  pages.] 

REPAlRS~Co7itinued. 

value  increased  by,  effect  as  to  increase  of  risk,  note,  327. 

making  ordinary  and  necessary,  not  within  prohibition  as  to  increase  of 

risk,  note,  331. 
express  privilege  to  make,  immaterial  whether  or  not  risk   increased,  note, 

333. 
may  be  made  under  sprinkler  clause,  note,  333. 

not  fatal  increase  of  risk  to  discontinue  for  necessary  repairs  use  of 
sprinkler,  note,  333. 
allowing  repairing  to  continue  for  more  than  specified  time  without  permit, 

avoids  policy,  335. 
under  Massachusetts  policy,  335. 
special  privilege  to  make,  note,  335. 
express  privilege  for  allows  them  to  be  made  in  reasonable,  proper,  and  usual 

way,  359. 
gasoline  or  naphtha  used  in  making,  358,  359. 
property  held  for;  memorandum  articles,  375. 

loss  occasioned  by  ordinance  or  law  regulating;  memorandum  clause,  375. 
selecting  nearest  port;  deviation,  note,  233. 
sale  of  ship;  total  loss,  note,  242. 
general  average  contribution,  243. 
constructive  total  loss,  243,  244. 
election  to  make,  and  not  abandon;  insurer's  non-liability  for  salvage  and 

general  average  expenses,  note,  252. 
indemnity,  where  ship  repaired,  partially  repaired  or  not  repaired,  254,  255. 
bids  for  and  survey  of  damage;  marine  loss,  note,  650. 

REPORTS, 

to  insurance  department,  8. 

REPRESENTATIONS, 
introductory,  117-120. 

law  founded  upon  peculiar  character  of  the  business,  117-120. 
what  constitutes  a  representation,  128,  145. 
extrinsic  matters  as  representations,  notes,  106,  139. 
strictly  speaking  relates  to  collateral  matter  of  inducement,  128,  145. 
sometimes  statements  in  contract  are  construed  as,  note,  128. 
material  misrepresentations  of  fact  avoid  policy,  128,  129. 

if  not  too  remotely  connected  in  time,  129. 
must  be  both  material  and  untrue  to  avoid,  note,  129. 
fraud  need  not  be  pleaded  in  the  answer,  note,  129. 
representations  need  be  only  substantially  correct,  129. 

distinction  between  warranties  and  representations,  129. 

illustrative  cases,  129,  130. 

effect  of  had  faith,  131. 
promissory  representations  are  merged  in  contract,  105,  172. 

whether  fraudulent  promissory  representations  admissible  for  rescis- 
sion, note,  130. 
effect  of  failure  to  answer  questions,  123,  151. 
rule  as  to  misrepresentations  more  strict  in  marine  insurance,  note,  130. 


920  INDEX 

[References  are  to  pages.] 

REPRESENTATIONS— Continued. 

misrepresentation  that  property  was  owned  by  successful  business  man 

instead  of  woman,  note,  130. 
misrepresentation  as  to  amount  of  other  insurance,  130. 
misrepresentation  no  rejection  by  other  life  companies,  130. 
statements  of  opinion  or  belief  not  generally  fatal,  131. 

as  to  expected  date  of  sailing,  131. 

as  to  good  health,  note,  131. 

as  to  physical  condition,  note,  131. 

as  to  cause  of  death  of  relatives,  note,  131. 

as  to  values,  note,  131. 

as  to  age  of  building,  note,  131. 
whether  obscure  diseases  are  matters  of  fact  or  opinion,  149,  150,  478,  482. 
test  and  definition  of  materiality,  131. 
influence  on  prudent  insurer  in  fixing  rate  and  deciding  whether  risk  be 

taken,  131. 
relation  of  the  misrepresentation  to  cause  of  loss  not  decisive,  132. 
immaterial  that  loss  is  unconnected  with  fact  misrepresented,  132. 
representations  refer  to  time  of  closing  contract,  132. 
changes  in  facts  pending  negotiations  must  be  communicated,  132. 
date  of  closing  orally  or  by  binder  controls,  132. 

but  compare  dictum  in  federal  court  case,  note,  133. 
representations  may  be  withdrawn  or  qualified  until  completion  of  contract, 

133. 
materiality  and  substantial  truth  questions  of  fact  for  jury,  133,  note,  131. 
when  issue  one  of  law,  115,  116,  133. 

whether  expert  testimony  as  to  materiality  is  admis.sible,  notes,  131,  133. 
statements  in  papers  merely  referred  to  are  not  warranties,  139. 
some  courts  construe  certain  warranties  as  representations,  note,  140. 
court  determines  whether  representation  or  warranty,  115,  note,  141. 
warranties  contrasted  with,  145,  146. 
statements  in  policies  sometimes  construed  as,  147,  149. 

sprinkler  clause  construed  a  mere  representation,  147. 
express  inquiry  is  evidence  of  materiality,  note,  147. 
representation  of  present  use;  if  true  when  made,  150. 
statutes  convert  warranties  into  representations.  1.56,  157. 

such  statutes  valid  and  controlling,  157. 

they  are  constitutional,  157. 

question  of  materiality  thus  relegated  to  jury,  note,  156. 

terms  of  policy  cannot  prevent  this,  note,  156. 

cannot  avoid  statute  by  stipulating  other  place  of  contract,  note,  156. 
statements   in    application    representations   unless  expressly   incorporated, 

fire  policy,  377-380. 
court  construes  as  representation  rather  th.an  warranty,  473,  note,  377. 
statements  as  to  title,  liens,  etc.,  146.  153,  1.54,  note,  378 

as  to  fear  of  incendiarism,  1.54. 

burden  of  proof  on  insurer,  note,  155. 

statement  as  to  artist  of  painting,  note,  378. 
statements  in  application  usually  incorporated,  life  policy,  471,  476 


INDEX  921 

[References  are  to  pages.] 

REPRESENTATIONS— Confmued. 

statement  of  fact  a  mere  representation  unless  warranted,  note,  471. 

rule  otherwise  in  marine  insurance,  note,  471. 
matter  of  surplusage  is  representation  rather  than  warranty,  474. 
incomplete  answer  as  to  rheumatism,  474. 
misstatement  as  to  convulsions  held  mere  representation,  475. 
liberal  statutes  making  warranties  representations,  476-478. 
list  of  references  to  statutes,  683,  706. 

issue  under  statutes  when  for  court,  when  for  jury,  477,  478. 
statutes  apply  to  fidelity  insurance,  note,  657. 
doctrine  of  applies  to  credit  insurance,  note,  662. 
See  Statutes;  Warranties. 
REPRESENTATIVES, 

See  Legal  Representatives. 
REPRISALS, 

perils  of  war,  etc.,  607,  608. 

RESCISSION, 

when  allowed,  108. 

a  form  of  relief  usually  misatisfactory,  108. 

insured  seeking,  liable  for  premium  until  time  of,  note,  282. 

for  fraud  of  insurance,  note,  651. 

RESERVATION, 

of  right  to  change  beneficiary,  86. 

RESERVE, 

what  is  the,  20. 

RESHIPPING  OR  TRANSSHIPMENT, 

whether  liability  of  insurer  continues,  245,  246,  note,  593. 
expenses  of,  under  sue  and  labor  clause,  633,  634. 

RESIDENCE, 

and  travel;  statements  or  requirements  as  to,  492. 

RESTRAINT  OF  KINGS,  610. 

RETAINER  CLAUSE, 

when  added  to  reinsurance  rider,  446,  448. 
form  of,  736. 

RETURN  OF  PREMIUM, 

See  Premium. 
REVIVAL  OF  CONTRACT, 

occurs  only  by  grace  of  insurer  after  forfeiture,  142. 

contract  is  voidable  for  breach,  154. 

breach  may  be  waived  and  contract  revived,  154. 

reinstatement  of  life  policy  after  forfeiture,  503. 

statutory  or  policy  provisions  allowing  reinstatement,  502,  503. 

options  allowed  on  surrentlei  or  lapse  of  life  policy,  502,  762. 
See  Forfeitures. 


922  INDEX 

[References  are  to  pagesj 

REVOCATION, 

by  assurer  of  contract  prior  to  date  of  performance, 
See  Anticipatory  Breach. 

RHEUMATISM, 

duration  of;  requirement  as  to  answer  not  complied  with;  no  fatal  breach, 
474. 

RICE  RULE, 

apportionments,  note,  441. 

RIDER, 

closing  of  contract;  fire,  note,  95. 
part  of  contract,  notes,  106,  109. 
when  prevails  over  general  terms  of  contract,  109. 
clause  as  to  additions,  alterations,  and  repairs,  290,  291. 
standard  mortgagee  clause,  396. 
usual  reinsurance,  446^48. 

for  many  special  purposes  attached  to  fire  policy,  459  and  note, 
to  marine  policy,  648. 

RIGGING, 

damages  to,  265,  605,  607,  778. 

RIOT, 

excepted  loss;  fire  policy,  368. 
a  peril;  marine  policy,  608. 

RIOTERS, 

attacking  ship  are  "pirates,"  note,  608. 

RISK, 

of  real  loss  essential  to  insurance,  2. 

different  meanings  of  the  term,  326. 

classification  of  risks,  18,  19. 

mixed  risks,  sea  and  land,  24. 

as  requisite  of  complete  contract,  98. 

persons  of  unsound  health  sometimes  insured,  18. 

temporary  suspension  of,  151,  152. 

decrea.se  of;  evidence  competent,  note,  327. 

period  of;  fire  insurance,  283. 

period  of;  fidelity,  etc.,  insurance,  658. 

period  of;  employers'  liability  insurance,  668. 

See  Builder's  Risk;  Clauses;  Increase  of  Risk;  Perils. 

RISKS, 

classification  of,  18,  19, 

ROADBED, 

of  railway;  walking  or  being  on;  accident  policy,  679. 

ROBBERY, 

death  in  violation  of  law;  life  policy,  522. 


INDEX  923 

[References  are  to  pages.] 

RULES, 

of  beneficiary  association  as  part  of  contract,  note,  4. 

apportionment,  where  non-concurrence  double  or  complex,  439,  440. 

"gradual  reduction,"  note,  441. 

Giese  and  Morristown,  note,  443. 

Reading  Rule;  apportionments,  note,  441. 

Finn;  Griswold;  Kinne;  Rice;  apportionments,  note,  441. 

RUNNING  DOWN  OR  COLLISION  CLAUSE,  FORM  OF,  769. 

RUNNING  OR  OPEN  POLICY,  FORM  OF,  734. 

RUNNING  POLICY, 

what  is  a,  22. 

marine;  shipments;  declarations  under,  591. 

RUPTLTIE, 

statements  as  to;  life  policy,  479. 

from  jumping;  accident  policy,  542. 

caused  by  exertion  or  over-exertion;  accident  policy,  note,  540. 

of  blood  vessel  by  violent  exertion;  accident  policy,  540. 

of  blood  vessel,  while  exercising  with  Indian  clubs;  accident  policy,  539. 

when  due  to  disease  and  not  accident;  accident  policy,  54.3- 

contributing  to  the  injury  or  death;  accident  policy,  565, 

s 

SAFETY, 

removal  of  property  for;  fire,  401. 

See  Good  Safety. 

SACRIFICE, 

See  General  Average. 

SAILING, 

defined,  note,  648. 

warranty  to  sail  on  or  before  certain  date,  648 

SAILS, 

damage  to  xmder  marine  policy,  605,  607. 
damage  to  in  general  average,  263,  778. 

SALE, 

of  ship;  repairs;  total  loss,  note,  242. 

master  may  sell  ship  or  cargo  in  case  of  necessity,  245. 

of  ship  or  cargo;  total  loss,  note,  245. 

of  ship  in  damaged  state;  indemnity,  note,  255. 

of  cargo;  port  of  refuge;  general  average;  communication  with  owner,  267. 

or  transfer  of  insured's  interest  without  insurer's  consent,  76. 

or  alienation  of  part  of  property;  severable  contract,  note,  152,  153,  305-309. 

of  damaged  property  may  forfeit  insurance;  fire,  303. 

under  judgment  not  within  foreclosure  clause,  note,  342. 

under  foreclosure  unconsummated  by  dehvery  of  deed  not  within  alienation 

clause,  note,  343. 
change  in  interest,  title,  or  possession  under  fire  policies,  343-352. 


924  INDEX 

[References  are  to  pages.] 

SALES, 

See  Alienation;  Conditional  Sale;  Foreclosure;  Sheriff's  Sale. 

SALOON, 

use  of  dwelling  house  for;  increase  of  risk,  note,  330. 

SALVAGE, 

operations;  constructive  total  loss,  243. 

effect  of  abandonment,  note,  249. 

share  of;  insured  own  insurer,  uninsured  balance,  250,  635. 

share  of;  disbursement  policy,  note,  250. 

charges;  contradistinction;  particular  average,  251. 

charges  recoverable,  252. 

charges;  sue  and  labor  clauses,  note,  252. 

charges;  English  marine  code,  642. 

services;  assured,  when  liable,  note,  252. 

loss  on  goods  and  particular  average  loss;  important  to  discriminate,  256,  257. 

charges  and  general  average  contribution,  257. 

expenses  or  charges;  general  average,  267. 

realized;  fire  policy,  305. 

under  sue  and  labor  clause,  628-635. 


SALVORS, 

"SANE  OR  INSANE," 
in  suicide  clause. 


See  Salvage. 


See  Suicide. 


SAVING  PROPERTY, 

neglect  of  insured  to  use  reasonable  means  for,  368. 

SAWMILL, 

vacancy  clause,  367. 

SCHOOLHOUSE, 

vacancy  clause,  368. 

SEAMEN. 

requirements  as  to  seaworthiness,  222,  226,  227. 
acts  of;  seaworthiness,  231. 

SEAWORTHINESS, 

the  implied  warranty  of,  221-231. 

what  constitutes,  note,  222,  225-231. 

standard  of,  not  uniform,  229. 

warranty  of,  affirmative,  137. 

condition  procodcmt,  nolo,  225. 

whether  warranty  of,  is  implied  in  time  policies,  224,  225. 

custom  or  statute  affecting,  226. 

requirements  as  to  equipment,  etc.,  222,  226,  227,  229. 

as  between  shipowner  and  insurer;  between  shipowner  and  shipper,  note,  222. 

when  warranty  extends  to  refrigerating  apparatus,  note,  224. 

aa  to  compass,  226. 


INDEX  926 

[References  are  to  pages.] 
SEAWORTHINESS— Continued, 
as  to  pilot,  226. 

ship's  cargo  must  be  properly  stowed,  etc.,  227,  228. 
no  warranty  that  vessel  shall  continue  seaworthy,  227. 
steam  vessels,  note,  227. 

that  cargo  stowed  on  deck  can  be  readily  jettisoned;  as  defense,  228. 
breach  of  warranty;  ignorance  or  innocence  of  assured  not  available,  228. 
latent  defect;  temporary  defect,  228. 

warranty  does  not  extend  to  lighters  employed  by  insured  ship,  228. 
no  warranty  that  goods  are  seaworthy,  229. 
voyage  performed  in  different  stages,  229. 
different  degrees  of;  "at  and  from,"  229. 
coaling;  renewing  consumable  stores,  229. 
where  voyage  partly  river,  partly  sea,  navigation,  229. 
insurance  out  and  home,  230. 

may  have  relation  to  character  of  ship  insured,  230. 
vessel  constructed  for  river  service;  voyage  also  by  sea,  230. 
as  affected  by  character  of  voyage,  230. 

nationality  or  neutrality;  necessary  documents  required,  231. 
warranty  of;  negligence  of  insured  or  agent,  59. 
burden  of  proof  on  issue  of  unseaworthiness,  222,  note  223. 
question  for  jury,  note,  115. 

SEIZURE, 

as  a  marine  peril,  608. 

warranted  free  from  expense  in  consequence  of,  646. 

SELF-DEFENSE, 

shooting  in;  not  violation  of  law,  or  duelling,  572. 

justifiable;  voluntary  exposure  to  unnecessarj-^  danger;  accident  policy,  573. 

SELF-DESTRUCTION, 

See  Suicide. 

SEMI-TONTINE  POLICY, 
what  is  a,  24. 

SERVICE, 

of  papers;  requirement  that  company  have  representative  in  state  upon 

whom  service  may  be  made,  9. 
of  notice  of  abandonment,  249. 

of  papers;  effect  of,  under  foreclosure  clause,  note,  342. 
of  cancellation  notice;  fire,  386-392. 
of  proofs  of  loss,  407-413. 
of  proofs  of  loss;  where  served,  412. 
of  statutory  notice  before  premiums  due,  500,  501. 
of  assessment  notice;  life  policy,  508. 
of  notice  of  assignment;  life  policy,  527. 

of  process;  injury  sustained  in;  intentional  injury  clause;  accident  policy,  570. 
of  notice  of  accident;  reasonable  time;  delay;  illustrations,  555-557. 
of  notice  of  employee's  dishonesty,  659. 
of  notice  of  injury  to  employee,  671. 


926  INDEX 

[References  are  to  pages.] 

SET-OFF, 

of  risks;  when  not  allowed;  illustration,  330. 

against  premiums  of  cost  of  carrying  risk  not  permitted  where  rescission  for 

insurer's  fraud,  note,  471. 
of  earnings  not  declared  as  dividends  cannot  be  claimed  by  insured;  life,  496, 

SETTLEMENT, 

final  unless  procured  by  fraud,  650. 
of  claims;  employers'  liability  insurance,  674. 
See  Adjustment. 

SEVERABLE  OR  DIVISIBLE  CONTRACT, 

See  Entirety  of  Contract. 

"SHEDS," 

includes  those  adjacent  and  also  more  distant,  note,  288. 

SHERIFF, 

insurable  interest  in  goods  seized,  note,  39. 
levy  by;  alienation  clau.se,  352. 

SHERIFF'S  SALE, 

purchaser  at;  interest  or  ownership  clause,  note,  337. 

SHIP, 

policy  on,  usually  valued,  21. 
insurable  value  of,  under  open  policy,  254. 
partial  loss  of,  how  estimated,  254. 
when  considered  unoccupied,  note,  368. 
description  covers  what;  marine  risk,  587. 
name  of;  marine  policy,  585. 

insurance  upon  body,  tackle,  apparel,  or  other  furniture  of,  586. 
commencement  of  risk,  588,  589. 
what  is  breaking  ground  to  sail,  note,  589. 
duration  and  termination  of  risk,  593-595. 
privilege  to  touch  and  stay,  598. 
sinking;  loss  of  cargo  by  fire,  proximate  cause,  618. 
warranty  as  to  loading;  capacity,  640. 
warranty  of  neutrality,  nationality,  papers,  etc.,  647,  648. 
warranty  of  condition  or  location  on  specified  date,  648. 
See  Deductions;  Waruanties. 

SHIP  OR  SHIPS, 

goods  insured  per,  586. 

SHIPPING  GAZETTE, 

See  Lloyd's  Lists. 

SICKNESS, 

no  excuse  for  violation  of  conditions;  warranties,  145. 
no  excu-se  for  non-payment  of  premium,  496. 

See  Health. 

SLEEPWALKING, 

as  contributing  cause  of  accident,  562,  565. 


INDEX  927 

[References  are  to  pages.] 

SLIP, 

See  Binding  Sup. 

SMOKE, 

results  of,  under  clause  as  to  loss  by  fire,  284. 
damage  by;  proximate  cause,  617. 

SMOKING, 

representation  that,  not  allowed;  statement  as  to  present  use,  effect  of; 
fire,  150. 

SMUGGLING, 

or  other  illegal  conduct;  marine,  notes,  238,  239. 

SOLD  BUT  NOT  DELIVERED, 
meaning  and  legal  effect  of,  293. 

SOLE  CAUSE, 

See  Promixate  Cause. 

SOLE  OWNERSHIP, 

See  Ownership. 

SOLICITING  AGENTS, 

knowledge  of  facts;  waiver  by,  525. 

See  Agents;  Solicitor's  Premium. 

SOLICITORS, 

authority  of,  as  to  contract,  198. 

no  apparent  authority  to  conclude  contract,  notes,  100,  101. 

limited  authority  of,  life,  198-205. 

notice  of  restriction  on  authority  of,  202. 

mere  knowledge  of,  works  no  estoppel,  202. 

limited  authority  of;  fire,  219. 

SPECIAL  CLAUSES, 

See  Forms;  Words  and  Phrases. 

SPECIFICATIONS, 

of  building,  etc.,  to  be  furnished;  proofs  of  loss,  413. 

SPITTING  OF  BLOOD,  481. 

SPONTANEOUS  COMBUSTION,  606. 

SPRAIN, 

when  accident,  539. 

SPREAD  OF  FIRE, 

whether  loss  by,  is  proximate,  284, 451. 

SPRINKLER  CLAUSE, 

as  representation  and  not  a  warranty,  147. 
repairs;  increase  of  risk,  note,  333. 

STAMP, 

required  on  slip;  British  revenue  law;  marine,  note,  97. 


928  INDEX 

[References  are  to  pages,  || 

STANDARD  LIFE  POLICIES, 

list  of  states  adopting,  forms  of,  New  York,  701,  760. 
See  Life  Policy  and  Clauses. 

STANDARD  FIRE  POLICIES, 
history  of  adoption,  277-280. 
prime  purpose  to  secure  "uniform  policy,"  214. 
whether  statutory  law  as  well  as  contract,  279. 
use  of,  obligatory  within  state,  279. 
statutes  constitutional,  278. 

when  unconstitutional,  notes,  278,  279. 
company  liable  though  policy  inconsistent  with  statute,  279. 
rules  of  construction,  279. 

insurer  must  not  add  clauses  inconsistent  with,  note,  279. 
which  states  follow  New  York,  which,  Massachusetts,  notes,  280. 
certain  features  of,  general  comments,  note,  280. 
general  comments  on  the  clauses  of  the  New  York  policy,  note,  141. 

classification  affirmative  and  promissory,  137. 
contrast  between  fire  and  marine  policies,  582,  notes  140,  141. 

reasons  for  contrast  in  attitude  of  courts,  582,  583. 
forms  of  all  standard  fire  policies  given  in  full,  719  et  seq. 
list  of  state  statutes  adopting,  691. 

See  Fire  Policy  and  Clauses. 

STATE, 

STATEMENT, 
proofs  of  loss. 


See  Regulation  and  Control. 
See  Notice  of  Loss;  Proofs  of  Loss. 


STATEMENTS, 

See  Representations. 

STATUTE  OF  FRAUDS, 

not  applicable  to  insurance,  reinsurance,  or  renewal  contract,  102,  444. 

STATUTE  OF  LIMITATIONS, 

creditor's  insurable  interest  in  life  of  debtor,  45. 

STATUTES, 

1.  General  Provisions. 

state  has  right  to  control  or  regulate  insurance,  9,  10. 

state  may  impose  conditions  upon  foreign  corporations,  lO. 
statutory  safeguards,  7. 

confining  insurance  business  to  corporations,  are  constitutional,  note,  3. 
impracticable  for  individual  underwriters  to  observe,  note,  3 
licensing  procuring  risks  from  non-admitted  companies,  12. 
affecting  contracts  with  unlicensed  corporations,  10,  11. 
against  wagering  contracts,  note,  32. 
generallj  have  no  extraterritorial  effect,  114. 
codes  giving  right  of  rescission  for  concealment,  note  124,  684. 
making  warranties  representations  and  providing  against  forfeiture,  136, 
156,  157. 


INDEX  929 

[References  are  to  pages.] 

STATUTES— Continued. 

such  statutes  valid  and  controlling,  157. 
making  soliciting  agent  insurer's  agent,  194,  381,  686. 

2.  Fire  Insurance. 

as  to  system  of  patrol,  9. 

failure  of  company  to  comply  with  does  not  disturb  subrogation,  63,  64. 

standard  policy  held  in  Wisconsin  to  be  a  statutory  law,  279. 

against  forfeiture  for  misstatement  unless  in  matters  material  to  risk,  156, 
157,  706. 

against  forfeiture  for  breach  of  conditions  unless  loss  occurs  during  or  by 
reason  of  it  or  risks  materially  increased,  156, 157,  692. 

that  no  statements  of  assured  shall  affect  forfeiture  not  evaded  by  agree- 
ment that  different  law  apply,  note,  156. 

where  tender  back  of  unearned  premium  required  by,  note,  282. 

coinsurance  and  other  restrictive  clauses  when  inconsistent  with  statutes 
and  eiTect  thereof,  301. 

relieving  from  forfeiture  in  case  of  temporaiy  breach  of  warranties,  310. 

controlling  effect  of  violation  of  vacancy  clause,  note,  364. 

requiring  sworn  statement  of  particulars  of  loss  before  action,  180,  697. 

allowing  counsel  fee  to  successful  plaintiff  where  total  loss,  constitutional, 
10,  300. 

3.  Life  Insurance. 

extensive   legislation    in    New  York,  following  investigation  of   committee, 

18. 
appointment  of  beneficiaries  and  assignments  subject  to,  53. 
domestic  relations  law;   policy  for  benefit  of  married  women   assignable, 

note,  80. 
as  to  assignment  by  wife  of  life  policy,  note,  80. 
provisions  of,  requiring  that  policy  contain  entire  contract,  476. 
provisions  converting  warranties  into  representations,  476-478. 
requiring  notice  of  premium  due  before  forfeiture  for  non-payment,  500. 
foreign  company  issuing  policy  in  New  York  subject  to  New  York  statute, 

501. 
New  York  company  making  contract  in  another  state  not  subject  to  New 

York  statute,  unless,  501. 
express  promise  to  pay  assessments  deduced  from,  505. 
options  given  assured  on  surrender  or  lapse  of  statutory  policy,  502. 

4.  Accident  Insurance. 

applicable  to  life  apply  to  accident  insurance,  note,  537. 

5.  Marine  Insurance. 

special  act  of  Parliament  incorporating  Lloyd's,  note,  14. 

stamp  required  on  slip  by  British  revenue  act,  97. 

affecting  question  of  seaworthiness,  226. 

non-compliance  with  law  of  Congress  as  to  stowing  water;   voyage  not 

illegal,  note,  238. 
insurance  prohibited  by  revenue  law  is  void,  239. 
regulating  trade  and  navigation;  policies  contravening,  void,  240. 
sailing  without  clearance  certificate  that  cargo  below  deck,  note,  240. 
English  act  as  to  constructive  total  loss,  243. 

59 


930  INDEX 

[References  are  to  pages.] 

BTATUTESt— Continued. 

as  to  general  average,  note,  260. 

as  to  suing  and  laboring  clause,  note,  629,  642. 

6.  Fidelity  and  Guaranty  Insurance. 
making  warranties  representations  apply  to,  657. 

7.  American  Statutes  Affecting  Contract  Classified,  681-717. 
in  general,  681-691. 

civil  codes  treating  of  insurance  law,  681. 

subject  of  insurance;  contingent  or  unknown  event,  681. 

what  policy  must  specify,  681. 

corporate  seal  not  required  on  policy,  681 ,  682. 

requiring  application  to  be  annexed  to  policy,  682, 

requiring  provisions  of  application  or  by-laws  to  be  set  forth  in  policy,  682, 
683. 

statements  to  be  deemed  representations  and  not  warranties,  683. 

when  contract  of  insurance  subject  to  laws  of  state,  683. 

what  matters  should  be  disclosed  or  communicated,  684. 

rescinding  contract  for  concealment,  684. 

rescinding  contract  for  false  representations,  684,  685. 

rescinding  contract  for  omission  to  communicate  matters  tending  to  show 
falsity  of  warranty,  685. 

requiring  that  express  warranties  must  be  contained  in  policy,  685. 

rescinding  policy  for  violation  of  material  warranty  or  provisions,  685. 

as  to  breach  of  warranty  without  fraud,  685. 

agreement  before  loss  not  to  transfer  claim  void,  685. 

that  insured  shall  not  be  deprived  by  policy  provision  of  right  of  trial  by 
jury,  686. 

making  gaming  or  wagering  policy  void,  686. 

making  soliciting  agent  the  agent  of  insurer,  686,  687. 

when  insurer  entitled  to  payment  of  premium,  687. 

effect  of  acknowledgment  in  policy  of  receipt  of  premium,  687. 

providing  when  insured  is  entitled  to  a  return  of  premium,  687. 

where  loss  occurs  from  a  specially  excepted  peril,  688. 

what  representations  must  be  communicated  where  insurer  obtains  rein- 
surance, 688. 

forbidding  reinsurance  with  companies  not  authorized  to  do  business  iu 
state,  688. 

that  policy  shall  not  be  invalidated  by  war,  689. 

forbidding  certain  limitations  of  time  for  suit,  688. 

designating  where  suit  against  company  may  be  instituted,  689,  690. 

anti-compact  laws,  090. 

forbidding  combinations  of  insurers  to  control  rates,  690. 

general  statutes  against  pools,  trusts,  or  combinations  to  fix  prices  or  restrain 
trade,  690,691. 
A.  Fire  Insurance,  691-700. 

statutes  providing  for  standard  form  t»f  policy,  691. 

requiring  that  conditions  be  inserted  in  policies,  691. 

forbidding  discrimination  in  premiums,  692. 

return  of  unearned  premium,  692. 


INDEX  9Zt 

[References  are  to  pages.] 

STATUTES— Continued. 

that  breach  of  condition  shall  not  avoid  unless  loss  occurs  during  or  by 

reason  of  it,  risk  being  materially  increased,  692,  693. 
temporary  breach,  692,  693. 
that  temporary  vacancy  shall  not  avoid,  693. 

that  insurer  may  rescind  contract  for  alteration  in  use  or  condition,  693. 
that  increase  of  risk  by  act  subsequent  to  execution  of  policy  shall  not  avoid, 

693. 
change  in  interest  proportionately  suspends  insurance,  7U9. 
that  insurer  shall  examine  premises  and  insert  description  in  policy,  693, 694. 
what  is  a  sufficient  description  of  property  or  premises,  693,  694. 
non-forfeiture  for  non-payment  of  premium,  694. 
requiring  notice  and  return  of  unearned  premium  before  cancellation  of 

policy,  694. 
giving  insured  right  to  cancel  policy,  695. 
valued  policy;  that  amount  stated  in  shall  be  taken  as  true  value  of  real 

property,  695,  696. 
as  to  effect  of  acts  of  mortgagor  where  policy  payable  or  assigned  to  mort- 
gagee, 696,  697. 
notice  of  loss  without  unnecessary  delay,  697. 
as  to  sufficiency  of  preliminary  proofs,  697. 
as  to  waiver  of  defects  in  notice  of  loss  or  of  delay,  697. 
dispensing  with  certificate  or  testimony  of  person  other  than  insured  as 

preliminary  proof,  697. 
forbidding  conditions  requiring  notice  of  loss  within  certain  period,  697,  698. 
forbidding  conditions  requiring  magistrate's  certificate,  697,  698. 
providing  for  appraisal  in  case  of  disagreement  as  to  amount  of  loss,  698. 
providing  for  selection  of  umpire  where  appraisers  have  not  agreed  upon  one, 

698. 
providing  for  protection  of  mortgagee,  699. 
anti-coinsurance  laws,  699,  700. 

exempting  money  derived  from  policy  on  homestead  improvements,  700. 
B.  Life  Insurance,  701-713. 

statutes  providing  for  standard  form  of  policy,  701. 

that  policy  shall  contain  the  entire  contract,  701. 

provisions  as  to  what  policy  must  and  must  not  contain,  701,  702 

prohibiting  insurance  without  consent  of  the  insured,  702. 

to  whom  the  policy  may  issue,  702,  703. 

that  policy  in  favor  of  person  convicted  of  felonious  homicide  is  void,  703. 

giving  days  of  grace  for  payment  of  premium,  703. 

forbidding  discrimination  in  premium  or  rates  or  agreements  or  rebates, 

703-705. 
forbidding  discrimination  against  colored  persons  as  to  premium  or  rates, 

rebates,  etc.,  705. 
against  forfeiture  of  policy  without  notice,  705,  706. 
that  misrepresentations  and  breaches  of  policy  shall  not  avoid  unless  in 

material  matters,  706,  707. 
technical  forfeitures;  warranties  converted  into  representations,  706. 
as  to  effect  of  misstatements  as  to  age,  707. 


932  INDEX 

[References  are  to  pages.] 

STATUTES— Continued. 

as  to  waiver  of  right  to  claim  forfeiture  where  no  medical  examination,  708. 
that  notice  to  agent  is  notice  to  company  as  to  health,  habits,  or  occupation 

of  insured,  708. 
forbidding  misrepresentations  by  company  as  to  terms  of  policy  or  benefits 

promised  thereby,  708,  709. 
change  of  interest  proportionately  suspends  insurance,  709. 
giving  right  to  insured  to  change  beneficiary,  709. 
as  to  notice  of  transfer  of  policy,  710. 
when  suicide  not  a  defense,  710. 

when  intemperate  habits  or  habitual  intoxication  not  a  defense,  710. 
that  policy  shall  contain  an  incontestable  clause,  710,  711. 
that  sum  fixed  in  policy  measures  indemnity,  711. 
for  protection  of  wife  and  children  against  creditors,  etc.,  711,  712. 
for  protection  of  all  beneficiaries  generally,  712,  713. 
as  to  voting  for  directors  of  mutual  life  insurance  companies  and  effect  of 

mailing  ballot  to  policy  holder,  713. 
c.  Accident  Insur.vnce,  714,  715. 

what  policies  against  accident  or  disease  must  state,  714. 

prohibiting  limitation  of  time  for  service  of  notice  of  injury,  714. 

what  notice  of  injury  is  sufficient,  714. 

that  benefit  not  liable  to  attachment  or  other  process,  71.5. 

that  when  policy  for  which   premium  note  given  is  canceled  insured  shall 

pay  proportion  of  all  losses,  715. 
cancellation;  mutual  companies;  accidents  to  employees,  715. 
D.  M.\RiNE  Insurance,  715-717. 

forbidding  gaming  or  wagering  policies,  715. 

what  information  must  be  communicated  or  disclosures  made  in  marine  risks, 

715. 
what  concealments  or  misrepresentations  do  not  vitiate,  715. 
as  to  effect  of  agreement  that  thing  insured  shall  be  free  from  particular 

average,  716. 
as  to  effect  of  insurance  confined  in  terms  to  actual  total  loss,  716. 
as  to  requisite  and  sufficiency  of  notice  of  abandonment,  716. 
as  to  effect  of  abandonment,  716. 
as  to  acceptance  of  abandonment  and  effect  of,  717. 
when  valuation  of  policy  is  conclusive,  717. 

right  of  insurer  to  rescind  for  fraudulent  valuation  in  policy,  717. 
in  cases  where  profits  are  valued  and  insured,  717. 
See  Beneficiary;  Constitutionality;  English  Marine  Code;  Regulation 
AND  Control;  Standard  Policy. 

STATUTORY  LIABILITY, 

insurable  interest  by  reason  of;  railroads,  note,  38. 

STATUTORY  LIEN, 

foreclosure  not  within  foreclosure  clause,  note,  342. 

STEAM, 

loss  by  explosion,  286,  369. 


INDEX  933 

[References  are  to  pages.] 

STEAM  BOILER  EXPLOSIONS, 
insurance,  note,  652. 

STEAM  CARS, 

See  Cars. 

"STEAM  SAWMILL," 

includes  machinery,  note,  289. 

STENOGRAPHERS, 

fees  as  "cost;"  employers'  liability  insurance,  678. 

STOCK, 

of  goods;  sales;  purchases  and  fluctuations  in;  alienation  clause,  347. 

"usually  kept  in  country  store,  allows  use  of  benzine  and  fireworks,"  note, 
357. 

of  fancy  goods;  privilege  to  keep  firecrackers;  memorandum  clause,  358. 

"  of  drugs  "  covers  gasoline,  benzine,  and  ether,  note,  358. 

"such  as  is  usually  kept  for  sale  in  a  drug  store;"  when  covers  benzine, 
note,  358. 

and  materials;  policy  covers  all  used  in  photographer's  business,  note,  358. 

of  railroad  contractors  held  not  to  cover  dynamite,  note,  360. 

"  of  cloth  .  .  .  and  all  other  articles  usual  in  merchant  tailor's  establish- 
ment;" no  recovery  for  patterns,  360. 

See  Merchandise. 

STOCK  COMPANIES, 

corporations  classified,  6. 

STORAGE, 

of  explosives,  etc.;  increase  of  risk,  334. 
property  held  on,  meaning  of  phrase,  376. 
warehouse  clause,  form  of,  726. 

STORE, 

fluctuating  stock;  alienation  clause,  347,  348. 
"retail  hardware  store"  covers  dynamite,  note,  358. 
vacancy  clause,  note,  368. 
and  dwelling;  vacancy  clause,  note,  366. 

See  Department  Store;  Stock. 

STOREHOUSE, 

vacancy  clause,  note,  368. 
form  of  warehouse  clause,  726 

STORING, 

oils  without  written  consent;  fire  policy,  note,  142. 

STOVE, 

use  of  imsafe;  increase  of  risk,  334. 

STOVE  PIPE, 

warranty,  as  to  being  well  secured,  construed,  note,  379. 


934  INDEX 

[References  are  to  pages.] 

STOWAGE, 

as  affecting  seaworthiness,  226-228. 

See  Cargo. 

STRANDING, 

voluntary,  whether  a  general  average  act,  266,  645,  646. 

illustrations  of,  267-270. 
"  free  of  average  unless  general  or  the  ship  be  stranded,"  644,  645. 
what  constitutes  stranding  within  the  meaning  of  this  warranty,  645. 
entry  of,  not  disclosed,  whether  fatal  concealment,  note,  121. 
whether  proximate  or  remote  cause  of  loss,  605,  606,  616,  617,  note,  620, 621, 
and  note,  623. 

STRESS  OF  WEATHER, 

under  head  of  sea  perils,  605. 

SUBJECT  OF  INSURANCE, 
under  fire  policy,  288-292. 
xinder  marine  policy,  586-588. 
profits,  use,  and  occupation,  57. 
the  subject  of  the  contract  is  a  chance  or  hazard,  118. 

SUBROGATION, 

fire  and  marine,  61  et  seq. 

definitions  of  the  rule,  note,  62. 

is  based  on  the  doctrine  of  indemnity,  61. 

insurer  must  first  make  payment,  63. 

life  insurance,  why  doctrine  does  not  apply,  65. 

must  not  prevent  indemnity  to  insured,  64  et  seq. 

applies  whether  pohcy  open  or  valued,  note,  63. 

basis  of  right;   insured  need  not  show  negligence,  63. 

extent  of  insurer's  rights  generally,  63  et  seq. 

unlicensed  insurer  entitled  to,  note,  11. 

when  insurer  member  of  trust  in  violation  of  statute,  64. 

marine;  insured,  if  a  coinsurer,  shares  in  salvage,  note,  64,  635. 

mortgagee,  mortgagor,  65. 

other  contract  rights,  66. 

where  a  tenant  of  the  insured  repairs  the  loss,  66. 

where  executory  vendee  subsequent  to  the  loss  pays  full  purchase  price, 
67,  68. 

other  instances,  68,  69. 
stipulation  in  bill  of  lading  for  benefit  of  insurance,  69. 
special  clause  in  policj'  to  preserve,  70. 
release  of  party  primarily  liable,  71. 
right  of;   how  prosecuted,  71. 

provisions  in  lease  excluding  right  of;  concealment,  note,  127. 
non-disclosure  of  provision  in  lease  depriving  of ;  policy  not  avoided,  note,  354. 
doctrine  as  preventing  recovery  of  more  than  insurable  value  from  whole 

body  of  insurers,  note,  295. 
under  standard  mortgagee  clause,  399. 
under  clause  of  standard  fire  policie8,  449-4.'i'2. 


INDEX  936. 

[References  are  to  pages.] 

SUBROGATION— Continued. 

tortious  fires,  spread  of,  proximate  results,  451. 

negligence  of  water  company,  452. 

order  of  civil  authority;  blowing  up  buildings  to  stay  conflagration,  453. 

title  insurance,  note,  654. 

applies  in  favor  of  insurer  who  has  paid  on  guaranty  bond,  note,  657. 

SUBSTANDARD  RISKS, 

substandard  or  unhealthy  lives  are  sometimes  accepted,  note,  18. 

SUCCESSION  BY  DEATH, 

whether  a  change  of  interest,  348. 

SUE  AXD  LABOR  CLAUSE, 

is  an  independent  engagement,  629. 

object  of  the  provision,  631. 
obligation  under,  may  exceed  the  face  of  the  policy,  629. 
salvage  rewards  are  not  recoverable  under,  630,  631. 
general  average  losses,  not  recoverable  under,  in  England,  630. 

rule  otherwise  in  this  country,  630. 
conditions  requisite  to  constitute  valid  claim,  631. 
instances  of  the  operation  of  the  clause,  633-635. 
insured,  when  coinsurer,  pays  his  share  of  expenses,  and  takes  share  of 

salvage,  635. 
expenses  under;   English  marine  code,  note  629,  642. 

smciDE, 

effect  of,  irrespective  of  contract  provisions,  81,  120,  511,  512. 

effect  of,  on  rights  of  beneficiaries,  81,  82,  512,  513. 

self-destruction  and  other  equivalent  phrases,  509,  510. 

differing  provisions  in  application  and  certificate;   ambiguity;  incontestable 

clause,  149. 
statute  excluding  as  defense  is  controlling,  157. 
e.xemption  in  life  policy  from  liability  for,  509. 
degree  of  insanity  required  to  save  insurance,  514. 
exemption  from  liability  for,  sane  or  insane,  511,  514-517. 
burden  of  proof,  suicide,  in.sanity,  517-520. 
within  one  year;   New  York  policy  limitation,  514. 
\inder  incontestable  clause;  life,  535. 
sane  or  insane;   accident  policy,  559. 
while  insane;  accident  policy,  539. 

See  Statutes. 

SUIT, 

See  Actions;  Equity;  Remedies. 

SUMMONS, 

delivery  of  to  sheriff  for  service;  commencement  of  action,  456. 

SUNDAY, 

premium  falling  due  on;  life,  note,  496. 

SUNSTROKE, 

whether  a  disease,  is  for  jury,  unless  attack  too  slight,  480. 
as  disease  rather  than  accident,  541. 


936  INDEX 

[References  are  to  pages.] 

SUPERINTENDENT  OF  AGENCIES, 

authority  of;   waiver;   payment  of  premiums,  626. 

SUPERINTENDENT  OF  INSURANCE, 
functions  of,  8. 
compelled  by  mandamus  to  license  or  to  file  certificate,  note,  8. 

SURETIES, 

obligation  of  individual,  and  bond  of  surety  company;   difference,  665,  656. 
suretyship  contrasted  vi'ith  insurance,  note,  5. 

See  Fidelity  Insurance. 

SURGICAL  TREATMENT, 

or  medical  as  contributing  cause  of  accident,  562. 

SURRENDER  OF  POLICY, 
cancellation,  385,  387. 

"SURRENDER  VALUE,"  20. 

SURROUNDINGS, 

See  Exposures. 

SURVEY, 

reference  to  as  representation  or  warranty,  note,  139. 
referred  to  in  policy  as  a  part  of  contract,  377. 
warranty  when  referred  to  in  policy,  377. 

See  "Binder  for  Survey." 

SURVEY  CLAUSE,  FORM  OF,  727. 

SURVIVORS, 

insurance  payable  to;  life,  466. 

SURVIVORSHIP  POLICY, 

what  is  a,  23. 

SWITCHMAN, 

occupation  of  added  by  subsequent  by-laws  to  extra  hazards,  note,  4. 

SWORN  STATEMENT, 
or  proofs  of  loss,  407. 


TANNERY, 

vacancy  clause,  note,  368. 

TAX  LIENS, 

not  a  change  of  interest,  348. 
not  an  increase  of  risk,  331. 

TEAMS  LIABILITY  POLICY, 
employers'  liability,  664,  665. 

TELEGRAPH, 

consent  by,  to  other  insurance,  322. 


INDEX  937 

[References  are  to  pages.] 

TEMPERATE  HABITS, 

warranty  as  to,  489,  566. 

TEMPORARY  REPAIRS, 

See  Repairs. 
TENANT, 

amount  of  recovery  by  under  his  fire  policy,  74. 

for  life;  not  sole  and  unconditional  owner,  note,  338. 

act  of,  when  avoids  policy  although  insured  without  knowledge  of  breach, 

142,  144. 
"occupied  by;  "  statement  of  present  use;  fire,  note,  161. 
and  owner;    the  clause,  as  interest  may  appear;    fire,  294. 
repairs  by;    doctrine  of  indemnity  enforced  against  landlord  in  favor  of 

insurer,  note,  297. 
violation  by,  of  memorandum  clause;   fire  policy,  356. 
of  insured;  acts  of;  increase  of  risk,  notes,  327,  335. 
breach  by,  of  vacancy  clause,  361. 

TENDER, 

of  premium  before  action,  note,  282. 

back  of  unearned  premium  unnecessary,  unless;   defense,  note,  282. 

of  unearned  premium  under  cancellation  clause,  387,  388,  392. 

of  premium  refused;  subsequent  tenders  unnecessary;  Ufe,  note,  495. 

TERM, 

of  one  year  often  understood  by  usage,  fire,  97. 

or  duration  of  insurance  as  essential  to  complete  contract,  98,  99. 

or  duration  of  marine  risk,  593-598. 

fidelity  insurance,  658. 

employers'  liability  insurance,  668. 

TERM  CLAUSE, 

meaning  of,  in  fire  policy,  283. 
meaning  of  noon,  283. 
fractions  of  day,  note,  283. 

TERM  POLICY, 

wKat  is  a  life,  23. 

TEST  OF  SOLVENCY, 
of  insurer,  8,  21. 

THEFT, 

during  fire,  loss  by,  285. 
excepted  loss,  fire  policy,  368,  309. 
as  a  peril  under  marine  policy,  611. 

THEIR  OWN  OR  HELD  IN  TRUST, 

meaning  of  the  phrase,  293,  294. 
double  insurance,  320,  321. 

THIEVES, 

fire  policy,  369. 

marine  policy,  611. 

loss  by;   conflagrations;   proximate  cause,  285,  618. 


938  iVijEX 

[References  are  to  pages.] 
THREE-FOURTHS  VALUE  CLAUSE,  FORM  OF,  733. 

TIME, 

is  of  essence  of  insurance  contract,  100. 

meaning  of  "  noon  "  in  term  clause,  283. 

limit  in  factory  clause,  324. 

limit  in  mechanics'  clause,  335. 

limit  in  cancellation  clause,  387. 

limit  for  proof  of  loss,  407. 

limit  for  notice  of  injury,  671. 

computation  of;    notice  of  cancellation  by  insurer,  388. 

computation  of;  day  of  mailing  notice  excluded,  note,  501. 
See  Limitation. 
TIME  OF  SAILING, 

statements  as  to,  143,  648. 

meaning  of  warranty,  note,  648. 

TIME  POLICY, 

what  is  a;   marine,  21. 

marine  risk;   commencement  and  termination  of  risk,  595. 
See  Deviation;  Seaworthiness. 
TITLE, 

interest  of  assured,  extent  of  obligation  to  state  it;  fire,  312,  313. 
change  of  interest,  title,  or  possession;  fire  policies,  343-352. 
See  Alienation;    Assignment;    Chattel  Mortgage;    Fee  Simple;    Incum- 
brances; Lien;  Mortgage;  Ownership. 

TITLE  INSURANCE,  653. 
purport  of  the  policy,  653. 
its  meaning  and  legal  effect,  653,  654. 
contrasted  with  other  kinds  of  insurance,  note,  653, 
rule  of  liberal  construction,  note,  654. 
doctrine  of  waiver,  654. 
subrogation,  note,  654. 
doctrine  of  warranty  applies,  note,  654. 

TONSILITIS, 

statements  as  to,  480,  481. 

TONTINE  ACCUMULATIONS, 

payable  to  insured,  when  subject  to  wife's  debts,  note,  90. 

TONTINE  DIVIDEND, 

what  is  a,  24. 

TONTINE  POLICY, 
what  is  a,  24. 
no  debt  from  company  until  assured  selects  option,  note,  90. 

TOOLS, 

covers  "patterns,"  note,  360 

TORNADO, 

insurance,  note,  652. 


INDEX  939 

[References  are  to  pages.] 

TORT, 

tortious  fires,  right  of  subrogation,  451. 

liability  of  water  company  for  insufficient  supply;  subrogation,  452. 
See  Negligence. 

TOTAL  LOSS, 

1.  Marine  Insurance. 

divided  into  actual  and  constructive,  241. 

actual  defined,  241. 

illustrations  of  actual,  241. 

whether  a  foundered  ship  is,  note,  241. 

goods  incapable  of  use  for  the  purpose  intended,  241. 

underwriters  taking  possession  may  convert  into  actual,  note,  241. 

total  loss  of  value  though  repairable,  note,  241. 

a  mere  congeries  of  materials  not  a  ship,  note,  241. 

perishable  goods  justifiably  sold  at  port  of  distress,  242. 

no  notice  of  abandonment  necessary  when  total  loss  actual,  242. 

presumption  of  loss  of  missing  ship,  242. 

whether  total  loss  where  part  of  goods  arrive  in  specie  without  net  value, 

note,  242. 
sale  because  of  lack  of  funds  not  a  total  loss,  note,  242. 
may  sue  for  total  and  recover  partial  loss,  note,  242. 
constructive  total  loss,  what  constitutes,  243. 
rule  in  England  as  to  constructive  total  loss,  243. 
constructive  total  loss  rule  in  United  States,  244. 

cost  of  repairs,  etc.,  exceeding  fifty  per  cent  of  value  when  repaired,  244. 
the  real  repaired  value  not  the  policy  valuation  governs,  244. 
many  instances  of  constructive  total  loss,  244,  246. 
when  master  has  right  to  sell  vessel  and  convert  into  total  loss,  245. 
constructive  total  loss  of  freight,  245. 
loss  of  more  than  half  a  cargo  of  coal  in  specie,  note,  245. 
constructive  total  loss  of  profits,  note,  245. 
when  duty  of  master  to  transship  cargo  or  other  movables,  246. 
whether  liability  of  insurer  continues  during  landing  and  transshipment,  246. 
as  giving  right  to  abandonment,  246-251. 
under  warranty  "free  from  average  unless  general,"  640. 

English  test  whether  ship  is  constructive  total  loss,  note,  641. 
rule  under  English  code  seems  otherwise,  note,  641. 
by  federal  rule  loss  must  be  actually  total  to  satisfy  the  warranty,  642. 
rule  of  New  York,  Massachusetts,  etc.,  allows  constructive  total  loss, 
642. 
total  loss  of  part  whether  a  partial  or  total  loss,  643,  notes,  254,  641. 
measure  of  indemnity  in  case  of,  253,  254. 
2.  Fire  Insurance. 

what  constitutes  under  valued  policy  laws,  298-300. 

stoppage  of  business  held  total  loss,  use  and  occupancy  policy  on  hotel, 

note,  300. 
repair  of  building  prevented  by  city  ordinance,  note,  300. 
permissible  to  allege  partial  and  recover  total  loss,  note,  300. 
certain  standard  policies  contain  valuation  provisions,  note,  300. 


940  INDEX 

[References  are  to  pages.] 

TOTAL  LOSS— Continued. 

definition  of  total  loss  by  Minnesota  court,  300. 
doctrine  of  constructive,  excluded  by  fire  policy,  305. 

See  Abandonment;  Measure  op  Indemnity;  Valued  Polict. 

TOTALLY  DISABLED, 
accident  policy,  549. 

TOUCH  AND  STAY, 
marine  policy,  598. 

TRADE, 

with  foreign  country;   war;  illegality;   marine,  note,  238. 
laws;  foreign;  insurance  against  breach  of,  legal,  note,  239. 
with  enemy,  unlicensed;   illegality;   marine,  239. 
statutes  regulating;   legality  of  insurance;   marine,  240. 
ship  fitted  for  special;  insurable  value;  indemnity,  note,  254. 
general  understanding  in,  may  be  shown  as  to  property  covered  by  policy, 
289. 

TRADE  USAGE  OR  CUSTOM, 

See  Usage. 

TRANSSHIPMENT, 

See  Reshipping;  Total  Loss. 

TRAVEL  AND  RESIDENCE, 

statements  or  requireipents  as  to,  492. 

TRAVELING, 

insurance  against  injuries  while,  581. 

"TREATIES," 

reinsurance,  449. 

TRIP-HAMMER  SHOP, 
vacancy  clause,  367. 

"TRUST," 

relation  of,  does  not  exist  between  insurer  and  insured,  88. 
meaning  of;  in  clause  held  in  trust,  etc.;  fire,  294. 

TRUST  DEED, 

foreclosure  clause;  sale,  341. 

when  construed  as  chattel  mortgage,  note,  341. 

TRUST  FUND, 

deposit  with  insurance  department  is  a,  note,  8. 

TRUSTEE, 

balance  recovered  over  value  of  property,  held  by  insured  as,  73. 

insurance  money  held  as  for  vendee,  75. 

in  insolvency;  conveyance  to,  by  wife  for  husband;  alienation  clause,  352. 

of  syndicate,  not  unconditional  or  sole  owner,  note,  338. 

when  insured  holds  proceeds  of  policy  as;  fire,  note,  296. 


INDEX  941 

[References  are  to  pages.] 

TRUSTEE— Continued. 

insurance  on  children's  interest;  prior  policy  by  child  when  not  void;  fire, 

note,  319. 
double  insurance,  320,  321. 

See  Assignee. 
TRUSTS, 

whether  associations  of  underwriters  which  incidentally  fix  rates  are,  note, 

10. 
ouster  of  insurance  companies  for  violation  of  statutes  against,  note,  10. 
pooling  of  profits  held  not  to  avoid  use  and  occupancy  policy,  345. 

TUBERCULOSIS, 

of  brain  is  "local  disease,"  note,  480. 

TUMOR, 

as  contributing  cause  of  accident,  564. 

TYPE, 

fine-print  conditions  and  legible  type  considered,  notes,  140,  141,  277. 

TYPHOID  FEVER, 

severe  attack  avoids  policy  under  warranty  "no  serious  illness,"  note,  482. 

u 

ULTRA  VIRES, 

estoppel  to  set  up  as  to  unauthorized  note  for  premium,  159. 
consideration  of  subject  under  waiver  and  estoppel,  168, 169. 
beneficiary  outside  permitted  class,  463,  464. 
whether  association  alone  may  rely  on,  note,  464. 

UNCONDITIONAL  AND  SOLE  OWNERSHIP, 

See  Ownership. 
UNDAMAGED  PROPERTY, 

See  Loss. 
UNDERVALUATION, 

of  what  is  saved,  etc. ;  fire,  313. 

UNDERWRITERS, 

right  of  individuals  to  become,  note,  3. 

marine  insurers  why  called,  note,  14. 

See  Insurer;  Statutes. 
UNOCCUPIED, 

in  vacancy  clause,  361. 

UNSEAWORTHINESS, 

return  of  premium,  note,  77. 
effect,  when  temporary,  221,  228,  note,  152. 
See  SEAWORTmNESs. 
USAGE  OR  CUSTOM, 

as  the  foundation  of  marine  insurance  law,  12-14. 
affecting  contract  provisions,  97. 


942  INDEX 

[References  are  to  pages.] 
USAGE  OF  CUSTOM— Continued. 

as  aid  to  arrive  at  meaning  of  contract,  109. 

to  explain  meaning  of  technical  words  or  phrases,  110. 

of  place  where  contract  made  as  affecting  construction  of  contract,  113. 

of  trade,  each  party  bound  to  know,  note,  125. 

as  to  credit  for  premium;  fire,  205. 

well  known,  effect  upon  term  clause;  fire,  note,  283. 

to  clarify  meaning  of  descriptive  words;  fire,  289. 

"any  usage  or  custom  of  trade  to  the  contrary;"  memorandum  clause;  fire, 
356-358. 

cannot  disturb  time  limit  in  vacancy  clause  by  evidence  of,  365. 

effect  of  as  to  notice  that  premium  due;  life,  496. 

"usages  of  Lloyd's,"  13,  14. 

as  to  deviation  from  usual  voyage,  14. 

as  to  use  of  binding  slip  by  marine  broker,  97. 

marine  broker  liable  for  premium,  England,  note,  96. 

trade  usage;  marine.  111. 

effect  of  as  to  policy  conditions;  marine,  notes,  140, 141. 

as  affecting  policy  on  ocean  transit,  141. 

as  affecting  seaworthiness,  226. 

as  affecting  deviation,  232-234. 

inadmissible  to  disturb  description  of  prohibited  waters,  note,  232. 

as  to  meaning  of  term  "harbor  of  New  York,"  596. 

as  to  goods  on  lighters,  596. 

as  to  reasonable  time  in  landing  goods,  597. 

of  steamers  or  sailing  vessels  to  follow  habitual  route  or  to  stop  at  certain 
port,  598. 

as  to  liberty  to  call  at  certain  port;  landing  and  loading  cargo,  598. 

cannot  control  plain  description  in  policy;  prohibited  waters,  note,  599, 

USE  AND  OCCUPANCY, 

description  of  insurance  upon,  23,  76. 
loss  of,  must  be  specifically  insured,  57. 
illustrative  cases,  346,  note,  300. 

See  Condition  of  Property;  Increase  of  Risk. 

USE  AND  OCCUPANCY  CLAUSE,  FORM  OF,  734. 


VACANCY, 

not  per  se  increase  of  risk,  331 . 

meaning  and  effect  of  the  clause  against,  in  fire  policy,  361-368. 

breach  of  the  condition  by  u  tenant  is  fatal,  361 ,  note,  362. 

breach  operates  also  again.st  insured  contents  of  building,  note,  362. 

temporary'  absence,  effect  of,  301. 

temporary  cessation  of  operations,  effect  of,  note,  366. 

distinction  between  "vacant"  and  "unoccupied,"  361. 

character  and  use  of  building  govern  rule  of  construction,  362. 

doctrine  of  divisibility  how  applied  to  avoid  forfeiture,  163,  154,  363,  364, 


INDEX  943 

[References  are  to  pages.] 

YACA'NCY— Continued. 

occupancy  of  one  building  does  not  excuse  vacancy  in  another,  364. 
breach  avoids,  not  merely  suspends,  364. 

provision  otherwise  in  policies  of  Iowa,  Michigan,  New  Hampshire, 
Wisconsin,  note,  364. 

Sse  Statutes. 
unoccupancy  e.xcused  by  fire,  note,  364. 
experts  may  not  testify  as  to  increase  of  risk,  365. 
the  clause  as  related  to  dwelling  houses,  365. 
definition  of  occupancy,  365. 

whether  person  sleeping  at  night  is  essential,  365-367. 
knowledge  of  insurer  of  vacancy,  note,  366. 
the  clause  as  related  to  other  kinds  of  buildings,  367. 

factory,    mill,    church,    schoolhouse,    vessel,    storehouse,    store,    etc., 
367, 368. 
permits  for  vacancy  to  be  liberally  construed,  note,  362,  366. 
clause;  privilege  to  employ  mechanics  for  fifteen  days  does  not  impliedly  al- 
low unoccupancy  for  same  period,  note,  364. 
clause;  Massachusetts  form,  366. 

clause;  "vacant  by  removal"  Massachusetts  and  New  Hampshire  forms; 
"  absence  "  and  "  removal "  distinguished,  366,  367. 

"VALID  OR  INVALID," 

clause  against  other  insurance,  322. 
words  not  in  Massachusetts  policy,  323. 
in  contribution  clause,  435. 

VALUATION, 

See  Apportionment;  Measure  of  Indemnity. 

VALUE, 

estimate  of  in  application,  as  matter  of  opinion,  note,  378. 
surrender  value  of  policy,  502. 

VALUED  POLICY, 
what  is  a,  21. 

the  basis  of  adjustment  if  no  fraud,  30,  31. 
laws  not  to  be  commended,  note,  ol. 
whether  laws  are  contrary  to  public  policy,  note,  31. 
laws  not  unconstitutional,  note,  31. 
life  insurance  as,  31. 
on  profit  is,  note,  58. 

not  necessary  in  United  States  to  prove  there  would  have  been  profits, 
note,  31. 

in  England,  otherwise,  note,  31. 
or  open;  subrogation  appUes,  note,  63. 
fire;  measure  of  damages,  298-300. 
provisions  are  in  several  standard  policies,  300. 
accepting  different  form  of  policy  is  no  waiver,  299. 
laws;  "total  loss"  of  building;  means  what,  299,  300. 
laws  where  loss  not  total,  300. 


g^  INDEX 

[References  are  to  pages.] 

VALUED  POLICY— Continued. 

laws  as  affecting  coinsurance  clauses,  note,  301. 

laws,  when  misstatements  as  to  value  will  not  forfeit,  note,  316. 

law  may  make  contribution  clause  inoperative,  note,  437. 

list  of  valued  policy  laws,  695. 

VAPOR, 

or  gas;  inhaling;  accident  policy  exception,  568. 

VENDEE, 

no  right  to  vendor's  policy,  76. 

whether  fire  gives  vendee  right  to  cancel  executory  contract  of  sale,  notes, 

67,  68. 
at  what  point  of  time  should  insure,  76,  349. 
when  sole  and  unconditional  owner;  when  not,  336,  337. 
agreement  of,  to  resell;  interest  or  ownership  clause,  note,  337. 
recovery  by,  under  his  own  policy;  fire,  74. 

VENDOR, 

whether  fire  gives  vendee  right  to  cancel  executory  contract  of  sale,  notes, 

67,  68. 
and  vendee,  under  clause  as  interest  may  appear;  fire,  296. 
when  ceases  to  be  sole  and  unconditional  owner;  executory  contract  for 

purchase,  336. 
at  what  point  of  time  loses  his  insurance,  349. 
recovery  by;  fire,  74,  75. 

VENDOR'S  LIEN, 

foreclosure  not  within  foreclosure  clause,  note,  342. 

VERTIGO, 

slight  attack  not  a  disease,  480. 

as  contributing  cause  of  accident,  562,  564. 

VESSEL, 

See  Ship. 

VESTED  RIGHTS, 

See  Beneficiaries. 

VIOLATION  OF  LAW, 

death  in;  Ufe  policy,  520,  523,  524. 

VISIBLE  MARK  OF  INJURY,  560-562. 

VOLCANO  CLAUSE,  375,  734. 

VOLUivTARY  EXPOSURE  TO  UNNECESSARY  DANGER,  572-578. 

VOLUNTARY  OVEREXERTION, 
accident  policy,  571. 

VOLUNTARY  STRANDING, 
in  general  a.vera|;e,  266-270. 


INDEX  94o 

[References  are  to  pages.} 

VOUCHERS, 

production  of,  or  of  certified  copies,  as  required  by  the  policies;  loss  by  fire, 

417. 
meaning  and  effect  of  the  clause,  4'17,  418. 
Massachusetts  policy,  418. 

VOYAGE, 

description  of;  marine,  591. 
three  ways  of  describing,  592. 
commencement  of,  590-593. 

sailing  defined,  note,  648. 
how  to  be  pursued,  592,  231-238. 
termination  of,  593-598. 

what  constitutes  change  of  voyage  and  its  effect,  233,  234,  590. 
change  of  voyage  to  be  distinguished  from  deviation,  233. 
performed  in  different  stages;  seaworthiness,  229. 
character  of,  as  affecting  seaworthiness,  230. 
illegality  of,  238-240. 

See  Deviation;  Illegality 

VOYAGE,  FIRST,  259. 

VOYAGE  POLICY, 
what  is,  22. 
duration  and  termination  of  risk,  593. 

See  Warranties. 

w 

WAGERS, 

pure  wagers  void,  against  public  policy,  27-31. 

insurable  interest  required,  27-32. 

contracts  once  tolerated  but  forbidden  by  statutes,  note,  32. 

necessity  of  requiring  insurable  interest  to  prevent  fraud  and  disorganization 

in  business  of  insurance,  notes,  40,  52. 
insurable  interest  in  life,  note,  41. 
insurable  interest  of  beneficiary;  life  policy,  50,  51. 
assignee  and  appointee  of  life  policy,  52-54. 
policies;  non-return  of  premium,  note,  76,  77. 
or  gambling,  note,  652. 

WAGES  OF  CREW, 

during  mere  delay,  do  not  fall  on  underwriters,  624. 

unless  crew  retained  to  work  on  repairs,  624. 
and  maintenance  of  crew  whether  allowable  in  general  average,  267. 
whether  allowable  under  sue  and  labor  clause,  633,  634. 
do  not  contribute;  general  average  adjustment,  note,  271. 

WAIVER  AND  ESTOPPEL, 
nature  of,  in  general,  158. 
what  constitutes  a  waiver,  158. 
what  constitutes  an  estoppel  in  pais,  158. 

60 


946  INDEX 

[References  are  to  pages.] 

WAIVER  AND  ESTOPPEL— Continued, 
words  often  used  interchangeably,  158. 

insurer  generally  waives  or  is  estopped,  but  doctrine  applies  against  as- 
sured, 159. 
insured  cannot  claim,  if  guilty  of  fraud  or  collusion,  201. 
waiver  of  one  breach  does  not  necessarily  extend  to  future  ones,  note,  159. 
estoppel  by  parol  testimony,  doctrine  as  peculiar  to  insurance,  159-163. 
operates  in  favor  of  privies  in  blood  or  estate,  note,  159. 
doctrine  of  implied  waiver  and  estoppel  moderates  common-law  rules  as  to 

concealment,  misrepresentation,  and  warranty,  159. 
election  to  waive  once  made  i^  final,  159. 
whether  new  consideration  is  required,  159. 

permits  written  and  delivered  require  no  consideration,  note,  160, 
such  permits  are  irrevocable,  note,  160. 
such  permits  may  be  attached  at  any  time,  note,  160. 
action  usually  upon  contract;  not  for  rescission  or  reformation,  161. 
disturbance  of  contract  by  parol;  illustrations,  161,  162. 
effect  on  common-law  rules  of  evidence,  162. 
considerations  favoring  doctrine  of  parol  waivers,  163. 
considerations  opposed  to  the  doctrine;  164. 
practical  operation  of  the  doctrine,  164. 
diflBculty  in  applying  doctrine,  166,  167. 
paucity  of  English  cases  upon,  in  striking  contrast,  note,  165. 
what  cannot  be  waived,  168. 
what  can  be  waived;  stock  companies,  170. 

antecedent  consent  or  promise  is  merged  in  contract,  cannot  be  shown  for 
waiver,  172. 
thus,  that  premium  need  not  be  paid  at  maturity,  172. 
oral  consent  for  other  insurance,  172. 
waiver;  mutual  companies,  170. 
new  subject  not  to  be  introduced  by  waiver,  170. 
what  amounts  to;  doctrine  amplified,  171,  172. 
acceptance  of  premium,  172,  173. 
receipt  of  overdue  premiums,  173. 
consent  to  assignment  of  policy,  173. 
renewal  of  policy,  173. 
effect  of  prior  course  of  dealing,  173. 
subsequent  parol  consents  of  waiver,  174,  175. 
knowledge  of  breach;  when  a  waiver,  175,  176. 

parol  evidence;  rule  in  federal  courts;  Massachusetts  and  New  Jersey,  178. 
whether  mere  silence  or  inaction  is  ground  for,  177, 178. 
failure  to  cancel  no  sufficient  ground  for;  fire,  177,  note,  178. 
failure  to  answer  letter,  when  not  a  waiver,  177. 
proofs  of  loss;  technicalities  are  more  readily  held  to  be  waived,  178. 
denial  of  all  liability;  proofs  of  loss,  etc.,  179. 

rule  not  clear  on  principle,  notes,  179,  180. 
demanding  proofs  of  loss  is  of  itself  not  a,  180-182. 
demanding  additional  proofs  of  loss;  rule  stated  and  criticised,  182,  183. 
whpre  policy  provides  that  such  acts  shall  not  be  a  waiver,  183. 


INDEX  947 

[References  are  to  pages.] 

WAIVER  AND  ESTOPPEL— Continued. 

non-waiver  agreement  after  loss,  effect  of,  184. 

construed  liberally  in  favor  of  assured,  note,  184. 
effect  of  trying  to  negotiate  an  adjustment  of  the  loss,  184. 
adjustment  and  agreement  to  pay,  a  waiver,  unless  fraud,  notes,  184. 
company  may  defend  on  other  grounds  than  those  first  named,  exceptions, 

185,  186. 
claimant  not  precluded  by  statements  in  proofs  of  loss,  186. 
retention  of  proofs  waives  defects  that  might  have  been  remedied,  186. 
whether  facts  constituting  waiver  or  estoppel  must  be  pleaded,  187,  note,  454. 
Waiver  and  Estoppel  by  Agents. 

insurance  companies  can  act  only  by  agents,  189. 

to  appoint  an  agent  is  to  clothe  him  with  a  measure  of  authority,  189. 

actual  authority  rather  than  policy  restriction  controls,  189. 

ostensible  or  apparent  authority  means  what,  189,  190. 

vmdisclosed  instructions  not  binding  on  insured,  190. 

agency  determined  by  facts  of  each  case,  191. 

whatever  policy  provides  principal  has  certain  responsibilities  by  law, 
191. 

neither  policy  nor  by-law  can  abrogate  rule  of  law,  191. 

a  leading  federal  court  case,  191. 
policy  stipulations  as  to  who  are  and  are  not  agents;  fire,  life,  192,  380. 

effect  of  such  stipulations,  192-194. 
effect  of  stipulations  in  earlier  forms  of  policies  restricting  to  written  waivers, 

194,  195. 
restriction  on  agents'  power  to  waive,  standard  fire  policies,  195-197,  458- 
460. 

some  standard  policies  differ  in  form,  note,  206,  324. 

trend  of  later  decisions,  note,  196. 
policy  restrictions  when  operative,  197. 

distinction  where  notice  of  restriction  is  in  application,  197. 
authority  of  officers  of  company,  197,  198. 

of  managers,  198. 

of  superintendent  of  agencies,  526. 
authority  of  life  insurance  solicitors,  198. 

giving  credit  for  first  premium,  198, 199. 

erroneously  writing  into  application  answers  correctly  given,  199,  201. 

misinterpreting  to  applicant  meaning  of  the  application  or  contract, 
201. 

in  dealing  with  illiterate  applicants,  203-205. 

restriction  upon  solicitor's  authority  contained  in  application,  202,  203. 
authority  of  commissioned  or  coimtersigning  agents  imder  standard  fire 
policies,  205,  206. 

certain  standard  policies  differ,  note,  206,  324. 

form  of  written  commission  to  agent,  note,  205. 

knowledge  by  agent  of  facts  constituting  forfeiture  when  policy  issues 
206-212. 

the  leading  federal  case,  knowledge  of  "other  insurance,"  207,  208. 

interesting  sequel  to  the  leading  federal  case,  note,  213 


948  INDEX 

^References  are  to  pages.] 

WAIVER  AND  ESTOFFEL— Continued. 

the  rule  of  the  federal  court  sometimes  favors  the  insured,  note,  213. 

divergent  views  of  the  state  courts,  206-212. 

federal,  state,  and  English  decisions  on  the  one  side  and  the  other 

tabulated,  206-212  and  notes, 
conclusion  to  be  arrived  at,  213,  214. 
considerations  of  public  policy,  214. 

present  knowledge  by  agent  of  facts  which  shortly  will  forfeit,  215. 
parol  waivers  subsequent  to  the  issuance  of  standard  policy,  215-217. 
authorized  acts  of  agent  contrasted  with  mere  declarations  or  promises, 

217,  218. 
as  to  provisions  relating  to  proceedings  after  loss,  218. 
authority  of  fire  insurance  solicitors,  219. 
authority  of  adjusters  and  other  agents;  fire,  219,  220. 
authority  of  clerks  of  agents,  220. 

the  restriction  of  the  standard  fire  policies  upon  agents'  authority,  458, 
note,  206. 
decisions  under  the  clause,  458-460. 
the  restriction  of  the  life  policies  upon  agents'  authority,  525. 

decisions  under  the  clause,  525-526. 
waiver  of  breach  of  warranty;  seaworthiness,  note,  223. 
when  no,  of  abandonment,  note,  247. 
no  waiver  of  forfeiture  to  retain  premium,  note,  282. 
no  waiver  of  benefit  of  law  by  accepting  policy  with  provision  repugnant  to 

law,  299. 
whether  omission  to  inquire  about  title  and  ownership  nullifies  express 

warranties,  339,  notes,  175,  312,  341. 
waiver  clause;  standard  policies  which  do  not  mention  written  agreement 

for  company's  assent,  324. 
operation  of  factory  after  certain  hours,  note,  326. 
foreclosure  clause;  waiver,  note,  342. 
cancellation  after  loss  and  return  of  unearned  premium  no  waiver  of  known 

forfeiture,  note,  365. 
when  waiver  carried  over  to  sustain  renewals,  383. 
no  waiver  by  requirement  as  to  appraisal,  etc.,  431. 

waiver  of  time  limitation  for  suing;  payment  to  mortgagee  not,  as  to  as- 
sured, note,  454. 
waiver  of  limitation  of  time  to  sue,  457. 
when  oral  statements  as  to  health,  made  to  medical  examiner  and  agent, 

are  not  waiver,  472. 
waiver  by  accepting  application  with  incomplete  answers;   warranties,  151, 

474. 
waiver  of  warranty  as  to  age,  48H. 
waiver  of  informality  in  mode  of  payment  of  premium  and  also  of  breaches  of 

policy,  498. 
waiver  of  prompt  payment,  and  of  forfeiture,  by  agreement,  note,  499. 
waiver  of  statutory  requirement  as  to  notice  that  premium  due;  insured 

cannot  waive,  note,  501. 
waiver  of  time*  limit  for  demand:  extended  or  paid-up  insxirance,  note,  502. 


INDEX  94d^ 

[References  are  to  pages.] 

WAIVER  AND  ESTOFPEL— Continued. 

waiver;  forfeiture;  conviction  of  felony;  subsequent  collection  of  dues,  571. 
waiver;  title  insurance,  note,  654. 

knowledge  of  solicitor  no  waiver,  credit  insurance,  note,  663. 
waiver;  doctrine  applies;  employers'  liability  insurance,  note,  665. 
See  Agents;  Solicitor;  Statutes. 

WALKING, 

or  being  on  railway  bridge  or  roadbed;  accident  policy,  579. 

WALLS, 

falling  whether  loss  by  fire,  285. 
falling  several  days  after  fire,  note,  286. 
falling  before  fire,  374. 
misdescription  of  division,  note,  378. 

See  Decorations. 

WAR, 

as  excuse  for  violation  of  conditions;  warranties,  145. 

prohibitions;  illicit  voyages,  marine,  note,  238,  239. 

"for  whom  it  may  concern;"  when  covers  belligerent  property,  note,  240. 

civil  war;  excepted  loss,  368. 

perils  of,  a  marine  risk,  607-610. 

seizure  and  sinking  of  vessel,  note,  607. 

contraband  of  war,  note,  238,  239,  638. 

persons  are  not  contraband,  note,  638. 

See  Enemy;  Representations. 

WAREHOUSEMAN, 

insurable  interest,  36. 

insurable  interest;  indemnity,  73. 

goods  held  by;  clause  as  to;  fire,  293—296. 

double  insurance,  320,  321. 

WAREHOUSE  CLAUSE,  FORM  OF,  726. 

WARRANTIES,  EXPRESS, 

how  doctrine  of,  came  to  be  adopted,  134,  135. 

insurance  contrasted  with  other  contracts,  135. 
breach  of,  at  common  law  discha^g<^s  insurer  from  date  of  breach,  135. 
warranties,  either  express  or  implied,  136. 

express  do  not  exclude  implied,  note,  136. 
definition  of  express  warranty,  136. 

distinguished  from  warranties  in  other  contracts,  note,  136. 

mere  exceptions  are  sometimes  in  form  warranties,  note,  136, 

examples  of  exceptions,  137,  138. 
gometimes  classified  as  affirmative  and  promissory,  136. 

examples  of  each  class  in  standard  fire  policy,  137. 

different  classification,  English  marine  insurance  code,  note,  137. 
no  particular  form  of  words  necessary  to  constitute,  137. 

any  statement  of  fact  or  stipulation  on  face  of  policy  or  incorporated 
especially  in  marine,  138. 


950  INDEX 

[References  are  to  pages.J 

WARRANTIES,  EXTKESS— Continued. 

modification  of  rule,  fire  and  life,  138,  note,  471. 
must  be  part  of  the  contract,  138. 

descriptive  phrases,  whether  warranties,  note,  138. 

riders,  indorsements  on  margin,  etc.,  note,  139. 

indorsement  on  back  not  enough,  note,  139. 
what  reference  is  sufficient  to  incorporate  as  warranties,  139. 

applications,  etc.,  whether  incorporated,  139. 

application  as  related  to  standard  fire  policy,  377. 

application  as  related  to  life  policy,  471. 

statutes  that  policy  shall  contain  the  entire  contract,  note,  140, 476, 691, 
701. 

statutes  that  application  must  be  attached,  476,  682. 
origin  and  nature  of  warranties,  140. 
must  be  literally  true  or  .strictly  complied  with,  136,  141. 

marine  policy  contrasted  with  fire,  note,  140. 
questions  of  materiality  and  good  faith  are  eliminated,  note,  141,  142-144. 
immaterial  that  breach  did  not  contribute  to  loss,  142,  472. 
whether  affirmative  or  promissory',  are  conditions  precedent  to  right  of  re- 
covery, 142,  notes,  145,  222,  309. 

whether  any  distinction  in  promissory-  warranties,  note,  140. 
many  illustrative  cases,  142-145. 
the  clauses  of  all  the  policies  furnish  illustrations,  145. 

doctrine  applies  to  title  insurance,  note,  654. 

doctrine  applies  to  credit  insurance,  note,  663. 
breach  of  affirmative,  prevents  policy  attaching,  142. 
breach  of  promissorv,  prevents  continuance  of  contract,  142. 

promissory  warranty,  change  in  circumstances,  note,  378. 
breach  by  tenant  of  insured  is  fatal,  142, 144. 
inability  to  fulfill  is  no  excuse,  145. 

sickness,  insanity,  death,  war,  145. 

as  to  provisions  applying  after  loss  the  rule  is  modified,  178,  402,  410, 
414,415,418. 
contrasted  with  representations,  129,  145. 

substantial  truth  or  materiality  of  representation  for  jury,  133,  146. 

many  illustrations,  146,  147. 

specific  inquiry  in  application,  e.  g.,  as  to  incumbrances,  or  date  of  sail- 
ing bears  on  materiality,  note,  147. 
list  of  rules  offsetting  rigorous  doctrine  of  warranties,  148. 
court  determines  whether  representation  or  warranty,  115. 
ambiguities  resolved  in  favor  of  insured.  111,  112,  148,  320. 

rules  of  construction  given,  note,  475. 

illustrations,  149. 

court  construes  as  representation  rather  than  warranty,  note,  148. 

rule  applies  to  application,  notes,  149,  377,  473. 

illustrations,  fire  policy,  377-380. 

illustrations,  life  policy.  471-494. 
statements  of  opinion,  expectation  or  belief,  149. 

as  to  latent  diseases,  notes,  149,  150,  471,  482. 


INDEX  951 

[References  are  to  pages.] 

WARRANTIES,  EXPRESS— Continued. 

estimates  of  value,  note,  378. 
statement  of  present  use  does  not  warrant  continuance,  150. 
questions  unanswered  or  partially  answered,  1.51,  380,  474. 

good  faith  is  required,  151. 
answer  a  warranty  only  so  far  as  responsive,  474. 
does  temporary  breach  avoid  or  suspend  at  common  law,  151. 

temporary  unoccupancy,  note,  151. 

temporary  change  of  use,  note,  152. 

temporary-  unseaworthiness,  note,  152. 

temporary  deviation,  etc.,  note,  152. 
temporary  breach,  construction  under  fire  policies,  309,  310. 
to  avoid  forfeiture  as  to  part,  contract  made  severable  or  divisible,  152-154. 

divergent  views,  152-154. 

construction  under  standard  fire  policies,  305-309. 

fraud  as  to  part  defeats  all  recovery^  154. 
burden  in  pleading  and  proof,  154-156,  note,  472. 

statutes  making  warranties  representations  or  relieving  from  technical  for- 
feiture, 156,  683,  706. 

See  Statutes. 

such  enactments  valid  and  controlling^,  157. 

such  enactments  constitutional,  note,  157. 

cases  construing  such  statutes,  fire,  note,  378; 
life,  476-478. 

statutes  apply  to  fidelity  insurance,  657. 

WARRANTIES,  IMPLIED, 

seaworthiness,  voyage  policy,  221. 

what  constitutes,  225-231. 

a  condition  precedent,  note,  222. 

burden  of  proof,  222,  note,  223. 

warranty  extends  to  insurance  on  freight,  cargo,  or  other  interest,  221. 
seaworthiness,  time  policy,  224. 
against  deviation,  231-234. 

by  delay,  234. 

what  justifies  deviation,  235-238. 
against  illegality  in  the  adventure,  238. 
none  as  to  nationality  of  ship,  note,  221. 
See  Accident  Policy  and  Clauses;  Application;  Clauses;  Fire  Policy  and 
Clauses;  Life  Policy  and  Clauses;  Marine  Policy  and  Clauses;  Waiver. 
WATCHMAN, 

clause  as  to,  326. 

WATER, 

damages  by,  under  marine  policy,  605. 
explosion  followed  by  influx  of,  proximate  cause,  622. 
damage  by,  in  general  average,  264,  note,  265,  778. 
See  Fire  Loss. 
WATERS, 

See  Prohibited  Waters. 


952  INDEX 

[References  are  to  pages.] 

WATER  COMPANY, 

negligence  of;  subrogation,  452. 

WEAR  AND  TEAR, 

loss  from  ordinary  action  of  wind  and  wave  not  covered  by  the  policy,  625, 

note,  600. 
instances  of  wear  and  tear,  601,  note,  625. 

WET, 

free  from  loss  by;  cargo  on  deck,  646. 

WHALING  TACKLE, 

and  stores  not  part  of  ship,  note,  587. 

"WHOLLY  DESTROYED," 
meaning  of,  note,  299. 

WHOM  IT  MAY  CONCERN, 
meaning  of  clause,  295,  584. 

WIFE, 

insurance  payable  to;  life,  465. 

rights  of,  as  beneficiary  not  affected  by  divorce,  note,  80. 

rights  of,  as  beneficiary  against  husband's  creditors,  90-92. 

premium  paid  out  of  separate  estate  of;  insured's  creditors  no  claim,  note,  9L 

conveyance  by,  to  trustee  in  insolvency  for  husband;  alienation  clause, 

note,  352. 
may,  in  absence  of  statute  prohibiting,  assign  her  interest  in  pohcy;  life, 

80,  81,  528,  529. 
statutory  provisions  as  to  assignment  by;  life,  529. 
See  HusB.^.ND. 

WILLFUL  EXPOSURE,  572-578. 

WITNESSES, 

See  Evidence;  Experts. 
WOODHOUSE, 

insvu-ed  as  such;  effect  when  only  such  in  part,  378. 

WORKMEN, 

See  Mechanics. 
WORMS, 

damage  by,  note,  602,  626. 

WRITING, 

contract  need  not  be  in,  102. 

constitutes  the  best  evidence,  105. 

prevails  over  the  formal  printed  conditions,  108. 

WRITTEN  CONSENT, 

See  Consent. 
WORDS  AND  PHRASES, 

abandonment,  different  meanings  of,  note,  243,  250. 

"absence"  and  "removal;"  distinction;  vacancy  clause,  367. 


INDEX  953 

[References  are  to  pages.] 

WORDS  AND  PHRASES— Continued. 

"absorbed"  in  poison  clause  in  accident  policy;  meaning  of,  note,  667. 

"accident;"  meaning  of,  538. 

"accidental  injury,"  540. 

"  act  or  neglect "  in  standard  mortgagee  clause,  398. 

"additions,  alterations  and  repairs,"  289  et  seq. 

"  adopted  children  "  may  include  illegitimate  children,  note,  466. 

"affianced  wife"  not  a  "wife;"  payment  of  insurance,  465. 

"agent;"  "representative"  does  not  mean,  note,  457. 

aleatory,  28. 

"all  other  perils,  losses  and  misfortunes;"  marine  risk,  note,  600,  602,  607, 

614. 
"allowed"  construed,  under  memorandum  clause;  "use"  of  gasohne,  note, 

357. 
"  all  risk  of  craft  whilst  loading,"  590. 
appraisers  "  competent  and  disinterested,"  422. 
"arrests,   restraints,    and   detainments  of  all  kings,   princes,   or  people;" 

marine  policy,  note,  600,  610. 
"as  interest  may  appear,"  295. 
"as  now  or  hereafter  may  be  constituted; "  insertion  of  words  in  partnership 

policy,  note,  351. 
"as  per  plan  on  file,"  used  in  description  or  "forms";  effect  of,  379. 
"as  per  survey  on  file,"  used  in  description  or  "forms,  "  379. 
"as  soon  as  practicable  after  he  ascertains  the  fact;"  written  notice  of  loss, 

406. 
"at  and  from;  "  marine  policy,  229,  588. 
" automobile  policy; "  employers'  liability,  664. 
"autopsy"  carries  right  to  "dissect,"  "examination"  does  not;  accident 

policy,  note,  558. 
"average;"  marine  policy,  note,  641. 
"average  unless  general;"  marine,  640. 
"barratry,"  611. 
"becoming  aware"  and  "knowing"  of  gambling  operations;  distinction; 

fidelity,  etc.,  insurance,  660. 
binder;  closing  contract;  fire,  95-97. 
binding  slip;  marine,  97. 

"bodily  infirmity"  or  "disease;"  accident  policy;  excepted  risks,  563. 
"breathing  gas"  involuntarily  is  not  "inhaling  gas,"  note,  568. 
"building  occupied  as  tannery"  does  not  include  engine,  etc.,  note,  289. 
"burnt"  when  ship  is,  note,  645. 

"  called  the  American  Ship  President "  not  warranty  of  nationality,  note,  138. 
"capture,  seizure,  and  detention;"  marine  policy,  608. 
causa  ■proxima  non  remota  spedatur,  603,  note,  GIG,  G17. 
"causes"  disease,  etc.,  as  in  exception  of  risks;  accident  policy,  565. 
cestui  que  trust,  of  company;  policy  holder  is  not  a,  88. 
"  chemicals  "  includes  benzine,  note,  289. 
"child"  includes  adopted  child,  465. 
"children;"  "orphans"  held  to  mean,  465. 
"children"  does  not  ordinarily  include  grandchildren,  466. 


954  INDEX 

[References  are  to  pages.] 

WORDS  AND  PHRASES— Continued.  , 

"  collision,  marine,  603. 

"concurrent"  insurance  not  construed  as  "identical,"  note,  324. 

"confined  to  the  inland  waters  of  New  Jersey,  New  York,  and  Long  Island; " 
warranty,  599. 

"confined  to  waters  of  New  Haven  Harbor;"  warranty,  note,  599. 

"consequences  resulting  from  derangement  of  machinery;"  proximate 
cause,  622. 

constructive  total  loss,  242. 

"contained  in;"  description  of  property,  292. 

"continuing  or  permanent  disability;"  accident  policy,  note,  550. 

"cost"  not  limited  to  statutory  costs;  employers'  liability  insurance,  678. 

covering  notes,  97. 

"daily  report,"  96. 

"declare  "  the  interest  by  indorsement;  marine  risk,  586. 

"  decorations  to  wall  and  ceilings  "  does  not  cover  outside  walls,  note,  289. 

"departure"  and  "sailing"  distinguished;  marine  risk,  note,  596. 

"dependent;"  beneficiaries,  467. 

"detached  at  least  one  hundred  feet,"  148. 

deviation,  2.31. 

"disbursement;"  marine  policy,  note,  22. 

"disbursement"  policy;  entitled  to  share  with  ordinary  insurance;  subroga- 
tion, note,  63. 

"disease;"  temporary  ailment  not  a,  note,  478. 

"drugs"  include  benzine,  note,  289. 

"dwelling  house"  insured  as  such;  effect  when  only  such  in  part,  or  when  a 
hotel,  377. 

"dwelling  house"  not  a  "hotel,"  note,  289. 

dynamite  held  not  covered  by  stock  of  railroad  contractors,  note,  360. 

"earnings"  or  "profits"  and  "use  and  occupancy"  not  synonymous,  346. 

"embezzlement  or  larceny;"  fidelity  bond;  surety  company,  655. 

"enemies;"  marine  risk,  608. 

"excess,  "  meaning  of,  as  to  use  of  liquor,  note,  489. 

"expectation  of  life,"  20. 

"extende.l  insurance,  502. 

"external  and  violent  means;"  accident  policy,  meaning  of,  541. 

"failure;"  credit  insurance,  note,  663. 

"family"  includes  whom;  life  beneficiaries,  466. 

"farm  implements"  covers  mowing  machines  and  binders  subsequently  ac- 
quired, 319. 

"F.  C.  S."  warranty;  marine,  637. 

"floating  policy,"  note,  22. 

"forms"  closing  contract,  note,  95. 

"free  from  all  consequences  of  hostilities;  "  marine  policy,  624. 

"free  from  average  imloss  general;"  marine,  640. 

"free  from  average  unless  general  or  the  ship  be  burnt,"  note,  606. 

"free  from  capture,  seizure  and  detention,"  638. 

"free  from  mortality  and  jettison; "  marine  policy  on  animals,  620. 

"free  of  mortality  and  jettison,"  639. 


INDEX  '^SS 

[References  are  to  pages.] 

WORDS  AND  PHRASES— Continued, 
"freight"  means  what;  marine,  588. 

"from"  and  "at  and  from;"  difference  between;  marine,  588. 
"from  the  loading  thereof"  excludes  goods  not  actually  loaded;  freight 

policy,  598. 
general  average,  260  et  seq. 
"general  liability  policy;"  employers,  664. 
"general  woodwork;"  employers'  liability  insiu-ance,  note,  666. 
"  good  American  ship  the  Rodman;"  warranty  of  nationality,  note,  138. 
"  good  safety; "  moored  twenty-four  hours  in;  marine  risk,  593-598. 
"  goods  "  or  "  merchandise  "  covers  what;  marine  policy,  587. 
"gradual  reduction"  rule,  note,  441. 
"  grain  and  seed  "  covers  flaxseed,  note,  288. 
"  grain  "  includes  broom  corn,  note,  288. 
"granite  building,"  note,  289. 
"gross  proceeds,"  note,  256. 
"gross  value,"  note,  256. 

"having"  construed  as  habitual  use  as  applied  to  benzine,  note,  357. 
"headache — severe,  protracted,  or  frequent;"  efTect  of  warranty  that  as- 
sured not  subject  to,  481. 
"health"  is  relative  term,  etc.,  478. 
"heirs"  includes  widow;  beneficiaries,  note,  463. 
"heirs"  construed,  464. 
"heirs  at  law"  meaning  of,  464. 
"heirs  at  law"  includes  widow;  life  note,  465. 
held  in  trust  or  on  commission,  or  sold  and  not  deUvered,  293. 
"hotel"  is  not  a  "dweUing  house,"  note,  289. 
"ice  clause;"  marine  pohcy,  621. 

" identical; "  "  concurrent "  insurance  not  construed  as,  note,  324. 
"immediate  family"  includes  wife  and  child  in  place  of  father,  467. 
"immediate  medical  attendance;"  employers'  liability  policy,  note,  671. 
"immediate  notice; "  accident  policy,  555. 
"immediate  notice"  of  injury;  employers'  liability  policy,  671. 
"immediate  notice"  of  loss,  404. 

"immediate  written  notice;"  fidelity,  etc.,  insurance,  659. 
"immediately  and  wholly  disable;"  accident  policy,  548. 
"immediately,  continuously,  and  wholly;"  accident  policy,  note,  549. 
"immediately  notify  the  surety;"  fidelity,  etc.,  insurance,  note,  659. 
"indemnity"  indicates  rule  of  liability,  298. 
"independently  of  all  other  causes;"  proximate  and  sole  cause;  accident 

policy,  545. 
"  in  good  safety; "  arrival  in;  marine  policy,  589. 
"inhaling  gas;"  accident  policy,  568. 

"injuries"  in  intentional  injuries  clause;  accident  policy;  held  to  mean  non- 
fatal injuries,  569. 
"injuries  or  bodily  infirmities, "  statements  about;  life  risk,  493. 

illustrations,  494  and  note, 
"injury  caused  by  poison; "  accident  policy,  567. 
"in  port;"  marine  risk,  595. 


956  INDEX 

[References  are  to  pages.] 

WORDS  AND  PRRASES— Continued. 
"in  port"  on  certain  date,  143. 

"in  specie;"  arrival  of  cargo;  memorandum  articles,  note,  643. 
"wife,"  insurance  payable  to,  465. 
"insured"  includes  legal  representatives,  4.57. 
"  insolvent "  credit  insurance,  663. 
"invasion;"  excepted  loss,  368. 
"iron"  in  warranty;  when  includes  steel,  note,  143. 
"irrecoverable  loss  of  both  eyes  "  resulting  "from  such  injuries  within  ninety 

days,  independently  of  all  other  causes,"  548. 
"its  own  ...  or  in  storage,  or  for  repairs"  implies  property  of  others, 

note,  376. 
"  keeping,  using,  and  allowing  "  explosives,  359. 

"kept,  used  or  allowed  on  .  .  .  premises  .  .  .  fireworks,"  etc.,  144. 
"king's  enemies;"  marine  risk,  note,  608. 
"knowing"   and   "becoming  aware"  of  gambling  operations;  distinction; 

fidelity,  etc.,  insurance,  660. 
"lawful  heirs"  when  includes  widow,  464. 

"  legal  heirs  "  us  including  all  distributees  under  statute  of  distributions,  465. 
"  legal  representatives "  as  meaning  executors,  administrators,  and  assigns, 

465. 
"legal  representatives;"  construed  life  risk,  note,  463. 
"legal  representatives;  "  meaning  of,  note,  457. 
"letters  of  mart "  and  "countermart;"  marine  risk,  608. 
Lloyds,  13-15. 
"loading,"  Ufe  insurance,  20. 

"local  disease,  "  tuberculosis  of  brain  is,  note,  480. 
"loss  by  severance  of  one  entire  hand,"  note,  551. 
"loss"  equivalent  to  "loss  or  damage,"  457. 
"lost  or  not  lost; "  marine,  19,  584,  585. 
"machinery  kept  for  sale,"  note.  289. 
"machinery  used,"  note,  289. 
manufacturing  estabhshment.  note,  325. 
"margin,"  life  insurance,  20. 
"maritime  perils,"  603. 
"mechanics;"  whether  painters  are;  use  of  gasoline;  memorandum  clause, 

359. 
"men-of-war;  "  marine  risk,  608. 
"merchandise,"  note,  289. 

"merchandise"  cover  what;  marine  policy,  587. 
"moored  twenty-four  hours  in  good  safety;"  duration  and  termination  of 

marine  ri.sk,  593-598. 
"mortality;"  marine  perils,  639. 
"neutral,"  ship  warranted,  647. 
"  New  York  harbor;  "  marine  policy,  note,  589,  596. 
occupation;  meaning  of,  note,  491. 
"occupied  as  dwelling,"  note,  138. 
"occupied  as  hotel,"  note,  138. 
"  occupied  "  in  vacancy  clause,  note,  362. 


INDEX  957 

[References  are  to  pages.] 

WORDS  AND  PHRASES— Continued. 

"  old  metal "  meaning  extended  by  trade  custom,  note,  289. 

"on  account  of  whom  it  may  concern,"  marine,  584. 

one-third  off  new  for  old,  259. 

"open  policy,"  22. 

"orphans"  held  to  mean  "children,"  465. 

"  other  insurance ; "  interests  must  be  same  or  in  part  the  same,  to  con- 
stitute, 319,  320. 

"our  children;"  beneficiaries,  note,  466. 

paid  up  insurance,  502. 

"partially  concurrent  apportionments,"  437-440. 

"particular  average,"  251. 

"particular  charges;"  marine  policy,  note,  640,  642. 

"patterns"  covered  by  "tools,"  notes,  289,  360. 

"  patterns; "  when  excluded  as  part  of  tailor's  stock,  360,  note,  376. 

"pecuniary  interest"  of  insured,  note  29. 

"  perils  of  the  seas; "  marine  risk,  600-606. 

"pirates;"  marine  risk,  608. 

"  pirates  "  includes  passengers  or  crew  who  mutiny,  also  rioters  from  shore, 
note,  608. 

"poison,  or  anything  accidentally,  or  otherwise,  taken,  administered,  ab- 
sorbed, or  inhaled,"  note,  567. 

policies,  definitions  of  various,  21-24. 

"port;"  "ports,"  232. 

"port  risk;"  marine,  note,  589. 

"  port "  what  are  limits  of,  note,  589. 

"P.  P.  I."  clauses,  649. 

"premises"  meaning  of,  in  memorandima  clause;  fire  policy,  356. 

"premises;"  meaning  of;  vacancy  clause,  note,  362. 

pretium  affedionis  excluded  by  clause  as  to  liability,  296. 

pretium  affedionis;  indemnity,  57. 

"  profits  "  or  "  earnings  "  and  "  use  and  occupancy  "  not  synonymous,  346. 

"  property  "  covers  articles  kept  for  u.se,  note,  289. 

pro  rata  itineris,  250. 

"pro-rated;"  credit  insurance,  note,  663. 

"rags"  meaning  extended  by  trade  custom,  note,  289. 

"removal"  and  "absence;"  distinction;  vacancy  clause,  367. 

"  renewal "  does  not  mean  reinsurance,  443. 

"representations,"  meaning  of,  128. 

"representative"  does  not  mean  "agent,"  note,  457. 

"reserve"  fund,  20. 

"  retail  hardware  store  "  covers  dynamite,  note,  357. 

riders;  marine  insurance,  648. 
fire  insurance,  459. 

"riskof  craft,"  121. 

"risk  to  continue  until  arrival  of  the  goods  at  a  market  at  their  final  port 
of  discharge;"  marine  risk,  597. 

"roadbed"  in  clause  as  to  walking  or  being  on  railway  roadbed;  accident 
policy,  579. 


958  INDEX 

[References  are  to  pages.] 

WORDS  AND  PHRASES— Continued. 

"robbery"  what  is,  as  exception  from  intentional  injuries  clause;  accident 

policy,  570,  571. 
"rovers;"  marine  policy,  608. 
"running  policy,"  22. 
"safely  moored,"  note,  589. 
"sailing"  defined,  note,  648. 
"  sailing  on  or  after  "  certain  date,  note,  143. 
"sane  or  insane"  in  suicide  clause,  511,  514-517. 
"satisfactory  proof"  of  loss,  412. 
"seaworthiness,"  221-230. 
"seizure;"  marine  risk,  607. 
"  serious  illness  "  means  what,  479. 

"settled  Umits  of  United  States; "  statements  as  to  residence  or  travel,  493. 
"  sovmd  health  "  means  what,  479. 
"  steam  saw-mill "  includes  machinery,  note,  289. 

"stock  in  trade"  of  furniture  dealer  covers  paints  and  varnish,  note,  289. 
"  stock  in  trade  "  of  jeweler  does  not  cover  blankets  hung  upon  building  to 

stay  fire,  note,  289. 
"stock  of  cloth  .  .  .  and  all  other  articles  usual"  in  tailor's  estabhshment; 

value  of  "patterns"  not  recoverable,  360. 
"stock  of  drugs"  covers  gasoline,  benzine,  and  ether,  note,  358. 
stock  when  held  not  to  cover  dynamite,  note,  360. 
"stock  usually  kept  in  country  store"  permits  use  of  benzine  and  fireworks, 

note,  357. 
"storage"  meaning  of;  memorandum  articles  clause,  376. 
"  substandard  risks,  note,  18. 
"sunk  or  burnt;"  marine,  note,  645. 
"sunstroke"  means  what,  541. 
"surrender  value,"  20. 
"survivor;"  beneficiaries,  467. 
"taking  poison;"  accident  policy,  567. 
"takings  at  sea;  "  marine  policy,  607. 
"teams  liability  policy;"  employers'  liability,  664,  665. 
temporary  insurance,  note,  502. 

"tenancy  of  present  occupants"  construed;  title  insurance,  note,  654. 
"thieves;"  marine  policy,  608,  611. 
"to  depart  from;  '  warranty;  marine,  note,  648. 
"  tools"  covered  by  "  patterns,"  notes,  2S9,  360. 
tortfeasor;  subrogation,  63. 
"to  sail  from;"  warranty;  marine,  648. 
"total  inability  to  labor;"  accident  policy,  note,  549. 
"  total  lo.ss  "  of  building,  300. 

"  total  loss  only; "  marine;  no  recovery  for  partial  loss,  except,  o43. 
totally  blind;  accident  policy,  551. 
'totally  disabled;"  accident  policy,  549. 
"to  the  best  of  my  belief;"  application,  150. 
"  to  the  best  of  my  knowledge  and  belief; "  effect,  as  qualifying  answers  and 

determining  breach,  482. 


INDEX  959 

[References  are  to  pages.] 

WORDS  AND  inaRASE&— Continued. 

"touch  and  stay  at; "  marine  policy,  598. 

"transacting  business;"  sending  unlicensed  agent  to  adjust  loss  is  not, 

note,  10. 
"treaties;"  reinsurance,  449. 
"trust;"  "held  in  trust,"  294. 
"two  entire  feet;  loss  of;  accident  policy,  551. 
uberrimcE  fidei;  insurance  contract  is  one,  14,  120. 
idtra  vires  doctrine,  168,  169. 
"unoccupied"  in  vacancy  clause,  361. 
"usages  of  Lloyds,"  13. 

"use  and  occupancy"  and  "earnings"  or  "profits"  not  synonymous,  346. 
"use  and  occupancy  insurance,"  20,  345. 
"use"  means  habit,  custom;  use  of  liquors,  note,  489. 
"used"  construction  of,  in  memorandum  clause;  fire  policy,  357. 
"  used  for  the  storage  of  ice,"  145. 

"  usually  kept  in  a  country  store  "  whether  includes  benzine,  note,  289. 
"vacant  "  in  vacancy  clau.se,  361. 

"  violation  of  law  "  what  is  under  provision  as  to  death  in;  life  policy,  522. 
"warranted  free  from  average,"  etc.;  marine,  640-642. 
"warranted  no  iron  in  excess  of;"  "iron"  includes  steel,  note,  143. 
"warranted  not  to  proceed  east  of"  a  certain  place;  marine,  143,  640. 
"warranted  Swedish  property;"  marine  policy,  note,  648. 
"warranted  to  be  American  property; "  marine  policy,  note,  648. 
"warranted  to  navigate  only  inland  waters,"  etc.,  note,  143. 
"watches,  watch  trimmings,"  etc.,  covers  silver  and  plated  ware,  note,  289. 
"  whole  insurance  "  in  apportionment  clause,  436,  438. 
"wife"  does  not  include  "affianced  wife;"  payment  of  insurance,  465. 
"  wife  Mary  and  children  "  includes  child  by  former  wife,  466. 
"wilful  misstatements  or  suppressions;"  fidelity,  etc.,  insurance,  note,  658. 
See  Definitions. 


YARDS, 

loss  of,  under  marine  policy,  605. 


YORK-ANTWERP  RULES, 

adjustment;  general  average,  273. 
given  in  full,  778  et  seq. 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 

Los  Angeles 
This  book  is  DUE  on  the  last  date  stamped  below. 


AUG  1 6 1986 


UC  SOUTHtRN  HtGIUNAL  LIBRARY  I- ACUITY 


AA    000  785  599 


